In States vs. Markets, Herman Schwartz presents two economic development strategies that have been employed by late industrial developers in order to either take advantage of existing comparative advantages or facilitate rapid industrial growth through state intervention and provision in order to gain a competitive foothold in world markets. Schwartz demonstrates how China was able to employ elements of these development strategies to generate capital from an abundant rural labour supply in order to pursue industrial development and attract foreign investment through economic reform starting in the late 1970's.
This paper will illustrate the theoretical framework of Ricardian and Kaldorian Development strategies and outline historical details of China's economic reforms since the late 1970's. Schwartz's framework will then be applied to examine how China employed Ricardian elements of comparative advantages to, initially, shift towards Kaldorian development strategies to overcome Gerschenkronian collective action problems and promote industrial growth and foreign investment. This essay will examine Schwartz's assessment that China faces Kaldorian collective action problems typical of late developers in order to illustrate the China's present and future economic development challenges.
Section 1: Theoretical framework
Ricardian Development Strategies
According to Schwartz (2010), successful implementation of Ricardian development strategies involves using existing comparative advantages such as agricultural outputs or other primary product exports to drive economic development. This can also extend to low-value industrial activities such as textiles and garments (59-60). These strategies rely on the resolution...
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