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Economic DevelopmentKey terms and concepts
The Global Economy: economic Development
UNIT 6: Aid, debt, and economic development
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Key Terms and Concepts: Aid, Debt, and Economic Development .............................................78 Lesson 1: Introduction to Aid, Debt, and Economic Development .....................................................79-80 Lesson 2: Types of Aid ..........................................................................................................................81-87 Lesson 3: Concerns about Aid .............................................................................................................88-89 Lesson 4: Non- Government Organizations (NGO's) ..........................................................................90-92 Lesson 5: The International Monetary Fund (IMF) .............................................................................93-94 Lesson 6: Structural Adjustment Policies (SAP's) ................................................................................95-98 Review Questions: Aid, Debt, and Development Economics.............................................................99
The Global Economy: economic Development
Key Terms and Concepts: Balance between Free Markets and Government Intervention ........................100 Lesson 1: Introduction to Balance between Free Markets and Government Intervention ..............................101-104 Lesson 2: Free-Market Led Strategies ................................................................................................................105-109 Lesson 3: Interventionist Strategies ...................................................................................................................110-112 Lesson 4: Conclusion: The Balance between Free Markets and Government Intervention ...........................113-114 Review Questions: The Balance between Free Markets and Government Intervention .................................115 Sources .......................................................................................................................................................................116
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Fundamental Vocabulary and Concepts
Aid Foreign Aid Official Development Assistance (ODA) Non-Governmental Organization (NGO) Humanitarian Aid Food Aid Medical Aid Emergency Aid OECD De e e A a ce Committee (DAC) Official Aid Development Aid Long Term Loans Tied Aid Project Aid Technical Assistance Aid Commodity Aid Bilateral Aid Multilateral Aide A de Wea e Indebtedness International Monetary Fund (IMF) Structural Adjustment Policies (SAPs) Third World Debt Crisis S e d g P b e L e Heavily Indebted Poor Countries (HIPC)Initiative
trade strategies for economic growth and economic development
• import substitution industrialization (ISI) • export promotion (export-led growth or outward oriented growth strategy) • trade liberalization • bilateral and regional preferential trade agreements • diversification (in exports)
source: jocelyn blink
import substitution industrialization (ISI)
• key idea: “produce it rather than import it!” • inward-oriented strategy • strategy:
– that a developing country should, whenever possible, produce goods domestically, rather than import them • it is the opposite of export-led growth • in order for it to work, there need to be some necessary conditions:
– the government needs to adopt a policy of organizing the selection of goods to produce domestically – subsidies are made available to encourage domestic industries – government needs to implement a protectionist system with tariff barriers to keep out foreign goods
source: jocelyn blink
advantages: import substitution
• protects jobs in domestic market • protects local culture and social habits • protects the economy from the power, and possibly bad influence of MNCs
source: jocelyn blink
disadvantages: import substitution
• may only protect jobs in the short-run • means that the country does not enjoy the benefits to be gained by comparative advantage and specialization • may lead to inefficiency in domestic firms • it may lead to high rates of inflation due to domestic aggregate supply constraints • it may cause retaliatory measures
source: jocelyn blink
export promotion
• key idea: “increase trade for growth!” • outward-oriented growth strategy • economic growth is achieved by concentrating on increasing exports and export revenue as a leading factor in the aggregate demand of a country • increase exports should = increased GDP which should = higher incomes which should = growth • country concentrates on producing and exporting products in which it has a comparative advantage
source: jocelyn blink
export promotion
• in order to achieve this, it is assumed that a country will need to adopt certain policies
– liberalized trade – liberalized capital flows – a floating exchange rate – investment in the provision of infrastructure to enable trade to take place – deregulation and minimal government intervention
this list illustrates a “package” of policies associated with export led growth
source: jocelyn blink
differences between primary and manufactured products as engine for growth
• difficult through the export promotion of primary goods • focus of export-led growth is usually on increasing manufactured exports
– Japan, South Korea, Singapore, Taiwan • focus on their comparative advantage
source: jocelyn blink
possible problems: export promotion
• leads to increased protectionism in developed nations against manufactured products from developing nations • certain assumptions were made about the necessary conditions for manufactured led export growth • increased arrival of MNCs • may increase inequality
source: jocelyn blink
