Lecture Topic Economic Development May 27, 2008 Professor Timothy C. Lim Cal State Los Angeles...

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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 …


Dynamics of the World Economy

Economic 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





In the standard definition,any increase in GDP signifies

“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





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Country ACountry ACountry BCountry B

GDP

GDP tells us that country A is more

developed than country B


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





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?






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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.”





Final Point: The debate over the best way to define development continues. Most agree, however, that development is more than just GDP growth


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





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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





“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?





“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”





+

the authors, therefore, suggest an integrated approach

consider the development of South Korea and Taiwan





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





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





how did Korea and Taiwan achieve their success?





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





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





the upshot?





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.




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





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?





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?





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





the simple answer: action-reaction





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?





the upshot?





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?





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”





solving poverty: the world bank’s new mantra






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”






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


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?






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





World Bank Group President Robert Zoellick


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?


there are, of course, very many

alternative voices, but …

one good representative is bono





bono has been heavily involved in a variety of issues, but his

work on debt relief stands out


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





how this impacts the process of development remains to be seen

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Lecture Topic Economic Development May 27, 2008 Professor Timothy C. Lim Cal State Los Angeles...

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