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Chapter 4

IDSB01H3 Chapter Notes - Chapter 4: Neoclassical Economics, Group Cohesiveness, Four Asian Tigers


Department
International Development Studies
Course Code
IDSB01H3
Professor
Ryan Isakson
Chapter
4

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IDSB01 - Chapter 4: Political Economic Challenges
Major political economic problems impede the achievement of a stable and prosperous
world. Addressing this challenge requires a deeper understanding of the nature of
uneven development, trade and debt, speculation and financial instability,
unemployment, economic inequality, and energy and environmental stresses.
Uneven development
Economic development on a global scale continues to be remarkably lopsided
This is the essence of what is commonly called the ‘North-South problem’
The developing nations are in a different league
Some formerly poor countries have certainly experience significant
industrialization and economic modernization over the past couple of decades.
South Korea, Singapore, Hong Kong, and Taiwan — the so-called ‘four
Asian tigers’ — achieved particularly rapid growth in per capita incomes
in the last 2 decades of the 20th century, while others, such as Malaysia
and Thailand, also had rapid increases in national prosperity (although, as
the regional economic crisis of the late 1990s reminded us, what goes up
can come down, too)
India and China as well have had very impressive economic
performances
The persistence of these glaring economic inequalities on a global scale is not
conducive to a stable world economic order.
The challenge is to establish more effective mechanisms to narrow the gap
between rich and poor, developed and underdeveloped.
Trade imbalances and debt
Uneven development is partly a product of trade imbalances and cumulative
debt
Trade deficits are understandably the norm among the poorer nations. Their
exports are, typically, primary products — produce of farming, forestry, fishing,
and mineral extraction — while their imports are characteristically manufactured
goods
Nations with trade deficits can finance them by the inflow of foreign investment
or the accumulation of debt.
Owing and debt though can result in the debt trap — where they must borrow
more and more in order to meet interest payments the sort of situation in which,
on a larger scale, many of the poorer nations have slipped. Such debts impede
economic development
The central role played by the IMF and the WB in these processes has led to
growing demands for their reform, even for their abolition
These institutions were set up by the richer nations at the Bretton Woods
conference in 1944, ostensibly to facilitate economic security and development.
However, their critics note that more has been taken out of the poorer nations in
debt repayments than has been put in to promote economic development.
Speculation and financial instability
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