The balance between Markets and intervention

The balance between Markets and intervention

Market led interventionist growth strategies	Gone on for 250 years Now being debated at international level Market led- Policies designed to minimize the role of gov and max free opp of supply and demand Include: Export led growth, growth through FDI, privatization, deregulation, structural adjustment policies Problems- Infrastucture is not created becuase it requires planning and gov intervention - developed countries protect their industries making it hard for developing countries to compete - spending on health and education needs to be high for development - can hit the poor because of increased unemployment increased prices of essencial goods - tends to focus on the urband, increases devide between urban and rural areas. leads to slums - not in possition to attract FDi because of political instability
Interventionist	Policies which involve gov manipulating the market Inclueds- imprt substitution, protectionist trade policies, exchange rate intervention, reglation, nationalization of industries, and government involvement in export markets to promote ceratin industries and their products.   •       Large public sectors lead to huge bureaucracy, over-staffing and inefficiency. o   If also politically unstable- corruption becomes likely. •       National industries often inefficient due to lack of competition and tend to make losses. •       Government spending can become excessive, leading to large budget deficits, the need for borrowing, taxes and the need for increasing the money supply. •       Increasing the money supply leads to high levels of inflation. •       Much spending is on infrastructure, often high costs and relatively little benefit.
conclusion	•       Solutions leading to development probably lie in a combination of market-led and interventionist strategies and need to be tailored to each individual country. •       Öne size fits all” doesn’t appear to work when it comes to development. •       Trade justice- decreased protectionist policies by developed countries. •       Debt relief- to release funds that may be invested in physical and human capital. •       Free domestic markets- with the caveat that they have achieved a competitive size, have sufficient infrastructure support, a quality labor force, technical and managerial expertise. •       Political stability, good governance and no corruption. •       Effective, targeted aid that leads to economic growth and a reduction in poverty.