chapter 6 - reading group

chapter 6 - reading group - INTD200 Ch 6 Development Theory...

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Ch. 6: Development Theory in the Wake of Structural Adjustment In the 1990s the left began to emerge once again, as problems with the neoclassical theory began to come to light A new version of statist thought emerged that drew on ideas from the new institutional economics and the success stories in the Far East created a new school of thought known as developmental- state theory that revived the infant-industry model o Became popular among leftists because it redeemed the image of the state, which the left placed great emphasis on However, this theory died out by the end of the 1990s Change at the World Bank In the 1990s, it became increasingly evident that state presence was needed in economic development Many neoclassical theorists (who believed in the invisible state) began to agree that the market needed state management to realize its potential They also began to realize that there were certain things that the free market could not control, such as environmental protection Nevertheless, the neoclassical theorists still believed that the duration of state intervention should be short-term and should not interfere with market forces They proposed that measures of target aid to affected groups should be implemented in order to deal with the difficult transition that structural adjustment programs imposed o In other words, the neoclassical solution was to maintain the market mechanism (no govt intervention in price setting), while dealing with those parts of the market that were failing consumers The idea of target aid was thus used by the World Bank and directed toward the poorest of the poor provided food, jobs, healthcare, and school fees The results were mixed, working in places like Jamaica, Chile and India but failing in places such as Zimbabwe and Ethiopia o Critics argues that targeting alleviates the misery of the poorest, but does little to reduce poverty itself (it is a short term solution) This new found interest in target aid illustrated the World Bank’s realization that the plight of the poor had more to do with political stability than with economic problems
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chapter 6 - reading group - INTD200 Ch 6 Development Theory...

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