Economic Growth | How & How NOT to Do Economics with Robert Skidelsky

Summary

The lecture explores three different economic theories explaining growth and development: the neoclassical, structuralist, and Marxist perspectives. The neoclassical view focuses on market forces and free trade, while the structuralist argument emphasizes the need for state intervention, especially through protectionist policies. The Marxist theory, in contrast, highlights the exploitation of poor nations by rich ones, arguing for a revolutionary shift. The discussion raises key questions about the effectiveness of liberalization, the role of the state in economic growth, and the impact of these theories on inequality and poverty in developing nations.

Takeaways

• 😀 The three primary economic theories discussed are the Neoclassical Story, the Structuralist Story, and the Exploitation Theory (Marxist Perspective).
• 😀 The Neoclassical Story promotes the idea of free trade and comparative advantage, but fails to fully explain or solve the problems faced by developing countries in global trade.
• 😀 The Structuralist Story critiques free trade and advocates for state-led economic development, including import substitution and protectionist policies.
• 😀 The Exploitation Theory suggests that the global capitalist system is inherently exploitative, benefiting rich countries at the expense of poor ones, requiring revolution for real change.
• 😀 Mainstream economics tends to focus on free markets and overlooks the role of the state in fostering economic growth, even though historical cases of successful development often involved state intervention.
• 😀 The Washington Consensus, advocating for liberalization and free-market policies, has had mixed results in poor countries, with some arguing that it worsens inequality rather than lifting countries out of poverty.
• 😀 Economic development is not only about growth but also about distribution and inequality, which are often neglected in mainstream economic theory.
• 😀 While liberalization claims to reduce poverty and inequality, evidence suggests that it often fails to deliver the promised benefits to poor countries.
• 😀 Protectionist policies, like import substitution, can sometimes be valid and necessary for countries that need to develop their industries and reduce dependency on external forces.
• 😀 The discussion raises critical questions about the true effects of economic liberalization and whether mainstream theories adequately address the complexities of global economic disparities.

Q & A

What is the central theme of this lecture?

The lecture focuses on different economic theories related to wealth creation, particularly exploring the views of Adam Smith, neoclassical economics, structuralism, and Marxism, with a focus on how these theories address economic growth and development.

How does Adam Smith define the concept of wealth?

Adam Smith defines wealth as the product of trade and accumulation, and he emphasizes the importance of understanding both the nature and causes of wealth, which is central to the exercise of economic development.

What does the lecture say about the classical economists' views on economic growth?

Classical economists believed economic growth depended on the widening of the market and accumulation of stock, particularly through trade and investment. They also suggested that societies needed to save and invest in future production for sustained growth.

What role did the state play in early economic growth, according to classical economists?

Classical economists generally viewed the state as an inefficient and wasteful entity. However, they acknowledged that state investment could play a role in promoting economic growth, particularly in defense, law, and order, but ideally, the state's role should be minimal.

What is the key criticism of the neoclassical economists' view of growth?

Neoclassical economists are criticized for overlooking the role of class differences and power in the economic system. They focus on market forces and ignore the influence of the business class and the state in shaping economic outcomes.

How does the lecture differentiate between classical and neoclassical economics regarding the role of the state?

While classical economists recognized the role of the state in early economic growth, neoclassical economists, a century later, removed this consideration, focusing instead on the market’s self-regulating capabilities, and disregarding the role of the state and class dynamics.

What does the lecture say about the importance of the state in industrialization?

The lecture argues that economic growth and industrialization, particularly in countries like Japan and China, were heavily state-led. The state was instrumental in capital accumulation, often through subsidies, tariffs, and protectionist policies, contrary to the free market principles promoted by classical economists.

What is the Washington Consensus and its impact on developing countries?

The Washington Consensus refers to a set of economic policies promoted by the IMF and World Bank in the 1990s, urging countries to liberalize markets, reduce trade barriers, privatize public enterprises, and allow global market forces to dictate production decisions. The lecture questions whether these policies have helped lift poor countries out of poverty.

What is the structuralist critique of free trade and globalization?

Structuralists argue that free trade locks rich and poor countries into fixed positions, with developing countries always at a disadvantage. They believe the gains from trade are systematically biased against poorer countries, and advocate for state intervention to improve terms of trade, particularly through policies like import substitution.

How does the exploitation theory view the relationship between rich and poor countries?

The exploitation theory, often associated with Marxist and dependencia theories, argues that peripheral countries are permanently disadvantaged due to capitalist structures that exploit them. It suggests that the only way for these countries to escape their plight is through revolution, as capitalism relies on unequal exchange to survive.

Why does the lecture claim that development economics is not fully accepted in mainstream economics?

Development economics has been seen as inferior in mainstream economics because it often incorporates extraneous elements like politics and sociology, and challenges the idea of a universal economic theory that applies to both rich and poor countries. Mainstream economics, particularly through the Washington Consensus, focuses on a unified approach.

What does the lecture suggest about the effectiveness of liberalization policies in reducing poverty?

The lecture questions whether liberalization policies, as promoted by the Washington Consensus, have actually succeeded in reducing poverty in poor countries. It invites discussion on the impacts of these policies on poverty rates and inequality.