AEB 4283: International Development Policy Section III: International Problems and Policies Week 15: Review and Wrap-up Today, Wednesday: § Schedule Change Announcements: § Exam #3 will be on last day of class, Dec 5, Monday (original Nov 16) § Project paper deadline, Dec 7, Wednesday (original Dec 5), 5 pm § No Make-ups for Exam #3 and Project paper (will be out of country) § Review your course grades so far on Canvas on Monday § Last class on Monday, no more classes!
The Take-Home Message
The Four Economic Role Models for Developing Countries, by Robert J. Shapiro, Futurecast, 2008. n n n USA, China, Ireland, and South Korea. USA • Big-country model of the benefits of unregulated markets, strong public investment in education and infrastructure, entrepreneurism, domestically-driven development, and aggressive globalization. • Basic democratic politics, limited social benefits and protections, and a tolerance for a relatively high inequality. • Model for India and, perhaps in time, Germany, France, Brazil, and Mexico. China • Wages and other resources priced to attract massive foreign direct investment, a mixture of highly regulated and lightly regulated markets, low consumption and very high personal savings, strong public investment in infrastructure, educational investments targeted to only part of the population, and severely limited social benefits and protections. • Authoritarian politics and a tolerance for high inequality. • The model could appeal to African countries, the more authoritarian
n The Four Economic Role Models for Developing Countries, by Robert J. Shapiro, Futurecast, 2008. Ireland • Small country model for the benefits of tax and subsidy policies designed to attract large-scale foreign direct investment, substantial investments in education and infrastructure, and relatively limited social benefits and protections. • Middle-class democracy and relative equality. • Because Ireland’s success is tied to its economic access to the European Union, it is becoming a model for transitional economies in central and Eastern Europe. n South Korea • Another small-country model based on massive public and private investments in education and health care, large initial subsidies for core industries accompanied by low barriers to imports and foreign competition, substantial social protections which, like the industrial subsidies, phase down, and support for entrepreneurism. • Unlike Ireland, it relied initially on authoritarian politics, with a prospect of a transition to democracy. • Could become a model for some African and Asian countries with
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n n n Improve agricultural productivity (implement a well-thoughtout land reform, if needed) – Move into labor-intensive manufacturing and then eventually into high-tech manufacturing and a service economy. Relatively open, market-oriented economies with strong property rights. Embrace globalization • Foster entrepreneurism and innovation. Make it easy to set up a business. • Receptive to foreign direct investment (FDI). • Negotiate conditions for FDI without scaring away investors (multinationals). • DCs must remove trade barriers to agricultural and manufactured products from LDCs.
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n n n Invest in human capital, even if you have plenty of mineral resources. • Countries should be obsessed about education, particularly on the STEM fields. The role of social capital (pp. 558 -559). Historical patterns of development matter: • Egalitarian agrarian societies vs. unequal societies (agrarian or mineral-based) • Religion? (e. g. , Protestants vs. Catholics). • Ethnic heterogeneity within a country. • Geography can be overcome: Switzerland, Botswana, Israel, Chile.
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n If Economic Development were a class and developing countries were students: • Best students would be: n Asia: South Korea, Singapore, Hong Kong, Taiwan, Israel. n Latin America: Chile, Costa Rica and Barbados. n Africa: Botswana and Mauritius. • Honor Mentions (for recent accomplishments): n Asia: Bangladesh (for microfinance and vibrant NGO sector). n Latin America: Mexico, Brazil (for social programs based on conditional cash transfers). n Africa: Ghana (for progress of democratic institutions).
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n If Economic Development were a class and developing countries were students: • Students who turned around: n China, India. • Greatest disappointments: n Philippines (Asia) and Argentina (Latin America). • Hall of Shame: n Asia: Pakistan, North Korea (how can you build nuclear weapons and go through a famine at the same time? ), many oil-rich Middle-East countries. n Latin America: Haiti, Bolivia, Venezuela, Nicaragua (the last three for waging war on the entrepreneurial class and property rights in general, in addition to government incompetence).
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n n Is there a role for government? • Yes. Just look at East Asian countries. Governments can be a force for good or for evil. Is there a role for multinational corporations? • Yes. Just look at Botswana (there are many other examples). MNCs are not in the business of helping people or countries per se. They are in the business of making money. But governments of LDCs can channel the resources, know-how and energy of MNCs to trigger economic development.
In conclusion, how can a low-income country become a middle- and eventually a highincome country? n Is there a role foreign aid? • I am a bit skeptical about ambitious aid programs channeled through governments of LDCs, especially in countries with a clear record of corruption. • Micro-loan programs targeting entrepreneurs in LDCs hold much greater potential (e. g. , Kiva). • Small-scale aid projects reaching clearly-identified beneficiaries in LDCs also have potential (e. g. , Water Aid). • Health campaigns funded with foreign aid have been hugely beneficial. • The impact of social entrepreneurs will grow in the future.
In conclusion, how can a low-income country become a middle- and eventually a highincome country? Economic development needs to be homegrown, from the bottom up (China’s transition to capitalism is a good example, despite its totalitarian government). Not too much success with top-down approaches. n Democracy needs to be homegrown too (hope for the Middle East? – the Arab Spring). n Advantage of common law (England) vs. civil law (France, Spain). n Improvements to doing business. William Easterly reports in 2006: n “It takes 153 days to start a business in Maputo, but two days in Toronto. It costs $2, 042 or 126% of the debt value to enforce a contract in Jakarta, but $1, 300 or 5. 4% of the debt value to do so in Seoul. It takes 21 procedures to register commercial property
My objectives in this course n n n That you learned something That you enjoyed the course That in the months and years ahead in your professional careers, or even just as you watch the news or read the newspaper you will encounter articles that will remind you of the issues we discussed in this course That this course will help you to better understand appreciate the significance of these issues That you are now better “Citizens of the World”
“The Gator Nation Seeks to. . . n n “Go find a cure for cancer!” “Go write the great American novel!” “Go to Mars!” “Go eliminate world hunger and poverty!”
And Regardless of Your Opinions and Views on International Development Policy. . . Go forth and do great things, both personally and professionally! But also do great things for your community, your state, your nation and the world to make it a better place for ALL people to live!
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