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economic growth and economic development - Coggle Diagram
economic growth and economic development
Import substitution
Import Substitution Industry (ISI), inward oriented strategy
Produce more than import
advantages
protects jobs
protects the local culture and social habits
protects the economy from the power
Disadvantages
reduce economic growth in long run
does not benefit from comparative advantage
inefficiency
possibility of high rate of inflation
may cause other countries to take retaliatory protectionist measures
Export Promotion
export-led growth, outward-oriented growth strategy
increases export
Policies:
Liberalized trade
Liberalised capital flows
floating exchange rate.
Investment in infrastructure
minimal government intervention
Trade Liberalisation
removal of trade barriers
10 common reforms (Washington Concensus) :
Fiscal discipline (balanced budget)
Redirect spending priorities
Lower marginal tax rates and broaden the tax base
Interest rate liberalization
competitive exchange rate
Trade liberalization
Liberalization of FDI inflows
Privatization
Deregulation
Secure property rights
criticism for this movement is called anti-globalisation
a way to ensure that MNCs have access to cheap labour markets
did not lead to high economic growth
Bilateral and regional preferential trade agreements
related to preferential trading areas
trading bloc give preferential access to products from other member countries
may be between two countries or two regional groups
Diversification
One major problem for a number of developing countries
to move from the production and export of primary commodities to replace these with the production
export of manufactured and semi-manufactured products
advantages:
from the volatile changes in primary product prices
stabilize or increase export revenue
increase employment
increased use of technology
increased demand for more highly skilled workers
barrier: tariff escalation, need for more highly qualified workforce