Lesson 3: Implications for Economic Development Policies Today

In the previous lessons, we have examined the Great Divergence Debate and its implications for economic history. In this final lesson, we will consider the implications of this debate for economic development policies today.

The Great Divergence Debate has important implications for economic development policies because it highlights the role of institutions and policies in promoting economic growth and reducing poverty. The debate has shown that institutions and policies can have a significant impact on economic outcomes, and that different approaches to economic development can have very different outcomes.

One approach to economic development that has been proposed is the 'Washington Consensus' approach. This approach emphasizes the importance of market-oriented policies, such as privatization, deregulation, and liberalization of trade and investment. The Washington Consensus approach has been criticized for being too focused on economic growth at the expense of social welfare, and for neglecting the role of institutions and governance in promoting economic development.

Another approach to economic development is the 'Asian Development Model' that emphasizes the role of the state in promoting economic development. This approach emphasizes the importance of strong institutions and governance, and the need for government intervention in the economy to promote industrialization and technological development. The Asian Development Model has been criticized for being too focused on state intervention at the expense of market-oriented policies, and for neglecting the role of democracy and civil society in promoting economic development.

The Great Divergence Debate has shown that both the Washington Consensus approach and the Asian Development Model have strengths and weaknesses, and that the best approach to economic development will depend on the specific context and conditions of each country. The debate has also highlighted the importance of institutions and governance in promoting economic development, and the need for policies that are tailored to the specific needs and challenges of each country.

Further Reading

• Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Business.
• Chang, H. J. (2002). Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press.
• Rodrik, D. (2018). Straight Talk on Trade: Ideas for a Sane World Economy. Princeton University Press.

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