POLS1005 Introduction to International Relations

Richard Frank

Week 8

Economic and political development

Todayʼs puzzle

 Background—We live in a time of unparalleled prosperity and opportunity. However, inequality
exists both within and between countries.
o Why are some countries rich while others are poor?

o What role does international relations play in shaping these outcomes?

3—“Happy families are all alike; every unhappy family is unhappy in its own way.”
Leo Tolstoy. 1899 (2013). Anna Karenina. Trans. Constance Garnett. Project Gutenberg

Lecture outline
1. Trends in economic development and inequality
2. Development (and the lack thereof)

3. The Sustainable Development Goals

5—The good news:
 The world is getting richer.

6—Graph of global distribution of income over time
7—Graph of growth in Australian GDP per capita
8—Graph showing Australia’s level of growth compared to China
9—Graph of China and India
10—Life expectancy globally and by world regions since 1770
11—Development doesn’t always go in one direction—Venezuela
12—Risk of famine in Africa and Yemen
13—World map of people living in poverty

14—The bad news:
 The world is getting more unequal.

15—Between-country inequality
16— Within-country inequality
17—The source of inequality has changed from being mostly about class to about location
18—Income inequality in Anglo-Saxon countries
19—Income inequality in emerging countries
20—Countries with high and low life expectancy and child mortality
21—Visualising changes in development
Source: gapminder.org. A demonstration of the online interface occurred during lecture.

Development (and the lack thereof)

UNDP’s definition of development
 “Human development is about freedom. It is about building human capabilities—the range of things
that people can do, and what they can be,” (UNDP 2009: 18).
 “The most basic capabilities for human development are leading a long and healthy life, being
educated and having adequate resources for a decent standard of living. Other capabilities include
social and political participation in society,” (UNDP 2009: 18-19).

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Measures of weath and inequality
 Gross Domestic Product (GDP)—The total value of all the goods and services produced in an
economy, a measure of national income.
 Gross National Income (GNI)—GDP plus net income from abroad
 Purchase power parity—A calculation of purchasing power that takes account of the relative cost of
living and the inflation rates of different countries.
 Absolute vs relative poverty—calculations according to universal or comparative standards

25—Difference between absolute and relative poverty

 Absolute poverty—“A standard of poverty that is based on an income level or access to resources,
especially food, clothing, and shelter which are insufficient to keep body and soul together.”
(Heywood: 360)
 Relative poverty—“A standard of poverty in which people are deprived of the living conditions and
amenities which are customary in the society to which they belong,” (Heywood: 360)
 Poverty has been the rule rather than the exception over time.

26—GINI index—A measure of inequality

 Definition—a measure of “the extent to which the distribution of income or consumption
expenditure among individuals or households within an economy deviates from a perfectly equal
distribution.
 “A Lorenz curve plots the cumulative percentages of total income received against the cumulative
number of recipients, starting with the poorest individual or household.
 “The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute
equality, expressed as a percentage of the maximum area under the line.
 “Thus a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality,”
(World Bank http://data.worldbank.org/indicator/SI.POV.GINI )

27—Maslow’s (1954) hierarchy of needs

28—Goals in economic development

 Immanuel Kant said that a human being should be treated as an end in themselves and not as a
means to something else.
 Therefore, the fact that we are human has intrinsic value.
 Amartya Sen argues that a focus on economic growth often treats humans as a means of
(instrumental) development rather than an end.

29—Sen argues that human freedom (like human rights) is both intrinsically and instrumentally important.
 Intrinsically important—Freedom is important for its own sake. It is a goal in and of itself.
 Instrumentally important—Freedom is important as a means to achieving something else.
 Economic growth and industrialisation also are seen (by some political actors) as being intrinsically
important.
 Sen thinks that economic development is instrumentally important. Economic prosperity is but one
way to enrich people’s lives.

30—Instrumental freedoms
 Political freedoms—civil rights, chose your leader, freedom of expression and the press
 Economic facilities—access to economic resources for consumption, production, or exchange
 Social opportunities—societal arrangements for education, health care, etc.
 Transparency guarantees—means for building social trust
 Protective security—social safety net

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31—Sen 1999—“The ends and the means of development”
 Development can be seen as either a fierce or a friendly process.
 Fierce— Countries have to sacrifice some (often social) goals while developing economically.
o Social safety nets
o Political liberties
o These goods can come once countries reach a certain level of development.
o Avoid the “softness”
 Friendly—Sen believes the softness actually helps further development rather than hinders it.
o The ends and the means of development are intertwined.
 E.g. social freedoms help contribute to economic development.

32—Different pathways to development

33—Economic development

 Globally, the rich and poor have a common interest in development.
 The rich want markets to buy their goods.
 The poor want more and better opportunities.
 However, there is disagreement on the best way to achieve economic development.
 And rich countries may support policies that hurt the poor countries.

34—Factors contributing to unequal development

 Legacy factors (geography & history)
 Domestic politics

 International politics

35—Geography—Jared Diamond’s Guns, Germs, and Steel

36—Geography & history

 Landlocked countries
o Higher costs of trade and engagement in global economy
 Tropical countries
o Poor soil; disease; infrastructure maintenance is costly
 Colonialisation
o Some colonies geared towards extracting assets rather than development.
o Many borders combine hostile populations.
o European empires divided land arbitrarily, with no knowledge/ consideration of local
cultures or ethnic divisions.
o Lasting effects, distorting the civil society organization of economy.

37—Domestic politics

 Politicians and military governments may cater to existing powerful interests
 (including their own) instead of to public interest.
 The rule of law is important so that producers, consumers, investors, and traders have a predictable
and stable environment to promote development.
 Arbitrary exercises of power can disrupt a development agenda.

38—The resource curse


 Natural resource wealth can:
o Allow for patronage and corruption

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 o Make taxes unnecessary, since there is no need to be democratic with big booms in
commodity prices
o Reduce accountability

o Deter economic diversification

39—Nigeria example
 Nigeria was ranked 136th (out of 176) in Transparency International’s Corruption Perception Index
 Video is shown regarding stacks of cash found in intelligence leader’s apartment

40—International factors

 The distribution of international trade’s comparative advantages
 Wealthy countries enjoy advantages in international economic institutions such as the WTO and the
IMF.
o Agendas typically represent wealthy interests.

o Poor countries have a large disadvantage in negotiating capacity.
o The IMF imposes conditions, not letting a country choose its own policy.
 Wealthy countries violate international rules, yet are rarely punished (e.g. agricultural subsidies).

41—Several popular development models

 Import-substituting industrialisation (ISI)
o High tariffs & trade barriers

o Foreign exchange & banking tightly controlled by state.

o The state borrows on international markets for domestic industry.
o Agricultural producers are heavily taxed & not provided with credit. Substantial business
participation, but closely regulated
 Export-oriented industrialization (EOI)

o Foreign exchange & banking are tightly controlled by the state.

o The state controls credit.

o Wages are set by the state and state-controlled unions.

o Little investment in domestic consumer economy; high trade barriers for consumer imports.


o State ownership is minimized.
 Washington Consensus

o Policies to encourage capital inflows
o Removing barriers to trade

o Privatizing state-owned industries
o Liberalizing the banking sector

o Lowering government deficits and spending
 State capitalism
o A residual category involving extensive control of state economy (e.g. Russia & China)

42—Overall, developed countries generally have:


 The ability to build physical infrastructure for commerce (e.g. ports, roads,bridges, power stations)


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  Provision of rule of law

 Stable regulatory policies

 Transparent and accountable economic institutions
 Civil society organisations

43—Poorer countries generally have:

 Less material wealth and income
 Wealthy countriesʼ GDP (pc) is in the $10,000s
 Poor countriesʼ GDP (pc) is in the 100s.

 Poorer distribution of wealth (higher inequality).

 Continued migration from rural to urban areas.

 A lack of domestic investment in people and productive facilities (e.g. poor services and
infrastructure)

 Often a younger and rapidly growing population.

44—Path dependence

45—Polya’s Urn
 a statistical model that captures the self-reinforcing properties of a process, here that the “rich get
richer.”

46—Qwerty keyboard

47—Countries that do not use the metric system and those that do

48—Countries by left and right-hand traffic in 2017

49—Sweden 1967

50—Theoretical views of development

51—Realist approaches to development

 No explicit theoretical approach per se because development is not the focus of realism
 When explaining differential development the focus is on mercantilism.
o 16th-18th cent. European theory advocating government regulation to enhance state power
o Encouraged higher tariffs and positive balance of trade
 Mercantilism thus sees a strong role for state including in intervention/protectionism.

52—Liberalist approaches to development

 Focus more on economic liberalism
 Policy approach is more market-oriented, which is argued to be self-regulating.
 Often associated with modernisation theory

53—Modernisation theory
 All countries go through roughly similar stages of development (Rostow 1960)
 W.W. Rostow’s stages of development
o Traditional societies (e.g. subsistence agriculture and hunting)
o Preconditions for takeoff (e.g. cash crops, infrastructure investment)

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 o Takeoff (e.g. urbanisation, industrialisation, technological developments)
o Drive to maturity (e.g. sector diversification, shift to consumer goods and social
infrastructure)
o High mass consumption
 State governments should facilitate economic development through minimal regulation.
 This is a structuralist approach to development

54—Critical approaches to development

 World Systems theory sees global division of labor (e.g. Wallerstein 1974)
o Core (West)
o Semi-peripheral (e.g. Brazil, China, India)
o and peripheral areas (e.g. Russia, most of Africa)
o Environmental theorists critique focus on growth as being unsustainable and a primary cause
of global environmental degradation. (e.g. Burkett 2006)
 Neo-Marxists often focused on external rather than internal explanations—dependency theory
(Singer 1949, Prebisch 1949)
 Resources flow from the periphery to the center.

55—Dependency theory
 Colonial powers forced specialisation.
 Colonialism gave way to neo-colonialism.
 There are hierarchies in the global economy.
 Northern developed states exploit lesser developed Southern states for their primary commodities.
 The World Bank, IMF, and other IOs help perpetuate inequalities through tough loan conditionality.
 Remedy is to develop own economy through import-substituting industrialisation.
 This leads to an increased role for the state in the economy.

56—During and after the Cold War

 Both the US and the USSR pushed their preferred economic models on their spheres of influence.
 After Cold War, modernisation approaches came to dominate.
o World Trade Organisation (WTO) was founded in 1995.
o Millennium Development Goals announced in 2000.
 However, there is growing skepticism about the current system’s effects on global and domestic
inequalities.
 This is exacerbated by the 2007-2008 global recession.

57—The Sustainable Development Goals

58—Millennium Development Goals, 2000-2015

 Eight goals with 21 targets

o Eradicate extreme poverty and hunger
o Universal primary education

o Promote gender equality

o Reduce child mortality

o Improve maternal health

o Combat HIV/AIDS, malaria, and other diseases
o Ensure environmental sustainability

o Global partnership for development

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  New post-2015 Sustainable Development Goals have 169 targets.

59—Background SDG video by UNDP (https://www.youtube.com/watch?v=5_hLuEui6ww)

60—Sustainable Development Goals overview

61—Amartya Sen video (https://www.youtube.com/watch?v=LggTrGMygFY)

62—The Economist. 2015. “Unstainable goals.”

(https://www.economist.com/news/international/21647307-2015-will-be-big-year-global-governance-
perhaps-too-big-unsustainable-goals)

63—Hartmut Elsenhans interview (https://www.youtube.com/watch?v=VVgr9ucAPi4)

64—Venezuela again tops Bloomberg’s 2018 Misery Index

65—Case study—Venezuela

66—"Venezuela is on the brink of a complete economic collapse.” Washington Post. 29 January 2018.

67—“Police believe thieves steal Venezuela zoo animals to eat them.” Reuters. 17 August 2017.

68—“Armed Venezuelan soldiers caught in Guyana begging for food.” Miami Herald. 15 August 2017.

69—“Malaria infections spreading in crisis-ridden Venezuela.” Al Jazeera. 16 August 2017.

70—“’We’re Losing the Fight:’ Tuberculosis Batters a Venezuela in Crisis.” New York Times. 20 March 2018.

71—"Protests Over Food Shortages in Venezuela Leave Three Dead in a Week.” Vice News. 14 June 2016.

72—“Venezuela may be sliding into a civil war.” Washington Post. 29 June 2017.

73—Al Jazeera video about Venezuela (https://www.youtube.com/watch?v=mL8d91vdR9g)

74—Financial Times video about Venezuela. (https://www.youtube.com/watch?v=ZTD8z7oCYrc)

75—“Venezuela Delays Presidential Vote, but Opposition Still Plans a Boycott.” New York Times. 1 March
2018.

76—Conclusions

 There are important implications between policies seeing economic growth as being intrinsically or
instrumentally important.
 Theorists and policymakers differ as to what the world is developing towards and how to get there.
 Successful development requires a country to overcome both internal and external obstacles.
 While everyone prefers development, powerful groups can block it or extract rents.
 Domestic institutions play an important role—they may promote or hinder development.
 Rich countries often adopt policies that hurt the poor.
 Issue selection and measurement are crucial to which conclusions reached.