OCR F585 Extract 5; research
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UNCTAD
     United Nations Conference on Trade and development (UNCTAD)
     194 member states â united nations body responsible for development
     âThink, debate and deliver.â
     Offers direct technical assistance to developing and transition economies to help them become equally integrated into the global economy
     Promotes international trade
     Offers member states expertise in investment and enterprise development
     Especially helps the least developed, landlocked countries and small island states
     Researches tech for increased competition and development
âLost decadeâ
     Refers to when there is little/no growth in the economy after a recession or global crisis
     Japan has had two lost decades â 1991-2000 and 2001-2010
Would expansionary fiscal policy lead to decreased deficit and debit?
 Millennium development goals
To eradicate extreme poverty and hunger
To achieve universal primary education
To promote gender equality and empowering women
To reduce child mortality rates
To improve maternal health
To combat HIV/AIDS, malaria, and other diseases
To ensure environmental sustainability
To develop a global partnership for development
Growth and development link
     Generally mutually reinforcing
     Aim to increase the strength of links between the two
     HDI = GNI Per capita (PPP US$) + life expectancy + education ( years of schooling and E(X))
     Doesnât necessarily lead to further development due to â inequality of distribution of income, poor health care, lack of government intervention and expenditure, political instability, lack of rights, lack of infrastructure, sustainability etc
     LINKS: technology improvements, increased trade, increased S and I
     Policy recommendations for countries with a weak link â improve minimum literacy and primary education, improve income distribution, and restructure public and private resources to focus on health, subsidies for social benefit rich industries.
     Recommendations for strong link countries- more attention to issues, target segments of the population that may have missed out from all the gains, advance the higher education sector
     Recommendations for those with (unbalanced links) fast growth and slow HDI â improve distribution of resources emphasising on job creation and productivity growth. Invest in education, reallocation G to meet basic needs with a transparent budget.
     Recommendations for those with (unbalanced links) fast HDI and slow growth â promote skill intensive industries for export, strengthen link between tech/ science and industry.
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IMF contrast with UNCTAD over negative impact of EU austerity on sub-Saharan Africa
     IMF backed austerity in Europe (Latvia, UK)
     Supported balanced budget fiscal expansion (G=T)
     IMF believes it didnât adversely affect growth in SSA
     They argue that they coped by increasing intra-regional trade and trading with emerfing markets (China, India and Brazil) the BRICS
     Commodity exports grow by 16.6% and proportionally a lot less in the EU
     Argument against is that this growth would have been far larger is growth within the EU were possible
Resource dependence
     Resource poor = Mozambique, Egypt, Ethiopia, Somalia and Sudan â lower growth
     Gold, diamonds, oil, gas, copper and cobalt
     Resources are non-renewable so arenât sustainable
     Resource rich benefited from:
Rising commodity prices
Rising D
Discoveries
Impact of rising commodity prices
     Higher commoditiy prices will mean greater benefit for the resource rich countries
     Could lead to higher GDP
     Which in turn could lead to higher rates of economic development (depending on how well it is used)
     However it could lead to a switch in the use of materials, depending on the XED (substitutes)
     If there was a better substitute then this could have an inverse affect on the developing countries
     The significance of the impact depends on the elasticityâs of the demand and supply in the long run as it is most probably inelastic (which leads to the volatility in the first place) in the short run
Consequences of rising commodity prices on (1) terms of trade, (2) Exchange rate and (3) Balance of payments
     Terms of trade: this should improve the SSAâs terms of trade as the export prices are going to be increased compared to the import average index price. Depending on the resources in each country.
     Exchange rate: this will push up the exchange rate in the SR as the same volume of commodity exports will be demanded but of higher value â as contracts will hang over and the response is likely to be inelastic in the short term. This will cause an increase in the exchange rate as more of the currency will be being demanded.
     Balance of payments: rising commodity price will help to improve the BoP in the resource rich SSA counties for export values will increase comparatively to imports meaning that a deficit can be reduced or a surplus increased. This is positive as It could act as an indicator to FDI etc
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Sustainability: Policies
     State ownership â can control the rate at which the resources are depleted
     High levels of tax creating a disincentive to excessively deplete the resources available
     Licencing and regulation â control the rates of depletion and the proper extraction etc
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         Ability of resource rich countries to grow faster
     Main source of income â exports of resources to other countries that are wealthier etc but donât have such a resources. This consistent trade combined with new discoveries and increasing prices led to higher growth in these countries.
Why has not development been achieved despite rising GDP and wealth
     Growth has been through capital intensive resource exportation meaning there has been little Keynesian multiplier effect as there has been little in the way of income increases thus little condition increases etc
     There may be corruption which leads to inequality of the redistribution of income that has been as a result of the growth
     The political system could also be extremely undeveloped or noninterventionist meaning it hasnât made many policy steps to properly grasp the changes in wealth and growth â taxes may not be progressive
     Inefficiency
Lewis dual sector model
     A model that there are 2 different sectors (industrial and traditional farmers)
     He postulated that workers would move from the unskilled agricultural work to the urban work as this offered higher wages
     But he said that the wages will have to level out, for when workers move they create a fall in the supply of food and contribute to higher demand as they themselves become richer.
     This means that income increases in rural sector
Lewis dual sector critique
     The labour is unskilled, but the work requires skilled work this can lead to unemployment, waste and inefficiency whilst creating shanty towns
     Creates development (poverty) trap
Rostrow
     The Rostow's Stages of Growth model is one of the major historical models of economic growth. It was published by American economist Walt Whitman Rostow in 1960. The model postulates that economic growth occurs in five basic stages, of varying length.
Traditional society
Preconditions for take-off
Take-off
Drive to maturity
Age of High mass consumption
     Rostow's model is one of the more structuralist models of economic growth, particularly in comparison with the 'backwardness' model developed by Alexander Gerschenkron, although the two models are not mutually exclusive.
     Rostow argued that economic take-off must initially be led by a few individual sectors. This belief echoes David Ricardo's comparative advantage thesis and criticizes Marxist revolutionaries' push for economic self-reliance in that it pushes for the 'initial' development of only one or two sectors over the development of all sectors equally. This became one of the important concepts in the theory of modernization in social evolutionism.
Critique of Rostrowâs model
     Rostow is historical in the sense that the end result is known at the outset and is derived from the historical geography of a developed, bureaucratic society.
     Rostow is mechanical in the sense that the underlying motor of change is not disclosed and therefore the stages become little more than a classificatory system based on data from developed countries.
     His model is based on American and European history and defines the American norm of high mass consumption as integral to the economic development process of all industrialized societies.
     His model assumes the inevitable adoption of Neoliberal trade policies which allow the manufacturing base of a given advanced polity to be relocated to lower-wage regions.
     Rostows Model does not apply to the Asian and the African countries as events in these countries are not justified in any stage of his model.
     Rostow's thesis is biased towards a western model of modernization, but at the time of Rostow the world's only mature economies were in the west, and no controlled economies were in the "era of high mass consumption." The model de-emphasizes differences between sectors in capitalistic vs. communistic societies, but seems to innately recognize that modernization can be achieved in different ways in different types of economies.
     The most disabling assumption that Rostow has taken is of trying to fit economic progress into a linear system. This assumption is false as due to empirical evidence of many countries making false starts then reaching a degree of progress and change and then slipping back. E.g.: In the case of contemporary Russia slipping back from high mass consumption to a country in transition the main cause being political change and environment and also Cold War.
     He has little to say and indeed offers little hope for small countries, such as Rwanda, which do not have such advantages. Neo-liberal economic theory to Rostow, and many others, does offer hope to much of the world that economic maturity is coming and the age of high mass consumption is nigh. But that does leave a sort of 'grim meathook future' for the outliers, which do not have the resources, political will, or external backing to become competitive.(See Dependency theory)
Haword-Domar model
     Post Keynesian model of economic growth
     Growth explained through savings and productivity of capital
     Suggests that there is no natural reason for balanced economic growth
Howard-Domar critique
     Assumes that there is no reason for growth to be sufficient to maintain full employment â based on the belief that price of labour and capital is fixed and used equally. This obviously isnât the case
     It also explains boom and bust through the accelerator principle (that investors are only influenced by output) which is widely considered to be wrong
     It sees economic growth and development to be the same thing â which it isnât
     Implies poor countries should borrow for capital to trigger growth - this is not back historically
Difference between GNI and GDP
     GDP is part of GNI
     GDP = total value of goods and services produced within the domestic boundaries of an economy
     GNI = GDP + income from other countries + tax revenue not included in output + residents income earnt abroadÂ
Hope this is useful
David Lifely
