- Market-orientated strategy
- A market-orientated strategy is a development policy that removes barriers to markets, so that prices, profits and competition decide what is produced and where capital goes.
- Interventionist strategy
- An interventionist strategy is a development policy in which the state steers resources itself, by spending, protecting, owning or controlling prices.
Market-orientated strategies
Can you name the six market-orientated strategies the specification lists?
Each one takes a barrier away and leaves the decision to the market.
Trade liberalisation is cutting tariffs, quotas and other barriers to trade, which exposes home firms to world competition and opens world markets to them.
Can you think of an example?
Tariffs on imported machinery are cut, so firms buy better equipment at world prices and protected firms must cut costs or close.
Promoting foreign direct investment means making it easier for foreign firms to build or buy factories, mines and offices in the country.
Can you think of an example?
Foreign firms may now own their plants outright. A foreign carmaker builds one, bringing capital, jobs and skills.
Removing government subsidies means ending payments and cheap loans to chosen firms or products, so that firms compete on equal terms.
Can you think of an example?
Governments in fast-growing Asian economies sometimes chose industries for cheap loans or subsidies, and found that more market incentives for firms and workers were a key ingredient in faster growth.
A floating exchange rate is one set by supply and demand in the foreign exchange market, with no central bank target to defend.
Can you think of an example?
The central bank stops spending reserves to hold the currency up. It falls, and exports become cheaper abroad.
Microfinance is small loans, savings accounts and other financial services for poor people whom ordinary banks do not serve.
Can you think of an example?
Village women each borrow enough to buy a sewing machine, and the group guarantees each member's loan.
Privatisation is the sale of state-owned firms to private owners, who then run them for profit.
Can you think of an example?
The state telephone company is sold to investors, who extend the network to win paying customers.