Development April 26, 2010

Extra Credit Opportunity!!! Read the paper “What is to be Done?” through course website link “extra credit-Vladi Chaloupka” Come to lecture on Monday 5/3 Write a one-page (double-spaced) thoughtful response paper Turn it in to your TA by 5/13

Results of Interventions "When two elephants fight, it is only the grass which gets hurt" Not easy to control internal politics Exacerbated civil wars Vietnam, Korea, Afghanistan debacles End of superpower patronage  end of wars & new wars In 3 rd world, stalemate Unintended consequences

Decolonization Imperial overstretch, exhaustion Changing international norms Nationalist rebellions How? Voluntary (Ghana), violent (Algeria, Vietnam), in-between/negotiated (India)

Colonial Legacies Nationalist, revolutionary ideologies and movements Rural, poor Insufficient infrastructure, human capital (sometimes) civil service, legal institutions

Modernization Theory Economies develop in stages 1) Traditional society: subsistence agriculture, pre-scientific, hierarchical 2) Take-off: Investment, technological progress, commercial agriculture industrialization, social mobility 3) Diversified economy, consumer society Economic change  – Social changes: urbanization, rationality, individualism – Political changes: education, middle class  demands for representation of interests Prescription—“Big Push”: injection of capital, import technology, get foreign investment Theoretical problems: West-centric, inaccurate Implementation problems: unequal starting conditions + global trade preserved structural inequality

The Solution: Statism Theory: Create industry through government policy (Import- substitution Industrialization—ISI) Components of ISI Trade protection Credits, subsidies for industry Currency manipulation (Somewhat) positive results: growth, industrial sector Negative results: – Subsidies to industry  deficits  print money (inflation) – Not enough money from exports to buy imports  debts – Weak currency  low purchasing power – unsustainable

Disappointing Development

African Debt

Reaction to Statism: Washington Consensus Rich creditor countries had upper hand. Lending conditional on “structural adjustment” Reagan: “Government is not a solution to our problem, government is the problem.” “Washington Consensus”: balanced budgets, low taxes, low government spending, privatization, low trade barriers, low inflation Problems: deepened recessions, hurt most vulnerable

Now, Instead of a Grand Theory… Debt relief Governance Micro-credit Community driven development