Development economics
[1] Development economics involves the creation of theories and methods that aid in the determination of policies and practices and can be implemented at either the domestic or international level.
Major European nations in the 17th and 18th centuries all adopted mercantilist ideals to varying degrees, the influence only ebbing with the 18th-century development of physiocrats in France and classical economics in Britain.
It emphasised the maintenance of a high positive trade balance (maximising exports and minimising imports) as a means of accumulating this bullion.
Theorists most associated with mercantilism include Philipp von Hörnigk, who in his Austria Over All, If She Only Will of 1684 gave the only comprehensive statement of mercantilist theory, emphasizing production and an export-led economy.
The names most associated with 19th-century economic nationalism are the first United States Secretary of the Treasury Alexander Hamilton, the German-American Friedrich List, and the American politician Henry Clay.
[9] Such theories proved influential in the United States, with much higher American average tariff rates on manufactured products between 1824 and the WWII period than most other countries,[10] Nationalist policies, including protectionism, were pursued by Clay, and later by Abraham Lincoln, under the influence of economist Henry Charles Carey.
Following Brexit and the 2016 United States presidential election, some experts have argued a new kind of "self-seeking capitalism" popularly known as Trumponomics could have a considerable impact on cross-border investment flows and long-term capital allocation[11][12] The origins of modern development economics are often traced to the need for, and likely problems with the industrialization of eastern Europe in the aftermath of World War II.
[18] An early theory of development economics, the linear-stages-of-growth model was first formulated in the 1950s by W. W. Rostow in The Stages of Growth: A Non-Communist Manifesto, following work of Marx and List.
[5] Structural-change theory deals with policies focused on changing the economic structures of developing countries from being composed primarily of subsistence agricultural practices to being a "more modern, more urbanized, and more industrially diverse manufacturing and service economy."
There are two major forms of structural-change theory: W. Lewis' two-sector surplus model, which views agrarian societies as consisting of large amounts of surplus labor which can be utilized to spur the development of an urbanized industrial sector, and Hollis Chenery's patterns of development approach, which holds that different countries become wealthy via different trajectories.
The pattern that a particular country will follow, in this framework, depends on its size and resources, and potentially other factors including its current income level and comparative advantages relative to other nations.
Competitive free markets unrestrained by excessive government regulation are seen as being able to naturally ensure that the allocation of resources occurs with the greatest efficiency possible and that economic growth is raised and stabilized.
Of the three, both the free-market approach and public-choice theory contend that the market should be totally free, meaning that any intervention by the government is necessarily bad.
Anne Krueger noted in 1996 that success and failure of policy recommendations worldwide had not consistently been incorporated into prevailing academic writings on trade and development.
Economists Jeffrey D. Sachs, Andrew Mellinger, and John Gallup argue that a nation's geographical location and topography are key determinants and predictors of its economic prosperity.
[27] Early researchers, such as Jonathan Pool, considered a concept dating back to the account of the Tower of Babel: that linguistic unity may allow for higher levels of development.
[28] While pointing out obvious oversimplifications and the subjectivity of definitions and data collection, Pool suggested that we had yet to see a robust economy emerge from a nation with a high degree of linguistic diversity.
[32][33] In addition, empirical research in the U.S., at the municipal level, has revealed that ethnic fractionalization (based on race) may be correlated with poor fiscal management and lower investments in public goods.
[34] Finally, more recent research would propose that ethno-linguistic fractionalization is indeed negatively correlated with economic growth while more polarized societies exhibit greater public consumption, lower levels of investment and more frequent civil wars.
[35] There is a body of literature that discusses how economic growth and development, particularly in the context of a globalizing world characterized by free trade, appears to be leading to the extinction and homogenization of languages.
[36] Manuel Castells asserts that the "widespread destructuring of organizations, delegitimation of institutions, fading away of major social movements, and ephemeral cultural expressions" which characterize globalization lead to a renewed search for meaning; one that is based on identity rather than on practices.
[37] Barber and Lewis argue that culturally-based movements of resistance have emerged as a reaction to the threat of modernization (perceived or actual) and neoliberal development.
[38][39] On a different note, Chua suggests that ethnic conflict often results from the envy of the majority toward a wealthy minority which has benefited from trade in a neoliberal world.
[35] Prasch points out that, as economic growth often occurs in tandem with increased inequality, ethnic or religious organizations may be seen as both assistance and an outlet for the disadvantaged.
Violent conflict destroys physical capital (equipment and infrastructure), diverts valuable resources to military spending, discourages investment and disrupts exchange.
Even though per-capita GDP as measured can make economic well-being appear smaller than it really is in some developing countries, the discrepancy could be still bigger in a developed country where people may perform outside of financial transactions an even higher-value service than housekeeping or homebuilding as gifts or in their own households, such as counseling, lifestyle coaching, a more valuable home décor service, and time management.
[46] This concept of inclusive growth is shared even by key world leaders such as former Secretary General Ban Ki-moon, who emphasises that: Researchers at the ODI thus emphasise the need to ensure social protection is extended to allow universal access and that active policy measures are introduced to encourage the private sector to create new jobs as the economy grows (as opposed to jobless growth) and seek to employ people from disadvantaged groups.
