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POL201Y1 (221)
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University of Toronto St. George
Political Science
C Jung

GOVERNMENT SUCCESS IN DEVELOPENT: THE CASE OF EAST ASIA- OCTOBER 30- POL201: • Look at the way states intervene in economies around the world • State- led development in asia • Framing how we think about development? What facilitates industrialization and economic growth? Why does it happen in some places and not others? • The story of the industrial revolution is one of how the market somehow spontaneously generates growth, however, the government intervenes to create the structure of the market DEBATE: is it the market or the state? What is the solution? Let the market solve the problem ( if it had been left to the market most of the companies would’ve gone bankrupt) or do we have the state intervene to prevent a complete meltdown? Descriptive- is it free of state regulation and intervention Prescriptive: should it be free of state regulation and intervention Market vs. structure. Mostly the differences tended to be ideological, normative, not empiracal THE MARKET: - “ human beings have a natural propensity to truck and barter” Adam Smith -- -this is driven by the profit motive, the incentive to accumulate wealth - it is driven by private entrepreneurs and investors - - if people are free, a market will develop more or less spontaneously - once labour is pushed off of the land and a food surplus is in place due to the agricultural revolution, industrialization takes off - enclosure lays the groundwork for industrialization - profit motive - invisible hand of the market - problems are solved by the market - what is the mechanism through which the market works? - Invisible hand: the law of supply and demand, supply will rise and fall to meet demand. In other words, demand drives supply. THE MARKET II: - state intervention - you should not overstate the degree to which the market is independent - 1. Secure private property - 2. To seucre intellectual property - 3. To ensure a supply of capital - on this account, there is a role for the state but the role for the state is minimal - considerable degree of state intervention seen in Britain THE MARKET III- THE STRUCTURAL ARGUMENT: - there is nothing natural about exchange for profit, selling your labour, treating land and knowledge as alienable and competition - the market only emerges as a result of self conscious and often violent intervention--- often after violent opposition from the people, labour forces - forced labour - enclosure story was often violent - sustaining the market is also the result of consistent government intervention in the form of labour laws, interest rate manipulation, government bailouts WHAT IS THE STRUCTURAL APPROACH TO DEVELOPMENT? - china’s great leap forward - german industrialization under Bismarck - soviet five year plans - Japanese MITI and plan rational economy - Singapore and other Asian newly industrialized countries - On this model industrialization and economic development are state policies and goals. It provides the management and the overall plan, it acquires a market, imposes tariffs, sets exchange rates, - The state intervenes at every step along the way to do what the market is supposed to accomplish naturally - It is the state that is implementing all of the policies that are going to make a market - 1 difference between a structural and market approach—timing - earlier developpers could use the market approach because they faced no competition - if you do not have a market for your products its much more difficult to have everything started up to begin with - late developpers face a different set of opportunities and constraints - late developers refers to countries like france and Germany that developed after Britain and found it difficult to compete because Britain had captured the market - france and Germany ( developomental states) states that take a leading role in producing development - historical models of developmental states are france as Germany HISTORICAL MODELS OF DEVELOPMENTAL STATES: FRANCE AND GERMANY: - you have a global history of so called developmental states from 2 centuries ago - the state wasn’t just needed in the global south - any country that entered the global economy after Britain who had already captured the market THE COMPARATIVE QUESTION: WHY DID BRITAIN DEVELOP EARLIER THAN FRANCE FRANCE: - disadvantage: political, social differences, hierearchies - internal structures: france is a bigger country - natural resource problems - Britain has access to the seas- has access to colonies - State has to intervene to create the market--- railways financed by the government - It has to produce the market in a far more developmental way than the brits do GERMANY: - before the establishment of the zollverein, they were fragmented, lacked a centralized government - Germany does not exist before 1871 it was a series of principalities/ separate states - Between the internal states there are all these internal tolls - Inner principalities are landlocked - Like Britain- Germany had coal and iron and it had some waterroutes - Germany couldn’t consolidate an internal market until 1834 - Like france, the german railroad was financed and planned by the German government In france and Germany are later developpers, all others who have yet to develop are late, late developpers SINGAPORE; - what are the obstacles to development? OBSTACLES TO DEVELOPMENT: - no resources - high tariffs from Malaysia against singaporian goods - strike prone unions – strong labour force, unstable labour situation - competition from hong kong and japan ( earlier developers) HOW DID THEY SOLVE THEM: - more interventionist but still effective - offering multinational tax breaks to attract investment - it has one of the lowest tax rates in the world second only to Ireland - they built office parks, streamlined bureaucracy and secured a stable labour force - they were ranked the number 1 logistics hub by the world bank - Singapore was turned into an unbelievably easy place to invest - 2. Controlling the unions: unions were turned into the arm of the government, top down rather than bottom up - unions are still strong but they organize and control labour from the top down. - 3. Economic planning: they began to choose what type of goods to produce.. - changing market incentives: drive out low wage industries by driving up wages - - attracted high tech enterprises by building science park with research facilities - intervenes by changing market incentives- not in an authoritative manner
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