Interventionist Strategies - Growth and Development

Question 1

Human Capital

Answer 1

‘knowledge, skills and health that people accumulate over their lives, enabling them to realise their potential as productive members of society ‘

Question 2

Strategies to improve Human capital

Answer 2

• Improve nutrition
• increase school attendance
• primary and secondary schooling
• inflow of skilled migrant (curb brain drain)
• re-skill investment
• Cash transfer intervention (e.g. education payments)

Question 3

Protectionism

Answer 3

Economic policy to limit imports from other countries

Question 4

Protectionism pros

Answer 4

• Import substitution (protect domestic industries that cannot compete internationally yet)
• need to raise tax revenues (e.g. duty revenues useful source of tax revenues)
• response to dumping (tariffs can be imposed)
• retaliatory response to allegations of competitive devaluation of country’s currency

Question 5

Protectionism cons

Answer 5

• may damage effects elsewhere e.g. higher prices of raw materials
• Revenue’s from tariffs = small percentage of government revenue
• risk of retaliatory action from other countries
• increases price for consumer = inflation
• can cost a government a lot e.g. subsidies to domestic firms

Question 6

Managed exchange rates how do they work?

Answer 6

• central bank can depreciate / appreciate currency

- reduce volatility of exchange rates

Question 7

Infrastructure development why good

Answer 7

• closing infrastructure gap

- crucial for social + economic development

Question 8

Infrastructure development why hard

Answer 8

• Savings gap - difficult to fund

- but can instead attract FDI e.g. one belt one road initiative

Question 9

what is a Joint venture with global companies

what do they do

Answer 9

• separate business entity created by two or more parties

- opportunity to acquire expertise in industries they hope to have comparative advantage in the future

Question 10

What is a Buffer Stock Scheme

Answer 10

• stabilise the market price by buying up supplies when harvests are plentiful and selling when supplies are low

Question 11

Buffer Stock pros

Answer 11

• lower risk of extreme food poverty
• more stable income and profits for farmers
• helps macroeconomic stability
• Buffer stocks ought to be self-financing

Question 12

Buffer Stock cons

Answer 12

• Buffer stock may not be large enough to change market price
• setting a high price for farmers causes rising surpluses (misallocation of resources)
• high costs of storage and falling quality of product
• Fail because of corruption + poor administration