DEVS Theories.docx

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Department
Global Development Studies
Course
DEVS 100
Professor
David A Mc Donald
Semester
Fall

Description
Capitalism: - Self-interested system - Emerged during Industrial Revolution following Feudalism - Private ownership of capital - Trading of goods - Selling of labour - Adam Smith: Laissez-faire economics  Invisible Hand of the Market o Market is self-regulating o Is there a role for government?  Small role – to regulate, equalizing, only there to equalize the playing field - Why is it important to development? o Creates differences in wealth between countries o Brings to question degrees of state involvement in the market o Can create innovating, new ideas, through competition o It‟s the system of exchange in which the world exists, creates competing PRO-MARKET Neo(classical) Liberalism: 1. Comparative advantage - Countries specialize in production or labour - Products are made at the lowest opportunity cost for this economy - Why is it significant to development? o Benefit trade between economies  A is good at producing lumber, B is good a milling it. A is going to distribute lumber to B to turn it into product. B is specializing in the manufacturing; A is specializing in the production. Therefore eliminating market inefficiencies o Helps developing countries enter into the market competitively  Can produce coffee beans at the lowest possible cost - Criticisms o Specializing in similar product across different countries, driving prices down o Exploitation of cheap labour (children, women, etc) o Sing-product economies, making them reliable on the Global North o Drives currency prices down, therefore drives costs down 2. P-D-L (Privatization, Deregulation, Liberalization) Privatization o Sale of state owned entities to private corporations - Private companies are profit driven, less wasteful, therefore are more efficient at delivering their services - Private firms are free from government regulation - Alleviates cost on the government, can derive profit when they sell off certain entities - Avoids corruption - Criticisms o Separate the lower costs from the hire costs  Limits access to services based on ability to pay (class segregation) o Profit driven, therefore the can cut corners o Labour exploitation Deregulation - Taking away restrictions that would otherwise allow the companies to operate freely in the interest of profit - Does away with regulations that prevent competition - Criticisms o Environmental impacts (environmental laws restrict company‟s freedom) o Allows companies to potentially exploit labor for profit (Trade) Liberalization - Striking down trade barriers - Promotes free trade - Tariffs make markets inefficient o Does not reflect true cost of the product - Criticisms o Can promote market predation o Encourages the outsourcing of jobs from domestic economies o Can kill local economies o South becomes highly dependant of the North 3. Structural Adjustment Policies - Introduces policies of P-D-L - Aid conditionalities imposed by IMF and WB - Late 70‟s, 80‟s, and 90‟s - AIM: help balance economies budgets, and reduce debt while boosting economy - Later called Poverty Reduction Strategy Papers (PPSP) - Criticisms o Creates dependent relationship o Neocolonialism o Countries saw the conditionalities as blackmail o Put countries more in debt o Austerity  Cut spending on social programs, raise taxes 4. Invisible Hand - A way of managing capitalism - Taking out the role of the state (minimize) in the market o Why should they equalize the playing field?  Otherwise you would end up with monopolies  Protecting private property  Introduce laws to make sure that everyone competes fairly - Emphasizes the individual - Markets are self-regulating - Let individuals think for themselves o Picking what they think is the best way for them - Assumptions about human nature o Self-interested o Self-maximizing - Individuals are rational o Maximize gain, through minimizing of costs Keynesianism: - Larger government role than neoliberalism - Government needs to bail out the market in times of crisis, leave the market alone when it is operating well - Market is not self-regulating: depressions can get worse - The market is not self-correcting - Private sector can sometimes lead to inefficient outcomes - Lack of savings can discourage reinvestment - Public sector needs to intervene in those times to correct the economy, such as controlling fiscal (taxation) and monetary (interest rate) policies - Public sector needs to step back when the market operates efficiency 1. Import substitution - Replace foreign imports with domestic production - Reduce foreign dependency - Self sufficiency through internal market - Achieved through nationalization, subsidization 2. Dependency Theory - World is divided into core-periphery o Core: developed economies o Periphery: developing economies reliant on the core - Theory says periphery countries should import substitution o Manufacturing things, rather than importing them - Because of this relationship, the countries in the periphery will never be able to actually modernize and invest in their economy - Reaction to modernization theory 3. Modernization Theory (Take-Off) - Rostow (50‟s) - Method for countries to follow for development - Take-off achieved through industrialization - Political and social structure to help grow - Require entrepreneurial class to invest in economy - 5 stages o Traditional societies o Preconditions o Take-off o Drive to maturity o High mass consumption ANTI-MARKET Marxism: - Anti-market - Socialist - Class conflict as the driver of history o A revolution of the proletariat (the working class) against the bourgeoisie (people who own capital) - Designed to exploit the working class - Agrees with capitalism in that it erased traditional feudal values, but isn‟t the final stage 1. Surplus value of Labor - In order to drive up profit, capitalists lower the cost of labor. Therefore, the profit derived is unpaid/exploited labour - Capitalism‟s tendency to drive costs down in order to maximize profit - Can lead to crisis of over-accumulation o Huge production of surplus with no one to consume because the labour force cannot afford to pay for what is produced 2. Hobson-Lenin Hypothesis - Lenin said imperialism is the highest stage of capitalism - Development of finance/investment capital - Capitalism will exhaust resources at home and must expand to less developed countries o To increase profit in home country, now you want to create new sources of pr
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