Chapter 11: Dilemmas of Development


Washington Consensus
This model is based on the US-backed IMF policies for economic development and accentuates the positive role unregulated liberal capitalism can have on economic development. These policies include smaller state sectors, privatized markets, and liberalized trade and financial sectors.


Your staff sends a memo to the Prime Minister detailing your decision, highlighting your desire to pursue an unregulated liberal capitalist economy. The memo outlines your plans to minimize state intervention in your free-market economy.

Developing countries face many challenges in the world economy because they lag behind developed countries. To try to overcome these development problems, many developing countries pursue market-controlling strategies to improve their international economic position. Fearful of the global economy, the Prime Minister suggests you pursue a market-controlling strategy, but is open to hearing your ideas. Which of these market strategies will you choose?

What do you do now?

Import-Substituting IndustrializationISI is a national development strategy that avoids industrialized international economic linkages in order to focus on domestic production. This approach uses high tariffs, subsidies, and other protectionist measures to forego imported goods and services in favor of developing 'national champion' firms. National champion firms are firms that the government believes could do the best job of producing the substitutable industrial goods.
International Commodity CartelKashmir would seek to partner with other states that have large mineral supplies to try to control the supply of the raw materials in world markets in order to drive up their price and maximize their revenues. The mineral supplies are not easily substitutable, but seven other states have large natural reserves, including China.
International Commodity AgreementKashmir would attempt to press mineral consuming states to set an acceptable, consistent price for the minerals. This route would not maximize prices and revenue, rather, it would establish consistent revenue that Kashmir can rely upon for development planning.
Export-Led GrowthELG is a market-accepting strategy that argues international economic linkages are good because the international economy provides important opportunities for development such as access to managerial expertise, labor, capital, and technology. This strategy entails switching preference for government credit and foreign currency from firms producing for local markets to firms producing for export markets.