2018/6/12 International Political Economy 1

International Development

and Aid

Min Shu

Waseda University

Group Presentation in Thematic Classes

Contents of the group presentation on June 26

Related chapter in Global Political Economy

Pre-assigned current issue(s)

Book chapter for Group 11

Ch12: ‘Global Growth, Inequality, and Poverty’

Current issue for Group 12

‘The Schengen Crisis and the Refugee Inflow to Europe’

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Outline of the lecture

What is (economic) development?

Industrialization: import-substitution or export-

promotion

Neo-liberalism and the Washington Consensus

1960-70s: North-South conflict and the NIEO

1980s: the debt crisis

1990s-: human development and poverty reduction

International development: ODA, World Bank and

private investment

Group presentations

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What is (economic) development?

What is development?

Economic growth

A multi-dimensional view on development

Economic development: multiple aspects

Improving people’s living standards

Industrialization, capital accumulation, technological evolution,

environment protection, etc.

Modernization of the society

Measuring economic development

Developed and developing countries

GDP per capita, economic growth rate

Income gap within individual countries

The Gini coefficient

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Nominal GDP per capita in 2016 (IMF)

http://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWORLD

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Gini coefficient in 2008~2013 (WB)

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What is (economic) development?

Development economics

Stages of economic development (Rostow)

Traditional society mass consumption society

Traditional society, Pre-conditions for take-off, Take-off, The

drive to maturity, Age of high mass-consumption

Structure of economic development (Lewis)

Agricultural economy industrial economy

Surplus labor and urban-industrailization

Neo-classical views on economic development

Vital roles of the market

Path to industrialization

Import-substituting industrialization

Export-oriented industrialization

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What is (economic) development?

State-led development

State intervention in the forms of industrial policy and/or trade

policy to achieve economic development

The developmental state in East Asia

Neo-liberalist views on development

Economic development based on market mechanism

Privatization and deregulation

Implications of economic development

Political institutions and democratization

Changes of social structure

Environmental impacts

…

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Industrialization:

import-substitution or export-promotion

Industrialization and economic development Moving beyond the agricultural economy

Mobility of labor: from agriculture to manufacture

Import-substituting industrialization Erecting trade barriers to protect local industries

Industrialization based on domestic industrial development

Export-oriented industrialization Using FDIs to promote exporting industries

Industrialization based on comparative advantage

Experiences of East Asia and Latin America

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State-led development and

the East Asian miracle

Newly industrialized economies (NIEs) in East Asia

1970s: South Korea, Taiwan, Hong Kong, and Singapore

1980s-: Thailand, Malaysia, the Philippines and Indonesia

2000s: China, Vietnam and India

State-led industrial policy

Guiding (private) investment to specific industries/sectors

Credit allocation, tax break, and trade protection

Promoting industrial upgrade

Textile steel automobile & semiconductor IT & high tech

The coordination between the state and business

Alliance capitalism (crony capitalism); state capitalism

Business sector receives support of the government

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State-led development and

the East Asian miracle

State-led development and the Asian values

Loyalty to authorities

Personal connections and networks

Bureaucrat-centered society

Economic foundations of rapid growth in East Asia

Emphasis on education

High saving rate

Inflow of FDIs

Human capitals

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Neo-liberalism and

Washington Consensus

What is neo-liberalism?

Economic policies based on neo-classic economic thoughts

Different from neo-liberalism in IR theories

Emphasising the roles of the market

Opposing state intervention

The rise of neo-liberalism

Keynesian economics under attack in the 1970s and 80s

The poverty trap; middle income trap

government failure or market failure?

IMF and World Bank policies

Post-Cold War US influences on global economic policy-

making

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Neo-liberalism and

Washington Consensus

The Washington Consensus Fiscal discipline

Removing subsidies

Tax reform

Market-based interest rate

Competitive exchange rate

Trade liberalization

FDI liberalization

SOE privatization

Deregulation

Property rights

Yet, the downside of market mechanism has been exposed by the global financial crisis in 2008

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1960-70s: North-South conflict and the NIEO

The focus of economic development 1960s: GNP growth

1970s: Basic Human Needs (GHN)

The North-South problem 1964 UN Conference of Trade and Development (UNCTD)

1973 Oil embargo against the US

1974 Declaration for the Establishment of a New International

Economic Order adopted by the UN General Assembly

1981 the North-South Summit failed

Developing countries resisting the IEO dominated by developed countries

However, facing domestic instability and global weakness

Failed to form a united front

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1980s: the Debt Crisis

Reasons behind the Debt Crisis

Trade deficit resulting from the increasing oil price

Oil dollars offered cheap credit through international capital

market

Deficit countries borrowed large amount of oil dollars

Mounting international debts in some developing countries

Unfolding of the Debt Crisis

1982 Mexico declared it unable to repay its debt

Debt crisis quickly spread to other Latin American countries

Impacts of the Debt Crisis

IMF and World Bank demands

Emergency policies: currency depreciation, fiscal austerity, etc.

Long-term policies: deregulation, privatization, etc.

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1990s onwards:

human development and poverty reduction

Human development

Since 1990 UN Development Programme have published

Human Development Report annually

Human Development Index (HDI)

Gender-related Development Index (GDI)

Gender Empowerment Measurement (GEM)

Human Poverty Index (HPI)

Poverty reduction

UN: the Millennium Development Goals

(1) poverty and hunger; (2) universal education; (3) gender equality;

(4) child mortality; (5) maternal health; (6) combat HIV/AIDS; (7)

environmental sustainability; (8) global partnership

IMF and WB: Poverty Reduction Strategy Papers (PRSP)

Poverty reduction: past and future

Rapid reduction of poverty

in the past two decades

However, an uneven future…

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International development:

ODA, World Bank and private investment

Official Development Assistance (ODA)

ODA was initially used to support non-communist regimes

Different countries’ ODA

Japan: mercantilist; US: strategic; EU: humanitarian

World Bank

World Bank Group: IBRD, IDA, IFC, MIGA

Policy frontier of international development

Private investment

Investment of private corporation

International NGOs

Philanthropy organizations

Group Presentation

International development

From WB to NDB and AIIB

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