Interventionist Strategies

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Interventionist Strategies to Promote Growth and Development

Interventionist strategies can also be used to support an emerging economy's development.

Development of human capital

Policies like improving primary education (both quality and quantity) would allow for higher literacy rates. This would make it more likely that the young generation would go onto higher skilled jobs.
The younger generation is likely to earn higher incomes, which can be channelled into both consumption and savings. These are both determinants of short-run and long-run economic growth.
For developing countries, the focus is more on primary education because many primary students lack basic literacy skills.

Protectionism

The 'infant industry' argument can be used to justify using protectionism in emerging economies.
Protectionist measures, such as tariffs or quotas can protect the developing industries in a country and allow them to get on their feet.
Once the industries are fully-fledged, the protectionist measures can be removed.
This policy is potentially dangerous as the industries can use the protectionist measures as a crutch.

Managed exchange rates

Governments have the option of intervening in foreign exchange markets if they wish to alter the value of their currency.
For example, if the government wishes to devalue the currency, exports can become more competitive. This helps improve AD and could lead to export-led economic growth.

Infrastructure developments

The government could build better highways, trains, airports and ports.
This will improve productivity because goods and labour can be transported around the country more efficiently.
Infrastructure can help connect rural areas to urban areas and so improve the geographical mobility of labour.
The problem with this and many other policies to promote development is that they are expensive and many less economically developed governments do not have the tax revenue to finance them.

Promoting joint ventures

A joint venture is when two or more companies work together in a project.
A joint venture between a MEDC business and a LEDC business could lead to economic growth and development.
This is because the LEDC can learn from the MEDC and benefit from their skills and resources.
In return, the MEDC company has a foothold in an emerging economy.
It is in the interest of all parties for the LEDC's economy to develop.

Buffer stock schemes

A buffer stock scheme can be used to stabilise the price of primary products.
This is particularly useful for agricultural goods.
By buying up more stocks, the price of goods can be maintained despite the harvests.
This helps LEDCs overcome the issue of volatile primary product prices.

Interventionist Development Strategies - Fairtrade & Debt

Fairtrade and debt relief are two more interventionist methods of helping developing nations to grow their economies at a faster rate.

Fairtrade

Fairtrade schemes effectively implement a minimum price in the markets where they are operated.
Groups of farmers receive a minimum price that is deemed to be 'fair'. In exchange, the farmers must meet certain standards of health and safety and production.
The farmers receive a higher price but also a certain price, enabling them to plan more effectively for the future. This certainty can encourage investment. Particularly when the prices for primary products can be volatile.

Debt relief

If the markets view the country’s national debt as unsustainable, then demand for government debt will fall. So the cost of borrowing will rise.
High repayments on the national debt (principal and interest) have a significant 'opportunity cost'. This is money which could be spent on health, education, etc.
Instead of spending money on infrastructure and education, more money goes on debt payments.
There is also a question of intergenerational fairness: will future generations have to face increased taxes to pay off the debt being built up now?
Some people question if there is a moral hazard if countries know they are likely to receive debt relief.

1Microeconomics

1.1Competitive Markets: Demand & Suply

1.1.1Markets & Demand

1.1.2Diminishing Marginal Returns

1.1.3Supply

1.1.4Market Equilibrium

1.1.5Price Mechanism

1.1.6Consumer & Producer Surplus

1.1.7IB Multiple Choice - Demand

1.1.8IB Multiple Choice - Supply

1.2Elasticity

1.2.1Elasticities of Demand

1.2.2Factors Affecting Price Elasticity of Demand

1.2.3Elasticity of Supply

1.2.4Price Elasticity of Supply

1.2.5IB Multiple Choice - Price Elasticity of Demand

1.2.6IB Multiple Choice - Price Elasticity of Supply

1.2.7IB Multiple Choice - Other Elasticities

1.3Government Intervention

1.3.1Indirect Taxes & Subsidies

1.3.2Application Question - Taxing Prices or Quantities

1.3.3Subsidies & Price Controls

1.3.4Deadweight Loss & Government Intervention

1.3.5Elasticity & Tax Incidence

1.3.6IB Multiple Choice - Government Intervention

1.4Market Failure

1.4.1Types of Market Failure

1.4.2Introduction to Externalities

1.4.3Negative Externalities

1.4.4Policy for Negative Externalities

1.4.5Positive Externalities

1.4.6The Deadweight Welfare Loss of Externalities

1.4.7Case Study - The Externalities of Education

1.4.8Public Goods & the Free-Rider Problem

1.4.9Asymmetric Information

1.4.10End of Topic Test - Market Failure

1.4.11Application Questions - Market Failure

1.5HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2Macroeconomics

2.1The Level of Overall Economic Activity

2.1.1The Circular Flow of Income

2.1.2Defining GDP

2.1.3Limitations of GDP

2.1.4IB Multiple Choice - Economic Indicators

2.1.5Business Cycles

2.1.6Output Gaps

2.2Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve

2.2.2Components of Aggregate Demand

2.2.3Shape of the Aggregate Demand Curve

2.2.4Shifts in Aggregate Demand

2.2.5IB Multiple Choice - Aggregate Demand

2.2.6Short & Long-Run Aggregate Supply

2.2.7Alternative Models of LRAS

2.2.8Equilibrium in the AD-AS Model

2.2.9Output Gaps & the AD-AS Model

2.3Macroeconomic Objectives

2.3.1Introduction to Unemployment

2.3.2Limitations of Unemployment

2.3.3Types of Unemployment

2.3.4Causes & Impact of Unemployment

2.3.5Defining Inflation

2.3.6Measuring Inflation

2.3.7Use of Index Numbers

2.3.8The Consumer Price Index

2.3.9Consequences of Inflation

2.3.10Causes of Inflation

2.3.11Inflation & Unemployment Tradeoff

2.3.12The Short-Run Phillips Curve

2.3.13The Long-Run Phillips Curve

2.4Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth

2.4.2Determinants of Productivity

2.4.3Economic Growth & Productivity

2.4.4Absolute & Relative Poverty

2.4.5Inequality

2.4.6Inequality 2

2.4.7Lorenz Curve

2.4.8Government Policy on Poverty

2.4.9End of Topic Test - Poverty & Inequality

2.4.10Application - Inequality & Poverty

2.5Fiscal Policy

2.5.1Introduction to Fiscal Policy

2.5.2Fiscal Policy and AD-AS Model

2.5.3Fiscal Policy Lags

2.5.4Automatic Stabilizers

2.5.5IB Multiple Choice - Fiscal Policy

2.6Monetary Policy

2.6.1Objectives of Monetary Policy

2.6.2Monetary Policy Implementation

2.6.3Monetary Policy & AD-AS Model

2.6.4Monetary Policy Lags & Pitfalls

2.7Supply-Side Policies

2.7.1Supply-Side Policies

2.7.2Supply-Side Policies 2

3The Global Economy

3.1International Trade

3.1.1Globalisation

3.1.2Globalisation for LEDCs

3.1.3Globalisation for MEDCs

3.1.4Comparative Advantage & Trade

3.1.5Protectionism

3.1.6Arguments for Protectionism

3.1.7Arguments Against Protectionism

3.1.8End of Topic Test - Globalisation & Trade

3.1.9Case Study - Globalisation & Trade

3.2Exchange Rates

3.2.1Floating Exchange Rates

3.2.2Fixed Exchange Rate

3.2.3Effect of a Stronger & Weaker Dollar

3.3The Balance of Payments

3.3.1Balance of Payments

3.3.2Balance of Payments 2

3.3.3FDI & Reducing a BoP Deficit

3.4Economic Integration

3.4.1Customs Unions & WTO

3.4.2Merged Currency

3.5Terms of Trade

3.5.1Absolute & Comparative Advantage

3.5.2Gains from Trade

3.5.3Terms of Trade

3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6Economic Development

3.6.1Factors Influencing Growth & Development

3.6.2International Institutions

3.6.3Measures of Development

3.6.4Barriers to Development

3.6.5Case Study - The Bottom Billion

3.6.6End of Topic Test - Emerging & Developing

3.7The Role of Domestic & International Factors

3.7.1Interventionist Strategies

3.7.2Development Strategies

3.7.3Development Promotion Policies

3.7.4End of Topic Test - Growth & Global Development

3.7.5Application Questions -Growth & Global Development

3.8The Role of International Trade

3.8.1International Institutions

3.8.2End of Topic Test - Globalisation & Trade

3.9The Role of Foreign Aid

3.9.1Aid

3.9.2Limitations of Aid

3.9.3Support for Aid

3.9.4Application Questions - Developing Countries

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