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What is economic development?
• A. Overall growth
• B. Emphasis on consumption and income levels
• C. maximizing people's capabilities--that is, their ability to lead the kind of life they value.
• Do all of these answers depend on economic growth?
• Yes – Most of the theories of development say so
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Embeddedness in Three Worlds of the Welfare State
Market • Liberal Welfare State
• Social Democratic Welfare State
• Conservative Welfare State
Society
Society Economy transformed
Society
(Traditional) Economy
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• High benefits: Generous unemployment insurance, retirement pensions
• Unequal benefits: Unequally distributed depending on occupation and contributions
• Corporatist administration: Delegated to new or traditional social organizations (trade unions, industry associations)
The Conservative (Communitarian) World of Welfare
Society Economy
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Consequences of the Conservative (communitarian) Welfare State
• Reinforces Traditional Gender Roles
– Preserves a traditional image of the family
• Generous benefits for the man of the family
• Keeps women out of the labor force (penalizes those who are out of the market)
• Joint taxation, no child care support, limited shopping hours, long lunch hours so men can go home
• Makes social distinctions
– Civil servants have the highest benefits
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Has globalization changed this?
• What is the role of comparative advantage?
• Aging populations?
• Need for competitive investment
The End
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Liberal Theories of Economic Development
Li
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Today’s Agenda
• Is the World Developing or Underdeveloped? – The good news: Growth and aggregate improvement in human welfare
indicators
• Liberal views on development and explanations for the growing gap • A. Rostow and Stages • B. Liberalism and integration into the international economy:
– Staples Theory (Trade) – Product cycle (MNC), – Institutions
• C. Internal Requirements for Development – Move from a traditionsl to a modern society – Democracy
• D. Summary of the Liberal position •
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The Global South: developing or underdeveloped….”emerging markets” or just
poor countries?
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Theory-based Terms: The words contain the theory
• Liberal Theory
– Developing countries
– Less Developed Countries
– Emerging markets
• Dependency theory
• Underdeveloped Countries
• Neutral?
– The Global “South”
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Who is North and Who is South?
• North = World’s Rich
• South = World’s poor, or developing nations, or emerging markets (more complicated)
– Used to be called the Third World
– We can no longer lump together the countries of the “south”
– Some are growing and “emerging” and some are not.
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The Good News
• 20th century economic output off the charts!
• South Korea and China doubled productive output in 10 years
• Humans are, on the whole more healthy now than 100 years ago.
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The Good News: Life expectancy and income
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Liberal explanations for global growth
• Walt Rostow: the intellectual context
– No previous conceptual apparatus
– But experience with Marshall Plan
– But there were historical patterns of development
– Winning the cold war meant:
Helping the “Third world” develop
Within the liberal capitalist model
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Stage 1: Traditional society
• Why no growth?
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Stage 2: Preconditions for Growth
• Population growth will outpace economic growth in traditional society
• Stimulus needed to mobilize capital and resources
– Revolution and institutional restructuring
– Technological innovation
Favorable international environment
External Injection of capital
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Stage 3: The Takeoff
•Productive investment must rise to 10 per cent of national income •Needed: rapid accumulation of capital and productive investment
Finance Stock market Trade Foreign investment aid
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4. The Drive to Maturity
• Employment growth
• Growth in national income
• Rise of consumer demands
• Strong domestic markets
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5. High Mass Consumption Society
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The Importance of Capital Accumulation
• Capital accumulation is the name of the game
• So how does it happen?
1. low factor costs attract investment
2. Economic levels in the world will equalize
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Economic development and the International Economy
• International interdependence will lead to economic development of ALL countries in a liberal system
• Trade serves as an engine of growth
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The Staples Theory
• Staples are field crops or minerals
• Earnings finance industrial growth
• Canada and Australia developed this way
• This justifies the theory of comparative advantage
• Export-led growth is the way to develop