Theories of Economic DEVELOPMENT

Article on Political Economy
Overview
Political economy influences other aspects of political interaction.Throughout the discussions,
the influence of domestic and international economic institutions and the idea of economic
interdependence appear as important factors when examining political decision-making. The
contemporary discussion on the level of government involvement in the economy begins
after WWII with the theoretical debate between those who believe governments should have
some control of the economy, the Keynesians,and those who believe government should
stay out of the economy, the Chicago School of Economics influenced by Hayek (Cran,
Sullivan, Stiers, & Yergin, 2002). The Keynesians won out, and most governments enacted
some level of government control over the economy. In Europe, this became control over the
“commanding heights” of the economy, or those areas that are necessary for production, like
oil, steel, electricity, etc. Even in the United States, government regulations and controls
influenced the price of commodities and items like airline tickets. In the 1970s, advanced
economies began to slow, resulting in what was called “stagflation”—a combination of
stagnation in the market along with the inflation of prices (Cran et al., 2002). Margaret
Thatcher and Ronald Reagan heralded in a change, following Hayek and Friedman’s ideas
(the Chicago School of Economics) on keeping the government out of the economy.
Deregulation became the norm, creating short term constraints in economic development,
but longer term benefits for some of the populations. Over time, domestic and international
policies moved toward these market ideas, influencing economic development worldwide
(Cran et al., 2002).The real long-term benefits of less government controls over the market are still beingdebated. With the worldwide economic downturn in 2008, many countries faced austerity
measures that drastically reduced standard of living benefits. Questions arose on whether
governments should have more control over markets and economies, especially in the areas
where personal greed influences improper or illegal behavior.
Many of the foreign policy interactions between states include trade agreements. The level
of tariffs, price fixing, and openness of markets influences domestic production and foreign
supply. The United States imports roughly three times as much goods in dollars to China
than it is able to export, creating an ever growing trade deficit (U.S. Census Bureau).
However, U.S. industries invest heavily in China, like General Motors, with China being a
significant part of their market share (Morrison, 2014). The China-U.S. example also reflects
the complex relationship between trading partners, with the United States promoting more
open and free trade while China continues to enact protectionist policies (Morrison, 2014).
International organizations like the World Trade Organization (WTO), the World Bank, and
the International Monetary Fund (IMF), greatly influence the economic relationships between
and among states and domestic policy decisions. As part of the requirement for IMF
investment, states must show how they are applying economic reforms, which often means
more open and democratic policies and structures. The WTO creates structures and
opportunities for trade relationships for member states, while the World Bank provides funds
for economic development. Debate surrounds the effectiveness of each of these
organizations as opportunities for development and trade or institutions focused on the
benefiting persons, groups, and states already holding power.
Conclusion
In this paper,we will explore the complex interaction between states and economies.
The domestic influences on global economic systems create norms and structure that
appear to be leading toward more interdependence politically and economically. At the same
time, economic interdependence means greater influences when one state falls into an
economic decline. In the discussion, students will examine the origins of the economic crisis
in the United States and the effects globally, appraising the effectiveness of states and
international organizations to address crisis situations like the global economic crisis. This
discussion becomes part of the continuing discussion on whether there is a reality of
growing political and economic interdependence in global politics or if it is realist anarchy as
usual.

References
Cran, W., Sullivan, M., Stiers, D. O., Yergin, D., InVision Productions, Heights Productions, Inc., & WGBH. (Producers). (2002). Commanding heights: The battle for the world economy (Television broadcast). Boston: WGBH Boston Video.
Morrison, Wayne M. (2014). China-U.S. trade issues. Congressional Research Service. Retrieved from
http://fas.org/sgp/crs/row/RL33536.pdf. Trade goods with China. (2014). U.S. Census Bureau [Data file]. Retrieved from https://www.census.gov/foreign-trade/balance/c5700.html.

Instructions
Please answer the following questions on the Theories of Economic Development .
Evaluate competing theoretical and methodological perspectives/approaches used in the readings to answer questions about political economy. Compare and contrast three theoretical or methodological approaches and consider which approach provides the best means for understanding the decision-making process regarding political-economic issues in order to formulate a direction for future policy. You may use other sources of information beyond the material provided(readings) but the article readings must be the major sources used in the assessment. Support for your position/argument will be drawn from scholarly,academic sources using APA style citations.(1).Formulate (propose solutions) future policy actions to address economic and development issues. (2).Why is your solution best for the real-world practice of politics? Justify your claims
and includes specific details.(3)Accurately formulate policy actions to address economic and development issues direction for the future and includes specific details.
Prompt
Literature Review: Three theoretical or methodological views
Which theoretical and methodological position you use will depend on the approach you take. Both consider levels of analysis or who the political actors are but are different in what they reflect for your research. Your literature review allows you to see the theoretical and methodological approaches that other researchers have taken on your topic/thesis area. Different theoretical positions could include a realist view (Waltz), a dependency view (the idea that what happens in developing states depends on the needs of developed, more powerful states), or institutional liberalism (international institutions can create change when focused on individual actor needs not states’ needs). There are many theoretical positions to consider, depending on the topic/thesis statement you have developed.
Methodological approaches are how the research is done. This is typically qualitative research, quantitative research, case study, ethnography, etc. Qualitative research tends to be descriptive and looks more deeply into motivation. Quantitative research takes information (surveys, coding, etc.) and translates it into numbers, developing mathematical equations to determine correlation and possibly causation (typically correlation as it is difficult to show absolute causation in the social sciences). For the literature review, you need to show both the theoretical position and methodological position of each source. This means you need to find articles that are research, peer reviewed articles. Your best sources will come from political science/international relations journals in the Kaplan library using the peer reviewed option. Your focus is on the research done and how the outcome points to a certain direction for continued research.


Theories of Economic Development
The political attributes in any economy shape the policy frameworks, international trade, and economic models applied to sustain growth. Whereas proponents of a political economy identify top-level industries susceptible to international economic fluctuations, those against political interventions consider interdependence vital for sustaining global economic developments. According to the neo-classical counterrevolution model, countries should establish freer markets to encourage increased inter-state trade and international developments. The model considers market attributes efficient in regulating demand, supply, and other product factors. Additionally, the model considers the presence of controls is susceptible to self-interests, corruption, and poor allocation of resources.
In the structural model, Myrdal (2013) argues that countries embark on transformative and innovative processes of economic development. However, this model proposes the intervention of political controls to spearhead the innovative transformation while regulating other economic functions as intended in the development plan. The model is more focused on internal developments that extending trade to other nations for diversity and sustainability. In the Solow’s model of economic growth, different economies are expected to stabilize at the same level of income because of equal savings, depreciations, raw materials, and productivity growth. Additionally, the model considers technology an essential component in realizing economic growth. Labor and capital are effectively substituted to facilitate sustainability. Among these economic models, the new-classical counterrevolution model is essential in enhancing cohesion and economic development and sustainability in the world. One of the requirements for the neo-classical counterrevolution model is freer markets that promote equitability and interdependence. The market attributes of resources, labor, supply, and demand are effectively realized in a free market. The future policy should focus on markets as determinants of economic growth. Additionally, the public-choice-theory associates controlling agencies with self-interest agendas. According to Chang (2011), the global economic platform should not be controlled by any agency to avoid the growth of corruption, biased regulations, and trade restrictions. The future should be determined by market forces rather than individual controls that are susceptible to corruption and biased restrictions. According to Jones (2011), the future economies should offer market-friendly approaches that do not restrict developing countries from access to market resources. It should the mandate of every country to enhance its political and government institution to eliminate financial conflicts and misappropriation of resources.
The choice for a freer future economy is influenced by the emerging interdependencies across states. The traditional influx of cheap labor has been transformed to embrace innovation and creativity. The competitiveness generated by the transformations should be applied to market environments to ensure that political institutions have minimal controls (Leigh & Blakely, 2013). The approach is expected to enhance fair competitive structures that are not founded on self-interests.
According to Elliott (2012), one of the challenges of realizing global economic growth is the gap between developed and developing countries. The gaps are characterized by high-level poverty and hunger. One if the ways of realizing a freer market is addressing poverty and unequal distribution of resources. These challenges can be addressed by introducing sustainable and affordable patterns of production, consumption, and managing resources. Additionally, the availability of essential human needs would eliminate corruption and misappropriation of resources. After addressing the economic gaps, the other strategy should focus on the establishment of freer international trade environments that are driven by creativity, innovation, and market attributes (Bass & Dalal-Clayton, 2012). The United Nations and other international bodies should handle international cooperation and peace appropriately to stabilize markets against political forces. The millennium development goals should be pursued to improve the quality of life, conserve the environment, and invest in cross-border trade opportunities.



References
Bass, S., & Dalal-Clayton, B. (2012). Sustainable development strategies: a resource book. New York, NY: Routledge.
Chang, H. J. (2011). Institutions and economic development: theory, policy and history. Journal of Institutional Economics, 7(4), 473-498.
Elliott, J. (2012). An introduction to sustainable development. New York, NY: Routledge.
Jones, C. I. (2011). Intermediate goods and weak links in the theory of economic development. American Economic Journal: Macroeconomics, 3(2), 1-28.
Leigh, N. G., & Blakely, E. J. (2013). Planning local economic development: Theory and practice. London, UK: SAGE.
Myrdal, G. (2013). The Political Element in the Development of Economic Theory: A Collection of Essays on Methodology. New York, NY: Routledge.