12 Questions
According to Theodore Schultz, what is needed to prevent a decline in production among farmers in LDCs?
New technology
What was the main focus of the 'Big push' idea proposed by some economists?
Government planning to kickstart industry
Which development approach involved protecting domestic industries in developing countries with high tariffs?
Import-substituting industrialization (ISI)
According to John Mellor, what is crucial for economic growth?
Rural and urban consumption linkages
Which of the following was a key feature of the Washington Consensus?
Privatization of public enterprises
What did the World Bank emphasize in the 1980s as part of structural adjustment programs?
Trade liberalization and market-based systems
What is a key focus of the introduction to the text?
The shift from price supports to social cash transfer schemes in Malawi
What is a concern related to economic development?
Population growth
Which theorist emphasized that saving and investment are crucial for capital accumulation and growth?
David Ricardo
What is the key engine of growth according to the Harrod-Domar Model discussed in the text?
Investment
Which model highlights the importance of surplus labor from agriculture fueling industrial growth?
W. Arthur Lewis's Dual-sector model
Who criticized W. Arthur Lewis's model and highlighted the importance of agricultural growth for industrial development?
Gustav Ranis
Study Notes
Introduction to Malawi
- Malawi is a very poor country with an annual income of $389 per capita (2018)
- Most of the population is rural and engaged in food production with limited use of fertilizers
- Shift from price supports to social cash transfer schemes (SCTS) for the poor
Economic Development
- Goals of economic development:
- Income growth
- Poverty and inequality reduction (welfare economics)
- Increased agricultural productivity
- Concerns of economic development:
- Economic demography (population)
- Labor economics (education and health)
- Organizational structure of the economy
- Provision of goods and services
- Natural resources and the environment
Historical Theories of Development
- Adam Smith: Markets and technological progress drive growth
- David Ricardo: Saving and investment are crucial for capital accumulation and growth
- Karl Marx: Capital accumulation by the wealthy fuels growth and widens inequality
- Harrod-Domar Model: Investment is the key engine of growth, but poor countries struggle to save
- W. Arthur Lewis: Dual-sector model, surplus labor from agriculture fuels industrial growth
- Gustav Ranis & John Fei: Agricultural growth is important for industrial development
- Theodore Schultz: "Efficient but poor" hypothesis, farmers in LDCs are efficient with limited resources
- Simon Kuznets & Richard Stone: Developed methods for measuring national output and economic growth
- Raul Prebisch & Hans Singer: Observed the deterioration of terms of trade for primary goods producers
- Albert Hirschman: Imbalances in supply and demand create pressure for growth
- John Mellor: Rural and urban consumption linkages are crucial for economic growth
Development Approaches after WWII
- Initial focus on foreign aid, capital, and foreign exchange proved insufficient
- Socialism was considered an alternative in some countries
- "Big push" idea: government planning was needed to kickstart industry in developing countries
- Soviet model: Exploited agriculture to build heavy industry through central planning
- Import-substituting industrialization (ISI): Developing countries protected domestic industries with high tariffs
- World Bank promoted structural adjustment in the 1980s, encouraging a shift to a market-based system and trade liberalization
The Washington Consensus
- A set of ten policy prescriptions for developing countries promoted by the World Bank and others in the late 1980s and early 1990s
- Aims to correct market distortions and promote growth through:
- Fiscal discipline (balanced budget)
- Reordering public spending priorities (education, health, infrastructure)
- Tax reform
- Liberalization of interest rates and exchange rates
- Trade liberalization (reduced tariffs and quotas)
- Foreign direct investment (FDI) liberalization
- Privatization of public enterprises
- Deregulation
- Secure property rights
Explore the economic landscape of Malawi, focusing on its income level, agricultural practices, and social cash transfer schemes for the poor. Learn about the goals of economic development in the country, including income growth and poverty reduction. Understand the role of developmental economists in analyzing economic development strategies.
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