Development Policy

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

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Development Policy

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

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