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A. Return to key lessons of Modules 1 & 2: (10pts) Embedded economy - nested within the society and the living world, recognizing that there are diverse ways to meet our needs and wants (Raworth) Doughnut economy - between the social foundation of human well-being and the ecological ceiling of pla...

A. Return to key lessons of Modules 1 & 2: (10pts) Embedded economy - nested within the society and the living world, recognizing that there are diverse ways to meet our needs and wants (Raworth) Doughnut economy - between the social foundation of human well-being and the ecological ceiling of planetary pressure lies the safe and just space for humanity (Raworth) Sustainability - meeting the needs of the present without compromising the ability of future generations to meet their needs (Brundtland Report), rather than “sustainable development” must be defined by the nestedness of economy in society in environment (Giddings). Relations of Globalization & Development Contested: generates growth & integrates economies into global markets, BUT exacerbates poverty & dictates engagements with the global economy. Must problematize the main institutional & ideological instruments of development. (McCloskey) 2. Problems posed by TNC to economy and governance TNCs: 1) use force of capital to capture new markets under favorable conditions to core, 2) accelerates globalization, 3) accountable only to stockholders, 4) reflect the capacity of trade rules to open up govts & markets to the advantage of private capital and core, 5) low wages, labor exploits, prevents unionization, relocates profits, environmental breach, 6) exercise immense political influence, 7) develop alarming level of political impunity, 8) could generate positive investment in developing countries but asset-strips natural resources from them while labor exploiting them, 9) influence over national governments in WTO negotiations. (McCloskey) 3. Internalizing externalities Making the party responsible for the external cost bears the cost. Yes if it leads to a realization of the cost on society and environment, and corporations decide to prevent it in the future. No, because capital cannot replace the loss in community or natural resources (Giddings). Relations of Economic growth vs. equity, well-being & happiness - not necessarily. Use these to argue: Kuznet's hypothesis, Pigou's dictum, Beja's emphasis on subjective experience of poverty and Philippine Misery Index (PM1), Tan's modified Easterlin's hypothesis, and Sen's freedoms. 1. Kuznet's hypothesis - The relationship between economic growth and equity is complex and not inherently at odds. Simon Kuznets’ inverted-U hypothesis suggests that income inequality rises in the early stages of growth but decreases after a  threshold income level (around $1,000 per capita) is reached, leading to greater equity. This view implies that short-term inequality is a necessary cost for long-term development, with economic growth eventually enabling governments to invest in health, education, and social capital, promoting equity and human development. - However, the Kuznets hypothesis is not a universal law, as the relationship between growth and equity varies across nations and over time. Some countries (e.g., Sri Lanka) have achieved equity at lower income levels through targeted policies, while others (e.g., Brazil) have seen worsening inequality despite growth. This highlights the role of government policies and societal priorities in achieving development goals. - Economic growth provides material resources to support broader goals, and greater human development can enhance productivity, creating a virtuous cycle. Balancing growth and equity requires proactive policies, especially in middle-income and less-developed nations, where divergence in GDP and HDI rankings demonstrates that growth alone does not guarantee equity or development. Countries can and should pursue equity and development simultaneously, regardless of income levels. 2. Pigou's dictum - Pigou’s dictum posits that changes in economic welfare (income) generally indicate changes in social welfare (happiness) in the same direction, though not necessarily to the same degree. This implies a positive relationship between income and happiness, with income serving as a proxy for overall well-being. - Subsequent studies, such as those by Easterlin (1974), supported this relationship within a country but found that income growth over time or across countries does not necessarily lead to increased happiness, a phenomenon known as the Easterlin Paradox. This paradox suggests that while wealthier individuals within a society report higher happiness, happiness remains constant despite long-term income growth due to factors like rising aspirations. 3. Beja's emphasis on subjective experience of poverty and Philippine Misery Index (PM1) - 4. Tan's modified Easterlin's hypothesis - Challenges to the paradox, such as the Modified Easterlin Hypothesis, acknowledge a positive relationship between income and happiness but argue that the effect diminishes or plateaus beyond a certain income threshold. At this point, further income growth has little to no impact on well-being, as argued by Di Tella and MacCulloch (2008). Empirical evidence thus supports the idea that income's influence on happiness weakens after basic needs are met. - There is a positive relationship between income and happiness but there is an income threshold, beyond which further income does no longer increase happiness or changes happiness at a much weaker rate.  5. Sen's freedoms Amartya Sen's concept of freedom, central to his Development as Freedom, argues that freedom is both the ultimate goal and the primary means of development. He challenges traditional development models that prioritize GDP growth, industrialization, or technological progress, advocating instead for enhancing human freedoms to achieve meaningful progress. 1. Freedom as the End of Development: The true measure of human progress is the enhancement of freedom, encompassing not only political liberties but also freedom from material deprivation. 2. Freedom as a Means to Development: Freedom empowers individuals to actively shape their lives and societies, fostering social change and economic growth. 3. The Five Distinct Freedoms: ○ Political Freedoms: Rights to participate in governance and express dissent. ○ Economic Facilities: Access to resources, jobs, and markets. ○ Social Opportunities: Education and healthcare to expand individual capabilities. ○ Transparency Guarantees: Trust and accountability in governance. ○ Protective Security: Social safety nets to prevent destitution. Classical (Adam Smith, Thomas Neoclassical (Adding Great Depression Malthus, David Ricardo, Karl Marx) & JM Keynes to context) Main Idea: Main Idea Production of wealth and output Allocation of scarce resources to Distribution of wealth and their best use (efficiency) via competing groups institutions Focus on requirements for achieving an equilibrium level of the saving behavior of society is the determinant variable Develpmentalist (Paul Heterodox (LA Structuralists: Paul Rosenstein-Rodan, Ragnar Nurkse, Prebisch & Hans Singer; Albert Hirschman, Arthur Lewis, WW Institutionalists: Clarence Ayres & Rostow) Gunnar Myrdal; Dependency Analysis: Paul Baran & Cardoso) A loose school of thought on the Minor changes in economic issues of economic development is conditions are not enough to create possible for less-developed development countries If done within the existing  Economic development is possible structures and institutions in for less-developed countries in a less-developed countries, it will short amount of time, and could only strengthen backward achieve its best results with a economic frameworks and lead to competitive market interacting path dependence with a responsive aand efficient Development requires governmental apparatus fundamental, Sweeping and profound changes Ma’am pointers To promote development You can't just set prices/incentivize to stimulate development. Some things are jeopardized by putting a price to them (erosion of social norms, devaluation of relationships). People are motivated financially rather than intrinsically, the latter speaking to values Instead of turning first to markets to mediate our social and ecological relationships, the 21st century economist would start by asking what social dynamics are already in play (values, norms, networks). To create deep and lasting social and ecological behavior change, the most effective approach is precisely to connect with people's values and identity, not with their pocket and budget. — The 21st Century Portrait We Need A better understanding of our own complexity that nurtures human nature and give ourselves a far greater chance of creating economies that enable us to thrive within the Doughnut's safe and just space. 5 broad shifts in how we can depict ourselves: 1) as social beings who reciprocate, 2) as having fluid values not fixed preferences, 3) as interdependent not isolated 4) we approximate not calculate, 5) we are deeply embedded in the web of life, From portrait to model: Robert Frank: "The pernicious effects of the self-interest theory have been most disturbing...By encouraging us to expect the worst in others, it brings out the worst in us." "our beliefs about human nature help shape human nature itself"* Donald MacKenzie and Yuval Millo: 'Financial economics, they concluded, 'helped create in reality the kind of markets it posited in theory. Rational economic man can reshape our behavior - in financial markets and everyday interaction. Examples: professionalism at work as less empathy & concern, understanding and identification of SELF as consumers (centrality of wealth & status) than as citizens (centrality of rights and duties). — NOTE: The Solow-type growth model and Harrod-Domar model will not be included in the exam. What is central to neoclassical thinking is that physical capital accumulation financed by saving out of an economy's total income explains long-term growth. We will add that after the Great Depression (1930s), JM Keynes promoted a more moderate economic theory in contrast to neoclassical theory. His main idea: Aggregate demand - measured as the sum of spending by households, businesses, and the government - is the most important driving force in an economy. Free markets have no self-balancing mechanisms that lead to full employment. Government intervention through public policies is needed to achieve full employment and price stability. B. Module 3 (30pts) Clearly differentiate some or all of the paradigms by explicitly comparing their main ideas. Example: classical vs developmentalist, heterodox vs neoclassical. Economics/Political Economy - Scholarly inquiry about how and why economic development occurs. Classical Political Economists - Explain the rapid expansion of total economic wealth that accompanied industrialization; tackled the enigma of the extremes of wealth and poverty and the lack of development affecting a large segment of the population. Classical Economists - interested in how society produced its output and wealth and in how wealth was distributed among competing groups; concerned with how economic growth took place and how to reduce the numbers living in poverty. 1. They provided the framework and bedrock of ideas of economics as a separate field of enquiry. 2. They assumed that the capitalist order was the natural order and that it represented the highest achievement of human development. Neoclassical Economists - Shifted the emphasis of economics from the broader macroeconomics of growth and development to a much narrower concern with the allocation of a fixed quantity of scarce resources to their best use with given institutions. 1. Efficiency as a focus and it led to a more static and marginalist perspective for economics. a. Emphasis on the accumulation of physical capital – machines, tools, building, etc. – as the fundamental lever for economic growth b. Accumulation of physical capital generates economic progress 2. Growth and development which often require substantial qualitative change in society and not just small quantitative change dispapered for quite some time as supply and demand and price determination became economics. 3. Neoclassical economic analysis was micro-oriented with a focus on the utility-maximizing behavior of individuals and the profit-maximizing actions of perfectly competitive firms CLASSICAL a. Adam Smith: A Theory of Competitive Capitalism and Growth TLDR: advocated for free markets and competition  Champion of laissez-faire. INVISIBLE HAND - The forces of supply and demand working to attain equilibrium in a competitive economy. Self-interested behavior leads an economy to higher levels of economic welfare. At equilibrium, both consumers and producers gain from exchange and there are no shortages or surpluses. There is a harmony of interests among consumers and producers and among workers, landlords, and capitalists and other groups in society which the competitive market capitalist system mediates to the benefit of all. COMPETITION - Counterweight to and a brake on the possible excesses that greedy and self-interested behavior might engender in its absence. An effective competitive environment is essential in restraining the actions of producers and owners/capitalists who constantly are tempted to form carters or monopolies in an effort to increase their individual profits at the expense of both consumers and workers. Naturally acquisitive capitalists would eagerly monopolize markets for their own benefit at the expense of others and might create working conditions inimical to the social and individual development of their own workers. The benefits of consumers of the market capitalist system rested on two, non-separable constituent components: (a) selfish behavior kept in check and (b) regulated by the forces of competition. When competition is threatened by self-interested actions of producers/capitalists, it is the responsibility of the government to create a legal framework and to put in place the appropriate enforcement mechanisms to defend and maintain a competitive environment. Smith’s views on economic development Capitalism as a productive system with the potential to vastly increase human well-being. Primary factors contributing to economic progress or to the wealth of nations: (1) Division of Labor (Specialization) - When there is one person to do each step in producing something; ensure there is more quantity produced and better quality of items. (a) Factory System (i) The pace of work was determined by the machinery which the employee toiled. (ii) Tasks would be divided and subdivided again and again, depending on the level of technology and the sophistication of the machinery available. (b) It led to an increase in the productivity of labor and greater efficiency contributed to increases in total  national output and income, resulting in an increase in the living standard for larger numbers of the population. (2) Free Trade - The larger the market of potential consumers, the greater were the possibilities for more specialization and for ever higher levels of output. (3) Law of Capital Accumulation - Owners of firms had a definite incentive to introduce the latest and best machinery and the newest ways of doing things since doing so would tend to increase efficiency and profits by further extending the division of labor and by making workers even more productive. (4) It is the accumulation of physical capital, technological progress, and the specialization of labor and free trade that are the intertwined sources of expanding economic wealth. (5) The institutional structure of a society played a crucial role in determining the likelihood of continued progress. b. Thomas Robert Malthus: Theory of Population and Economic Growth The division between the wealthy few and impoverished many was the natural outcome of the capitalist system. THEORY OF POPULATION TLDR: Population growth tends to outpace food production, leading to cycles of poverty and famine. Population would grow whenever average incomes rose above the level necessary for subsistence. This is because of the animal nature of human beings, specifically of the laboring poor, that Matlhus viewed as morally inferior to the land and property owning rich. (1) Why the poor remain poor. (2) The ultimate limit on population expansion was the inability of the land to produce sufficient food to continue to sustain the population surge. (3) The production of basic foods could not keep up with the geometric population growth. Population increases in a geometric progression. Agricultural output increases in arithmetic progression. Equilibrium would be achieved when the population grew again at a pace consistent with increase in food production. Malthus’ theory predicts a “vicious circle of poverty” where equilibrium level of income per person is subsistence only. Anything that reduced the birth rate and/or increased the death rate would slow the natural rate of population growth. Two Types of checks that balance population with resources:  (1) Positive Checks: Increased death rates through war, diseases, plagues, natural catastrophes, and starvation. (2) Preventive or Voluntary Checks: Factors that reduce number of births through human restraint such as late marriage and sexual abstinence (a) Typically absent among the poor. Acts of charity might be expected to lead to a decrease in the willingness of the poor to work by diminishing their fear of starvation, hence reducing total national production and income and thus actually accelerating the pace of decline toward subsistence. There is no automatic mechanism by which all classes in society necessarily gained from the increased productivity of the new capitalist structure. AGRICULTURAL REVOLUTION - increased food output and higher living standards with less effort. c. David Ricardo: Theories of Diminishing Returns and Comparative Advantage TLDR: Advocates for free trade to enhance global productivity. Industrialists as the dynamic center of the workings of the capitalist economy. With economic and population growth, landowners threatened the capacity of the capitalist system to continue to grow since this meant a reduction in profits of the industrial sector. What landowners gained in income with population growth, industrialists lost. THE LAW OF EVENTUALLY DIMINISHING RETURNS When economic growth occurs, land of lower productivity is brought into use. This land is called marginal land. (1) If marginal land is used, the overall price of food will rise because of the rising marginal cost of producing additional food from less productive land. (2) Those producing on land are more productive than the marginal lands, the higher price that their output would now command will generate for them a windfall gain. (3) This is because the price of the output from more productive land will be the same as that sold from less productive land, but the costs of production will be lower on the farms with more fertile land. This is called economic profits. (4) Windfall profits to landowners were called rents. (5) Rents increase as a share of total income as the population grows. As a consequence, less and less of society’s total income is available for wages and for the profits of capitalists.  (6) Ricardo: The interest of the landlord is always opposed to the interest of every other class in the community. Every economy has a maximum level of income per person that could be produced from an optimum quantity of inputs. Stationary equilibrium state - workers receive only subsistence wages. Cheap food means lower industrial wages and lower wages means higher profits for capitalists. Higher profits for capitalists meant greater possibilities for continued capital accumulation in industry that could result in higher levels of production and higher income levels for the economy as a whole. Productivity of labor in agriculture is the principal basis for sustaining economic growth. In the long run, greater productivity could be achieved from technological changes. In the short term, overseas markets could supply food to counteract rising food prices. FREE TRADE: Ricardo advocated for free trade because the increase in supply would contribute to keeping wages lower by keeping prices down. (1) This means higher profits and more capital accumulation by industrialists but lower profits for landowners. Free trade and an open economy contributed to offsetting the adverse effects of the law of eventually diminishing returns from agriculture in the short term, thus permitting industrial workers real wages to continue to rise even with population growth. THEORY OF COMPARATIVE ADVANTAGE Unrestricted exchange between countries will increase total world output IF each country specializes in those goods it can produce at a relatively lower cost compared to its potential trading partners. With free trade, all countries will find that their consumption possibilities have been expanded by such specialization and trade beyond what would have been possible from their domestic production possibilities alone. Opportunity Cost - Ricardo focused on the international trade-off in production of one good for the other, that is, on the internal opportunity cost of production within each country for one unit of each good in terms of how much of the other must be sacrificed. Ricardo recognized that what was important in determining what each country should produce for trade was the relative cost of producing each good within individual countries, not the absolute cost. When countries specialize and trade with one another, each country will be able to consume outside its own production possibilities frontier.  (1) It is not required that each country forgo producing the good with higher opportunity cost to gain from trade. It is only necessary to shift resources toward the goods that can be produced at a relatively lower opportunity cost. Specialization in production and free trade, that is, trade between countries with a minimum of tariff and non-tariff barriers, is the best policy for countries to follow. Specialization and free trade increase world production and the consumption possibilities for each country by increasing the degree of internal efficiency in production in individual countries so that there is more available for all to consume. Specialization allows each country to provide to the world market goods and services it can produce most efficiently. (1) It is the shift toward greater efficiency in the use of inputs that increases total world output. Then, wvia mutually beneficial trade, every country can be better-off than if each had simply produced and consumed goods in isolation. EVALUATION OF THEORY OF COMPARATIVE ADVANTAGE Restrictions applied to the theory: (1) It was assumed that the factors of production (natural resources and land, labor and capital) were immobile and that all countries had the capacity to produce all goods. d. Karl Marx: Analysis of Capitalist Development Capitalism as not a permanent or natural state of human society. Capitalism was only a historical phase in progression that began with primitive communism, evolved through slavery and feudalism and would eventually give way to socialism and communism. Marx noted that capitalism created more wealth in a century than all previous modes of production combined. The system’s focus on capital accumulation and technological progress spurred economic growth. Marx criticized the human costs and unequal distribution saying that: Bourgeoisie owned the means of production and appropriated wealth while the proletariat, who actually created this wealth through labor, were exploited and undercompensated. According to surplus value: workers produce goods worth more than their wages and this surplus is appropriated by capitalists as profit, not because of their productivity but due to their ownership of production facilities. Capitalists continuously reinvest profits to accumulate more capital and adopt new technologies and this leads to an increase in productivity but also intensifies inequalities.  Overproduction leads to economic crises. These crises highlight the inherent instability of capitalism The concentration of wealth among capitalists and the exploitation of workers would create class tensions. Over time, the proletariat would develop class consciousness and overthrow the capitalist system. Capitalism would only transition to socialism after achieving a high level of technological and capital development. CAPITAL ACCUMULATION and TECHNOLOGICAL INNOVATION are the prime drivers of productivity Inequality and class conflict highlights the social and political consequences of economic development. and growth. NEOCLASSICAL a. Adding the Great Depression & JM Keynes to context - SOLOW-TYPE NEOCLASSICAL GROWTH MODEL - Solow-type growth function predicts that, for any given rate of savings and investment, there is a constant, steady-state level of real per capita income that can be attained - Implies that poorer nations would be expected to grow faster than richer nations, assuming equal rates of saving and investment and growth rates of population // Predicts the convergence of per capita income amongst different nations sharing similar “fundamentals.” - Ex. Two countries with the same rate of saving and the same population growth rate will tend to have the same level of real per capita income. Hence if one starts at a lower non-equilibrium level of income, that economy will grow faster until it reaches the steady-state equilibrium income level associated with the rate of savings and population growth. - According to the Solow formulation, it is not possible for a nation to increase its rate of economic growth by dedicating more of its income to installing more physical capital goods. - the law of diminishing returns means that more rapid accumulation of physical capital will simply result in the country reaching its target level of per capita income more quickly. - the maximum steady-state (constant) level of income per person would have been reached and growth stops. - higher level of saving and investment that adds physical capital machinery faster to the production process does not lead to a higher rate of growth of income that can persist over time - There is a limit on the level of per capita income for that level of income– as it approaches it, the rate of growth of per capita income decreases because of diminishing returns, eventually reaching zero as the steady-state  income level is attained and the optimum level of physical income is reached - Countries that are poor and not growing are thus poor because they are not saving and investing a sufficiently high proportion of their income. - Countries that wish to increase their average standard of living can do so by increasing the rate at which national income is saved and invested and by accumulating physical capital at a higher rate. - HARROD-DOMAR MODEL: A KEYNESIAN APPROACH - The labor force grows at a constant rate - Introduced the concept of the warranted rate of growth– the rate of growth of output consistent with equilibrium in both the input and output markets. - What the growth rate of total output shows is that an increase in the savings rate (which allows a higher level of investment and capital goods creation) will increase the growth rate of the economy ceteris paribus - It is an expansion of total physical capital goods as a share of total output - higher levels of investment creates higher income levels - This equilibrium growth is unstable - If output grows at a rate faster than savings rate/constant capital-output, then the growth rate of output in the next period will be even larger as investors react by investing and producing even more output - If the growth of output is less than the rate of s/v, the economy slows down even more as investors invest/produce less - KNIFE-EDGE EQUILIBRIUM: If an economy was not growing at the rate required by current rate of saving and given the current capital–output ratio then the economy would veer further and further away from equilibrium, either growing too quickly, and eventually igniting inflationary pressures, or growing too slowly, leading to unused capacity and rising unemployment as the economy spiralled away from equilibrium. - Without the right savings rate, the Harrod-Domar analysis predicted the alternative abysses of either self-perpetuating inflaiton or spiralling unemployment - Keynesian economics rejected the laissez-faire, full-employment assumption of classical theory and argued that central government intervention was necessary to approach full-employment equilibrium - Keynesians did not believe that full employment was the automatic outcome of advanced capitalist economies. Without government oversight, inflation or unemployment  were as likely to result, or more likely to result, than a fully employed economy. - rate of saving, level of physical capital accumulation, and capital-output ratio are amenable to public policy decisions, easing the way for strategies to manipulate behavior and influence decisions to affect the pace of economic development - Solow showed that the Harrod-Domar result was the consequence of assuming that production required fixed ratios of the inputs to production - Standard neoclassical assumption: The capital and labor inputs are infinitely substitutable in production, though such substitution was subject to the law of eventually diminishing returns - Solow’s equilibrium did away with the problem of the knife/razor edge problem. - For any rate of saving, there is a steady-state equilibrium level of income per person - Stil, public policy can still impact the rate of growth and the level of per capita income, if not the long-run rate of growth via the saving rate, and the rate of population growth - Policy that can increase the rate of savings by increasing the proportion of total output that is invested in physical capital can increase income per person– So can policies that reduce the population growth rate DEVELOPMENTALIST a. Paul Rosenstein-Rodan’s Big Push Theory - Calling attention to hidden potential of economic growth in LDCs - Big push from concurrent industrial investment could jump start large scale industrialization projects which could lead to increasing returns and launch chain reaction of virtues cycles and complementary investments that would ripple throughout an economic system - BUT it's not just investment to industry that can bring about the big push. Social overhead capital is also important. - Social overhead capital (SOC) goods - available to anybody therefore it is social and aren’t tightly linked to any particular part of production hence overhead. - Examples: roads, bridges, docks, communications, hospitals, schools, irrigation, flood control projects. - Should be held by government through taxes - Generate substantial positive external benefits to society as a whole, thus essential for achieving faster and self-sustaining growth. Social benefits exceed costs. - Accounts for 30-35% of total investments should be state-sponsored because the market mechanism will not adequately create SOC Innovations: Disguised unemployment-agricultural labor could be tapped for building public works Any labor-oriented that is not contracted  Large scale investments have impact on overall growth these have to be planned and targeted with subsidized investments Emphasis on social overhead capital Big push result in technological external economies resulting from large scale industrialization as it trains labor that could capacitate various sectors b. Ragnar Nurkse (1953) - Theory of Balanced Growth - Work more on self-sufficiency by improving domestic models - Export pessimism: Contradicted idea that free trade based on comparative advantage was good, road to development isn’t export-led - International demonstration effect: less-developed countries vulnerable to socially created wants of imported goods based on higher income groups demonstrating their desirability; lead to bias for imports and limit savings that could be directed towards capital formation - In less developed states can achieve balanced growth if there’ large scale industrialization (increase in supply ) to be met by a concomitant increase in demand (purchase of increasing domestic good, not imports or import sustituting) - Increase in demand MUST NOT BE MET by import substitutions - States can create positive impact on economic growth, not even by getting involved in production, but by creating fiscal policies such as 1) food savings by taxing higher income groups 2) repress consumption of national income c. Albert Hirschman (1958) - Theory of Unbalanced Growth - Unbalanced growth & market equilibrium can deliberately be used to stimulate or speed up economic growth - Focusing only on certain industries first will create excess capacity in them and intensify shortages in others, which will then create pressures and subsequent reactions; that open up opportunities for entrepreneurs - Happen through industrial linkages: backward linkages and forward linkages. Development policies could be built around maximizing industrial linkages - Backward Linkages: Induced effects on the output of supplying industries. - Forward Linkages: Induced effects of the output of the industry in the direction of the final consumer - Mechanizing labor prices lead to higher productivity, greater efficiency and new attitudes transmitted to society and change outmoded social structures in less developed countries d. Arthur Lewis - Growth with Unlimited Supplies of Labor  - Export Optimism: rising incomes and Productivity in developed countries will create stronger demand for agricultural produce which remains promising for less developed nations. Nevertheless less developed nations also had potentia,l hidden, and dynamic comparative advantage in some types of manufacturing. They could restructure their economies towards these, given their comparative advantage of lower labor cost - Surplus Labor: hidden resource that could contribute to greater industrial production (w/o affecting agricultural productivity and eventual food price increase) - Less Developed Countries are visually dualistic—having an agricultural sector that’s detached from its industrial sector, labor is a linkage - Lewis revised: Later, he recognized that income generated in less developed countries are squandered in conspicuous consumption not just by capitalists but also by the residual class (landowners, political elite) they don’t invest as around. Thus, he advocated raising taxes on top 10 to 20%. e. Rostow: Stages of growth theory - Traditional society - Society remains to be predominantly agricultural, landholders playing a dominant role in determination of political and economic power - Does not take into consideration the historical conditions happening in the Third World while this was happening in Europe - Preconditions to take-off - Destruction of trad society - Blurred the lines between a colonized nation and a colonizing nation itself → both are swept into this stage of development regardless of the power dynamics between the two types of countries - Reactive nationalism - modern businesses will be created which will make use of new and sophisticated methods of productions, which unfolds in both colonial and post-colonial regions → a new drive for modernatization - Take-off → into sustained growth - Neither the role of the “reactive nationalism” nor the existence of profit motive tappeared to be sufficient conditions to launch Latin Maerica into its “take-off” stage. - “(1) a rise in the rate of productive investment from, say, 5 percent or less to over 10 percent of national income; - (2) the development of one or more substantial manufacturing sectors with a high rate of growth; [and]  - (3) the existence or quick emergence of a political, social and institutional framework which exploits the impulses to expansion.” - STAGES 4 AND 5: Maturity and Age of mass consumption - a period wherein growth is sufficiently high so that there is significant increase in per capita income. The economy becomes diversified and technologically sophisticated, such that the society can now produce anything, but not everything, it chooses; - a subsequent period where production is largely for the purpose of consumption, with relatively little concern for the need to further build production capabilities. Society is now devoted to the pleasures of consumer choice, the pursuit of security, and the enjoyments of the arts and leisure. - CONTESTED: PH remains to be in both take-off and age of mass consumption - CRITICAL RESPONSES: appealing as Rostow’s list of conditions for take-off may be, it is disconcerting to HETERODOX a. Much of Prebisch’s work on questions of development policy pivoted on his willingness to draw a distinction between the timeless constructs of neoclassical economic theory and what he saw as the dynamic effects of real economic forces, particularly those existing between the already-developed center nations, such as the European powers and the United States, and the less-developed periphery nations of Latin America, Asia, and Africa. Prebisch began to learn and grapple with the fact that behind the laws of demand and supply there often lurked power relations and quite dissimilar forms of production between nations. Prebisch noted that during the Great Depression, the export prices of agricultural and other primary products fell much further and faster than did the prices of manufactured, or secondary, products. In manufacturing, they reasoned, the supply of output was relatively price elastic; thus as demand decreased so did the quantity supplied. The equilibrium price would fall, of course, but in a somewhat more limited manner, depending on the value of the supply elasticity. In the extreme case, as with supply curve SE, which is perfectly elastic, the decrease in demand has no effect on price, but only on the quantity traded in the market. In the agricultural markets, supply conditions are dramatically different; suppliers, many of whom were small farmers with limited land, tended to plant or grow as much as possible, year-in and year-out. Supply was therefore relatively price-inelastic. When demand decreased, the quantity supplied did not fall by much, but prices quickly and dramatically decreased.  In the extreme case, which might be somewhat more common in agriculture than in manufacturing, the momentary supply curve would be perfectly inelastic, as for supply curve SI , and all If Prebisch was correct in believing that the terms of trade would move against the developing nations, then a successful development program would, of necessity, force a nation to either: (1) Adopt a programme that emphasized internal changes which would restructure the peripheral economies more toward the domestic market and away from exports, (2) Or develop a new export strategy which would emphasize manufacturing and processing and other secondary production activities, rather than the export the decrease in demand would be transmitted as a lower equilibrium price for the agricultural good. b. In terms of Trade Given the existing international division of labor, in which the developed center countries produced manufactured goods for export to the periphery and the less-developed peripheral countries produced primary products for export to the center, all the benefits of trade would accrue to the center and none to the periphery. The periphery would have to produce more and more agricultural or raw material products simply to obtain the same quantity of imported manufactured products. of raw materials, foodstuffs, and other primary products. There was a second argument for industrialization: greater overall economic stability could be maintained if the degree of industrialization were increased. Third, an industrial base might facilitate the transmission of technological advances from industry to agriculture – that is, a growing manufacturing base could create technological externalities in agriculture which would increase productivity and income. The structural changes inherent in industrialization require rationality and foresight in government policy and investment in infrastructure to accelerate growth, to obtain the proper relation of industry with agriculture and other activities, and to reduce the external vulnerability of the economy. In development economics, the theory that the terms of trade tend to move against raw materials, agricultural and primary producers is known as the Prebisch-Singer (P-S) hypothesis. Prebisch had analyzed the relations between nations at unequal levels of development using the spatial imagery of the center and periphery. In Prebisch’s and Singer’s analysis, then, free trade can actually be harmful to the peripheral, less-developed nations.  This view, of course, is in diametric opposition to the very basic orthodox economic contention, from the time of David Ricardo at least, that the pursuit of comparative advantage in international trade will benefit all participating nations and that, in time, income levels between different regions of the world should tend toward equality as a consequence of the equalizing tendencies set in motion by the movement of goods and factors of production with free trade (1) according to the P-S hypothesis, the center nations gain doubly from new technology and trade with the periphery, while the periphery becomes worse off as a result of a deterioration in their terms of trade that results from the price movements on center exports and periphery exports. In effect, with the constant spread of new production technologies in the world economy, the P-S hypothesis predicts that the prices of what the periphery sells on the world market will decline, while the import prices of what the periphery purchases from the center remain about the same. Just the reverse is true for the center nations, which find their terms of trade, and hence the purchasing power of their exports, rising Additional factors contributing to declining terms of trade The transition of economic dominance from Great Britain to the United States created challenges for peripheral countries. The U.S. had a lower import coefficient than Britain, reducing its reliance on imported goods. This limited market opportunities for traditional exports from peripheral economies, restricting their ability to earn the foreign exchange necessary to import manufactured goods. This shift underscores the importance of industrialization in the periphery to reduce dependency on exports of primary commodities. The role of foreign aid Singer advocated non-market offsets to compensate for the effects of laissez-faire. Singer was, indeed, perhaps the most outspoken and relentless advocate of foreign aid among the heterodox economists. He maintained that aid could take many forms, such as buffer stock purchasing programmes for primary products to temporarily offset falling raw materials prices, and “soft loans,” that is, lending made at below the market rate of interest to the poorer nations to permit them to build up their infrastructure and/or make other long-term social investments. c. Institutionalist (UAN) - Proper subjects of analysis are the institutions of an economy, forms of production, ownership, work processes and ideologies which combine to create an economy and society. Ayres: a. Mega theory - the progress of the country depends on which of 2 forces are dominant: technology and ceremonialism. b. Development happens with technology and ceremonialism delays it. Ayres was interested in a “mega theory” of development, which would have application to the advanced and the poor nations alike. At the center of Ayres’s theoretical structure on the “how” of economic development are two fundamental forces: technology and ceremonialism. c. Tech: inseparability of human skill and use of tools. Synonymous with economic development. d. Ceremonialism: any past binding behavior that curbs and limits the speed of technology’s forward progress. Social stratification Social mores/convention Ideologies that justify stratification and mores Systems of behavior that reinforce 1 and 2 e. Human capital accumulation - expanding educational opportunities for all is the surest way to progress f. Education: is central and can diminish ceremonialism A developing nation must attain an independent technology learning capacity g. Tldr: He believed that economic progress is the result of technology triumphing over ceremonial behavior. Ceremonial structures assign privileges to certain classes and condition the population to resist social and economic change. Ayres argued that successful development requires revamping these institutions and the associated behavioral patterns that hinder the creation of indigenous technological capacity. Myrdal: a. In the absence of counteracting policies, inequalities would tend to increase both internationally and within a country. b. CUMULATIVE CAUSATION and BACKWASH EFFECTS Cumulative causation in countries with dual economy, inequality present backlash effects: Myrdal's cumulative causation refers to a concept that explains the dynamic economic effects that progressively move a society away from equilibrium. (1) In the context of economic development, Myrdal argued that when a less-developed nation receives a stimulus for growth, it is likely to be experienced in the more prosperous region of the economy. As a result, this region surges even further ahead, leaving the more  economically deprived regions of the economy lagging behind. Reasons for this: a. Migration of Skilled Workers: More ambitious and better-trained workers tend to migrate from poorer regions to the growing regions. This results in a population shift, leaving behind a population in the poorer areas that is largely composed of dependents and low-productivity workers compared to those who leave. b. Population Dynamics: In the backward rural areas, there is likely to be a higher rate of fertility, leading to a more rapid rate of population growth. This puts increasing demand on a smaller number of the least productive workers, which in turn pushes down income per person in these poorer rural regions. c. Cumulative Movements: The movements in any one direction tend to be cumulative, exacerbating poverty and sustaining low levels of development where they exist. Conversely, these movements favor and expand upon economic development and progress where they already exist. d. These cumulative movements, which tend to economically weaken a region, are termed backwash effects. Secondary backwash effect a. If the economic stimulus took the form of the expansion of industry in the economically more advanced region of a country, the output of the new firms might well compete with the peasant and artisan production methods prevalent in the poorest region. Example, Artisan production might then be undercut by the economies of scale realized by manufacturers in the more advanced region of the country, The Process of Economic Development slowly disrupting and then displacing artisan and small manufacturing industry in poor, rural regions. Such effects could be accelerated if the more economically advanced region of the country became more involved in international markets. The spread effects could outweigh the backwash effects only if income and employment in the leading sectors grew relative to that of the laggard sectors, as they did in the now advanced countries. The elites do not fear state power Only radical institutions reforms will bring development b. Dependency Analysis 1960's the causes for the lack of development are external to socio-economic formation of less-developed nations. c. The institutional approach meant enlarging the study to include what in a summary way I referred to as “attitudes and institutions”. They were found to be largely responsible for those countries’ underdevelopment and would  have to be changed in order to speed up development. (Myrdal 1984: 153) Only radical institutional reforms would allow for development. Some examples of such changes needed might be land reform, a campaign against corruption, and displacement of the elite from the commanding heights of state policy. In short, the causes of underdevelopment and the cure for poverty were to be found in the study of and changes in the “attitudes and institutions” of the less-developed nations. Economic theories about saving and investment, “big push,” “balanced” or “unbalanced” strategies were hardly enough. d. Tldr: He believed that understanding the sources of economic underdevelopment required an analysis that extended beyond the constructs of orthodox economics. Myrdal emphasized the need for radical institutional reforms, such as land reform, anti-corruption campaigns, and displacement of existing power structures, to facilitate development. He highlighted the role of attitudes and institutions in perpetuating underdevelopment and advocated for their transformation to accelerate progress. D. Dependency Analysis (LULU) Dependency theorists posit that underdevelopment in peripheral nations is primarily a consequence of their subordinate position in the global capitalist system. They argue that the economic and political structures of the periphery are shaped by external forces, resulting in a relationship of dependency on the center. This dependency manifests itself in various forms, including: Exploitative Trade Relations: Building on the Prebisch-Singer hypothesis, dependency theorists argue that trade relations between the center and periphery perpetuate unequal exchange. The periphery exports primary products at declining terms of trade while importing manufactured goods from the center at higher prices. Domination by Transnational Corporations (TNCs): Dependency theorists highlight the influential role of TNCs in shaping the economic landscape of peripheral nations. They argue that TNCs, driven by profit maximization, often extract resources, exploit cheap labor, and repatriate profits, hindering local development. Influence of Multilateral Institutions: Dependency analysis criticizes the role of institutions like the World Bank and the IMF, suggesting that their policies often serve the interests of the center. These institutions impose conditions that perpetuate dependency and limit the policy space for peripheral nations. Stagnationist Perspective: Some dependency theorists, like Andre Gunder Frank, argue that dependency inevitably leads to economic stagnation in the periphery, trapping these nations in a cycle of underdevelopment. Associated Dependent Development (Cardoso): Fernando Henrique Cardoso, a prominent dependency theorist, offered a more nuanced view. He argued that while dependency creates challenges, it also creates opportunities for economic growth and development, albeit within a dependent framework. Cardoso termed this phenomenon "associated dependent development," suggesting that peripheral nations can experience some progress by collaborating with TNCs and adapting to the global capitalist system. Criticisms and Evolution of Dependency Analysis: Dependency analysis faced criticism from both orthodox economists and classical Marxists. Orthodox Critique: Orthodox economists questioned the empirical evidence for declining terms of trade and argued that market-oriented policies, rather than state intervention, would be more effective in promoting development. Classical Marxist Critique (Warren): Bill Warren, a classical Marxist, argued that capitalism, even in its peripheral form, remained a progressive force that would eventually lead to industrialization and the emergence of a working class that could challenge the existing order. Warren emphasized the positive aspects of capitalist expansion, suggesting that it would ultimately pave the way for socialist transformation. Despite criticisms, dependency analysis remains relevant, especially in light of globalization and its impact on developing countries. As Girvan noted, the dependency of many countries has intensified in recent decades due to factors like rising foreign debt and the constraints imposed by global trade agreements. These developments have led to calls for a renewed critical analysis from an updated dependency perspective to understand the contemporary challenges of development in a globalized world. Assumptions: TNCs create negative externalities D.A. primarily talks about core and periphery countries (1) Core - receoves the manufacturing needs (2) Periphery - produces agricultural goods/raw materials, that which is extracted by the core countries International Factors → seen as an extension of external factors Core provides aid, thus are always unequal (1) Aid always goes to the industrialists than the wage workers Internal - dysfunctional institutions were played down (1) Structures create “culture of poverty” → it is not the “culture of poverty” that creates poverty (a) “Culture of poverty” is learned behavior because of the structures that put poverty. External - TNCs are the negative influence & multilateral institutions (by the Bretton Woods) & their extensive influence towards internal affairs (SAPs - Structural Adjustment Policies). Baran (Marxist) Monopolies siphon TNCs (1) Pessismistic, stagnationist dependency School in Latin America and Africa (2) MONOPOLY CAPITALISM: there are no competitive economies - vested interests; thus they maintain backwardness of LDCs & dependence of periphery (3) Economic Surplus: defined as mass of resources, actual and potential, which a society could have at its disposal in order to  facilitate economic growth; it is the amount that might be reinvested in productive ways to increase the future level of social output. (a) This “surplus” is that residual left over out of total income after a society’s basic needs have been met for food, clothing, shelter, and human companionship. Potential for economic change: national capital, foreign capital, and state capital (1) Poor nations creates Import Substitution Industrialization (ISIs) that changed the structure of their entire economy (2) Foreign Investment, while it can affect one portion of the national income, it remains to be a narrow isolated portion of the national economy. Ceremonial Retarding Institutions - bolstered by enhanced revenues (foreign capitals, TNCs), which flowed into “stakeholders” In States in LDCs are incapable of performing decisions → thus putting forward national interests Thus, there is a need to move to socialism TNCs celebrate/propagate retarding institutions Cardoso (Non-Marxist) New alliances are created between TNCs and local elites (1) As such, state has to interfere in order for the nation to get more of the pie created by the TNCs and local elites Periphery needs TNCs because TNCs have capital TNCs need periphery for new sales most especially because of periphery’s upper and middle class (1) BUT PERIPHERY AND TNCS HAVE UNEQUAL POWER Associated Dependent Development (1) Periphery is not powerless because they form new forms of capitalist accumulation at work (2) By portraying a submissive dependency and stagnation, many intellectuals hoped to stimulate a political shift towards revolution Growth is created by the new alliance between domestic capitalists and the transnationals under dependent development 2. Identify and explain specific theories that apply to a given question/problem. Examples: Which theory can be applied to the link between PH development and PH ranking 2nd to the last in the Program for International Student Assessment (PISA) in 2024 for creativity? C. Module 4: (10pts) (CY) 1. What is policy? What is public policy? Policy - It sets guidelines for humans to follow and so that everyone is on the same page.  - A deliberate system of guidelines to guide decisions and achieve rational outcomes. - A statement of intent implemented as a procedure or protocol. - Policies are generally adopted by a governance body within an organization. - Synthesis: - Policies are structured guidelines adopted by a governance body within an organization to ensure consistency and rational decision-making. They serve as a statement of intent, outlining procedures or protocols that help align actions and outcomes, ensuring everyone is on the same page and decisions are made systematically. Public Policy - The framework of laws, regulations, and actions governments implement to achieve social and economic goals. It is a statement of the government’s intent and commitment to address a particular issue or problem. Public policy shapes the decisions of government officials and agencies, and it affects society, the economy, and politics. - Public Policy is a deliberate systematic effort to address various social, economic, and political issues that affect society. 2. What are the policy challenges for the PH? - Policy reforms processes encounter conflict among powerful institutional factors, such as vested interests. - The power center is a centralized and patronage-ridden presidency that orchestrates the execution of policy and allocation of spoils. Concentration of power is supported by the power of families and clans in the local areas, within the context of a “neo-patrimonial” political system (Azfar, et.al., 2000). - Philippine legislature by and large does not mediate differing interests; its policies, laws, and resources are seen widely as directly favoring powerful constituencies. Voting arrangements, financing of campaigns and political parties, and other institutions are maintained or revised to keep incumbents in office. - Policies are thus created on the basis of politicians designing and modifying institutions to stay in power or support business interest. - Synthesis: - Policy reform processes in the Philippines often face conflicts rooted in powerful institutional dynamics, such as vested interests. A centralized and patronage-driven presidency orchestrates policy execution and resource allocation, supported by local power structures dominated by influential families and clans within a neo-patrimonial political system. The legislature generally fails to mediate competing interests, with policies and resources often favoring powerful constituencies. Voting systems, campaign financing, and political institutions are structured or altered to maintain incumbency, resulting in policies shaped primarily to secure political power or advance business interests. 3. Be ready to answer questions about the Case Study on Ecotourism Characters and Their Situations: 1. Lucy Soto ○ Profile: Lucy has come to protect her father, but she also wishes to protect her interests as a worker. ○ Situation: She works in poor conditions on an assembly line, handling bananas all day, which has caused a rash on her body. She shares a room with three other girls and finds her wages insufficient to support her family. Despite her father's disapproval, she expresses a desire for better wages and working conditions, indicating a certain freedom in making her own money. 2. Nicole Harvey ○ Profile: Nicole is a non-governmental organization (NGO) leader from the United States, concerned about global trade policy and its impact on the poor. ○ Situation: She recognizes the dual purpose of the new ecotourism policy, which aims to protect the rainforest while ensuring a labor pool for large plantations and factories. She has called a roundtable discussion to advocate for fair compensation for those displaced by land reclamation. 3. Manuel Soto ○ Profile: Manuel is a fifty-three-year-old campesino who has lived near the Carara Biological Reserve his whole life. ○ Situation: He feels the government has taken his land without providing skills or adequate compensation. He expresses a strong desire to return to the way things were and is frustrated by the idea of being forced to adapt to a modern economy. He is also concerned about the impact of ecotourism on his community and the environment. 4. Daniel Allende ○ Profile: Daniel is an environmentalist from San Jose, Costa Rica, dedicated to preserving rainforests. ○ Situation: He is worried about the increased foot traffic at the Carara Biological Reserve and the potential harm to indigenous species due to tourism. He emphasizes the need for the affected people to be included in decisions about land reclamation and foreign investment. 5. Luis Ortega ○ Profile: Luis is a representative of the government. ○ Situation: He acknowledges the concerns of the local community and states that the government is trying to develop the park sustainably. However, he faces criticism from Manuel for offering land far from his family, which Manuel finds unacceptable. 6. Henry Copple ○ Profile: Henry is a participant in the roundtable discussion.  ○ Situation: He acknowledges the benefits that the United States will gain from the ecotourism initiative, indicating a recognition of the economic implications of the project. 7. Felipe Antonio Arce ○ Profile: Felipe is a worker at the Carara Biological Reserve and is also from the land taken by the government. ○ Situation: Unlike Manuel, Felipe is excited about the expansion of the national reserve because his job is now secured, and he believes that the ecosystem is better protected. He has worked at the Carara Biological Reserve for several years and feels that the growth of parks like Carara is important for preserving the unique flora and fauna of Costa Rica. Felipe has experienced career growth since the land reclamation, as he now supervises many workers, including former poachers, and has received a new vehicle for his use, which has made him happy. Important Points: The ecotourism policy aims to protect the rainforest but also serves the interests of multinational corporations and the government. There is a significant disconnect between the decision-makers and the local communities affected by these policies. The characters express a range of emotions, from hope for better opportunities to frustration over loss of land and cultural identity. The need for fair compensation, education, and job training for displaced individuals is a central theme in the discussions. Page 4 Questions: 1. What potential dilemmas exist among the seven people? a. Economic vs. Cultural Displacement: Manuel’s forced relocation highlights the profound impact of land reclamation policies on individuals who have deep cultural and emotional ties to their land. The government's approach to modernization disrupts centuries-old traditions, forcing people like Manuel to abandon their way of life for an uncertain future in urban areas. For Lucy, the dilemma manifests in her attempt to adapt to urban employment while grappling with unsafe working conditions and loss of community ties. b. Conservation vs. Development: Felipe supports the growth of protected areas and ecotourism, believing they secure jobs and protect biodiversity, but this comes at the cost of displacing communities and restricting their access to resources. Daniel, while also an environmental advocate, fears that increased tourism will damage fragile ecosystems and compromise the very species conservation seeks to protect. c. Globalization vs. Local Autonomy: Henry and Luis see globalization and trade agreements like CAFTA as essential for economic progress, but their  vision largely benefits foreign investors and the urban elite while marginalizing rural communities. Nicole and Daniel argue that these policies exploit local labor and resources while excluding affected populations from meaningful participation in decision-making. d. Ethics vs. Survival: Manuel’s poaching encapsulates a moral and practical dilemma. While illegal and harmful to biodiversity, his actions stem from desperation and lack of viable alternatives, underscoring the failure of state policies to provide sustainable livelihoods for displaced individuals. 2. Which groups are most likely to have the most conflict? Explain. a. Manuel vs. Felipe: As individuals from the same community, Manuel and Felipe embody the stark contrast in outcomes for displaced locals. Manuel, now a poacher, resents the state’s actions and sees Felipe’s job at the reserve as a betrayal of their shared heritage. Felipe, on the other hand, sees ecotourism as an opportunity for conservation and personal advancement, potentially dismissing Manuel’s struggles as an individual problem rather than a systemic failure. Their conflict highlights the divide between those who benefit from development and those who are left behind. b. Nicole vs. Luis and Henry: Nicole’s NGO champions fair trade and equitable treatment for displaced communities, challenging Luis and Henry’s prioritization of foreign investment and economic liberalization. Nicole’s stance on including affected populations in decision-making threatens their top-down approach, creating friction between social justice advocacy and the neoliberal agenda of rapid development. c. Daniel vs. Luis: Daniel’s environmental advocacy directly opposes Luis’s belief in unregulated development as a pathway to modernization. Daniel’s concerns about the ecological impact of increased tourism are at odds with Luis’s willingness to sacrifice environmental protections for economic growth. 3. Although Felipe, Manuel, and Lucy are all from the same land, what different views might they have about what is happening? Why? a. Manuel sees the displacement as a violation of his fundamental rights. Having relied on his land for generations, he views the state’s actions as a betrayal of his identity and livelihood. For Manuel, the government’s compensation is insufficient, and the push for ecotourism benefits outsiders at the expense of local communities. His frustration manifests in illegal poaching, which he sees as a survival strategy rather than a moral failing. b. Lucy represents a generation caught between tradition and modernity. While she shares her father’s disdain for displacement and poor working conditions, she also values the newfound independence her job provides. This perspective reveals a generational shift, with younger individuals like Lucy willing to compromise cultural ties for personal empowerment, despite the exploitation they endure. c. Felipe sees the expansion of protected areas and ecotourism as a positive development for Costa Rica. His secure job at the reserve gives him a vested  interest in supporting the government’s initiatives. Unlike Manuel, Felipe believes that the benefits of ecotourism, such as biodiversity conservation and job creation, outweigh the costs, though he may underestimate the challenges faced by displaced individuals. 4. Even though Henry and Luis support U.S. business presence in Costa Rica, can you see them having conflicts about anything? a. Yes, Henry and Luis could face conflicts over how much control foreign businesses should have in Costa Rica. While both prioritize economic growth, their goals may diverge in implementation: i. Foreign Control vs. National Sovereignty: Luis, as a Costa Rican official, may push for policies that retain some level of national control or ensure local benefits, such as stricter labor laws or environmental regulations. Henry, as a U.S. trade representative, would likely oppose these measures, prioritizing minimal restrictions to maximize profitability for U.S. corporations. ii. Long-term vs. Short-term Gains: Henry’s focus on rapid economic integration through CAFTA might clash with Luis’s desire to balance modernization with the needs of Costa Rica’s population. While Henry views globalization as a universal good, Luis might recognize the social unrest and inequality that unregulated foreign investment could exacerbate. iii. Perception of Success: For Henry, success is defined by increased trade and the dominance of U.S. interests in Costa Rica’s economy. Luis, however, faces the challenge of appeasing his constituents and demonstrating that globalization benefits Costa Ricans, not just foreign investors. Their priorities might align in rhetoric but diverge significantly in practice. Page 9 Questions 1. What are the main debates in the above discussion? a. The primary debates revolve around the trade-offs between environmental conservation and the displacement of local communities. The discussion also explores the fairness of compensation provided to displaced individuals, the exploitation of workers under globalization, and whether ecotourism genuinely benefits the local population or mainly serves foreign interests. Additionally, the environmental impact of tourism and the balance between development and sustainability are critical points of contention. 2. Should Manuel have taken the land given to him by the state? Why or why not? a. Manuel's refusal to take the land offered by the state is understandable because it was far from his family and community, isolating him from social and economic support systems. Taking the land might have provided him with a modest starting point, but it failed to address his livelihood needs or align with his cultural and emotional ties to his ancestral land.  Therefore, while accepting the land could have been practical, it was not a sufficient solution to his displacement. 3. Should Lucy have done things differently? In your opinion, to whom is she most closely allied? a. Lucy's decisions are shaped by her limited options and the harsh realities of displacement. Her desire for better wages and working conditions suggests she could have sought collective action through unions or alliances with organizations like Nicole Harvey's NGO. However, her willingness to embrace independence and small luxuries shows her alignment with the modernizing forces, contrasting her father's traditional values. Lucy appears most closely allied with Nicole Harvey's perspective on fair compensation and better labor conditions while still maintaining ties to her family's struggles. 4. Is Henry Copple’s claim that the problems experienced by Manuel and Lucy “are just growing pains” a valid argument? a. This argument lacks validity as it trivializes the severe impacts on individuals like Manuel and Lucy, including loss of livelihood, cultural disconnection, and hazardous working conditions. These are not minor inconveniences but systemic issues that demand equitable and sustainable solutions. Labeling them as "growing pains" ignores the need for policies that protect the vulnerable while pursuing modernization. 5. How should people whose land is taken from them be compensated? a. Compensation should be comprehensive, including fair monetary payment that reflects the true value of the land and its cultural significance. It should also provide alternative livelihoods, access to education, and housing within proximity to their community. Social support and skills training must accompany these measures to enable displaced individuals to adapt successfully to new environments. 6. What measures should be taken to protect the environment? Should similar measures be taken to protect the workers? a. Environmental protection requires strict regulations on tourism development, such as limiting the number of permits, enforcing waste management practices, and promoting eco-friendly infrastructure. Conservation programs should involve local communities to ensure sustainable practices. Similarly, workers need protections like fair wages, safe working conditions, healthcare access, and representation in labor policies. Both environmental and labor concerns should be addressed concurrently, as they are interconnected in creating a sustainable and equitable system. Additional Notes from “The Policy Development Process and the Agenda for Effective Institutions: The Philippines” by Luis Key Ideas and Facts:  1. Unfulfilled Potential: Despite early promise, the Philippines has lagged behind its Southeast Asian neighbors in economic growth and poverty reduction. This stagnation is largely attributed to institutional weaknesses and a history of policy reversals driven by political expediency. 2. Vested Interests and State Capture: The Philippine political economy is characterized by a centralized presidency and powerful local families and clans, creating a system susceptible to "state capture" by vested interests. This capture manifests in policies designed to benefit specific groups at the expense of national welfare. "Various interpretations of Philippine political economy commonly suggest the likelihood of 'capture' of the state and its instrumentalities by vested interests based on political clans...In this context, public agencies serve as conduits for capture of both policies and public resources." (Llanto and Gonzalez, 2006) 3. Supporting Institutions: Two types of institutions are crucial to the policy development process: a. Coordinating Institutions: Entities like the National Economic and Development Authority (NEDA) and the Department of Budget and Management (DBM) are tasked with harmonizing development efforts and ensuring policy coherence across government agencies. However, they often struggle with political influence and resource constraints. b. Independent Review Institutions: Organizations like the Philippine Institute for Development Studies (PIDS) provide objective policy analysis and recommendations. However, they lack enforcement power and their recommendations are often ignored by policymakers. "It is true that Philippine policymakers take cognizance of the results and recommendations of independent reviews but they can also at the same time studiously ignore them." (Llanto, 2007) c. Case Studies:Shipping Industry: Deregulation of the shipping industry, while intending to increase competition, has been largely ineffective due to a lack of enforcement and continued dominance by a few large operators. Safety concerns also persist, highlighting the need for robust regulatory oversight by MARINA. d. Telecommunications Sector: Reforms in the telecommunications industry have been more successful, fostering competition and improving access to services. However, challenges remain in regulating dominant players like PLDT and ensuring a level playing field for new entrants. The National Telecommunications Commission (NTC) needs greater independence and resources to effectively regulate the sector. e. Strategies for Reform:Strengthening Regulatory Agencies: Granting statutory independence to regulatory agencies, such as MARINA and NTC, is critical to shield them from political interference and enhance their credibility.  f. Promoting Transparency and Public Participation: Increasing transparency in decision-making processes and encouraging public debate can help counter the influence of vested interests and build support for reforms. g. Building a Meritocratic Public Service: Reforming the civil service to promote meritocracy and neutrality can create a more professional and accountable bureaucracy, less susceptible to political manipulation. h. Learning from Best Practices: Examining successful reform experiences in other countries, such as Chile’s telecommunications sector, can provide valuable insights for the Philippines. Important notes: "A serious policy development process cannot be commanded from the outside, but needs committed leadership from within, correctly from the topmost levels of the state." (Llanto and Gonzalez, 2006) "The locomotive of Philippine policy reforms is faltering. Policy reform is not a sustained but a 'boom-bust' effort, which has created a pathetic and unstable policy environment." (Llanto and Gonzalez, 2006) "The bold decision of the Ramos administration de-monopolized the telecommunications industry. It does not mean however, that 'no single operator today is able to exercise considerable market power'." (Llanto and Gonzalez, 2006) Conclusion: - Addressing institutional weaknesses is paramount for achieving sustainable and inclusive development in the Philippines. Strengthening regulatory agencies, promoting transparency, building a meritocratic public service, and fostering collaboration between independent review institutions and civil society are crucial steps in this process. Ultimately, sustained political will and commitment to good governance are essential to overcome vested interests and ensure that policy reforms serve the broader public good.