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POL201Y1 (221)

Government Success in Development

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University of Toronto St. George
Political Science
Sophia Moreau

Government Success in Development: The Case of East Asia o What generates industrialization and economic growth? (This is a how question) o Why does it happen in some places and not in anothers? (Why question; why here and not there?) o In this class, were focused on the market and the structure (state) o Either the market operates independently or the state intervenes and produces development o First, we focused on the market The Market o The Market: Human beings have a natural propensity to truck and barter Adam Smith o If people are free, a market will develop more or less spontaneously (industrialization, industrial revolution in Britain) this is that gets told about the IR in Britain; once agricultural revolution has laid the groundwork, IR takes off o The Profit Motive - the incentive to make a profit Development is driven by private entrepreneurs and investors who are in turn driven by the profit motive The profit motive and the propensity to truck and barter these are characteristics of human nature and human nature itself when given a free reign will produce the market and will in turn produce development What is the mechanism through which the market works? o The Unseen Hand the law of supply and demand Supply will rise and fall to meet demand Youll never have too much or too little because supply will always follow demand; whatever the demand is, the supply will rise or fall to meet it Its demand that drives the market; its the market itself people buying things; supply follows demand; this is what regulates production (equilibrium) Recall, Heilbroner people from outer space coming to the world and trying to explain to them how the market works; this relates to that story the mechanism that dictates how much of something will be produced; its dictated by what the market will bear IR in Britain history with the whole idea of development; the whole origin that this is how the world works and this is what modernization involves The IR is a starting point for thinking about development and the place of development in the modern world Its also a case of industrialization being generated by the market alone At the same time, its important to temper that faith in the market not to overstate the degree to which the market is independent of state intervention Even in the IR in Britain, the state also intervenes to sustain markets to create basic laws to reduce transaction costs o State Intervention To secure private property the state produces the enclosures o This doesnt just happen spontaneously; the state creates private property out of what had been common land To secure intellectual property patent system o Inventions; people invest in inventions and spend money and become inventors and then produce venture capital for inventors o This is because Britain has a patent system; inventions can make money for people; other countries in Europe dont come up with a patent system as early as Britain did To ensure a supply of capital physically, this is a bank o The bank of England; short-term and long-term capital o IR was financed; its primarily financed privately but by people who are able to take out loans from banks o Nevertheless, in the story of Britain (its important to keep in mind that its an example of the market playing the predominant role), there is state intervention the state intervention is fairly minimal o The state does not have its own goals necessarily; it doesnt have a development agenda; it creates the minimal conditions that allowed the market to develop Structural Approach (State-Led Development) o Today, were going to look at the structural approach a completely different way of thinking about how development comes about o From a structural perspective, development comes about as a result of decisions that the state makes o Theres nothing natural about exchange for profit, selling your labor, treating land and knowledge as alienable o The market itself is often a result of government intervention, often from a result of violent opposition from the people
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