Chapter 11: Dilemmas of Development

You have made a series of choices as the Secretary of Economic Development of Kashmir. Let's analyze each of your choices.

The Washington Consensus model of economic development champions unregulated liberal capitalism. The competition drives your domestic firms to continuously innovate and charge lower prices. Some unprotected firms will get priced out, and Kashmir will experience economic volatility sometimes. Overall, your domestic economy will grow and improve over time.

Export-led growth is a market-accepting strategy that embraces international linkages, while helping firms that export goods to the world economy. This was the strategy of choice among the four Asian Tigers of Taiwan, South Korea, Singapore, and Hong Kong. All benefitted greatly from the development opportunities of economic integration, including access to technology, labor, capital, and managerial expertise. At the same time, domestic firms were able to compete with the rough international competition through subsidies and preferential access to foreign currency. You can expect the same success with Kashmir.

Closing Kashmir off from international financial flows mean your firms will not have reliable access to necessary foreign capital. Spurning foreign direct investment means your markets will not benefit from multinational enterprises bringing over technology, labor, capital, and managerial expertise from their developed countries. Furthermore, if Kashmir experiences financial crisis, you will have to resolve your economic problems on your own as you rejected official development assistance and multilateral institutions' loans. You have shielded your firms from the volatility of international financial flows, but you have severely lowered the potential growth the Kashmiri economy could experience as a result.

Overall, you have done a subpar job as the Kashmiri economy will grow minimally, which means you have failed one of your two goals of stability and growth.