PSCI 4356- Final Exam Guide - Comprehensive Notes for the exam ( 34 pages long!)
69 views34 pages
4 Dec 2017
School
Department
Course
Professor
UT-Dallas
PSCI 4356
FINAL EXAM
STUDY GUIDE
2/19/2017 OneNote Online
https://onedrive.live.com/view.aspx?Bsrc=Share&Bpub=SDX.SkyDrive&resid=15CDBB404D6F9171!45798&cid=15cdbb404d6f9171&app=OneNote&authkey=!Al…
1/2
• Trade and Growth
○If trade is optimal and economists are right, it should be a good tool for countries trying to grow
economies
○Developing countries look to trade policy to control their growth
○There are a few different ways to approach trade policy
• Import Substitution Industrialization
○Remember how most colonies looked like
• Focused on export of raw materials and import of manufactured materials
• Transportation routes weren't geared around population centers, focused where raw materials
were
• From the mines or plantations to the ports
• Not a good setting for industrialization
○1930s
• Smoot-Hawley act wasn't different from the response around the world
• Lots of tariffs to try to move to autarky for economic development
○1940s
• Many Latin American countries continued these models as a conscious choice
• If they could industrialize their own economy, they could remove tariffs and compete
• Nationalist manufacturers, small businesses, and some intellectuals all pushed to reduce
competition
○Key to economic development was creation of a strong manufacturing sector
• Key to industrialization was domestic investment
○Economic Dualism
• Modern dynamic sectors and traditional stagnant sectors
• Workers in modern sectors make high wages
• Capital earns lower returns in industrial sector
• Persistent urban unemployment
○Terms of Trade Argument - The way the world works
• Why are these countries having a hard time competing in the global market?
• Over time the stuff they were importing were rising in price but raw materials were getting
cheaper
• Primary commodity exporters saw prices fall slightly while manufactured goods rose
○Infant industry argument clearly underpins the ideas of ISI
○Components of ISI
• High barriers to trade
• Government gives subsidies and incentives to industry
• State ownership of much of the economy
○ISI Successes
• Worked in certain countries, but not everywhere
• Brazil achieved 9% GDP growth between 1965-1980
• Imports went from 60% to 10% between 1949 to 1964
• In large economies it can be effective, need a large domestic market
○ISI Limitations
• Deepening of ISI meant intermediate goods, need to make all the other parts
• Highly capital intensive
• Lots of foreign borrowing to keep up this influx of foreign capital
• These infant industries had a hard time finally competing on the global market
○The End of ISI
• Debt crisis reduces willingness to loan to ISI countries
• Brazil in the 1980s
• Imports were only 5% of GDP, inflation was 260%
• Starting in the 90s we see the growth of trade liberalization
• Brazil Tariffs fell from 78% to 14%
• Foreign portfolio investment increases dramatically
• Export-Led Industrialization
○Instead of trying to protect from the global economy, ELI emphasizes world markets
○Attempt to find narrow and profitable sectors and encouraging growth
○Asian Tigers
• South Korea
• Taiwan
• Singapore
• Hong Kong
○For four decades all countries averaged GDP growth 6-8% a year
○Poverty in these countries fell during this time period
Trade Strategies
Wednesday, February 15, 2017 8:35 AM
Thissectionisreadonly.
find more resources at oneclass.com
find more resources at oneclass.com
2/19/2017 OneNote Online
https://onedrive.live.com/view.aspx?Bsrc=Share&Bpub=SDX.SkyDrive&resid=15CDBB404D6F9171!45798&cid=15cdbb404d6f9171&app=OneNote&authkey=!Al…
2/2
• Brazil ratio of top 10% to bottom 20% was 25:1
• Taiwan was 4.2:1
• South Korea was 5:1
○Factors common to Asian Tigers
• US Aid
• Land reforms
• Take land, make it private and give titles to property
• Property rights encourage risks with assets
• Weak organized labor
• Strong, centralized authoritarian states
• Skilled technocrats in the bureaucracies
• High domestic savings and investment
• Keeps capital local
• Education as a public good
• Managed trade
• Not free trade, many forms of high tariffs, import quotas, and others
○Some differences between the countries
• Varying levels of state involvement
• Firm size and networks
• Korea has large conglomerates (chaebol), Taiwan had many small companies
• Foreign investment source
○Most of these countries have moved away from low-cost producers and moved to high-tech
manufacturing
• "Moving up the value chain"
○ELI might not always be able to be successful
• Asian tigers faced lower competition in these lower cost markets
• Many OECD countries started liberalizing trade during these periods, opening massive new
markets
• Difficult to have a bureaucracy determine which industries to promote
• Collaborative Strategies for LDCs
○Some developing countries have tried to work together to better their terms of trade
○Most developing countries were still exporting raw goods under GATT, which targeted
manufacturing
○1970s saw a full-scale revolt with the Non-Aligned Movement
• Avoided taking sides in the Cold War to play the countries off each other
○G77 formed to try and get better treatment in global market
• Commodity price stabilization
• Direct financial transfers
• Access to rich country markets
○NIEO, an attempt by G77, tried to remake the rules governing IFIs and commodity markets
○
find more resources at oneclass.com
find more resources at oneclass.com