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2) then, start building heavy industries (more sophisticated manufacturing, e.g. machinery, automobiles, electronics, computing, etc.)

  • import-subtitution: helps the growth of local industries -> protective tariffs & regulations are OK for some time.
  • export-led growth: makes local industries

competitive internationally -> government can

help by stimulating it (tax breaks & subsidies)

and negotiating better trade conditions

  • concentration of capital induces industrial growth
  • as local industries grow, dependency from North/developed nations lessens (->less loan, debt)
  • education & technology transfer - avoid brain drain
  • microcredits & microlending (Grameen Bank, Bangladesh ->loans to women especially productive) -> growth of middle class -> poverty
  • authoritarian vs. democracy: the democratic way is slower (e.g. India)
  • North-South Capital Flows: FDI -> MNCs are critical, they need:

financial & political stability + favorable local regulations

  • Debt - renegotiations - get favorable terms
  • Paris Club - public/state creditors
  • London Club - private creditors
  • IMF Conditionality: how & on what terms?
  • SAP (Structural Adjustment Program)
  • WTO/ South-South trade agreements - foment local trade
  • New International Economic Order ? (since 1973)
  • Foreign Assistance /AID - Development Assistance Committee (DAC)

International Development

Economic Development:

combined processes of

  • capital accumulation,
  • rising per capita incomes,
  • increasing skill in population,
  • adoption of new technologies,
  • social changes.

Newly Industrialized Countries (NIC)

World Systems/Dependency theories, 1970s-2000):

http://www.stephenhicks.org/2011/11/24/thankfu-wealth-and-life-expectancy/

(I. Wallerstein, R. Prebish, H. Cardoso)

  • core (developed economies-manufacturing)
  • pheriphery (less developed co.-extracting)
  • semi-pheriphery (in between, large markets)

1) 1970s: export light manufactured goods, developed greatly (e.g. textile &apparel industry)

http://en.wikipedia.org/wiki/File:World_trade_map.PNG

first: by importing goods, plants, later by importing know-how

3) developing local R&D capacities and apply them to industries

4) Role of government:

strong hand, strong protection of local industries (higher import tariffs & import substitution and push for export: economic policy (subsidies & other government help)

export-oriented

* Cultural aspects: high sense of community (as a nation) and savings rate (private)

* Political aspects: support from the US during the Cold War

"Four Tigers"

South Korea, Taiwan, Hong Kong, Singapore

key to economic success:

  • free market elements,
  • massive capital accumulation
  • increased labor productivity
  • "selective intervention" of government

(IMF)

http://www.imf.org/external/pubs/ft/issues1/index.htm

Source: The World Bank, 2012

from these

Economic Development strategies

Lessons

INTERNAL FACTORS

Source: The World Bank, 2012

  • corruption & governance (transparency)

* other cultural & political factors also play a big role!

Lessons

from these

Economic Development strategies

EXTERNAL FACTORS

bilateral & multilateral aid (90% DAC), grants (free), credits (for goods), loans (development), loan guarantees, technical cooperation, military assistance, Peace Corps, UN Development Programs (UNDP), Disaster Relief (UNDRO), Handout Model, OXFAM model (1942, UK- famine: project partners)

Why Nations Fail?

(D. Acemoglu & J. Robinson, 2012)

Challenge previously presented theories, such as:

Koreas - N/S

Nogales MX/AR

  • The Geography Hypothesis (South/tropical climates count for a huge handicap in catching up, North/template climates are more beneficial for growth (e.g. Jeffrey Sachs, Jared Diamond - farming & tech. app.)
  • The Culture Hypothesis (certain cultures/religions promote more growth than others, e.g. Chinese work ethic, protestant work ethic, Latin "mañana" culture, e.g. Max Weber)
  • The Ignorance Hypothesis (ignorant leader who don´t apply the proper economic/political tools & institutions and can´t make poor nations rich - e.g. not understanding markets, e.g.T. Killick, A. Lewis)

Propose:

Extractive vs Inclusive Economic and Political Institutions

E.g. Roman Empire, Mayan city states, medieval Venice, Soviet Union, Latin America, African countries

"I´ve seen the future and it works"

Lincoln Steffen, 1931

Can we break vicious cycles and create a virtuous one?

Global Balance Sheet

http://www.economist.com/content/global_debt_clock

Which are the fastest growing countries now?

The Rise of the Rest

and how do we grow from here???....

3G Countries (2011)

...BRICS (2001)

(Global Growth Generators)

  • 11 countries with high growth rates
  • 6 key performance indicators
  • Domestic saving/investment
  • Demographic prospects
  • Health
  • Education
  • Quality of institutions and policies
  • Trade openness

http://en.wikipedia.org/wiki/3G_(countries)

New NIC/Emerging Markets (2010)

  • Mexico
  • Turkey
  • South Africa
  • Indonesia
  • Brazil, India, China
  • Intermediate income (PPP/capita)
  • Catching-up growth
  • Institutional transformations and economic opening
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