I. Economic Development and Globalization during the 20th Centuiry

A. Top-down policies: governments, multi-national corporations, NGOs are major actors
B. Primary goals

1. transition from agriculture to industry (industrialization)
2. population movement from rural to urban areas (urbanization)
3. increase in labor productivity and specialization (modernization)
4. rise of state as economic planner (bureaucratization)

C. Key assumptions

1. rural sector declines, not productive, isn't important
2. use agricultural surplus to expand industry

D. State policies to jump-start industry

1. overvalue currency, imported industrial inputs are cheap
2. low industrial workers' wages, at subsistence level
3. low food prices subsidize urban industrial workforce
4. import substitution: replace consumer goods manufactured abroad with ones produced domestically

E. Policies to extract rural surplus

1. direct export tax (mostly affects agricultural goods, as those are main exports)
2. cheap food prices (to feed industrial workers)
3. State revenues from export taxes go to industry
4. Decline in agricultural productivity frees up more farmers to work in industry
5. Declining profits in rural sector prompt urban migration
6. Nearly infinite supply of cheap labor from rural areas benefits industrialists

F. Secure foreign aid and investment for industry
G. Impact of these policies

1. Economic growth
2. Prestige projects: superhighways, airports
3. Traditional parts of economy saw little development
4. Cheap labor force lacks skills
5. Growing foreign indebtedness

II. Structural Adjustment

A. Policies imposed by creditors (World Bank, IMF) so that countries can repay debt
B. Stop protection of local industry, "liberalize" economy, cut government spending, promote "fair trade"
C. Developing economies tended to

1. Shield domestic industry from competition
2. Keep currency value high
3. Support social services

D. Adjustment measures reverse this. They include:

1. Cut government spending
2. Sell off state-owned industry
3. Develop exports to earn foreign currency to pay debts
4. Reduce tariffs on imports to encourage free trade and open local markets
5. Stop protecting local industry
6. Devalue currency to make products more attractive on world markets
7. Increase interest rates
8. Eliminate subsidies and price controls, such as those on basic necessities or industrial inputs

E. Effects

1. Inflation, it takes more local money to buy things than before
2. Reliance on key exports, crops or raw materials exposes economy to global volatility
3. Industry can't afford foreign equipment

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