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ECONOMY CHAPITRE 3 : Do Economists make policies ? - Coggle Diagram
ECONOMY CHAPITRE 3 : Do Economists make policies ?
Introduction :
Economists employed :
at all level of government and public insitutions
In the private sector
Bank and fiancial insitutions
Large corporations
Think Thanks
Tech companies
International orga
Case study : the World bank
The world bank : a few basics
Création during the yalta Conference (1945)
=> share the world in two blocks
Creation of the NATO and UN
What the world after the war will look like ? What are the rules for the global economie after the war ?
Bretton Wood Conférence (1944)
3 keys subject :
The fiancial of the post war reconstruction and the economic developement of the world (creation of the IBRD International Bank for reconstruction)
Ensuring the monatary and fianncial stability of the global economy => creation of IMF international Monetary Fund
Promoting free trade against protectionism => creation of the ITO international trade organisation => The General Agreement on Tarifs and Trade (GATT)
IBRD : International bank for Reconstruction and Development
Helps the reconstruction and the development of Member States by facilitationg the investisment of capital to productive pupose
12 Member State in 1945
Frist beneficiare : France
Find it capital by the contribution of Member Stae
Prète aux état avec un taux d'interet identique et faible
Growth and development from 50's to the 90's
The world bank today
Headquarter : Washington + 6 regional offices
189 Member States
Around 10 000 employees
A group for 5 structures :
IBRD
International Development Association (IDA)
International Fiance coropration (IFC)
International centre for Settlement of Investment Disputes
Multilateral investment Guarantee Agency (MIGA)
Missions
Fiancial institutions : lending to Member States and private compagnies of Mmeber States
A bank for development : guiding Members' development policies
Research bank : producing Knowledge (statistical, theorical case study) on development
Governance
Board of Governors
189 Members => one for each states
Meeting once a year
Donne des orientation
Board of Directors
25 excecutive directors (dont 20 qui représeten tles pays qui contribuent le plus)
Meeting twice a week
Take the decsions
President of the World Bank
Charging the board of Director and managing the Bank's staff
Vice president and chief economist
Regional directors
Voting power of each Mmeber country depends on its shareholding position in the Bank's capital
But need aan approval of the Board of Governors
2 types of loans (prets) for members countries :
IBRD :
make loans to developing Member States (Who have a GDP/ capita btw 1025 USD and 5825 USD)
Loans are made at the market rate (no benefit)
Main cointries : 42% of total loans
China, bresil, Indonesia, Turkey, India
The IDA
Make loans to least developed Member States (GDP/capital lower than 1025 USD)
IDA are made at a lower interst rate than the market interest rate
80 countries qulify for IDA
55% of total loans
India/ Chia/ Bangladessh/ Pakistant/ Vietnam
The IFA
Make loans for private corporation in Member State countries (least developed and developing
Loans as to be profitable (interest rate higher than market interst rate
Growth and development early policies
From XIXth century to the 50's
SMITH
Country rich accuulated capital
Bring to them more capacity to make more instance
Cercle vertueux
Ability to save and invest instead of consuming => figure ok K
Richesse d'une soc est décidé quand il y'a beaucoup de biens de staisfaction
From XIXth to 50's =>
idea that objective is to boost GDP/capit =>
Goal of dvlpt is link with the increasing of GDP/K
Need virtous and strong banking system
50's
Conception that poor countries are poor because they have a lack of capital
They don't save and invest enough money
Bad fianncial banque
The concept of "growth"
Growtth : a sustainable and long run increased of GDP per capi
SOLOW
Entrain tousand economist from the Massachusetts Institute of technology in Cambridge
Economics as a social enginerring
Can pb solving
Policy oriented empirical
Mathematical reasonning : simple clear, tractable mathematical models => find pratical reasons that work => simplify the math language
Technical change and the Aggregate Production Function
Decomose the observed growth of GDP for us data
growth of quantity of capital
growth of quantity of labour
Result => 2 factors explain arond 13% of the observed GDP
The residual 87% of the growth in GDP should be explained by the increase in the total productivity of facotrs (progrès technologique)
Apport of Trevor SWAN => the "Sollow-Swan" growth model
Rôle du progrès technique dans la croissance éco
On travaille moins mais on produit plus => qualité du W qui détermine la croissance
Q du W améliorée grâce au progrès technique incorporé dans le capital => qualité de W plus élevée
The neoclassical growth model : Policy implications
Obj
In order to achieve sustained growth => developing country need to accumulated capital
In order to accumulated capital, developpeing country need invest (and saving)
In order to maintien their growth level, debveloping country need technological cahnge
The world bank policies in the 50's - 60's
Poor country are poor because
Lack of savings
Lack of invst
Lack of K accumulation
Lack of technological development
Policies
Large scale infrasctural projects funded by the WB to boost K accumulation and technological transfert
Transportation networks
roads
Railroads
Ports
Airports
Energy prodction facilities
Carbon plants
Dams (barrage)
Electricity network
Heavy industry plants
Mining facilities
Stell mills
Oils estraction
Chemical industries
Green révolution
Industrialising ag
New cultures
Irirgations
larger parcels
But most of these project are unless (not use by local pop
All of these infrastrcuture has to be remboursed
Projects can have neg csq => env disaster
CSQ : Mauvaise image dans les pays en dvlpt
Two turns in économics :
Exogenous Vs Endogenous Growth
But from where does techno progress comes from ?
The creative destruction
Schumpeter
La destruction créatrice est le processus de disparitions d’activités productives remplacées par de nouvelles activités du fait du progrès technique.
la fabrication d’un bien nouveau
l’introduction d’une méthode de production nouvelle
’ouverture d’un débouché nouveau,
la conquête d’une source nouvelle de matières première ou de produits semi-ouvrés,
la réalisation d’une nouvelle organisation
Une innovation majeure nouvelle bouleverse les structures économiques existantes en termes de destruction des anciennes et de création de nouvelles
à court terme, cette phase d'ajustement met en lumière les destructions d'activités et d'emplois liés aux innovations passées
à long terme, les créations l'emportent soutenues par la diffusion de nouvelles innovations majeures
Human capital
Endogenous growth
Theory that explied thechno progress by human capital ccummulation
What drives progress is the productivity of individuals
Ind become more productive by accumulating human K
Education, trainning experience
Health and env conditions
Having rights and equal opportunities
Human capital and public policies
Amartya SEN
POverty and famines
The ideas ofcapability and "positive" freedom
Povrety and famine happen to be => distribution and allocation of food
State should provide to ind what is good for them => how soc dvlpt capability (each ind is able to pursuit what is good for them
Neg freddom
Are thing that are forbid
Positive fredom
Support with measure and possibility that willa llowed the capabilities
Growth Vs dvlpt
Growth : GDP/K
Q of tinistution supporting innovation is a driver for technological progress
Ind and intellectual property rights
Markets
Banking and financial system
Public policies supportinf market actv
Development : Phenomena that combines growth (Gdp/K) with other soc and economic change including the reduction of povrety
Need insitutions with Q => supporting educatio, higher education and fundamental research
The WOrld Bank "interpretation" of the idea of creative destruction in the 70's and the 80's
Context
Failures + critisme during 50's-60's policies
begining of a troubled era for the global eco (oil shocks, stagflation, debt crises)
WB loans comes with structural adjustement programs
Austerity in public policies
Public debt reduction
Fighting inflation
Stabilising currencies
Given place to markets
Liberalising éco
Privatisation
free ciruclation of capitals and free trade (GATT/WTO)
Bilan
Positif
Foreign capitals arrived in many developing countries
Multinational firms invested in these markets
A few countires entered in the late 1980's in a sustained growth phase
Neg
dvlp countries became dependant from foreign private actors
Devlopt countries became very vunerable to global economic volatility
The World Bank and fight agiansit poverty
Funding public expenditure
Education
Soc programs
Microcredit
heatlh
Small-scale actions
Horizontal cooperation
State
Local communities
NGOs
Economists
ABDUL LATIF JAMEEL POVRETY ACTION LAB
Randomised control trials (RTA) and impact evaluation