1. International Political Economy Four Development Strategies: Autarky, Mercantilism, Dependency Theory, East Asian Model Prepared for Junior Int'l Polt. class at NENU, Fall 2015

2. What Is (Economic) Wealth?  Standing Wealth (homes, cars, farms, factories, ports, railroads, etc.)  Liquid Assets (AKA: Capital)  Incl. Currency reserves, portfolio investments (“securities” = stocks & bonds)  Capital Accumulation: Allows for investment, either domestic or foreign (i.e. FDI, which buys Standing Wealth in other states)  Gross Domestic Product (GDP): Standard measure for both wealth & power  = the size of a state's total annual economic activity  GDP growth = economic growth  GDP growth rate = how fast the economy is growing (or shriking)

3. How Have States Grown Their Economies in the Past?  The first step in the modern global economy is to Industrialize  Industrialization requires extremely high domestic capital accumulation or investment from abroad.  After a country industrializes, it may become a “post- industrial” economy (i.e. rich) and shift away from manufacturing toward becoming a “service” economy.  The richest countries are rich because they provide “financial services” for MNCs and rich individuals. Some are now considered “knowledge economies”.  By this time, GDP growth rates tend to slow, because the economy is already VERY LARGE, so even 1-2% growth can be highly significant.  OR The economy may get “stuck” in the “Middle Income Trap” (Brazil, S. Africa) or a “Natural Resource Curse”

4. Development Strategies = Industrialization Strategies  Development strategies may be divided by their types and levels of engagement with the global economy, especially in terms of trade and sources of investment.  The four basic strategies are:  Autarky  Mercantilism  Dependency Theory  East Asian Model

5. Autarky = Self-Sufficiency  Usually state-led  Often motivated by nationalism and a fierce desire for independence or a distrust of other countries  Trade with other countries is minimized, except for introduction of basic technologies  Examples: Albania in Cold War, China after Sino-Soviet split (and various dynastic periods of closure), North Korean ju-che  Results: Poor. Autarkic states tend to lag economically.

6. Mercantilism = “Economic Realism”  Concern with relative gains requires states to protect their own interests at the expense of others, AKA a “beggar thy neighbor” zero-sum game  Goal: Use protectionism (especially tariffs) to ensure a positive balance of trade.  Imports, which lead to outflows of capital, are bad.  Exports, which result in capital inflows (and weaken rivals by indebting them), are desirable.  May result in trade wars, wherein barriers to trade reciprocally escalate, as in an arms race.  Results: Mixed. Worked “well” in high colonial era for European empires which translated economic power into military power. Creates a highly inefficient global economy.

7. Dependency Theory & World-Systems Theory  Assumes global economic core exploits the periphery, but periphery is dependent on the core for capital investment, technology, etc.  To break the dependency, poor countries should cooperate and only trade with each other, pooling resouces to create alternative sources of capital.  To protect “infant industries,” high tariffs keep out manufactured products from the core  Focus on “Import Substitution Industrialization” (ISI) for domestic consumption.  A popular strategy for independent states of Latin America and parts of Africa in the 1960s-70s, an adaptation of Marxism  Results: Poor. Either the core wanted to keep the periphery dependent, or “infant industries” never were able to take advantage of “economies of scale”

8. East Asian Model = Export-Led Growth (ELG)  At first, tariffs are kept high, as in ISI, but only until “infant industries” can produce products which are globally competitive. Barriers to trade are then lifted, free trade and globalization are embraced.  Often, the state chooses “national champions” in strategic industries, as in Strategic Trade Theory (STT)  Examples: Japan, “4 Dragons/Tigers”, China, Vietnam?  Results: Successfully sustained GDP growth, industrialization, poverty alleviation. Dependent on globalization & U.S. consumer market?

9. Can Other States Follow the East Asian Model?  Liberal economists & institutions debate whether states were primarily responsible for the success, or whether private Asian firms were better at navigating markets and managing FDI and other capital investments.  Is a “Confucian” culture necessary?  A collective (nationalist) mindset may help the nation unite for “self-strengthening”  Prioritizing education makes for an attractive workforce for FDI  Rejecting liberal democracy (at first) gives the state a lot of power to invest in heavy (polluting) industries without regard for labor rights & environmental protection  Are there any other success stories in modern/recent times?