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"
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