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Strategies to Promote Economic Growth and Economic Development - Coggle…

- - - - Government needs to adopt a policy of organizing the selection of goods to produce domestically (Labour-intensive, low skill manufactured goods)
        
        Subsidies are made available to encourage domestic industries
        
        Government needs to implement a protectionist system with tariff barriers to keep out foreign imports.
    - - ISI protects jobs in the domestic market, since foreign firms are prevented from competing, which means that domestic firms can dominate the market.
        
        ISI protects the local culture and social habits by practically isolating the economy from foreign influence.
        
        ISI protects the economy from the power, and possibly bad influence, of multinational corporations
    - - ISI may only protect jobs in the short-run. In the long-run, economic growth may be lower in the economy and the lack of growth may lead to a lack of job creation
        
        ISI means that the country doesn't enjoy benefits gained from comparative advantage and specialization (Inefficient)
        
        Inefficiency in domestic industries, no competition
        High rates of inflation due to domestic aggregate supply constraints
        
        Cause other countries to take retaliatory protectionist measures.
  - - - Success of "Asian tigers", since around 1965 and emergence of China (exporting powerhouse) led to increased protectionism. Trade unions in developed countries could not compete against imports from low-wage developing countries. Government lobbied to put tariffs and quotas on lower-priced goods. Price increases, comparative advantage removed from exporting countries. Tariff escalation reduced abilities for developing countries to export forcing many to export primary products
      - Certain assumptions were made; however, successful countries don't necessarily meet them. Economists argue it's vital and minimizing government intervention is not the way forward. Governments played an important role (provide infrastructure, subsidizing output through low credit terms via central banks, and promoting savings and improvement in technology) in "Asian tigers". Governments also protected domestic industries that can't compete with foreign firms yet and promoted industries that were ready. "Infant industry" argument for protection. It's controversial about the government intervention.
      - Attracting MNC to kick-start the export-led growth might cause the MNCs become too powerful
      - Argued by some economists that free market-export-led growth may increase income inequality thus economic growth achieved at the expense of economic development
  - - - Advantages/opportunities associate with economic integration
        
        Larger export markets, economies of scale
        
        Encourage diversification, reduce dependence on narrow range of commodities
        
        Encourage regional cooperation (infrastructure transport etc)
        
        Regional integration offer vital links to infrastructure networks in neighboring countries for landlocked countries
        
        Stimuli for inward FDI
        
        Workers to work in other member countries sending remittance if there's free movement of labour
        
        Companies can invest in other member countries if there's free movement of capital.
        -Greater political stability and cooperation
        
        Greater efficiency, competitiveness
        
        Part of trading bloc, increase their bargaining power in multilateral trade negotiation.
      - Disadvantages/challenges associated with economic integration
        
        Role of WTO is undermined, allows member countries look inwards
        
        Complication in trading because of agreement of trading bloc
        
        Unemployment may arise, less efficient companies can't compete with lower priced imports from other member countries.
        
        Trade creation will benefit producers who can import inputs without tariffs.
        
        Trade viersion
- - - - Barriers:
        
        Practice of tariff escalation (Rate of import tariffs on goods rises the more the goods are processed). Importing country protects its processing and manufacturing industries (Lower tariffs on imports of raw materials and higher tariffs on processed and finished products. Little incentive to diversify away as higher price by tariffs will make processed goods uncompetitive
        
        Need for more highly qualified workforce. Developing countries lack it because of low educational standard thu the country is in poverty trap. Low education > production of low profit commodities and components > low incomes for governments > low ability to fund education
- - - - Increased savings and developing countries suffered from savings gap,FDI fills that gap.
        
        MNC provide employment, education and training
        
        Greater access to R&D, technology and marketing expertise
        
        Stimulating growth by multiplier effect
        
        Host government gain tax revenue
        
        MNC bought existing companies, injecting foreign capital and increase AD
        
        Infrastructure of economy physical and financial
        
        Lower price for consumer, essential goods that aren't available domestically
      - Disadvantage
        
        Bring their own teams, inexpensive low-skilled workers for basic production
        
        Too much power, tax advantage/subsidies, exert too much influence
        
        Transfer pricing
        
        Legislation on pollution not effective, create more external cost. Environmentally damaging
        
        Extract particular resources
        
        Capital-intensive production methods
        
        MNCs repatriate their profits, transfer the profits out of the country back to origin
    - - Contribute to economic, environmental and social progress
        
        Respect internationally recognized human rights
        
        Encourage local capacity building
        
        Encourage human capital formation through providing employment and training
        
        Provide full financial and operating information
- - - - E.g.: Sunny Money aims to provide solar powered products to rural communities in Africa. Solar torches, solar light, solar battery chargers, at low prices.
        
        Some argue, giving away the products is better. The director argues, "We have taken a market-based approach because we believe that only by helping to create a viable market, which serves the needs of customers, will any intervention be sustainable. Giving away products runs the risk of destroying a market which responds to the needs of people. How can an entrepreneur in Kenya, for example, make a living out of selling solar lights if a nearby NGO is busy giving them away for free?"
- - - - Microfinance
        
        Geared specifically to the poor. Provision of financial services (small loans, saving accounts, insurance and cheque books)
        
        Small loans = micro-credit.
        
        Micro-credit loans enable poor people to start up very small-scale businesses (micro-enterprises).
        
        Give regular income, build wealth and escape poverty
        
        Women main recipient, better credit risk
      - Mobile phone banking
        
        A person send money via text to the receiver's phone number.
        
        Mobile phone companies taking over baking services in less developed countries.
  - - - Increasing support for the education of females
        
        increase the access to healthcare for women
        
        Create a safe environment in the home, workplace and society
        
        Establishing the right for women to own property and other assets
        
        Increase female involvement in decision making, both within the home and outside
  - - - Invest in high levels of transparency and independent external scrutiny. Allows audit agencies and the public at large to provide effective oversight)
        
        Reform institutions. Design reforms to tackle corruption from all angles. E.g: Reform to tax administration have greater payoff if tax laws are simpler and reduce officials' scope for discretion
        
        Build a professional civil service. Transparent, merit-based hiring and merit-based pay.
        
        Keep pace with new challenges as technology and opportunities for wrongdoing evolve. (Higher risk such as procurement, revenue administration and management of natural resources)
        
        More cooperation to fight corruption. Countries joined efforts, harder to cross borders.
    - - Collect, analyze and disseminate gender desegregated data. Sufficient, accurate, up-to-date information
        
        Recognize and address specific gendered forms of corruption such as sextortion
        
        Include women in anti-corruption decision making. Fairer access to political rights, part of formulation, implementation, monitoring and evaluation of said policies.
        
        Empower women. Unaware of their rights and entitlements, easier target for corruption. Campaign and distribution of information.
        
        Gender sensitive reporting mechanism. Safe, accountable, accessible gender sensitive to report corruption
  - - - Secure land rights are an important pillar for agriculture. Secure land titles, incentive to invest in their land and borrow money
        
        Secure land rights are essential for urban development. Failure to clarify land rights, and formation of large informal slums in cities.
        
        Secure property rights help protect the environment. Incentive to look after their land, ensure sustainability.
        
        Secure property rights and access to land are crucial for private sector development and job creating. Gives collateral to companies to help finance operations.
        
        Secure property rights are important for empowering women.
        
        Secure property rights help secure indigenous peoples' right. Can happen take over, or use without consent.
        
        Secure property rights are vital for keeping peace. War and conflict caused millions of people leaving their properties behind. Without property right, won't be able to go back to their home
- - - - Positive outcomes in many developing countries with programme called conditional cash transfers (CCT). Transfer payments targeting low-income people. Reduce poverty by making welfare programs conditional upon the actions of the person receiving the money.
        
        The govt or NGO transfer the money to poor people for fulfilling specific behavioral conditions (children's school attendance, up-to-date vaccinations). CCTs give immediate income, positive impact of well-being.
        
        CCTs permit children more access to education and healthcare, more productive, higher income, break cycle of poverty. CCTs not enough, simply adds to the income and provide compensation.
        
        CCT money enabled girls to extend their education up to two years, which had significant economic and social impacts.
- - - - Minimum wage's effectiveness is limited by the sheer size of the informal sector, and the extent of non-compliance that may prevent workers from being paid the legal minimum wage
- - - - Given either by government, through official aid agency or one of multilateral international institutions
        
        Bilateral aid: Government give aid directly to another country
        Multilateral aid: Government gives aid money to recognized international agencies
        
        Foreign aid must be provided by official agencies and it must be 'concessional (grant or a soft loan)
        
        Interest-free, or at below market interest rates, usually repaid over a longer period than commercial loans
        
        ODA doesn't include military aid or aid that's donated for donor's security interest
        
        Concerns about aid
        
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- - - - Concern and Criticism of NGO
        
        NGOs rely on funding to carry out their work. NGO can or can't do depends on where their funding came, limit the effectiveness of what they were meant to do.
        
        NGOs operating in developing countries, resulting in uncoordinated and wasteful activities.
        
        NGOs have political or religious bias
        
        NGOs, are unaccountable; they aren't elected by the people that they are representing
        
        Can be accused of spending more money on advertising and promoting their activities.
- - - - International Development Agency (IDA) works with the world's poorest countries. The poorer the country, the more favorable the loan conditions.
    - - Primary purpose: ensure stability of the international monetary system - the system of exchange rates and international payments that enables countries to transact with each other
        
        Responsibilities of the IMF are set out in Articles of Agreement:
        
        Promoting international monetary cooperation
        
        Facilitating the expansion and balanced growth of international trade
        
        Promoting exchange stability
        
        Assisting in the establishment of a multilateral system of payments
        
        Making its resources available to members experiencing balance of payments difficulties.
      - Concerns about the World Bank and the International Monetary Fund
        
        Both established in US. They have been accused of promoting free market, business-friendly policies which mainly help companies in developed countries and high-income people in developing countries.
        
        The head of the World Bank is appointed by the American president.
        
        Negative impression of the IMF with conditions that it may set.
        
        Washington Consensus
        -Trade liberalization
        
        Encouraging the export of primary commodities
        
        Devaluing the currency
        
        Liberalized capital flows
        
        Encouraging FDI
        
        Privatization of nationalized industries
        
        Elimination of subsidies and price controls
        
        Austerity measures to reduce government spending, including spending in areas such as education and health.