FLS Chapter 10_ Development_ Causes of the Wealth and Poverty of Nations

FLS Chapter 10_ Development_ Causes of the Wealth and Poverty of Nations

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A very important policy that governments can undertake to boost development is to provide public goods that contribute to economic growth and prosperity. One such public good is the economic infrastructure , basic structures necessary for social activity, such as transportation and telecommunications networks and power and water supply. Physical infrastructure includes roads, railroads, airports, utilities, ports and the like, which are necessary to allow trade and exchange. It also includes such economic institutions as financial and monetary systems, which permit people to carry out payments and investments easily. A social infrastructure to-public health and sanitation, education, urban planning- can encourage growth and development by allowing citizens to focus their efforts on economic activity in a productive way. Types of production include primary commodities, manufacturing, services The Resource Curse is the curse that removes incentive for leaders to encourage domestic development since they rely on revenues from natural resources (oil, mining, agriculture). They can centralize it, so that the government benefits, instead of private companies. Trade liberalization affects development through protectionism by developed states and LDCs. International political factors emphasize the relative powerlessness of developing nations in their interactions with richer countries. Indeed, rich countries often pursue their own interests in ways that harm prospects for development in poor countries. This is unintentional, but rather the effect of the installment of policies to safeguard their own interests. The power disparity between rich and poor countries clearly works against the LDCs. The governments of the developing world have been almost entirely unsuccessful at getting their farmers greater access to the market of the industrialized nations. Meanwhile, the government of the rich countries have been quite successful in getting the LDCs to open their markets to manufacturers, multinational corporations, and international banks from the developed world. The weakness of the LDCs relative to the developed nations means that they often lose out in international interactions of this sort, to the ultimate detriment of their economic prospects. International trade agreements similarly reflect the interests of the rich and powerful. Initiatives of the developing countries are frequently ignored, even when they clearly go in the direction of the WTO’s purported goal, trade liberalization. Many developing-country exports face protectionist barriers in the industrialized nations, provided at the behest of affected industries that do not want to face such stiff competition. Import substituting industrialization (ISI) reduces imports, directly and indirectly aka through trade barriers, subsidies to manufacturing, and state ownership of basic industries, by allowing industries to take root and hopefully someday become competitive. This approach has gone out of popularity. Most generally, developing-country governments wanted their economies to move
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