The Long View & Role of Demographics Flashcards
What is the cause of poverty?
Low labour productivity
Why might productivity be low? (5)
- Lack of skills?
- Limited access/investment in new tech
- Small market size limits investment in tech
- Financial constraints limit investment
- Market and policy capture by incumbent elites
What is a large source of inequality?
Difference between countries
How do we define a rich/poor person and a rich/poor country
Rich person -> 90% of nation’s income distribution
Poor person -> 10% of nation’s income distribution
Rich country -> 90% of world income distribution
Poor country -> 10% of world income distribution
What did Europe look like in the 19th century?
European countries shared some characteristics, those being
1. Relatively educated and skilled labour
2. Institutions that protected property rights
They were conductive for absorbing new mass production techniques
What is Periphery and what happened during the 19th century?
Periphery -> outlying regions with poor communications and sparse population
During the 19th century, periphery failed to industrialize. They instead specialized in commodities and raw materials. They were forced into free trade in commodities
What was colonization like in the 19th century?
The search for raw materials encouraged colonization. The most vulnerable were resource rich countries.
Colonizers often set up extractive institutions with the goal to extract resource cheaply, no focus on property rights/education
What was the overall record of globalization?
Most periphery countries didn’t benefit much, though there were “miracles” that did.
What was the first miracle?
It was Japan. Despite the periphery traits it held, they industrialized before 1914 with the Meiji Restoration of 1868 which involved reforming economic development and modernization through education, banking and more. Industrial policy was key as their policy focused on promoting new industries and in training workers.
Lessons from the first miracle?
Japan managed to develop a world class cotton textiles industry and by 1914, they displaced UK as the biggest textile exporter in Asia.
The key lesson was that the state could play a key role as Japan combined activist state with energetic private sector
What was the second miracle?
It was S. Korea and Taiwan. Both countries started off poor but started transforming in 1960’s similar to Japan. Their important initial step was land reform and combined the private initiative with public policy.
What were the lessons from the second miracle? (3)
- They held state interventions in markets such as subsidies for identified priority sectors, loads, etc.
- They discouraged foreign MNCs from entering local markets
- They held protections and incentives contingent on meeting export targets.
What was the third miracle?
It was China. The Chinese revival started in 1978. They were poor but the state became active and followed the same approach as the other two. Their first reform was agrarian, and their policy allow private sales after meeting targets thus incentivizing farmers.
What were the TVEs and why did they succeed? (3rd Miracle)
The TVEs were new policy established in Town and Village Enterprises. They were owned by local govs and produced consumer and capital goods. They succeeded because local govs found these to be revenue generators and provided protection which was a form of property right.
What are Special Economic Zones (SEZ)
Countries needed foreign tech and investment so SEZs were introduced in the 1980’s. They had better infrastructures and duty free imports. MNCs found it profitable to set up operations and SEZ firms focused on exports -> western know-how + cheap labour.
