Week 4 - Big Push

Question 1

What were the key ideas, strategies and policies of the Big Push according to Nurkse?

Answer 1

“industrial policy” and “infant industry protection” to promote investment into “increasing returns activities”

Question 2

When did the Big Push happen?

Answer 2

1945-1970s

Question 3

What were the key ideas, strategies and policies of the Big Push according to Hirschman?

Answer 3

import substitution industrialisation (ISI) and backward and forward linkages

Question 4

What were the key ideas, strategies and policies of the Big Push according to Arthur Lewis?

Answer 4

mobilisation of “surplus labour” from agriculture for labour intensive manufacturing

Question 5

What were the key ideas, strategies and policies of the Big Push according to Singer and Prebisch?

Answer 5

“unequal trade” and problem of “primary commodity exports”

Question 6

Who took on the major role in the Big Push?

Answer 6

major role for the state to shape markets

Question 7

What brought industrial policy back on the policy agenda today?

Answer 7

new debates throughout OECD after 2007-2008 financial crisis and again coming out of the pandemic
China’s successful deployment of industrial policy

Question 8

What were four big ideas of post-war development?

Answer 8

“Big Push” for industrialisation
transform the relationship between agriculture and manufacturing
invest in manufacturing with attention to “forward and backward” linkages
overcome unequal arms of trade between poor and rich countries

Question 9

What is a debate within the “Big Push” regarding growth?

Answer 9

balanced growth (simultaneous investing in many lines of manufacturing, Nurkse) vs unbalanced growth (one thing at a time, promote forward and backward linkages, Hirschmam)

Question 10

What is a debate within the “Big Push” regarding financing?

Answer 10

finance domestically (keep TNCs at bay as tend to establish enclaves and repatriate profits, how and when to transition from ISI to production for export) vs attract foreign aid and FDI (rely on TNCs as source of technology transfer, how and when to transition from ISI to production for export)

Question 11

One of the big ideas of post-war development is industrialisation, what does this involve?

Answer 11

industrial policy
“infant industry” protection in manufacturing sector
planning, as long-term view is needed
direct finance (including aid and foreign investment) to productive sectors
need for a “big push”, which requires “critical mass of investment” and “balanced growth”
depart from price signals (as they are slow and short-term and do not capture externalities)
import-substitution industrialisation

Question 12

What are policy moves to promote industrialisation?

Answer 12

tariffs to protect infant industries
control foreign exchange to use for priority investment
overvalue currency to discourage primary exports and favour production for domestic market
state control of finance
incentives/compulsion on foreign firms to invest in priority sectors
subsidies to private firms in priority sectors
state directly established firms where private sector found it too risky, or where private sector was absent

Question 13

What is Lewis’ Two Sector Model?

Answer 13

1) traditional rural subsistence “surplus labour”
2) high productivity modern urban industrial sector, absorbs labour from rural areas

Question 14

What is the unlimited supply of labour (Lewis)?

Answer 14

disguised unemployment in rural areas, e.g. West Indies, Egypt and India’s government needed to invest in manufacturing to absorb this labour, where there were no private investors to do the job
labour shortage due to abundant land, e.g. Ghana’s government needed to invest in raising agricultural productivity to release labour for manufacturing without driving up wages, which would discourage investment in manufacturing
match the state intervention with the specific market failure

Question 15

What happens to the wage rate as surplus labour is absorbed?

Answer 15

wage rate rises as surplus labour is absorbed (has been happening in China over past 20 years)

Question 16

One of the big ideas of post-war development is “forward and backward” linkages (Hirschman), what does this involve?

Answer 16

new industry with eye on both
backward linkages which promote production of inputs for the industry
forward linkages which utilise its outputs in new activities (harder)
substitute imports with goods produced at home

Question 17

One of the big ideas of post-war development is overcome unequal terms of trade, what do Singer and Prebisch say about this?

Answer 17

critique of dependence on export of primary commodities (terms of trade unfavourable)
differences in gains from technological improvement (industrialised countries were consumers of primary commodities and producers of manufactured articles, underdeveloped countries were consumers of manufacturers and producers of raw materials)

Question 18

What did Prebisch say in his 1949 ECLA Manifesto?

Answer 18

developing countries face declining terms of trade, leading to unequal development
workers in industrial countries capture all gains from productivity improvement
dual economy (modern and traditional)

Question 19

What did the ECLA say on the role of the “smart state”?

Answer 19

not against agriculture, trade, or private sector
reduce technological disparity
promote high return investments (e.g. steel)
implement exchange controls
endorse “healthy protectionism”
attract FDI
boost savings and investment
wage policy to boost demand (as per Keynes)

Question 20

What was ECLA’s blind spot?

Answer 20

backing away from redistributive agrarian reform even though in favour, as it was politically sensitive issue

Question 21

What was land redistributions role in the “Big Push”?

Answer 21

gave way to exclusive focus on raising agricultural productivity while bringing social justice and changing the balance of power
increase rural incomes by investing in education and health and creating demand for manufactured goods
could remove speculation on and accumulation of land as a strategy by elites (could free them to invest in risky but higher return activities in manufacturing)
could increase political and social power of small farmers and reduce or eliminate rural elite’s political power
land reform was seen as politically unacceptable

Question 22

What was Latin America’s experience with industrialisation?

Answer 22

Brazil had great advance in 1950s and 1960s (early ISI, heavy industries, developmentalist ideology, succumbed to political crisis)
most of Latin America was different, half-hearted (no move from consumer to producer goods, improved consumption but not production, finishing touches on imported products, TNCs often the main beneficiaries)

Question 23

What was India’s experience with industrialisation?

Answer 23

national planning boards, industrial development corporations, input-output analysis, growth models, built heavy industry
did not work well

Question 24

Why did India’s industrialisation experience not work well?

Answer 24

bureaucrats were generalists
federalism undermined central state
propertied groups stayed in power
business families were more powerful than state
domestic market constraint meant no land reform
protected industries were inefficient as they were not subjected to competition

Question 25

Why did Africa's experience with industrialisation?

Answer 25

from very low starting point and concentrated in just a few countries neoliberal structural adjustment abandoned industrialisation in 1980s, onward SSA was "out of phase" with global industrialisation possiblities

Question 26

Why was SSA's experience with industrialisation?

Answer 26

1914-1945 was era of possible ISI but lacked independent state to work with local businesses, finance for industrialisation and trade regime 1945-1970 was era of deliberate import substitution but lacked sovereignty (until 1960), economic processes to produce what rich countries wanted and alliance between state, TNC's and national capital 1973-1982 was debt financed growth but had no industrial products to export, did not get FDI nor foreign loans for industry and borrowing after 1979 oil shocks was for balance of payment cover

Question 27

What is a criticism against the "Big Push" from a political spectrum? (Bauer)

Answer 27

denying price mechanism, as they are inefficient overestimating capacity of state suppressing entrepreneurship biased against agriculture, which hurts exports over-reliance on aid scared away FDI

Question 28

What is a criticism against the "Big Push" from neoclassical economists? (Krueger)

Answer 28

trade controls costly resources used up in "rent seeking" high cost of using quantitative controls because of increased competition to secure rents false premises about unequal trade, efficacy of the state, peasant producers, etc. no means to identify dynamic externalities overvalued exchange rate taxed (/wrecked) agriculture and subsidised capital goods imports

Question 29

What is a criticism against the "Big Push" from dependency theory?

Answer 29

overly optimistic view of "mutual benefit" in industrialisation of third world Europe actually "underdeveloped" Africa thesis on unequal trade did not go far enough need radical rupture from the rich capitalist countries

Question 30

What is Hirschman's 'self-critique' of the "Big Push"?

Answer 30

doubts about mutual benefits provided justification for authoritarian governments (worried how dictators exploited the ideas to justify their seizure of power)

Question 31

What does Arthur Lewis say about surplus labour?

Answer 31

surplus labour moving to manufacturing without decreasing productivity in agriculture and wages in agriculture increase as there is less supply of labour

Question 32

What is the centre and periphery?

Answer 32

centre is industrialised nations which produce and export manufactured goods periphery is developing countries which primarily export raw materials and agricultural products

Question 33

What does the centre and periphery trade pattern create?

Answer 33

unequal economic relationships, where the centre benefited more than the periphery (Prebisch)

Question 34

What does dependency theory say?

Answer 34

global capitalism perpetuates the underdevelopment of peripheral nations while benefiting the core nations focus on external factors, like colonial legacy and unequal trade relationships, rather than internal factors, like governance and policies

Question 35

What were the structuralist economics opinions in initial development efforts?

Answer 35

challenged the dominant neoclassical economic theories (particularly in Latin America) argued that development challenges in underdeveloped regions streamed from structural issues, not just capital deficits

Question 36

During initial development efforts, what became a key strategy in developing countries?

Answer 36

import substitution industrialisation, particularly in Latin America, as a means to reduce dependency on foreign imports and promote domestic industries (a trade and economic policy that advocates replacing foreign imports with domestic production)

Question 37

What is ISI?

Answer 37

a way of achieving economic growth by protecting local industries and decreasing reliance on external goods (high tariffs, subsidies by governments)

Question 38

What did ISI require?

Answer 38

required importing initial capital goods (e.g. machines) and then substituting imports with own industries

Question 39

What did Hirschman think ISI could be financed by?

Answer 39

foreign investment (, however inviting in TNCs led to few spillovers)

Question 40

What was a big issue under ISI?

Answer 40

financing, as other way would be taxing elite

Question 41

Why was moving away from ISI difficult?

Answer 41

elites wanted to protect infant industries which they often controlled (elites worked closely with government)

Question 42

What are the critiques of ISI?

Answer 42

overemphasis on protectionism (lack of competition) failed to create strong linkages between industries (structural imbalances with fragmented industrial sector) neglect for agriculture and rural development (serves interests of urban elite, unequal outcomes) still reliant on expensive imports of capital goods and technology from advanced countries only enhanced the dependency cycle between core and peripheral countries agriculture remained the backbone of many developing countries, yet agricultural exports failed to generate sufficient foreign exchange underestimated the deeper structural constraints imposed by global capitalism and the dependency relationship initially worked but often led to inefficiencies, where economies became “stuck” (difficulty of entering export markets)

Question 43

What does industry linkages mean?

Answer 43

investment in one sector can create demand in another (positive spillover effects)

Question 44

What does the dual-sector model encourage? (Lewis)

Answer 44

shift resources and labour from low-productivity sector (agriculture) to high-productivity sectors like manufacturing and industry (wages rise in agriculture and industry gets promoted without a drop in agricultural productivity)

Question 45

Why was there much surplus labour in agriculture in the 1950s?

Answer 45

many people worked on subsistence levels in agriculture and seasonal

Question 46

Why are the terms of trade considered unequal?

Answer 46

terms of trade agreements are not favourable to the developing countries (developing countries export cheap raw materials, whereas industrialised countries export more expensive, manufactured goods) over time, manufactured products become more expensive in relation to agricultural products (eventually you need more agricultural products to get the same manufactured products) primary commodity products are not stable leads to increasing between country inequalities

Question 47

What is the comparative advantage trap?

Answer 47

where developing countries become dependent on exporting primary good in which it has a traditional advantage (limits economic diversification, and prevents the country from investing in other industries)

Question 48

What does dependency theory state?

Answer 48

global capitalism created unequal relationships between "core" and "periphery" countries (core countries exploit the periphery for raw materials and labour while supplying high-value manufactured goods creating dependency as periphery countries are unable to industrialise or diversify and remain vulnerable to external factors)

Question 49

What do dependency theorists advocate for?

Answer 49

reduced reliance on foreign capital and a focus on self-sustained development (e.g. through ISI)

Question 50

What were the key factors of the post-World War II period?

Answer 50

decolonisation movement (reduce reliance on former colonial powers) geopolitical concerns (fear of former colonies falling under communism influence) establishment of International Institutions (to promote global cooperation and economic growth) all industries destroyed (WWI, WWII, Great Depression)

Question 51

Why did post-World War II 'development economists' place emphasis on industrialisation?

Answer 51

seen as most effective way to generate economic growth and improve quality of life increase productivity, foster innovation and create economies of scale upper value of value chain (do not want to be exporting primary exports) "depressed areas" were believed to suffer from a lack of industrial development (push from western-based international institutions, e.g. UN promoted industrial policy)

Question 52

What does the government consist of?

Answer 52

consists of many actors politicians who seek political support from various groups, bureaucrats, technocrats, etc. (there are often divisions within and between each of these groups)

Question 53

What does the failure of commission involve (government failure)?

Answer 53

occur when government policies actively cause distortions or inefficiencies (examples include high-cost public sector enterprises engaged in a variety of economic activities not traditionally associated with the public sector, e.g. state marketing boards, state ownership of retail shops for the distribution of foods or state operation of mines and manufacturing activities , state-owned enterprises that operate inefficiently due to lack of competition and profit incentives , economic controls, like price controls or subsidies, that lead to resource misallocation (e.g., overproduction in protected industries) , large budget deficits, often resulting from high public spending on subsidies, which can trigger inflation)

Question 54

What does the failure of omission involve (government failure)?

Answer 54

happen when governments fail to provide necessary public goods or services (examples include inadequate infrastructure maintenance, undermining economic growth (e.g. deterioration of transport and communications facilities) , outdated exchange rates that hurt export competitiveness (e.g. maintenance of fixed nominal exchange rates in the face of rapid domestic inflation) , neglecting basic public services, like health and education, due to misallocation of resources)

Question 55

What is the relationship between the government and rent seeking and corruption?

Answer 55

government intervention often creates opportunities for rent-seeking, where individuals or groups seek to gain economic benefits through lobbying or corruption (examples include the allocation of import licences or subsidies, where the distribution of rents attracts efforts to influence government decisions rather than focusing on improving productivity)

Question 56

What is the relationship between the government and bureaucratic incentives and expansion?

Answer 56

government agencies tend to expand their activities and budgetary needs, even when the programs they manage are ineffective (bureaucrats often advocate for policies that increase their influence and resources, even if not in the public's best interest)

Question 57

What does comparative advantage role of the government mean?

Answer 57

governments should focus on areas where they have comparative advantage, like providing large-scale public goods (e.g., infrastructure, law enforcement, basic education) (diverting resources away from these core areas toward ones where the private sector is more efficient can exacerbate inefficiencies)

Question 58

What are Kureger's policy recommendations regarding the government?

Answer 58

emphasises the need for policies that minimise administrative costs and reduce rent-seeking opportunities should be designed with a realistic understanding of government limitations (costs and constraints of government interventions, administrative feasibility and likelihood of rent-seeking) political economy factors should be considered when designing policies, as incentives of policymakers and bureaucrats can significantly influence policy outcomes (examples include using tariffs instead of quantitative import restrictions as tariffs are more transparent and less prone to manipulation, simplifying regulations to reduce the administrative burden and limit bureaucratic discretion, prioritising transparency in public spending to ensure that resources are allocated efficiently)

Question 59

What is a critique of "market failure" approaches?

Answer 59

critiques earlier development policies that focused on correcting market failures without considering potential for government failures (interventions to fix market imperfections often led to worse outcomes due to unintended consequences of government overreach)

Question 60

What did African nations adopt after independence?

Answer 60

African nations adopted Import Substitution Industrialisation (ISI) after independence, however, many projects were poorly executed, over-reliant on the state, and underfunded

Question 61

What economic crises did African economies face in the late 1970s and 1980s?

Answer 61

in the late 1970s and 1980s, African economies faced severe crises due to both external shocks (e.g., oil crises, falling commodity prices) and internal issues (mismanagement, corruption, rising debt)

Question 62

What were the Structural Adjustment Programs (SAPs)?

Answer 62

IMF and World Bank-led SAPs were implemented to stabilise economies and involved austerity, currency devaluation, trade liberalisation, and privatisation

Question 63

What did the SAPs lead to (regarding industry)?

Answer 63

SAPs led to the collapse of local industries, especially in manufacturing without state protection and facing foreign competition, industries failed, leading to job losses and declining industrial capacity

Question 64

What social impacts were there due to austerity measures (SAPs)?

Answer 64

austerity measures resulted in reduced public spending on social services like education and healthcare, worsening poverty and inequality

Question 65

What is Mkandawire's criticism of the SAPs?

Answer 65

criticises SAPs for their one-size-fits-all approach, which ignored African countries' specific contexts argues they prioritised stabilisation over long-term development, causing further underdevelopment

Question 66

What does Mkandawire advocate for as a development strategy (alternative to SAPs)?

Answer 66

advocates for alternative development strategies that focus on industrial rebuilding, social welfare, and more context-sensitive economic policies for Africa

Question 67

What led to Latin America's debt crisis after 1982?

Answer 67

despite Latin America experiencing high growth (between 1950-81) due to ISI, the countries' inability to adjust their ISI policy led to debt crisis that impoverished their economy

Question 68

When did Mexico default on its foreign aid and what did this mark?

Answer 68

Mexico's default on its foreign debt in 1982 marked a turning point, ending the era of rapid growth and ushering in a period of economic stagnation and political instability in Latin America

Question 69

What did the Latin American crisis in the 1980s expose?

Answer 69

crisis exposed the flaws of the ISI model, which had become unsustainable due to declining export revenues, rising debt, and inefficient domestic industries

Question 70

What was the shift to industrialisation in Latin America based on?

Answer 70

shift was based on the belief that industrialization would lead to higher economic growth, reduced vulnerability to external shocks, and improved living standards

Question 71

Despite a significant increase in exports, what was seen in developing countries?

Answer 71

decline in their global market share (particularly evident in the case of commodity exports)

Question 72

What did current account deficits for Latin America in the 1980s lead to?

Answer 72

led to excessive borrowing from surplus funds from OPEC countries

Question 73

What did the 1982 debt crisis in Latin America forced the countries to do?

Answer 73

forced Latin American countries to accept stringent neoliberal policies imposed by international financial institutions like the IMF and World Bank

Question 74

What was unique about per capita income in Latin America in the 1980s?

Answer 74

Latin America countries experienced declining per capita income unlike the growth experienced in Asia and the stagnant per capita income in Sub Saharan Africa

Question 75

What was seen as the evidence of the effectiveness of neoliberal reforms (Latin America)?

Answer 75

relatively quick economic recovery of Chile, which had already adopted neoliberal policies and was favoured by the IMF and seen as evidence of the effectiveness of neoliberal reforms

Question 76

How did Latin American country leaders first view the shift in policy to neoliberalism?

Answer 76

initially, Latin American country leaders viewed the shift in policy as temporary to manage debt but eventually there was full scale switch to rigid neoliberalist policies

Question 77

Why did Latin American countries go into current account deficits, external debt, inflation during the 1950s?

Answer 77

their exports of primary commodities did not grow in proportion to international demand due to ISI policies

Question 78

Did Latin American countries experience growth in the 1950s?

Answer 78

Yes, did experience high growth (exception of Argentina) in the 1950s however ISI policies became increasingly complex, obscure, and subject to bureaucratic manipulation since industrial elites continued rent seeking activities

Question 79

What did the Alliance for Progress introduced by the US lead to?

Answer 79

pushed the countries (Cuba, Latin American) more towards socialist policies, resulting in a clash between socialism and neoliberalism that continued in Latin American countries

Question 80

What differed between the Latin American countries and NICs regarding their protectionist measures?

Answer 80

key difference lay in their approach NICs used protection to nurture export-oriented industries, while LAC focused on ISI

Question 81

What caused a worsening overall trade balance for Latin American countries in the 1960s and early 1970s?

Answer 81

decline in commodity trade surpluses was not offset by a sufficient reduction in the trade deficit for manufactured goods

Question 82

What countries initially benefited during the oil crisis in Latin America?

Answer 82

while oil exporting countries(Mexico and Venezuela) initially benefited, it led to a case of Dutch disease in these countries and capital flight political instability, economic uncertainty, and high inflation rates led to capital flight, further exacerbating economic problems non oil exporters had high growth financed by debt whereas Venezuela and Mexico had stagflation

Question 83

What did Latin American countries do to service their debt in the 1980s?

Answer 83

increased exports but this resulted in terms of trade deteriorating (imports also reduced leading to slow economic growth and hyperinflation)

Question 84

What did the 1980s end with for only four countries in Latin America?

Answer 84

1980s ended with only four countries (Chile, Colombia, Costa Rica and Uruguay) having recovered basic macro-balances

Question 85

What made the difference in the long term economic growth between East Asia and Latin American countries?

Answer 85

approaches to ISI

Question 86

What did ISI often lead to?

Answer 86

inefficient industries, high costs, and low productivity

Question 87

What did FDI inflows often focus on in Latin American countries during the 1990s?

Answer 87

FDI inflows often focused on domestic markets rather than export markets

Question 88

What did the failure of ISI in Latin American countries lead to?

Answer 88

rise in neoliberal policies in 1990s

Question 89

What did ISI lead to an improvement in in Latin American countries?

Answer 89

has only led to improvement in inflation (not current account balances and low economic growth)

Question 90

What are the endogenous causes of Latin American problems during the 1990s?

Answer 90

rigid ideologies and the characteristics of its capitalist elite that persisted during ISI and neoliberal models ideology is often strongly adopted without evolving and then dropped in favour of another ideology (e.g. switch from socialism to neoliberal policies) lacks social cohesion (ideology becomes a powerful force because it helps to define a sense of national identity and social purpose in the absence of other unifying factors) elite has history of rent seeking behaviour to benefit from government policies and subsidies (economic problems are rooted in deep-seated structural issues, including inequality, corruption, and lack of effective governance)

Question 91

What does dependence mean?

Answer 91

means that an economy's expansion is conditioned to another economy (the dominant one), the latter can expand and self-sustain its economy but the former (the dependent economy, the periphery countries) can only achieve such expansion through the dominant economy

Question 92

In the first two stages of dependence (colonial, financial and industrial), what four factors restricted the emergence of internal markets?

Answer 92

1) most national income was derived from export 2) available manpower was subject to harsh exploitative measures which limited its consumption 3) part of the consumption was provided by the subsistence economy which complemented their income in depressions 4) for countries which land mines were owned by foreigners a great part of accumulated capital was sent to the core countries limiting consumption and reinvestment

Question 93

In what ways does the current dependency inhibit growth in periphery countries? (3)

Answer 93

1) industrial development needs an export sector that gives it necessary foreign capital to kickstart industrialisation, as the export sector is conditioned to the backward relationship with the core markets and dominated by oligarchies which also limits growth of internal markets 2) industry in conditioned by fluctuations in balance of payments which leads to deficit due to dependency relations (trade takes place in highly monopolised market which tends to lower price of raw materials and raise prices of industrial products) (foreign capital retains control over most dynamic sectors of the economy and repatriates a high volume of profit) (result is that foreign capital becomes necessary in financing deficits and development) 3) industrial development is conditioned by technological monopoly exercised by imperialist centres (when developing countries want to import machinery they can do so only by patenting or they convert these goods into capital and introducing them in the form of their own investment)

Question 94

How does the dependency structure affect the productive structure of developing countries? (2)

Answer 94

1) continuation of agrarian and mining export structure where these countries specialise in exporting primary products 2) industrial and technological structure in developing countries responds to needs of core investing countries (corporations), not needs of local development needs which gives rise to the high inequality of productive structure, high concentration of incomes, underutilisation of installed capacity, and exploitation of existing markets concentrated in large cities

Question 95

What is Dos Santos' main argument about the elements that are needed to gain development?

Answer 95

all elements that are needed to gain development, like capital, finance, and technology are monopolised by the core countries and make it very difficult for developing countries to gain access to them