Development Economics

Explain the different approaches that may lead to economic development.
There is no easy way of promoting economic development. However, there are four main approaches to promoting economic development; state ownership, government intervention and import substitution, export promotion, filling the savings gap through international aid and the Washington Consensus and the role of markets;. In this essay I will be looking at how these four approaches may lead to economic development for a country.
State ownership, government intervention and import substitution can all be used in order to promote the development of an economy. Many early policies used in order to promote economic development emphasised a big role for government intervention through large-scale economic planning, high levels of public investment, state ownership of firms and controls of the private sector. One of the most common approaches for these ideas has been to set up state owned enterprises in the manufacturing sector, setting maximum prices for agricultural commodities and finally control the export and import of goods and services, which in turn will help the balance of payments. This is known as the “big push” approach to economic development, and it was the main focus in much of Latin America until the 1960’s, and has also been used in both India and Africa after Britain left and gave them independence. It was hoped to provide massive investment in infrastructure and rapid industrialisation through the policy of import-substituting industrialisation (ISI). ISI involves countries putting tariffs on imported manufactured goods in order to allow the domestic industry to expand and grow. They hoped the structure of the economy would become less reliant on the primary sector and that a new comparative advantage would be created, thereby freeing the economy from the constraint of declining terms of trade and the developing trap which were both created by the use of free trade. What happened...