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POLB90 - Final Exam Review

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Political Science
R Rice

POLB90 - Comparative Development in International Perspective Study Guide Final Exam Import Substitution Industrialization (ISI) - A strategy of industrial development based on manufacturing goods domestically that were previously imported - Pros o Increase in domestic employment (reduces dependence on non-intensive labour industries) o Restricts imports (so local companies are used more) o Economic resilience (like recessions) o Less long distance transportation of goods (cuts down on fuel emissions and greenhouse gas) - Cons o The industries that are created become obsolete because they aren’t exposed to globally competitive industries (rivals) o Less growth Export Oriented Industrialization (EOI) - An industrialization strategy that is heavily tied to exporting manufactured goods - Aims to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage - Pros o Wider markets o Able to focus on developing only a few products - Cons o Increases market sensitivity o Lack of product diversity (may make economies unstable) - Countries such as China, South Korea and Taiwan have implemented successful export led growth East Asian Miracle - 1960s - 1990s - Tawian, South Korea, Singapore and Hong Kong achieved rapid growth in production of several decades - Because of this, they have become influential participants in international markets - Some have argued that there is little to be learned from this success story, while others (mainly the World bank and neoliberal economists) believe that the main lesson is that free markets, free trade and an export-oriented development strategy is the key to economic success - It has now been accepted that the success of the NICs was largely a result of the crucial role played by the state - Second generation: Thailand, Malaysia, Indonesia and China? - Reasons for East Asian Success: o Developmental state o Relative income inequality o High educational levels o Successful agrarian reform o Switched to EOI o Semi-authoritarianism o Skilled bureaucracy o Relatively weak civil society o Confucian culture Developmental State - Refers to state-led macroeconomic planning in East Asia in the late twentieth century - In this model of capitalism, the state has more independent, or autonomous political power as well as more control over the economy - A developmental state has strong state intervention and extensive regulation and planning Statism - Emphasizes the role of the state in politics or supports the use of the state to achieve Economic, military or social goals Sustainable Development - Development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs - Thus, economic growth that fails to protect its environment is not true development because it cannot be sustained - An example of this is the Indira Gandhi project: o In the short run, it has raised output and incomes, however unless major changes are made in the drainage systems, the irrigation will poison the soil and crop yields will fall o For this to be a genuinely successful example of economic development the canal project would have to provide for the long run productivity of the land - Mainstream View: sustainable development can be promoted by better resource management and by using market mechanisms - Alternative View: sustainable development can be achieved through local, participatory processes of environmental management - Radical View: the pressure exerted on the environment already exceeds global ecological carrying capacity, thus dramatic action is needed now Poverty and Environment - Poverty o Income distribution is an important part of economic growth o The mainstream view is that economic growth has brought an increased inequality between the rich and the poor (at least in the early stages) o Overtime, the gap has widened in some poor countries and narrowed in others o In the 1970’s the World Bank president, Robert S. McNamara and his associates directed attention to the needs of the “absolute poor”. Dudley Seers and other independent economists called for a strategy that focused on “basic needs”. o Poverty, rather than GDP became the target o The basic needs of each person were thought to include: sufficient nutritious food, shelter from the elements, decent clothing, protection from disease and elementary education. This way of thinking considered development as whether these basic needs were being met, not on whether the average GDP was growing - Environment o Economic growth has taken a major toll on the natural environment in both rich and poor countries o It has been associated with water pollution and water scarcity, air pollution, problems of solid and toxic wastes, soil degradation and desertification, deforestation, loss of biodiversity, ozone depletion, other atmospheric changes and global warming o Because of this, people have claimed that economic growth and development are incompatible with environmental preservation, if we are to maintain a healthy environment, we must cut back on economic growth Participatory Development - Seeks to include the various stakeholders (local populations) in the proposing, planning, implementation and monitoring of development projects - It has taken a variety of forms since it first emerged in the 1970s - It was considered a very important part of the “basic needs” approach to development - Benefits: o While they may have startup costs, they will be more sustainable in the long run o Better at addressing local needs and more relevant to local populations - Criticisms o Slow (a project may take longer if one has to work with and compromise with local communities) o Higher startup costs that traditional development o Reaches a smaller group NGOs and Development - NGOs are Non-governmental organizations; private organizations that promote the interests of the poor, protect the environment, provide basic social services or undertake community development - Strengths: 1) No strings Attached Agenda o They are not looking for votes/ have political autonomy, so the local economy may trust them more than a political party 2) Strong Grassroots Link o NGOs work closely with communities to develop programs that fit local needs and concerns 3) Participatory Methodologies and Tools o NGOs maximize interactive learning technologies (ie: role playing, mapping, preference ranking) 4) Innovation o Given their small size and flexible nature, NGOs are able to experiment with new approaches and practices 5) More Cost Effective o NGOs provide services to the poor more cost effectively than the state is able to - Weaknesses 1) Dependence on Foreign Funding o NGOs are becoming more dependent on foreign aid and less autonomous 2) Corruption o In some cases a large percentage of donations go to operating expenses and salaries rather than development projects 3) Too Small Scale to Make a Difference o Cannot provide the long term, comprehensive programs that the state is supposed to 4) Community Dependence Over Time o NGOs sometimes create a dependent relationship with civil society for development assistance 5) Poor Accountability/ Inadequate Evaluation o NGOs tend to not conduct audits of their projects and programs (for fear of losing funding) Debt Crisis - In 1982 - Mexico announced it would not be able to make the interest payments on its foreign debt causing international banks to place a halt on new lending to developing countries and to recall their existing loans. - Originated because of OPEC price increases in the 1970s, their imports could not absorb all of the new earnings and they were left with a huge volume of liquid cash (recycling problem) - OPEC countries invested these funds in developed countries banks. The banks, with all these new funds, wanted to lend it out (at a profit). Many oil importing countries were eager to borrow to cover the costs of imported oil. Mexico, among other countries began to borrow large amounts to cover their growing consumption. - Basically, the borrowers were desperate for the funds because of their high oil bills and the lenders were desperate to make the loans because they owed interest payments to the OPEC countries - In the early 1980’s the crisis began, mostly in Latin America. They simply could not meet the debt repayments. - In 1980, Mexico’s debt repayments amounted to 50% of the value of its exports, Brazil’s 63% etc. - If the loans were to be repaid the peoples standards of living would collapse. - The stability and prosperity of the entire international economic system was at risk. The third world was at huge risk. - Recovery occurred in the early 2000s in most countries - Private initiative rather than government intervention became seen as a solution Debt and Development - Debt undermines development - Odious Debt - 1927 - Alexander Nahum Sack, Russian legal theorist - A legal theory that says that the national debt incurred by a regime for purposes that do not serve the best interests of the nation should not be enforceable - Such debts, are thus considered to be “personal” debts of the regime and not debts of the state Lost Decade - 1980s - Five worldwide trends that produced the Lost Decade: o - The Brady Plan (1989) o Sought permanent reductions in loan principals and existing debt-servicing obligations in exchange for the implementation of market-oriented economic reforms Stabilization Policies - Short-term measures to reduce budget imbalances by cutting down on government expenditures and reducing deficits (IMF) - Stimulate an economy out of a recession or constrain the money supply to prevent inflation - Fiscal policy (often tied to Keynesian economics) uses government spending and taxes to guide the economy - Monetary policy controls the value of currency by lowering the supply of money to control inflation and raising it to stimulate economic growth (concerned with the amount of money in circulation) Shock Therapy - A sudden release of price and currency controls, withdrawal of state subsidies and immediate trade liberalization within a country (usually includes a large scale privatization of previously publicly owned assets) - Began in Bolivia and then carried over to Poland and Russia with varying levels of success - The policies of shock therapy provoked much debate that centered on whether or not the final achievements justified the pain that accompanied such radical restructuring Structural Adjustment Programs (SAPs)/ Poverty Reduction Strategy Paper (PRSPs) - SAPs are designed to improve a country's foreign investment climate by eliminating trade and investment regulations, to boost foreign exchange earnings by promoting exports, and to reduce government deficits through cuts in spending. o Typical Features of SAPs  A shift from growing diverse food crops for domestic consumption to the production of cash crops for exp
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