Chapter 7 - Presentation §

Class: IS302 Created Time: October 28, 2020 3:59 PM Database: Assignment Database Last Edited Time: June 11, 2021 11:20 AM Status: Done

Members §

1. Chea Resan
2. Sambath Thearavattey
3. Long Chhunneang
4. Sokha Nylyching

Outline §

Takes 1 session/1 hour

Has 3 sections

Can include activities

• Game
• Quiz

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Page 192-248

Introduction (2pages):

• Emerging problems with import…(3.5pages):

Sokha Nylyching

• The East Asian model (12 pages): Sambath Thearavattey
• Structural Adjustment and the politics of reform (3.5pages):

Long Chhunneang

• Getting institution right (5.5pages):

Chea Resan

Conclusion:

Long Chhunneang

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Getting Institutions Right §

1990s, people doubted SAP’s ability in sustainably liberalizing and developing economies (Structural Adjustment Program)

SAP is necessary for sustained development

SAP is not sufficient for sustained growth.

Agreement that institutional quality holds the key to prosperity around the world.

Popularity of institutional approach rose with two configurations

Inclusive Institutions §

Encouraged individual initiative and sustained economic growth

Politically

• Individuals right to select and constrain governments
• Adherence to rule of law
• A strong but constrained state

Economically

• Strong property rights
• Market that rewards individual talent:
  • people are encouraged to be creative to be successful
  • economic opportunities are available to mass public, not only to elites
• Likely to provide high quality public services: education, health

This direction is good for sustained economic growth

Extractive Institutions §

Politically

• Power is exclusively given to small group of elites
• Elites are unconstrained from use of power: no institution power, or fair judicial system

Economically

• Little reward for individuals: property rights are lacking and is unfairly treated
• Elites extract income from non-political people and give to elites who keep the government in power
• Corruption within state and among elites

This direction is not good for sustained economic growth

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In historical context §

South Korea vs North Korea

• Both has the same culture, language, and history
• South Korea has inclusive institutions allowing rapid economic growth
• North Korea has extractive institutions causing poor economic performance

East Germany (Soviet Allied) vs West Germany (US Allied)

Problems With Theory §

Reverse Causality §

Possible that Economic Development is the cause of Institutional Configuration

• Economic development cause democratization: “the level of economic development, as measured by per capita income, is by far the best predictor of democratization”

Origins of Political Institutions §

Why do some countries have extractive institutions if it’s bad for economic development?

First Explanation: It’s from Colonial Settlement Patterns, Due to climate and disease

• if the colony has high colonial mortality rate ⇒ colonists will establish extractive institutions to maximize short run gain.
• if the colony has low colonial mortality rate ⇒ colonists will establish inclusive institutions for long term economic development.

The Second Explanation: The Interaction between resource endowment and colonialism led to the establishment of particular institutional arrangements.

• Caribbean: where land, climate, and labor fits for plantation-based agriculture (mass one crop production).
  • Colonists relied on imported slave labor
  • Slaves were excluded from politics
  • High inequality, low political inclusiveness
• North America: it’s land and climate encouraged family based grain farming
  • Less economic inequality
  • Political institutions more inclusive
• Questions

  1. Which institutional approach is good for sustained economic growth? ( Answer: B )

     A. Extractive Institution

     B. Inclusive Institution

     C. Reverse Causality

     D. Colonial Political Institution

  2. In an extractive institution, elites are limited in their exercise of power. (False)

  3. In an inclusive institution, citizens are encouraged to be creative to be successful. (True)

  4. Due to climate disease, colonists establish a inclusive institution when: (Answer: A)

     A. There is low colonial mortality rate

     B. There is high colonial mortality rate

     C. There is an abundance of farmland

     D. There are a large population

  5. When there is scarcity of land and labor, colonists import slaves, leading to higher equality and more inclusive political system. (False)