Deck 7: Trade and Development II: Economic Reform

Question 1

Import substitution industrialization (ISI)gave rise to trade deficits primarily because

A) it generated a considerable exports but did not generate sufficient imports.
B) export revenues were adversely affected by negative terms of trade.
C) import revenues were adversely affected by negative terms of trade.
D) governments were unable to continue to subsidize state owned enterprises.
E) it generated a considerable demand for imports but did not generate sufficient exports.

Answer 1

E

Question 2

According to Oatley,policies that government used to promote industrialization weakened agriculture to such an extent that

A) heavy tax burdens caused massive rural protests.
B) farmers left the rural areas for urban areas in massive numbers in search of new jobs.
C) the fall in payments received by government marketing boards caused severe budget deficits.
D) farmers had to smuggle their goods to foreign countries to avoid taxes.
E) falling prices gave farmers little incentive to increase agricultural production.

Answer 2

E

Question 3

By the mid-1980s,in Taiwan and South Korea,

A) textiles were still their largest exports.
B) steel and petrochemicals were their largest exports.
C) steel and ship building were their largest exports.
D) electronics and automobiles were their largest imports.
E) electronics and automobiles were their largest exports.

Answer 3

E

Question 4

East Asian governments were more successful in their development strategies than those in Latin America and Africa because

A) they shifted to export-oriented substitution once they had exhausted the gains from easy ISI.
B) they shifted to export-oriented substitution without resorting to easy ISI.
C) they shifted to export-oriented substitution once they had exhausted the gains from commodity exports in agriculture.
D) they shifted to secondary ISI once they had exhausted the gains from easy ISI.
E) they were not interested in rent seeking trade strategies.

Question 5

Rent-seeking is the term used to describe

A) efforts by public officials to use the political system to achieve a higher-than-market return on an economic activity.
B) efforts by public officials to use the economic system to achieve a higher-than-market return on an political activity.
C) efforts by private actors to use the political system to achieve a higher-than-market return on an economic activity.
D) efforts by public officials to pressure producers to pay a higher-than-average taxes on an economic activity.
E) any corrupt practices associated with government interference in the market.

Question 6

According to Oatley,manufacturing industries created through ISI were not competitive in international markets primarily because

A) of collusion by advanced industrial states.
B) industries achieved economies of scale but not economies of experience.
C) of insufficient capacity to satisfy domestic consumption.
D) domestic markets for ISI goods were too small to achieve economies of scale.
E) governments were forced to privatize them.

Question 7

According to Oatley,governments in developing countries were unwilling to scale back their industrialization strategies because

A) it was unclear what model they should shift to because of the myth of adverse terms of trade.
B) market-oriented development strategies would reduce corruption.
C) they preferred to obtain higher rents by borrowing from foreigners.
D) they were unwilling to fight against the GATT system.
E) foreign lenders would eventually expose their corruption.

Question 8

Microeconomic inefficiencies created by ISI policies were aggravated by the tendency of developing country governments to

A) maintain undervalued exchange rates.
B) maintain overvalued exchange rates.
C) depreciate currency under fixed rates of exchange.
D) depreciate currency under floating rates of exchange.
E) inflate the value of foreign currencies.

Question 9

According to Oatley,Governments promoted ISI policies so that

A) they could require all citizens who wanted to import something to get special permits.
B) import permits would make goods more available to consumers who paid bribes.
C) importers could obtain rent on the sale of import permits.
D) government officials could obtain rent on the sale of import permits.
E) a maximum number of public officials could obtain rent through political bribes.

Question 10

Between 1973 and 1982 developing countries were also harmed by three international shocks which included

A) increase in oil prices, increase in commodity imports and higher interest rates on the foreign debt.
B) increase in oil prices, reduction in their terms of trade and lower profits on simple ISI products.
C) increase in oil prices, improvement in their terms of trade and higher interest rates on the foreign debt.
D) increase in oil prices, reduction in their terms of trade and lower interest rates on the foreign debt.
E) increase in oil prices, reduction in their terms of trade and higher interest rates on the foreign debt.

Question 11

In what has come to be called the East Asian model of development,economic development is conceptualized as a series of distinct stages.In the third stage,

A) industrial policy promotes labor-intensive light industry.
B) industrial policy promotes capital-intensive heavy industry.
C) industrial policy promotes high tech consumer durables and industrial machinery.
D) industrial policy promotes labor-intensive heavy industry.
E) industrial policy acquires high technology imports and foreign capital.

Question 12

East Asian governments used industrial policies to

A) increase the cost of investment in targeted industries.
B) create incentives to export.
C) reduce protection on infant industries.
D) promote the export of skilled labor.
E) use credit to assist importers' input suppliers.

Question 13

In what has come to be called the East Asian model of development,economic development is conceptualized as a series of distinct stages.In the first stage,

A) currency exchange policy promotes consumer imports.
B) industrial policy promotes capital-intensive heavy industry.
C) industrial policy promotes labor-intensive heavy industry.
D) industrial policy promotes capital-intensive light industry.
E) industrial policy promotes labor-intensive light industry.

Question 14

According to the World Bank and the IMF,East Asia experienced greater economic development compared to Latin America because

A) states played a large role and markets played a small role in allocating resources.
B) markets played a large role and states played a small role in allocating resources.
C) of cheap labor and borrowing in international financial markets rather than domestic savings.
D) high inflation promoted high savings rates and investment.
E) governments intervened in exchange markets to enhance domestic exports.

Question 15

ISI policies in the long run constrained the ability of governments to implement reforms because

A) they created too many veto players to block change.
B) they raised consumer expectations to unreasonable levels.
C) they raised producer profit expectations to unreasonable levels.
D) state owned enterprises became too corrupt to manage.
E) government subsidies were too popular with urban elites.

Question 16

The East Asian model was praised by those opposed to ISI trade strategies because

A) ISI trade deficits were declining in Latin America and sub-Saharan Africa.
B) per capita income grew almost three times faster than in Latin America.
C) the power of commodity exporters was reduced.
D) it reduced current account deficits caused by excessive imports.
E) it eliminated tariffs and non-tariff barriers.

Question 17

In what has come to be called the East Asian model of development,economic development is conceptualized as a series of distinct stages.In the second stage,

A) industrial policy promotes capital-intensive heavy industry.
B) industrial policy promotes labor-intensive light industry.
C) industrial policy promotes capital-intensive light industry.
D) industrial policy promotes high tech consumer durables and industrial machinery.
E) industrial policy promotes computers, robotics, and biotechnology.

Question 18

A current account deficit means that

A) a country is exporting more than it is importing.
B) a country is importing more than it is exporting.
C) a country is unable to pay off its loans.
D) a country is making less money on its exports than on its imports.
E) a government is spending more than it is receiving in revenues.

Question 19

Economic crises struck many developing countries outside of East Asia in the early 1980s in large part because of decisions to

A) use foreign loans to finance large infrastructure projects or domestic consumption.
B) use foreign loans to subsidize export oriented development
C) use domestic savings to finance large infrastructure projects or domestic consumption.
D) use government funds to fight drugs and terrorism.
E) allow corrupt governments to put their money into foreign banks.

Question 20

According to Oatley,most East Asian development scholars agree

A) about the relative unimportance of the state in creating export oriented industries.
B) that the success of export oriented strategies is a superior work ethic by Asians.
C) export-oriented strategies produced superior results compared to ISI.
D) stable macroeconomic environments can only be produced by neoliberal approaches to development.
E) East Asian success is due primarily to state-led industrial policies.

Question 21

World Bank structural adjustment loans were largely dependent on developing countries changing policies to

A) avoid the strategies at the core of the East Asian development model.
B) privatize state-owned enterprises.
C) refinance foreign debt with higher interest rates.
D) raise taxes to reduce budget deficits.
E) reduce dependence on oil exports.

Question 22

Brazil,India,and China (the BICs)have sharply increased their share of world output since 1980 now accounting for about 20% collectively.Which of the following statements is not true?

A) China's growth accounts for most of this increase.
B) The BICs have taken steps to institutionalize their growing influence.
C) The BICs are not unified in their bargaining strategy.
D) Other developing countries have been enthusiastic about allowing the BICs to represent their interests in trade negotiations.
E) In spite of their growth, the BICs are populous but still relatively poor.

Question 23

Economic performance,as a result of neo-liberal reforms mandated by World Bank and IMF structural adjustment policies,has been uniformly successful throughout the developing world.

Question 24

According to the World Bank and the IMF,East Asia succeeded because markets played a large role,and states played a small role in allocating resources.

Question 25

ISI also generated an important imbalance in persistent current-account deficits.

Question 26

According to Oatley,one of the worst features of ISI was the opportunities it created for government corruption.

Question 27

Why was the East Asian export oriented strategy so successful for the countries that adopted it? What effect did it have on the decline of manufacturing labor in advanced industrial states?

Question 28

Domestic politics in support of urban residents aggravated the budget deficits generated by ISI.

Question 29

Brazil,India and China are now using their greater economic and trade power to attempt to capture a larger share of the gains available from international trade cooperation by shaping the agenda of the Doha Round.

Question 30

How did ISI inefficiencies reinforce the tendency of most governments to maintain overvalued exchange rates?

Question 31

How did the search for urban political support in the wake of the failure of export oriented agriculture during the inter war period lead to budget crises under ISI development policies?

Question 32

Explain why most developing countries reversed 35 years of post WW II structuralist development policies to adopt neo-liberalism and export-oriented industrialization.

Question 33

According to Oatley,the international institutions of the IMF and the World Bank linked financial assistance to economic reforms that

A) reduced the ability of governments to spend on education and health care.
B) increased the role of the market in the economy.
C) drastically reduced the wages of domestic workers.
D) dramatically increased political instability.
E) increased the interest rates on foreign debt to discourage government spending.

Question 34

The adoption of neoliberal reforms in the developing world has

A) not altered the dynamics of global economic exchange.
B) resulted in the capital-intensive aspects of production now shifting to developing societies.
C) resulted in the labor-intensive aspects of production being shifted to developing societies.
D) brought substantially higher incomes to almost all groups.
E) resulted in larger incomes redistributed among structuralist groups.

Question 35

How did Asian governments implement policies that encouraged exports?

Question 36

The decline in agricultural production caused by government promotion of industrialization was most severe in Latin America.

Question 37

According to Oatley,recent research clearly demonstrates that neo-liberal reforms have reduced poverty and narrowed the income gap between the advanced industrial countries and the developing world.

Question 38

According to Oatley,the economic consequences of World Bank imposed structural adjustment policies that

A) were not very hard to implement because markets adjustments are easy.
B) lead to the overthrow of governments that opposed ISI strategies.
C) lead to huge profits by buyers of state-owned enterprises.
D) hurt producers in export-competing sectors.
E) lead to large job losses because of privatization and civil-service reforms.

Question 39

Economic crises struck developing countries during the early 1980s's in large part as a consequence of governments' decision to borrow to finance their budget and current account deficits.

Question 40

According to Oatley,the main reason that the East Asian model was so successful was that the Taiwanese and South Korean governments eliminated most import tariffs and non-tariff barriers.

Question 41

Compare and contrast the strengths and weaknesses of the two different explanations for East Asian success.

Question 42

Explain the role of World Bank/IMF structural adjustment mandates on large job losses through privatization and cut backs in government spending.

Question 43

What are the costs and benefits of the "Washington Consensus" model of development policy versus the "Beijing Consensus" model?

Question 44

Explain the success of the three pillars of China's economic reforms in spite of the inefficient state-owned sector that still employs tens of millions of people.

Question 45

How have Brazil,India and China (BICs)changed the direction of the WTO and greater trade liberalization talks in recent years?