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Development Economics

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elena isac

on 8 May 2010

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Transcript of Development Economics

Schools of thought Jeffrey Sachs Dambisa Moyo William Easterly Paul Collier security trade laws and charters aid Instruments governance TRAPS landlocked
countries resource
curse conflict > Economist of Columbia

> "The End of Poverty" , 2005

> "Utopian" planners

> Argues for ending poverty by pumping millions into the underdeveloped world, washing away malaria, diarrhea deaths and famine

> Economist from NYU and former economist at World Bank

> "The White Man's Burden"

> Consummate pessimist

> Argues bureaucracy inevitably comes back, money is washed away, thus little progress is made
> Zambian graduate of Harvard and Oxford, former economist at Goldman Sachs

> "Dead aid"

> Argues that West should scrap its foreign aid program entirely, as it's only exacerbating Africa poverty

> 4 horsemen of African apocalypse - war poverty disease and corruption
Suggests trade policies = building alliances with the emerging economies, such as China and India, rather than focus on the traditional markets; also extend it to the capitalist markets

Criticism Prof. of economics at Oxford and Director of the Center for the Study of African Economies;
Middle ground between the optimism of Sachs and pessimism of Easterly

> analyzes the problem of the bottom billion based on econometrics
> identifying the bottom billion
World's poorest nations, such as Bolivia, Burma, Cambodia, the Central African republics, Laos, North Korea and Yemen.

> external assistance can help to break the 4 traps
main arguments Suggested Policies .. Anna Rumyantseva | Elena Isac, | Shailendra Dhaubhadel | Sorin Bucur
A new agenda for action in development policies Development
Economics Aid in most forms is ineffective and is only a small part of the solution.

Change the way aid is provided, to make it more effective and increase the scope for aid absorption

> Once a country has had one civil war, they are likely to have more

> The poorer a country becomes, the more likely it is to fall into a civil war Dutch disease: the resource exports cause the country’s currency to rise in value against other currencies. This makes the country’s other export activities uncompetitive. Yet these other activities might have been the best vehicle for technological progress. Resources are killing growth by killing exports > Neighbors matter for transport corridors, open markets

> Natural barrier for transport

> If you combine a numerous slow-growing individual economies, you have a poor, slow-growing regional economy >Three quarters of the bottom billion live in countries that are either failing, or recently were failed states – countries such as Somalia, Haiti, Sudan, Zimbabwe.

>While governments do not function, or exist only to benefit themselves, development is ultimately impossible.
Need to establish a set of international standards for different important issues and scenarios facing the bottom billion:

natural resource extraction
budget transparency
post conflict recovery. > Rich country trade policy

> High trade barriers = key source of corruption

> Productivity growth is produced by COMPETITION.
- NO domestic competition, markets often too small
- NO external competition, due to trade barriers
Subsidizing the production of crops

Tariff escalation on processed materials

The bottom billion has no role in WTO

Productivity growth is produced by COMPETITION
Military intervention might be needed in certain cases

Cases of conflict will require an external military presence for a long time, lasting for around a decade this makes it harder for the bottom billion to diversify their exports by processing the raw materials before exporting them

Manufacturing is the surest route to development

Tariffs against the bottom billion should be removed, where there are already tariffs against Asia

Export diversification

Specialization and moving from products to task

Converting resource based rents into productive assets

Infrastructure and trade logistics
Industrial cluster
Regional integration

Natural resource extraction

Knowledge and construction Developed countries
Further ... Increase the role in the WTO
Rethinking WTO
Trade liberalization should not happen as a "big bang" effect
[Friedrich List]
One simple scheme - the same one across OECD - with more generous rules of origin, pan-African coverage and a 2015 phase-out
Change of the mindset
BIG PUSH = large but temporary aid
Criticism Selling Out the Bottom Billion by Daniel Ben-Ami (The spiked review of books) The Least Among Us by Neil Ferguson (New York Review) Foreign Aid Goes Military! By William Easterly (New York Review) “Seventy per cent of the billion poorest people live in Africa” The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It by Ruth Uwaifo Oyelere (FAITH & ECONOMICS) References Further discussion 2. “Imperialism is capitalism at that stage of development at which…the division of all territories of the globe among the biggest capitalist powers has been completed.”

Is aid getting more imperialistic?

1. Can the bottom billion catch up within the next 40 years ? OUTLINE 1. Schools of thought
2. "The Bottom Billion" (Collier)
3. Criticism
4. Suggested policies
5. Further discussion

> Too simplistic view to assume that all aid is corrupt and useless

> Economic climate of crisis Vladimir Lenin, 1916
Industrialization and the bottom billion Negotiating contract
Encourage long term contract
Transparency in revenues
Aggregate saving decision
Public investment decision Trade preference
Capacity building for trade
Aid for trade

Ben-Ami, D. (2007, July). Selling out the ‘bottom billion’. London.

Collier, P. (2007). The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford University Press.

Craft, P. (2009). Re-thinking Foreign Aid: Paul Collier’s The Bottom Billion and Dambisa Moyo’s Dead Aid. The Stanford Review , XLII (3).

Easterly, W. (2008, December 4). Foreign Aid Goes Military! The New York Review of Books .

Ferguson, N. (2007, July 1). The Least Among Us. The New York Times .

Industrial Development Report 2009. Breaking In and Moving Up: New Industrial Challenges for the Bottom Billion and the Middle-Income Countries. Vienna, Austria: United Nations Industrial Development Organization.

Kandeh K. Yumkella, P. C. (2009). Industrial Development Report 2009. UNIDO.

MunkDebates (Producer). Is foreign aid to the developing countries doing more harm than good?” [Motion Picture]. United States.

Oyelere, R. U. (n.d.). The Bottom Billion: Why the Poorest Countries Are Failing and. FAITH & ECONOMICS , 86-90.

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