Lecture 19: LateLate Industrializers

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Lecture 19 Late-Late Industrializers
1. Liberal Theory Versus Dependency Theory 2.
The Empirical Record Who Is Right? 3. The
Product Cycle 4. Case Studies A) Chile B)
South Korea C) Nigeria
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Development Strategies
1. What is Mercantilism? 2. Liberal School A)
Reliance On Market Mechanisms B) Limited
Government Intervention In The Economy C) Free
Trade Policies 3. Dependencia School A) Rejects
Liberal Model B) Trade Favors The More Developed
States C) Wallerstein The Core And The
Periphery D) Solution Break Chains Of
Trade Import Substitution Industrialization
(ISI)
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Testing Dependency Theory
H1 All AICs Should Grow Fast All LDCs Should
Grow Slow H2 All LDCs Should Grow Slowly and at
a Similar Rate H3 All States in Periphery Should
Remain in Periphery H4 All Commodity Exporters
Should Be Exploited H5 LDCs Which Trade Should
Grow More Slowly H6 LDCs With Multinational
Corporations Should Grow More Slowly Than Those
Without H7 the Most Isolated LDCs Should Grow
the Fastest
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Empirical Record Who Is Right?
1. Import Substitution Industrialization
Fails A) Does Not Produce Efficient
Firms Monopoly Position Means No
Competition B) Strategy Can Only Work For Large
States 2. Alternative Strategy Export Led
Industrialization (ELI) A) Use Exports As Engine
For Development And Growth B) Exports Must Be
Competitive In The World Market 3. ELI And The
Newly Industrializing Countries (NICs) (South
Korea, Taiwan, Hong Kong, And Singapore)
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Are The Liberals Correct?
1. Do NICs Prove The Liberals Are Correct?
No!!! 2. Most NICs Deviate From Liberal Model In
Important Ways A) Not Free Traders In All
Markets B) Lots Of Government Intervention In
Some Cases 3. Only Hong Kong Follows The Liberal
Model 4. Is There A Third Model? The NIC
Model? A) Focus On Exports B) Governments
Reward The Efficient Not The Weak
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The Product Cycle
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Case Study 1 Chile
1. Conquered By Spain In Early 1500s 2.
Independence In 1818 3. Political Evolution A)
Civil Wars (1818-30) B) Conservative Rule
(1830-61) C) Liberal Rule (1861-91) D)
Parliamentary System (1891-1925) E) Military
Rule (1925-31) F) Democracy (1932-73) G)
Military Rule (1973-90) H) Democracy (1990-
Present)
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Economic Development Of Chile
1. Major Wheat Exporter In Spanish Mercantilist
System 2. Major Cooper Exporter By
Mid-1850s 3. Nitrate Mines a) War Of The
Pacific (1873-83) b) Massive Government Spending
Early Industrialization c) Collapses With
German Substitute In World War I 4. Copper
Exports American Multinationals 5. Great
Depression And World War II Leads To ISI
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Economic Development Continued
1. Growth Slows 1950-70 (1937-50 7 1950-60
3.5 1967-70 1.2) 2. Election Of Socialist
Salvador Allende In 1970 A) Nationalization B)
Increased Government Spending C) Redistribution
Of Income 3. Economic Collapse Leads To Coup
Allendes Death 4. Military Implements Liberal
Model A) Tariffs Fall Sharply (1973 104
1975 44 1979 10) B) Progress Interrupted in
the 1982 Financial Crisis C) The IMFs Model For
Development
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Economic Development Of Chile
Population GNP per capita Government GNP as
Openness Year (millions) (US85m) of GNP of
US GNP of Economy 1950 6.2 2431 18 28 25 1955 6.8
2617 21 28 21 1960 7.7 2885 21 30 31 1965 8.6 327
1 20 29 26 1970 9.5 3605 21 29 29 1975 10.4 2986 2
8 22 53 1980 11.1 3892 22 26 50 1985 12.1 3467 22
21 54 1990 13.2 4338 17 24 65 Sources Penn
World Tables
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Case Study 2 South Korea
1. Ancient Nation Homogeneous Population 2.
Historically China Was Dominant In The Region 3.
First Sino-Japanese War (1894-95) 4.
Russo-Japanese War (1904-05) 5. Protectorate
Becomes A Colony In 1910 6. Japanese
Occupation a) 1910-20 Harsh b) 1920-35 More
Mild c) 1935-45 Extremely Harsh
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Recent South Korean History
1. Division After World War II -- Most Industry
In The North -- Loss Of Japanese Markets 2. The
Korean War 1950 3. Massive U.S. Foreign Aid 4.
Syngman Rhee And ISI 5. Military Coup 1961 6.
Decline In U.S. Aid
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Shift To Export Led Growth
1. Currency Devaluation (1964) And Floating
(1965) 2. Korean Trade Promotion Corporation
(KOTRA) 3. Normalization Of Relations With
Japan 4. Exporting Firms Get Access To Cheap
Capital 5. New Laws Encourage Foreign
Investment Tremendous Success But Not Without
Costs
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Impact Of The International System
1. Japanese Occupation Destroys Many Barriers To
Change 2. Cold War And Division Of Country 3.
U.S. Intervention And Massive U.S. Aid 4. Cold
War Encourages U.S. To Keep Markets Open 5.
Threat From North Encourages Cooperation
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Final Comments On South Korea
1. ISI Was Not A Total Failure 2. Could Korea
Have Shifted To ELI with a Civilian
Government? 3. Is The Korean Model Only Useful
For The First Stage Of Industrialization? A)
Extensive Government Intervention B) Tremendous
Industrial Concentration C) Weak Banking Sector
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Economic Development Of South Korea
Population GNP per capita Government GNP as
Openness Year (millions) (US85m) of GNP of
US GNP of Economy 1950 21 796 18.6 8.4 11.8 1955 2
1 879 16.9 8.9 11.6 1960 25 904 16.1 8.7 15.9 1965
28 1058 13.5 8.9 24.7 1970 32 1680 12.5 12.8 37.9
1975 35 2323 12.1 16.5 64.1 1980 38 3093 11.3 19.
8 75.5 1985 41 4217 9.1 25.4 67.9 1990 43 7251 8.5
42.1 61.2 Sources Penn World Tables
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Case Study 3 Nigeria
1. The Slave Trade 2. British Ban International
Slave Trade In 1807 -- Shift To Palm Oil And
Kernel Exports 3. British Take Direct Control
Around Lagos In 1861 4. Expansion Of British
Control A) Yoruba Civil Wars B) Race For
Colonies In 1880s 5. Southern (1894) and
Northern (1900) Protectorates Formed 6. Merged
Into Colony In 1912 7. Federal System And
Indirect Rule
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Nigerian Development
1. Independence On 1 October 1960 2. Federal
Constitution With Three Regions A) North (Hausa
And Fulani Dominated Muslim) B) Eastern (Ibo
Dominated) C) Western (Yoruba Dominated) 3.
Coalitional Government NPC and NCNC 4. Military
Coups 1966 Creation Of Unitary Government 5.
Civil War 1967-70 Eastern Ibo Region Secession
(Biafra) 6. Military Coup 1975 Assassination
1976 7. Civilian Government 1979-83 8. Military
Coup 1985 Military Nullifies Elections 1993 9.
Return To Democracy 1999
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Nigerian Economic Development
1. Six Percent Growth Per Year Until Civil
War 2. After Civil War, Economy Becomes
Dependent On Oil Exports 3. State Controls Oil
Production Distribution 4. Rapid Growth In
Government Sector And ISI 5. Over 3/4 Of
Government Revenue And Export Earnings From The
Sale Of Oil 6. Failure By Almost Any Measure
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Economic Development Of Nigeria
Population GNP per capita Government GNP as
Openness Year (millions) (US85m) of GNP of
US GNP of Economy 1950 33 456 7.9 4.6 18 1955 37
557 10.9 5.1 20 1960 52 567 12.7 5.3 21 1965 58 6
24 14.4 4.4 23 1970 66 767 20.0 4.8 20 1975 61 124
5 26.1 8.2 41 1980 71 1438 21.9 12.2 48 1985 83 10
62 21.5 6.4 29 1990 96 995 23.2 5.1 65 Sources
Penn World Tables
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Globalization
What is Globalization? Is Globalization a Good
Thing? Should the United States Promote
Globalization Policies? Who are the Winners and
Losers in the Globalization?