Final Exam Study Guide

Key Terms

Chaebol

• Large, family-owned conglomerates in Korea
• Important for Korea’s rapid industrialization

Conditionalities

• Requirements for countries to receive aid
• Often involves spending aid on donor countries' goods

Dead Capital

• Lack of formal legal documents for assets
• Cannot be used as collateral or for financial capital
• Hinders economic development in the developing world

Future Generation Funds

• Government saving funds for when natural resources deplete
• Aimed at preserving resource revenues for future use

Gross National Happiness

• Measure of national well-being beyond economic output
• Includes 9 dimensions

Kgotla

• Assemblies in Botswana influencing cohesive-capitalistic society
• Aids in public trust and reduces corruption in political institutions

Ladders and Nudges

• Ladders: Access to resources and knowledge to escape poverty
• Nudges: Incentives or policy changes for beneficial choices

Marshall Plan

• U.S. foreign aid program post-WWII for Western Europe's reconstruction
• Largely non-repayable; some loans

Microcredit

• Lending small amounts to poor people
• Often used to start businesses

Place Premium

• Income increase from moving to a more productive country

Poverty Trap

• Cycle where poverty perpetuates itself
• Lacks capital and surplus income to invest

Problem of Scale

• Challenge of large-scale implementation of development programs

Publish What You Pay

• Transparency in extractive industries
• Ensures government revenue openness from natural resources

Randomized Controlled Trials

• Method to evaluate impact of development interventions

Remittances

• Money sent by migrants to home countries

Rent-Seeking Behavior

• Wealth increase through economic manipulation
• Does not produce new wealth

Stabilization Funds

• Regulation of revenue to buffer against price fluctuations

Time Inconsistency Problem

• Tendency to delay actions with future benefits

ISI (Import Substitution Industrialization)

• Replaces imported goods with domestic production

SAP (Structural Adjustment Program)

• Economic reforms by international lenders like IMF, World Bank

Discussion Questions

State Intervention Success

• Legacy of Colonialism: Influences state intervention success through economic policies favoring stability and growth
• Ideal State Types Impact: National movements and coercive policies

Kohli's "Ideal Types" of States

1. Cohesive-Capitalist (South Korea)
   • State-private sector collaboration
   • Centralized authority
2. Neopatrimonial (Nigeria)
   • Weak authority
   • Corruption and rent-seeking
3. Fragmented Multiclass (India)
   • Fragmented authority
   • Inconsistent policies

• Most successful: Cohesive-Capitalist for promoting industrialization

Why Some States Are More Effective

• Influenced by type of state authority and colonial legacy

Kohli's Chariot Metaphor

• Represents state and private sector collaboration as essential for industrial success

Confucianism's Role in East Asia

• Economic growth through work ethic and nationalism

Resource Curse Dimensions

1. Conflict: Resource rent competition
2. Economic: Revenue shocks, fiscal mismanagement
3. Political: Rent-seeking, corruption

• Avoidance: Requires governance improvements

Alluvial vs. Kimberlitic Diamonds

• Alluvial diamonds easier to find, fund conflicts more easily

Dutch Disease

• Economic phenomenon related to resource curse
• Effects: Spending effect and resource movement effect

Chad-Cameroon Oil and Pipeline Project

• Model for transparency and poverty reduction
• Failed due to governance issues and corruption

Global Geopolitical Context Changes

1. Oil Crisis (1973-1979): Focused on poverty reduction
2. Third World Debt Crisis (1980s): Led to SAPs
3. Dissolution of USSR (1990s): Strong state institutions focus
4. September 11, 2001: Shift in development practices

Foreign Aid to Africa

1. Sachs: Insufficient aid, big projects needed
2. Moyo: Aid hinders growth, fosters corruption
3. Banerjee & Duflo: Wrong type of aid
4. Mitchell & Ferguson: Misinterpretation of challenges

Strategies to Reduce Poverty (Sachs vs. Moyo)

1. Sachs: Focus on development plans and donor transparency
2. Moyo: Increase investment, infrastructure, and jobs

Development Agencies Misinterpretation

1. Economic Challenges: Misunderstood as geographic or technological problems
2. State Role: Seen as neutral, ignoring class interests

Karnani's Critique of Microfinance

• High interest, low entrepreneurial potential
• Suggests employment opportunities as better poverty reduction

De Soto's Capital Access Proposal

• Aims to reduce poverty by formalizing capital
• Criticized by Gilbert for impracticality

Open Borders Incentives

1. Human Capital Development: Motivates education
2. Governance Improvement: Pressures accountability
3. Conflict Reduction: Fosters interdependence

"Starving Marvin" Libertarian Illustration

• Argues for the importance of migration over aid

Agazzi's Critique of Western Development Model

• Criticizes impractical, one-size-fits-all approach

Industrialization vs. Other Goals

• Advocates for balancing industrialization with other societal goals
• Highlights historical challenges like in India