Development Policy
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Development Policy

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A quick summary of two articles about development policy and the role of trade

A quick summary of two articles about development policy and the role of trade

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Development Policy Development Policy Presentation Transcript

  • Development Policy and the role of trade
    Craig Belden & Heidi Correa
  • The Washington Consensus: A post-mortem
    Robert K. McCleery and Fernando De Paolis
  • Washington Consensus (WC) Overview
    Consists of ten factors
    Maintenance of public exchange rate
    Privatization
    Macroeconomic stability
    Reforming tax systems
    Trade liberalization
    Liberalization of interest rates
    Deregulation
    Property rights
    Reordering public expenditures
    Liberalization of FDI
    View slide
  • Three Groups
    Group One
    Things that everyone agrees with
    Group Two
    Factors that are correct if done right
    Group Three
    A more contentious group
    View slide
  • Current Proponents of the WC
    What would be their reasons for the WC not working like it was designed to?
    Not the fault of the policies
    Problems of timing
    Lack of coordination
    Poor implementation
  • The WC View of Growth, Poverty, and Distribution
    “Trickle-down” Effect
    Current studies support this finding
    Do you think that distribution is an important factor in poverty reduction?
  • Authors View of Growth, Poverty, and Distribution
    Distribution Matters!
    In egalitarian societies
    Higher incentive to save and invest
    Land reform promote efficiency
    Universal education gives everyone a head start
  • Inequality and Growth
    Inverse relationship
    Inequality serves as an excuse for corruption which can lead to
    Capital flight
    Rent seeking
    Tax evasion
  • Trade Theory
    Does increased trade reduce inequality?
    NO!
    What is important is factor endowments of developing countries relative to other developing countries, NOT developed
    China and India example
  • Can the argument for trade liberalization be saved?
    It needs a link to the development of institutions
  • WC View on Institutional Involvement
    The government should lay the foundation of economic growth in a country and leave everything else to the free market.
    What does this mean?
    Give examples of actions a government should take and actions they shouldn’t
  • Should
    Provide legal system to protect property rights to encourage investment
    Provide security
    Provide macroeconomic stability
    Provide basic social services
    Provide infrastructure
  • Shouldn’t
    Directing credit
    Controlling prices of goods and services
    Intervening in labor markets
    Borrowing heavily
    Excessive taxing
    Blocking foreign investment
    Producing or distributing goods and services
  • Interventionist
    They look at the East Asian model and see them doing both
    Arguing that it leads to short cuts
    Opponents could only say that it was not transferable
    They “concluded that social institutions play a vital complementary role to public policies”
  • Six Lessons from East Asia
    Lesson one
    Failures
    Lesson two
    Don’t kick them out, improve their capacity!
    Lesson three
    Context matters
  • Lessons Continued…
    Lesson four
    Incentives
    Lesson five
    Governance
    Lesson six
    Accountability
  • Financial Liberalization
    According to Prasad, Rogoff, Wei, and Kose
    Financial integration is not a necessary condition for achieving a high growth rate
    Example - China and India
    Financial integration is not a sufficient condition for a fast economic growth rate
  • Final Thoughts on the WC
    Williams Views - Success
    Vs.
    The Authors (amongst many others) views - South Korea, Indonesia, Thailand
  • How to Help Poor Countries
    Nancy Birdsall, Dani Rodrik,
    & Arvind Subramanian
  • From the Inside Out
  • Market Access
    Agriculture
  • Market Access
    Increased reductions of trade barriers will mean taking away access to markets by doing away with preferential trade agreements and leaving developing countries to compete with other developing countries.
  • Show me the money
    What are the central recommendation in regards to aid made by developing countries?
  • Show me the money
    What are the central recommendation in regards to aid made by developing countries?
  • Show me the money
    Can it create key institutions and long-term economic health?
  • Burdens
    -TRIPS
    -Not enough space to craft their own economic policies
    -Meeting demands before accession into the WTO
  • Positive Steps
    -Taking action against corrupt leaders
    -Assisting with R&D
    -Enhancing global labor majority
    -Prevention and resolution of conflicts and humanitarian crises
    -Stopping arms sales
    -Stopping illegal trade (diamonds, drugs, humans)
    -Reforming international economic institutions
  • Positive Steps
    -Taking action against corrupt leaders
    -Assisting R&D
    -Enhancing global labor majority
    -Prevention and resolution of conflicts and humanitarian crises
    -Stopping arms sales
    -Stopping illegal trade (diamonds, drugs, human)
    -Reforming international economic institutions
    Can you think of other creative steps?
  • Activity time!!!!!!!!!!
    Haiti
    Brazil
    Sudan
    Kazakhstan
    Definitely
    Mmm, Sometimes
    Not in your life
    Countries
    Categories
  • Washington Consensus
    Maintenance of public exchange rate
    Privatization
    Macroeconomic stability
    Reforming tax systems
    Trade liberalization
    Liberalization of interest rates
    Deregulation
    Property rights
    Reordering public expenditures
    Liberalization of FDI