COURSE OUTLINE

THE POLITICAL ECONOMY OF

INTERNATIONAL DEVELOPMENT
Professor: Charles Oman
Academic Year 2016/2017: Fall semester

BIOGRAPHICAL INFORMATION
Head of Strategy at the Development Centre of the OECD (Organisation for Economic Cooperation and
Development) until 2010, Charles Oman is a native of Berkeley, California. Advisor to governments of
developing and OECD countries, and to civil society organizations, he holds a Ph.D. in Economics from the
University of California at Berkeley. His publications include The Postwar Evolution of Development Thinking
(with G. Wignaraja), Uses and Abuses of Governance Indicators (with C. Arndt), Globalisation and
Regionalisation-The Challenge for Developing Countries and New Forms of International Investment in
Developing Countries.

Books
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, AddisonWesley
D. Acemoglu & J. Robinson (2012), Why Nations Fail: The Origins of Power, Prosperity, and Poverty,
Crown
Joseph E. Stiglitz (2006), Making Globalization Work, W.W. Norton

COURSE OUTLINE
Session 1: Introduction
Why Development? Why Political Economy?
Comparative Statistical Perspectives on Developing Countries (what the numbers tell us, what they dont;
whose numbers?)
Alternative Indicators (per capita GDP, PPP, HDI, GNH, Sen-Stiglitz-Fitoussi, OECD): strengths and
limitations
Readings:

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COURSE OUTLINE

Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 1, Sec. 1.3 (pp. 14-23: What Do We Mean by Development)
Ch. 2, Secs. 2.1 2.3 (pp. 38-56: Defining the Dev. World, Basic Indicators of Dev., Holistic
Measures)
Ch. 5, Intro. (pp. 202-204), pp. 211-219 in Sec. 5.1 (Measuring Absolute Poverty), Secs. 5.3-5.4 (pp.
229-241: Absolute Poverty: Extent & Magnitude, Economic Characteristics of High-Poverty Groups)
Session 2: Conceptual Foundations
How the interaction of economic and institutional forces can sustain, or block, a development process
(conceptual framework)
Historical examples: the transitions from hunter-gatherer to agrarian-pastoral societies and from feudalism to
capitalism
Importance of public goods, path dependency, and the collective-action problem (or the economics of
politics, and the politics of economics)
Readings:
D. Acemoglu & J. Robinson (2012), Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Crown
Chs. 1-3 + Ch. 15 (these four chapters are obligatory; the entire book is highly recommended)
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 2, Secs. 2.4-2.8 (pp. 56-93: Characteristics of the Dev. World, How Low-Income Countries
Today Differ from Developed Countries in Their Earlier Stages, Are Living Standards of Developing
and Developed Nations Converging?, Long-Run Causes of Comparative Development, Concluding
Observations)
Ch. 4 (pp. 155-195: Contemporary Models of Development & Underdevelopment you can ignore
graphical model of Big Push [pp. 165-170] & algebraic presentations of Kremers O-Ring Theory)
Ch. 11, Sec. 11.7 (pp. 533-539: Development Political Economy: Theories of Policy Formulation and
Reform) + pp. 540-541 on public goods & free-rider problem
Recommended:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 3 (incl. Case Study comparing S. Korea & Argentina), esp. explanations of Rostow, Harrod-Domar
& Lewis models, concept of Structural change, & Neoclassical Counterrevolution (Market
Fundamentalism)

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Session 3: Lifting the Natural Resource Constraint (on the early phases of development)
The Food Problem (from Malthus and Ricardo to the Green Revolution, and recent food- price crises)
Population explosion since the 1920s: a challenge not faced by todays developed countries
Peasant societies, dual economies, rural-urban migration, the importance of agricultural land yields and
labor productivity (and the water problem)
Urbanization and the role of cities
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 9 (pp. 416-457: Agricultural Transformation & Rural Development incl. Case Study on The
Need to Improve Agricultural Extension for Women Farmers: Kenya) Recommended:
Ch. 6 (pp. 289-307: Population Growth & Econ. Development, incl. Case Study on Population,
Poverty, and Development: China and India)
Session 4: Industrialization, Capital Accumulation, and Trade
Structural change, capital formation and technological progress: the importance of productivity
Role of international trade in development: transcending the debate between optimists and pessimists (the
data, the consensus)
Import-substituting vs. export-oriented industrialization strategies (facts, interpretations, misinterpretations)
Dutch disease and the natural resource curse (a governance problem)
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 12 (pp. 564-629: International Trade Theory & Development Strategy especially Secs. 12.512.8: Export Promotion vs. Import Substitution, The Industrialization Strategy Approach,
South-South Trade , Trade Policies of Developed Countries incl. Case Study on Taiwan);
also pp. 675-679 Case Study 13, on South Korea
Joseph E. Stiglitz (2006), Making Globalization Work, W.W. Norton
Ch. 5 (pp. 133-158: Lifting the Resource Curse)

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Session 5: Multinational Corporations and Foreign Direct Investment

Trends and patterns (historical, current, emerging)
Pros and cons for developing countries
Rise and fall of the new forms of investment
Corporate governance in developing countries
Globalization and the rise of Third World MNCs
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 14, Secs. 14.1 - 14.2 (pp. 684-695: The International Flow of Financial Resources, Private FDI
& the MNC); also pp. 718-721 Case Study 14 on Botswana (African Success Story at Risk)
Joseph E. Stiglitz (2006), Making Globalization Work, W.W. Norton
Ch. 7 (pp. 187-210: The Multinational Corporation)
Session 6: International Development Assistance
History, motivations, methods
Role of the Multilateral Financial Institutions (World Bank, IMF, regional develop. banks)
Rise and fall of the Washington Consensus (including the Paris Declaration & MDGs)
Assessing the impact of aid
Role of civil society and NGOs
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 14, Secs. 14.3-14.5 (pp. 695-717: Remittances, Foreign Aidthe Debate, Conflict)
Ch. 1, Sec. 1.4 (pp. 23-25: The Millennium Development Goals)
Ch. 11, Sec. 11.8 (pp. 539-546: Roles of NGOs) & Case Study 11 ( the BRAC Model)
Session 7: Sustaining Productivity Growth
Importance of health and education (why growth is not enough)

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From substituting capital for labor to substituting human capital for physical capital: East Asian lessons on
the importance of education (for catching-up growth)
Institutional conditions for sustained human capacity development, successful international technology
borrowing, and social organization for catching-up growth
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 8 (pp. 359-406: Human Capital: Education and Health incl. Case Study on
Progresa/Oportunidades)
Session 8: Poverty and Inequality
Concepts and Measures
Relationships between Poverty, Inequality and Growth
Informality; Child labor; the Gender Gap; Ethnicity & Indigenous populations
Redistributive and other policy options
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Remainder of Ch. 5 (pp. 204-211: Measuring Inequality & Poverty; Sec. 5.2 pp. 219-229: Poverty,
Inequality & Social Welfare; Secs. 5.5-5.6, pp. 241-249: Policy Options, Summary & Conclusion;
pp. 250-255: Case Study on Ghana & Cte dIvoire)
Ch. 7 (pp. 311-350: Urbanization & Rural-Urban Migration, especially Secs. 7.4-7.5, pp. 327-336, on
The Urban Informal Sector, Migration); incl. Case Study on India & Botswana
Session 9: Markets vs. States vs. Communities
Concepts and Functions: the Market, the State, the Community
Market failures in developing countries (why strong markets need strong states)
Government failures in development, and the good governance agenda (controversies and critical
perspectives; democracy vs. autocracy - which is better for growth?)
Communities and relationship-based organizations: trust as social capital, managing common-property
resources, supplying local public goods; community failures
Development roles of NGOs (continued) and the Media

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COURSE OUTLINE

Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Remainder of Ch. 11 (Secs. 11.1-11.6, pp. 511-532: Development Policymaking A Question of
Balance, Development Planning, Some Basic Models [can ignore maths], Government
Failure, The Market Economy, The Wash. Consensus + Sec. 5.9, pp 546-551: Trends in
Governance & Reform)
Session 10: Finance and Fiscal Policy
Development role of (domestic) financial systems and their reform
Microfinance: contributions and controversies
Fiscal policy for development (taxation, accountability, quality of public spending)
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 15 (pp. 729-767: Finance & Fiscal Policy) incl. Case Study on the Grameen Bank
Session 11: International Financial Markets, Debt Crises, the Stabilization Controversy
Understanding balance of payments accounts (data and trends)
Debt crises: causes and consequences
Macroeconomic instability, IMF policies, and their critics
Globalization and international financial reform
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 13 (pp. 638-674: Balance of Payments, Debt, Financial Crises, & Stabilization Policies)
Highly recommended:
Joseph E. Stiglitz (2006), Making Globalization Work, W.W. Norton
Ch. 8 (pp. 211-244: The Burden of Debt) and Ch. 9 (pp. 245-268: Reforming the Global Reserves
System)

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COURSE OUTLINE

Session 12: Green Growth and the Sustainable Development Challenge

Rural poverty and environmental destruction (then and now)
Urban development and pollution
Global warming and climate change
Political economy of international cooperation (including the north-south debate over global warming)
Readings:
Michael P. Todaro & Stephen C. Smith (2011), Economic Development, Eleventh Edition, Addison-Wesley
Ch. 10 (pp. 465-501: The Environment & Development)

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