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Underdevelopment and unregulated markets: Seven reasons why unregulated markets reproduce underdevelopment

Hansjörg Herr

No 103/2018, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: After World War II only a few developing countries were able to catch up to real GDP per capita levels prevailing in developed countries. These successful countries in almost all cases came from Asia and did not follow the free market doctrine in the tradition of the Washington Consensus. There must be theoretical explanations as to why underdevelopment is reproduced and most countries in the world do not catch up. This essay reviews different economic approaches which attempt to explain the lack of convergence. A first group of approaches focuses on the lack of sufficient productivity development (free trade, global value chains, negative terms of trade effects, abundance of scarce resources, premature deindustrialization); the second group focuses on problems to trigger sufficient growth (distorted financial systems, high restrictions on macroeconomic demand management). Countries can suffer from several of these factors, which can explain why development is only possible with the support of comprehensive government policies.

Keywords: underdevelopment; financial system; free trade; inequality; Keynesian paradigm; Washington Consensus (search for similar items in EconPapers)
JEL-codes: B50 F40 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-mac
Date: 2018
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