Development Strategies. What is the cause of poverty?
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Transcript of Development Strategies. What is the cause of poverty?
Development Strategies
Development Strategies
What is the cause of poverty?
Development Strategies
Which one
can solve
the problem?
Development Strategies
Introduction
Growth vs. Development Some left behind Many paths to one goal Who has the right answer???
Development Strategies
Strategies for Development (site map)
Health and Education Empowerment of Women Microcredit Free Trade and Export Promotion Intervention and Import Substitution FDI by MNCs ODA Financial Institutions Redistribution
Development Strategies
Health and Education
Merit goods with positive externalities
Capital comes from savings Benefits multiply, knock on effects Education for technology
Development Strategies
PROBLEM !
No money in poor countries How to set priorities for
primary/secondary expenditures Brain drain Health increase population and
consumption Inappropriate technologies
Development Strategies
Microcredit Schemes
Mohammed Yunus Grass-roots level Small amounts Women are the best risk Community lending schemes Pervasive growth
Development Strategies
PROBLEM!
Shift of responsibilitySharksPrivatized for profit
Development Strategies
Empowerment of Women
51%+ “Educate women, educate a
generation” Labor source Education ↑ = Income ↑ Education ↑ = Birth Rate ↓ “Glass ceiling” inequalities
Development Strategies
Free Trade Model Specialization in Factor Endowment Trade clearly increases world output BRICs data BOP problems manageable Infant Industry Access to foreign markets, globalization Rise in wages, poverty escape World prices always cheaper, autarky is bad Rewards endowed and efficient countries
Development Strategies
Neoliberal / neoclassical philosophy…
Supply-side Deregulation, free-market, laissez-
faire, globalization Privatization, foreign investment,
more competition from FDI Gov’t can do nothing right Efficiency (not equity) Washington Consensus
Development Strategies
Export Promotion or Import Substitution
Outward-looking Strategy: export promotion Open global system, encourage trade Labor/capital/products move across borders
freely, more access to world markets MNC privatization Inward-looking Strategy: import substitution Restrict imports or replace with domestic, learn
new technologies, Infant industry protection Reduce BOP deficits Self-reliance, manage own destiny
Development Strategies
PROBLEM ! LDCs vulnerability Primary export dependence Prebisch-Singer Theory: measurable decline in
Terms of Trade over time, rich-poor gap Solutions include protectionism, import
substitution N-S Model of unequal trade Synthetic substitutes weaken LDC exports DC tariff/quota/subsidy anyway Less revenues due to low income elasticity and
price elasticity
Development Strategies
FDI (Foreign Direct Investment)
MNCs, large corporations, global factories, bargaining power, offer highest returns
Brings technology, management styles, innovation, possibly tax revenues (more later), modern lifestyles
BOP balance as exports rise Managed by foreign policy/embassies
Development Strategies
PROBLEM !
Power and influence over govt policy NO tax revenue for tax-free countries “crowding out” of local firms by agreement Repatriation of wages, profits, interest,
royalties Creation of elite, expat vs foreign wage
differential Social returns may be negative,
inappropriate products
Development Strategies
Planned vs Market philosophy LDCs represent market failure Instability must be managed Unequal distribution must be righted 5-year focus, mobilization Resp gov’t attracts foreign aid Market has no soul State-sponsored cost/benefit analysis State-sponsored economic signals Public good / public expenditures in
any economy
Development Strategies
PROBLEM !
Pro-market is anti-state Market is inevitable dominant
paradigm Gov’t is notoriously inefficient Gov’t failures and corruption
Development Strategies
Redistribution
Wealth vs. Income Concentration of wealth Gini coefficient Ownership vs. Rent Africa Model: Mugabe Government intervention
Development Strategies
Aid $$$ Public: Official Development Assistance (ODA)
i.e.; bilateral or multilateral government funds Private: Unofficial i.e.; charity, UN, NGO,
commercial, banks Fills savings-investment gap, technology gap Total amount vs. %GNP “Aid-in-kind” technical assistance or material
(noted on Iraq BOP) Washington Consensus “Millennium Account”
based on accountability Concessional MDG
Development Strategies
PROBLEM ! “Tied aid” based on political behavior,
contracts, providing proxy services like anti-terrorism
Capital fosters the rich politicos Supports dictators and corruption Postpones reforms Dependence (up to 25% of GNP) % returns to donor in management fees Inappropriate projects
Development Strategies
Financial Institutions
IMF World Bank Central Banks Rural Development Banks Microcredit: Grameen Bank, small-
scale enterprise, women, group lending
Bahrain Development Bank and Business Incubator
Development Strategies
PROBLEM !
“IMFs 4 steps to damnation” IMF / WB board members Big banks neglect small people Debt: commercial rates, principle,
interest, refinancing, default Debt forgiveness