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Lecture Topic Economic Development May 27, 2008 Professor Timothy C. Lim Cal State Los Angeles POLS/ECON 426.

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Presentation on theme: "Lecture Topic Economic Development May 27, 2008 Professor Timothy C. Lim Cal State Los Angeles POLS/ECON 426."— Presentation transcript:

1 Lecture Topic Economic Development May 27, 2008 Professor Timothy C. Lim Cal State Los Angeles POLS/ECON 426 International Political Economy

2 what is development? Like many concepts in the social sciences the concept of development remains ill-defined and contested. Yet, to have a serious and substantive discussion of development requires that we have a clear-cut idea of what is meant by the term, so … what is development? Dynamics of the World Economy Economic Development

3 what is development? The standard measure of development is economic growth, and more specifically GDP GDP growth This approach emphasizes economic variables exclusively and focuses on aggregate growth Dynamics of the World Economy Economic Development In the standard definition, any increase in GDP signifies development

4 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 Country A Country B GDP tells us that country A is more developed than country B

5 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 … Equity Health Education

6 human development index Dynamics of the World Economy Economic Development High and over 0.900– – –0.849 Medium 0.750– – – – – –0.549 Low 0.450– – –0.399 under not available also known as HDI what is human development?

7 what is human development? Dynamics of the World Economy Economic Development 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:

8 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 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?

9 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 You should already have a good sense of how development is explained from these two perspectives

10 theoretical perspectives 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 societys efforts to develop. Underdevelopment is primarily a product of exploitation, of the rich oppressing and hurting the poorer countries of the world.

11 What is the authors view? Dynamics of the World Economy Economic Development

12 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 + the authors, therefore, suggest an integrated approach

13 consider the development of South Korea and Taiwan

14 South Korea and Taiwan utterly transformed their economies and societies in less than two generations South Korea and Taiwan utterly transformed their economies and societies in less than two generations Dynamics of the World Economy Economic Development Seoul 1950 Seoul 2005

15 South Korea, which was one of the worlds poorest countries in the 1950s, is now one of the richest In terms of HDI, South Korea is 26th in world, with a score of.921: it has caught up with most of the OECD * No figures are available for Taiwan, but its rank would be similar South Korea, which was one of the worlds poorest countries in the 1950s, is now one of the richest In terms of HDI, South Korea is 26th in world, with a score of.921: it has caught up with most of the OECD * No figures are available for Taiwan, but its rank would be similar Dynamics of the World Economy Economic Development

16 how did Korea and Taiwan achieve their success?

17 the story of South Koreas and Taiwans 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

18 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

19 the upshot?

20 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 the upshot?

21 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 development project reliance on the state regulation good focus on national market death of classical liberalism discourse of managed trade globalization project 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?

22 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 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

23 review whats the double movement? Dynamics of the World Economy Economic Development

24 whats 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 the simple answer: action-reaction

25 Dynamics of the World Economy Economic Development Much of the history of the international and global political economy in the 20 th 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

26 the upshot? Dynamics of the World Economy Economic Development

27 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)

28 the upshot? 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

29 the development discourse working for a world free of poverty Dynamics of the World Economy Economic Development solving poverty: the world banks new mantra

30 the development discourse Dynamics of the World Economy Economic Development the world banks 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

31 the development discourse Dynamics of the World Economy Economic Development key items on the world banks 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

32 the development discourse critics remain skeptical of the bank and are particularly concerned with the banks 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

33 the development discourse the authors argue that the banks 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 due to the influence of dominant members, but also to the broader constraints of the global financial system Dynamics of the World Economy Economic Development World Bank Group President Robert Zoellick

34 the development discourse what ever ones 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 Dynamics of the World Economy Economic Development where have the alternative voices come from?

35 the development discourse there are, of course, very many alternative voices, but … one good representative is bono 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

36 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 how this impacts the process of development remains to be seen


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