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Lecture TopicLecture Topic Economic Economic DevelopmentDevelopmentMay 27, 2008May 27, 2008
Professor Timothy C. LimCal State Los [email protected]
POLS/ECON 426 International Political Economy
what is development?
““Like many concepts in the social sciences the concept Like many concepts in the social sciences the concept of development remains ill-defined and contested.”of development remains ill-defined and contested.”
Yet, to have a serious and substantive discussion of Yet, to have a serious and substantive discussion of “development” requires that we have a clear-cut idea “development” requires that we have a clear-cut idea
of what is meant by the term, so …of what is meant by the term, so …
what is development?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
what is development?
The standard measure of development is economic The standard measure of development is economic growth, and more specifically growth, and more specifically GDPGDP growth growth
This approach emphasizes This approach emphasizes economic variableseconomic variables exclusively and focuses on aggregate growthexclusively and focuses on aggregate growth
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
In the standard definition,any increase in GDP signifies
“development”
what is development?
Development-as-GDP-growth has several advantages:
Increasing GDP can be considered a prerequisite to social and social progress; equity is a function of growth
GDP is well understood and easily measured (in most cases); it allows for meaningful cross-national comparisons
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
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Country ACountry ACountry BCountry B
GDP
GDP tells us that country A is more
developed than country B
what is development?
Many critics have argued that GDP growth, by itself, is a poor indicator of development
They argue that any conception of development must include a number of other variables, such as:
Recognizing the limitations of GDP, critics developed an alternative, known as …
EquityHealthEducation
human development index
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
High█ 0.950 and over█ 0.900–0.949█ 0.850–0.899█ 0.800–0.849
Medium█ 0.750–0.799█ 0.700–0.749█ 0.650–0.699█ 0.600–0.649█ 0.550–0.599█ 0.500–0.549
Low█ 0.450–0.499█ 0.400–0.449█ 0.350–0.399█ under 0.350█ not available
also known as HDI
what is human development?
what is human development?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
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are needed to see this picture.
This video, produced by the UNDP
(the creator of the HDI), provides an
overview of the human development
concept
For more information,go to the following
website:http://hdr.undp.org/
HDI versus GDP
The use of GDP per capita versus the HDI is not just a statistical exercise
“Because the HDI measures
social factors it will give higher rankings to
societies that have a more equal distribution of wealth and invest in social services. In contrast GNP per capita can rank societies that have a large amount of wealth highly no matter what its distribution amongst the population.”
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
Final Point: The debate over the best way to define development continues. Most agree, however, that development is more than just GDP growth
what is human development?
theoretical perspectives
“The political economy of development has initiated a number of theoretical debates and controversies.”
Not surprisingly, the disagreements largely reflect the same theoretical divisions we have been discussing all quarter
For our purposes, though, it might be better to divide the debate into two basic schisms:
Internal causation theory
External causation theory
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
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You should already have a good sense of how development is
explained from these two perspectives
You should already have a good sense of how development is
explained from these two perspectives
theoretical perspectives
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
“The causes of underdevelopment are to be found in the underdeveloped
society and the solution to underdevelopment is therefore
to be found at the domestic level”
Internal Causation Theory External Causation Theory
Underdevelopment is the result of external forces that constrain a society’s efforts to develop. Underdevelopment is primarily a product of exploitation, of the rich oppressing and hurting the poorer countries of the world.
What is the authors’ view?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
“From the perspective taken in this book, both internal causation and external
causation theories are flawed. A complex phenomenon such as development is not
attributable to forces arising from a single level of analysis.
National societies are … integrally linked to an emerging global political economy….
[but] external structures are mediated through internal processes in ways that are
not automatic thus raising serious questions about the external causation approach”
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
+
the authors, therefore, suggest an integrated approach
consider the development of South Korea and Taiwan
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
South Korea and Taiwan utterly transformed their economies and societies in less than two generationsSouth Korea and Taiwan utterly transformed their economies and societies in less than two generations
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
Seoul 1950Seoul 2005
South Korea, which was one ofthe world’s poorest countries inthe 1950s, is now one of the richest
In terms of HDI, South Korea is26th in world, with a score of .921:it has caught up with most of theOECD
* No figures are available for Taiwan, but it’s rank would be similar
South Korea, which was one ofthe world’s poorest countries inthe 1950s, is now one of the richest
In terms of HDI, South Korea is26th in world, with a score of .921:it has caught up with most of theOECD
* No figures are available for Taiwan, but it’s rank would be similar
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
how did Korea and Taiwan achieve their success?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the story of South Korea’s and Taiwan’s is complicated and subject to intense debate
Some things, however, are very clear
both economies successfully pursued a policy of export-led industrialization (or export-oriented industrialization, EOI)
both economies also simultaneously pursued a strategy of import-substitution industrialization (ISI) and infant industry protection
both economies limited and/or carefully managed FDI
in neither economy were domestic prices determined by the “invisible hand” of market competition; instead, the state played a key role
both economies were heavily protected through both tariff and non-tariff barriers, and subsidies were pervasive
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
some very clear aspects of South Korean and Taiwanese development (continued)
in general, both economies had effective, highly interventionist, neo-mercantilist and non-democratic states (during the period of most rapid economic growth)
neither country accepted passively its position in the global division of labor: both quickly moved from low skilled, labor-intensive, and low value-added sectors to high skilled, capital intensive, and high value-added sectors
both countries had a special relationship with the United States and occupied important positions in the geopolitical framework of the Cold War era
both countries have a well educated population
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the upshot?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
Korean and Taiwanese development is a product of both internal and external factors. It reflects liberal
principles insofar as international trade was integral to their success. But it also unequivocally reflects the
heavy and very visible hand of the state.
Events since 1997 show, however, that both economies remain vulnerable to external forces and
processes: they are part of the global economy, which is governed by both market forces and power.
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Developmentthe upshot?
major developments
The last, historical, point about South Korean and Taiwanese development must be highlighted: their development occurred during a relatively opportune time, but …
the times have changed
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
development project 1947-1981 reliance on the state regulation good focus on national market death of classical liberalism discourse of managed trade
globalization project 1982-2006 reliance on the market regulation evil focus on global market death of keynesianism discourse of free trade
what are the two major periods or historical projects discussed by the authors?
major developments
what is the significance of these two periods with regard to questions of development?
is it harder to develop today than in the past? why or why not?
why did the era of the development project end? is the era of the globalization project ending?
what is the alternative?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
Always remember: Things change, and they usually change for a reason. In IPE/GPE, one key mechanism or reason for change is the double
movement
review
what’s the double movement?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
what’s the double movement?
action.
deliberate, planned creation of an unfettered liberal market. consider the washington consensus
reaction.
political response to the suffering caused by the liberal market
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the simple answer: action-reaction
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
Much of the history of the international and global political economy in the 20th century (and
early 21st century) can be understood in terms of the double movement
The embrace of Marxism and communism in the early 1900s, the rise of fascism in the 1930s,
the emergence of the welfare state, the rise of fundamentalism, and the present day “alter-
globalization” movement
All were responses to the development, (re-)expansion, and deepening of capitalism
the upshot?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the upshot?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
development takes place under very different conditions and circumstances; what is possible in one
era may not be possible in another era
development is an inherently political process
the globalization project has elicited a political reaction, one result of which is a movement toward
new forms and modes of development
these include sustainable development (a new form) and an increasing role for international and non-governmental organizations in promoting
national development (a new mode of development)
the upshot?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
another sign of change is in the discourse of development
the discourse of liberal economies and free trade remain strong, but we are seeing the emergence of a
new discourse focused on poverty reduction and human development
we are also witnessing a shift--albeit nascent--away from “pure” market-based solutions toward a
broader, more inclusive approach involving international cooperation, global governance, and
people- as opposed to state-based solutions
this change is partly reflected the redefined role of the world bank
the development discourse
“working for a world free of poverty”
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
solving poverty: the world bank’s new mantra
the development discourse
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the world bank’s shift in focus came after years of pushing forth an agenda of neo-liberal reforms
through “structural readjustment”
beginning in the mid-1990s, the bank has been focusing on the new goal of sustainable
development and poverty reduction as primary goals
the bank now defines its mission in terms of “investing and empowering poor people to
participate in development”
the development discourse
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
key items on the world bank’s agenda now include …
overcoming poverty and spurring growth in the poorest countries
ensuring food security by building “productive and development-oriented” safety nets
expanding access to health care and directly combating HIV/AIDS
establishing micro-credit programs
providing support for primary education, including programs to reintegrate “child-soldiers” back into
society and to provide better educational access for girls
promoting sustainable development
the development discourse
critics remain skeptical of the bank and are particularly concerned with
thebank’s decision-making process
they point to the appointment of paul wolfowitz in 2005
has the bank really changed? what
do the authors say?
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
the development discourse
the authors argue that the bank’s role has changed
they assert that “much criticism of the bank is often out of date
at the same time, the bank is is clearly subject to constraints, both dueto the influence of dominant members, but also to thebroader constraintsof the global financialsystem
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
World Bank Group President Robert Zoellick
the development discourse
what ever one’s view of the world bank, it is important to recognize that both the rhetoric--and, to a significant degree--
the actual lending policies of the bank have changed
this change reflects two basic processes
the failure of neo-liberal policies to solve the “development problem”
the emergence of alternative voices in the development debate
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where have the alternative voices come from?
the development discourse
there are, of course, very many
alternative voices, but …
one good representative is bono
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
bono has been heavily involved in a variety of issues, but his
work on debt relief stands out
the development discourse
more generally, we can argue that civil society is playing an increasing important role on specific issues, especially development,
in the global political economy
the role of civil society, however, is complicated
it is sometimes direct--as in the work non-governmental organizations do--but also indirect in terms of influencing public policy, both nationally and
internationally, and in reshaping the discourse on development and other issues
the increasing role of civil society also complicates the dynamics of the global political economy
Dynamics of the World Economy
Economic Development
Dynamics of the World Economy
Economic Development
how this impacts the process of development remains to be seen