Nafziger Economic Development (4th ed)

746 Glossary

process. Failure to repay by any member jeopardizes the group’s access to future credit. See a prominent example, the

Grameen Bank.

Group of Eight (G-8) Group of Seven plus Russia.

Group of Seven (G-7) The major industrialized countries – the United States, Canada, Japan, the United Kingdom, Germany, France, and Italy. Often G-7 meetings include a representative of the European Union. In 2004, China sent its finance minister and central bank governor to G-7 meetings.

Group of 10 (G-10) The dominant 11 members of the 55-member Bank for International Settlements – Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States. The finance ministers and central bank governors of the 11 often meet to discuss cooperation among central banks and other agencies to achieve financial stability.

Group of 77 The coalition of LDCs established in 1964, which now numbers 133, that articulates and promotes LDC collective economic interests in the United Nations and promotes economic and technical cooperation among LDCs.

Harris–Todaro model A model that uses expected income (wage times the probability of employment) to explain why rural to urban migration in LDCs continues despite high urban unemployment.

hawala system An informal banking or money transfer system for migrants from or within the Middle East and North Africa to avoid substantial transactions costs in commercial banks or other financial institutions. Hawala means “transfer” in Arabic.

head-count approach to poverty Measuring poverty by the percentage of a population in poverty as complementary to incomegap and Gini measures.

Heckscher–Ohlin theorem See factor proportions theory.

hedging Buying or selling on the forward (for example, 90-day) foreign-exchange market to fix future rates for conversion from one currency to another.

high-income countries (HICs) Countries with a per-capita GNI of $9,000 or more in 2002, according to the World Bank. The margin of error is substantial and the boundary between HICs and LDCs rises each year with inflation.

HIPC (highly-indebted poor countries’) initiative A World Bank/IMF initiative, 1997– 2004, to provide debt relief through grants from the sale of IMF gold and from Paris Club rescheduling and writeoffs. To qualify, these countries were to improve governance and maintain sound macroeconomic policies.

historical materialism Marx’s dialectical theory that explains the collapse of each historical stage by changes in the relationships between ruling and oppressed classes.

household responsibility system The system introduced in China in 1979 in which local authorities allocated long-term user rights to agricultural land to individual households.

human capital Investment expenditures in the education, training, research, and health of people that increase their income or productive capacity.

Human Development Index (HDI) The U.N. Development Program’s alternative measure of welfare to GNI or GDP, which combines indices of literacy and schooling, life expectancy, and GDP per capita in purchasing power parity (PPP) U.S. dollars.

hyperinflation An extraordinarily rapid increase in the overall price level, for example, according to Sachs and Larrain (1993:729–739), inflation at least 20 percent monthly (or 792 percent annually).

ICOR (incremental capital output ratio) The

inverse of the ratio of increase in output to investment, which, together with the

Glossary

investment rate, explains the rate of economic growth.

IDA-eligible countries Countries eligible for International Development Association concessional lending.

import substitutes Domestic production replacing imports through tariffs and quotas.

impossibility theorem The contention that, given the U.S. and rich countries’ substantial appropriation of the world’s nonrenewable resources and net primary productivity, the entire world’s population cannot enjoy U.S. consumption levels (Herman Daly).

impossible trinity The achievement of all three goals – stable exchange rates, free capital mobility, and monetary autonomy – by national economic policy makers (Reisen 1993).

income elasticity of demand Percentage change in quantity demanded/percentage change in income.

income-gap approach to poverty Measuring poverty by the additional income needed to bring the poor up to the level of the poverty line, as complementary to the head-count and Gini measures.

incomes policy Direct attempts by government to control prices and wages to reduce inflation.

income terms of trade The value index of exports divided by the price index of imports.

indicative plan A plan in a mixed or capitalist economy, which states expectations, aspirations, and intentions, but falls short of authorization. This type of plan may include economic forecasts, helping private decision makers, policies favorable to the private sector, how to raise money and recruit personnel, and a list of proposed public expenditures usually authorized by the annual budget.

indirect taxes Taxes levied on producers, such as import, export, turnover, sales, value-

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added, and excise taxes. The burden of these taxes can be passed on to consumers depending on the elasticities of demand and supply.

individual economy The small entrepreneurial sector in China.

indivisibilities Discontinuities in the productivity of infrastructure and the response of investment decisions to demand growth that necessitate, in the view of RosensteinRodan, a synchronized application of large amounts of capital to all major sectors of an underdeveloped economy.

industrial concentration ratio The proportion of an industry’s or product’s output produced by, say, the three largest firms in the industry.

industrial countries See high-income countries; also the same as DCs.

infant industry arguments Arguments for protection for newly industrializing countries based on advantages they gain from increasing returns to scale, external economies, and technological borrowing by latecomers.

inflation An increase in the overall price level.

inflationary expectations The way in which anticipation of inflation affects the behavior of workers, consumers, and businesspeople.

inflation targeting A country’s central bank setting of a publicly announced numerical target (or sequence) for overall price increases.

inflation tax Inflationary financing through the government treasury expanding credit or printing money so that the government can raise funds in excess of tax revenues. This financing imposes a tax on the holders of money.

informal sector The part of the LDC urban economy with small-scale individual, family, or other firms with less than 10 workers, with wages below official minimum wages, with labor-intensive production and few capital, skills, and entry barriers. The sector

748 Glossary

is often not recorded in official statistics. In many low-income countries, it provides a major source of urban employment.

information and communications technology (ICT) The technology that connects computers, communication linkages, and other equipment for collecting, producing, processing, storing, managing, manufacturing, and information spreading purposes (Mohan 2004).

infrastructure Social overhead capital such as that in transport, communication, power, and technical research that increases the productivity of investment in directly productive activities.

innovation The embodiment in commercial practice of some new idea or invention (Schumpeter).

input–output table A table that describes the interrelationships among major industries and sectors, wages and salaries, surplus, investment, saving, consumption, government spending, taxes, exports, imports, the balance of payments, and national income. When divided horizontally, the table shows how the output of each industry is distributed among other industries and sectors of the economy. When divided vertically, the table shows the inputs to each industry from other industries and sectors.

institutions “The rules of the game of a society composed of the formal rules (constitutions, statute and common law, regulations), the informal constraints (norms, conventions, and internally devised codes of conduct) and the enforcement characteristics of each. Together they define the way the game is played” (North 1997:2).

institutional wage An infinitely elastic wage in a less-developed economy resulting from government setting a minimum wage or from labor union pressure.

intellectual property rights (IPR) World Trade Organization provided rights to protection of patents, trademarks, copyrights, biotechnological products, and other innovative products.

intermediate technology Techniques somewhere between the most internationally advanced capital-intensive processes and the LDCs ’ traditional instruments.

internal balance Balance or equilibrium in the domestic macroeconomy, including full employment and price stability.

international balance of merchandise trade

See balance of trade.

international balance of payments statement A systematic summary of all economic and financial transactions between one country and the rest of the world (usually on an annual basis).

international balance on goods and services

Exports minus imports of goods and services.

International Development Association (IDA) The concessional window of the World Bank, primarily for low-income countries.

international economic order This order includes all economic relations and institutions, both formal and informal, that link people living in different nations. These economic institutions include international agencies that lend capital, provide shortterm credit, and administer international trade rules. Economic relations include bilateral and multilateral trade, aid, banking services, currency rates, capital movements, and technological transfers.

International Monetary Fund (IMF) The agency created in 1944 at Bretton Woods, New Hampshire, charged with providing short-term credit for countries’ international balance of payments deficits.

international network of agricultural research centers Research centers on LDC principal food commodities and climate zones, including the Consultative Group on International Agricultural Research (CGIAR), supported by the World Bank, the UN Development Program, the Ford Foundation, the Rockefeller Foundation, the U.S. Agency for International Development, and agencies of other governments,

Glossary

in partnership with numerous National Agricultural Research Systems and nongovernmental organizations (NGOs).

inverted U-shaped curve The shape of the curve that frequently relates income inequality to the level of economic development. As economic development proceeds, income inequality may follow an upside-down U, first increasing (from lowto middle-income countries), and then decreasing (from middleto high-income countries).

investment The flow of resources into the production of new capital.

invisible hand In Adam Smith’s classical theory, a force behind the self-interest of capitalists, merchants, landlords, and workers, directing their actions toward maximum economic growth in a competitive economy.

iron law of wages The theory of wages of the English classical economists that indicates that the natural wage is at subsistence. Wages above subsistence increase population whereas wages below subsistence contribute to deaths and labor shortages.

keiretsu Japan’s post–World War II groups of affiliated companies loosely organized around a large bank, or vertical production groups consisting of a core manufacturing company and its subcontractors, subsidiaries, and affiliates.

kleptocracy A government run by thieves.

Keynesian theory of income and employment The theory developed by John Maynard Kenyes in the mid-1930s to explain economic depression and unemployment. Unemployment occurs because of insufficient aggregate demand for GNP to attain full employment or full utilization of resources of production.

kulaks Prosperous small Soviet landowners considered a class enemy by Stalin in the late 1920s and early 1930s.

Kuznets curve An inverted U-shaped curve in which inequality first increases and

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then decreases with growth of income per capita. The curve is named after Simon Kuznets, who statistically identified this relationship for DCs.

labor participation rate Ratio of the labor force to population.

labor supply elasticity Percentage change in quantity supplied/percentage change in wage, a key variable in the Lewis and FeiRanis models in determining the growth of the industrial sector.

laissez-faire Government noninterference.

law of diminishing returns The proposition that states that adding an equal extra input to fixed land will result in successively lower extra output.

learning curve A curve that shows how much labor productivity increases with cumulative experience.

least developed countries (LLDCs) A statutory United Nations list of countries based on a low combined score for the following indicators: per-capita GDP, human development (life expectancy, per capita calorie consumption, primary and secondary school enrollment, and adult literacy rate), economic diversification, and population (see UNCTAD’s annual Least Developed Countries Report). These countries are supposed to receive the majority of the aid provided by DCs .

less-developed countries (LDCs) Lowand middle-income countries, that is, those with a per-capita GNI of less than $9,000 in 2002, according to the World Bank. Although the margin of error is substantial and the boundary between categories rises each year with inflation, membership in the category has been relatively stable from the 1980s to the first decade of the 21st century.

Lewis–Fei–Ranis model An analysis that shows how economic growth in a lessdeveloped country with a subsistence agricultural sector and an industrial capitalist sector occurs through the increase in the

750 Glossary

size of the capital-accumulating industrial sector relative to the agricultural sector.

liberalism In economics, a school of thought that stresses freedom from the state’s economic restraint. Present-day proponents of this view are often called “neoliberals,” followers in many respects of the English classical economists of the late 18th and early 19th centuries such as Adam Smith and David Ricardo.

liberalization A country’s movement toward the market, including a reduction in price controls, subsidies, regulations, and ownership of land and capital by the state.

LLDCs See least-developed countries.

London Club A venue for LDCs to renegotiate their foreign debts through agreements with commercial banks.

London Interbank Offered Rate LIBOR A virtually riskless interest rate used as a standard for comparing other interest rates.

Lorenz curve A graph that shows how much income inequality varies from perfect equality (0) or perfect inequality (1). See Gini coefficient.

low-income countries (LICs) Countries with a per-capita GNI of $950 or less in 2002. See LDCs for details.

macroeconomic stabilization See stabilization.

Malthusian view The view, named after the turn-of-the-19th-century English economist Thomas Robert Malthus, that population growth would grow faster than food supply. His contemporary followers, NeoMalthusians, believe that Malthus’s pessimism applies to less-developed countries.

managed floating exchange-rate system An international currency system where many major central banks intervene in the market to influence the price of foreign exchange.

marginal abatement cost (MAC) The extra dollar cost of reducing pollution emissions by one unit.

marginal damage (MD) The extra dollar cost from increasing pollution emissions by one unit.

marginal revenue productivity of labor The addition of revenue attributable to the last unit of labor.

market friendly Refers to systems or reforms that assign an important role to deregulation, price decontrol, privatization, and reduction of tariffs, subsidies, and transfers. Making these changes is expected to improve the efficiency of resource allocation.

market socialism An economic system that combines state ownership of the means of production with use of the market to allocate resources.

material balance planning Soviet-type planning involving detailed allocation by central administration of the supply and demand for basic industrial commodities.

middle-income countries (MICs) Countries with a per-capita GNI of more than $950 and less than $9,000 in 2002. See LDCs for details.

“missing” women An estimate of a country’s deficit of females from infanticide and antifemale health biases compared to a benchmark or norm for the ratio of females to males (Sen 1993).

modern economic growth The rapid, sustained increase in per-capita GNP from substantial capital accumulation and technological progress since the last half of the 18th century and 19th century (Kuznets).

monetary policy Actions taken by a country’s central bank to affect the money supply and the rate of interest.

monopolistic competition An industry structure characterized by a large number of firms, no barriers to entry, and product differentiation.

monopoly A single seller of a product without close substitutes.

monopoly advantages Advantages accruing to an entrepreneur or manager, from

greater opportunities, such as more economic information, greater wealth or position, superior access to training and education, larger firm size, lucrative agreements to restrict entry or output, and a lower discount of future earnings. These advantages contribute to higher profits.

monopoly rents Returns to a factor of production from being the only or nearly the only production factor in an industry or sector. These returns are often from a monopoly or near monopoly granted by government policy.

monopsony A market in which there is only one buyer.

moral hazard The risk associated with a loan in which the borrower has incentives to invest in projects with high risk where the borrower does well if the project succeeds but the lender bears most of the loss if the project fails. The prospect of “bail out” of failed projects by, for example, the International Monetary Fund and the international community means that borrowers are more likely to shirk or use funds for personal use or power.

multilateral aid Aid given to a country by an agency with several donor countries.

multinational corporations (MNCs) Business firms with a parent company in one country and subsidiary operations in other countries.

negative externalities External diseconomies or costs that a firm or actor imposes on the rest of society. For example, some population theorists contend that a couple that gains by an additional child may, however, increase the net cost of that child to society.

negative real interest rate A nominal rate of interest less than the inflation rate.

neoclassical counterrevolution A revolution in economic policy and analysis in response to the dirigiste doctrine that emphasized the importance of the role of the state in development. This counterrevolution, which initially took place during the 1980s

and 1990s, emphasized economic liberalism and components of the Washington consensus.

neoclassical theory of growth Robert Solow’s theory of growth that stressed the importance of savings and capital formation for economic development and for empirical measures of the sources of growth.

neoclassicism Economic theory and policy that stressed freedom from the state’s economic restraint.

neoliberalism See liberalism.

net primary productivity (NPP) The total amount of solar energy converted into biochemical energy through the photosynthesis of plants minus the energy these plants use for their own life (Postel 1994).

net transfers Net international resource flows (investment, loans, and grants) minus net international interest payments and profit remittances.

new (endogenous) growth theory A theory that assumes that technology is endogenous or explained within the model. This theory contends that innovation or technical change is the engine of growth, and that this model is closer to the realities of international flows of people and capital than the neoclassical model.

newly industrializing countries (NICs) Countries who have recently become industrialized, such as South Korea, Taiwan, Singapore, and Hong Kong (China). Sometimes Mexico, Brazil, Malaysia, Thailand Turkey, Argentina, India, China, Portugal, and South Africa are included in this category.

nomenklatura system Soviet bureaucratic system in which the Communist Party controlled the state by using the power to recommend and approve managers in administration and enterprises, and make appointments and promotions to government positions. During the post-Soviet period, many economists argue that the

752 Glossary

nomenklatura still occupy the top positions in Russian society (Millar 1994:5–6).

nongovernmental organizations (NGOs)

Organizations independent of the state, such as labor unions, private relief agencies, and scientific organizations.

oligopoly Competition among few sellers characterized by interdependent pricing decisions.

$1 per day poverty A real income international line for extreme poverty equivalent to $PPP1 in 1985 and $PPP1.45 in 1998, used to estimate the proportion of the world’s population that exists at an income that secures the bare essentials of food, clothing, and shelter.

Organization for Economic Cooperation and Development (OECD) Club of the rich (high-income) countries of the world, viz., the United States, Canada, Western Europe, Japan, South Korea, Australia, and New Zealand. In addition, upper-middle- income Poland, Czech Republic, Slovak Republic, Hungary, Iceland, Turkey, and Mexico are members.

Organization of Petroleum Exporting Countries (OPEC) A cartel of petroleum exporting countries whose members have agreed to limit output and fix prices.

O-ring theory of economic development A theory of coordination theory that indicates that production consists of many tasks, all of which must be successfully completed for the product to have full value (Kremer).

overvalued currency Attaining a price of foreign currency (exchange rate) below the market rate through exchange controls and trade restrictions.

parastatal enterprises Public corporations and statutory boards owned by the state but responsible for day-to-day management to boards of directors, some of whom are appointed by the state.

Paris Club A venue for LDCs to renegotiate their foreign debts through agreements with official creditors.

patronage The establishment by the ruler of clientelist networks to distribute public offices, monopoly rents, or other rewards in return for political support.

patron–client system A patronage system between a superior (patron) and client (subordinate).

peasants Rural cultivators running households whose main concern is survival. Their contrast is to commercial farmers, who run a profit-oriented business enterprise.

perestroika The economic restructuring undertaken under Soviet leader Mikhail Gorbachev from 1985 to 1991.

Physical Quality of Life Index (PQLI) An alternative measure of economic welfare that combines three indicators – infant mortality, life expectancy, and adult literacy rate.

policy cartel The managed oligopoly of advice among Washington institutions, the International Monetary Fund, World Bank, and U.S. government. See also Washington consensus.

political elite This group includes not only individuals who directly or indirectly play a considerable part in government – political leaders, traditional princes and chiefs, high-ranking military officers, senior civil servants and administrators, and executives in public corporations – but also large landowners, major business people, and leading professionals.

political inflation Inflation arising from government failing to restrain wage and price demands arising from a struggle among a country’s major economic interest groups.

population age pyramid A structure that shows the percentage distribution of a population by age and sex (see Figure 8-10).

population momentum The continuing increase in population after a society has reached replacement-level fertility as a result of an age structure with a relatively high percentage of women at or below reproductive age.

Glossary

portfolio investment Financial investment by private individuals, corporations, and pension and mutual funds in stocks, bonds, certificates of deposits, and private and government notes. These are assets in which the investor has no control over operations.

Porto Alegre A Brazilian city that frequently hosts a major antiglobalization meeting, the World Social Forum, a rival to the annual World Economic Forum of the world’s economic elites.

poverty line A real income measure, usually expressed in constant dollars (for example, $1 or $2 per day in 1985 PPP), used as a basis for estimating the proportion of the world’s population that exists at an income that secures the bare essentials of food, clothing, and shelter.

poverty-weighted index An alternative to GNP growth that gives an equal weight to a 1-percent increase in income for any member of society. For example, a 1-percent income growth for the bottom 10 percent would be given the same weight in growth as a 1-percent income growth for the top 10 percent.

Prebisch–Singer thesis The thesis stating that the terms of trade deteriorated historically for primary product exporters because of the slower growth of demand for, and less favorable market structure for, primary product production relative to manufacturing production.

preconditions stage One of Walter Rostow’s early stages, in which radical nonindustrial changes provide the prerequisite for the takeoff into self-sustained growth.

predatory ruler The ruler of a predatory state.

predatory state Rule by a personalistic regime ruling through coercion, material inducement, and personality politics, a regime that tends to degrade the institutional foundations of the economy and state.

preferential trade arrangement Regional integration that provides lower tariff and

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other trade barriers among member countries than between members and nonmembers.

present (discounted) value (V ) The current market value of receiving a given amount of dollars in t years (or a stream of benefits and costs over the time period t).

price elasticity (of demand) The absolute value of the ratio of the percentage change in quantity demanded to the percentage change in price. For example, the increased price of a good, such as sisal used for fiber, by 10 percent, reduces the amount of sisal demanded by 20 percent, a price elasticity of 0.20/0.10 or 2.0.

(P) price level of GDP The ratio of the purchasing power parity (PPP) exchange rate to the actual (or market) exchange rate, where both exchange rates are measured as the domestic-currency price of the U.S. dollar.

price of foreign exchange The domestic currency price of foreign currency, for example Rs. 45 = US$1.

primary products Food, raw materials, minerals, and organic oils and fats.

privatization Policies that include changing at least part of an enterprise’s ownership from the public to the private sector, liberalization of entry into activities previously restricted to the public sector, and franchising or contracting public services or leasing public assets to the private sector.

product cycle model A model that explains shifts in comparative advantage as a good becomes standardized, enabling LDCs to acquire an advantage while advanced economies, such as the United States and Japan, have an advantage in nonstandardized goods that require highly skilled labor and technological research and development.

production function A statement of the relationship between the amount of various inputs and capacity output.

productivity paradox The lack of positive relationship between information and

754 Glossary

communications technology investments and productivity (observed in the 1980s).

progressive tax A tax in which people with higher incomes pay a larger percentage of income in taxes.

property rights Laws and mores pertaining to the rights of real estate and asset owners and users.

Protestant ethic The inner-worldly asceticism of 16thto 18th-centuries’ Protestantism that stimulated hard work, frugality, and efficiency that, according to Max Weber, stimulated the spirit essential for capitalist development in the West.

public enterprise See state-owned enterprise.

public goods Goods characterized by nonrivalry in consumption, so that an individual’s consumption does not diminish the amount of good available for others, and nonexclusion in consumption, so that if one person consumes the good, then others cannot be excluded from consuming it.

Purchasing Power Parity (PPP) The exchange rate at which the goods and services comprising gross domestic product cost the same in both countries. Hence also the adjustment made to gross domestic product that reflects the country’s purchasing power relative to all other countries.

ratchet inflation Inflation resulting from price increases with increased demand but no reduction in prices when demand decreases.

real domestic currency appreciation An increase in the value of the domestic currency relative to foreign currencies.

real domestic currency depreciation A reduction in the value of the domestic currency relative to foreign currencies.

real economic growth The inflationadjusted rate of growth in gross product (or income) per capita.

real exchange rate The nominal exchange rate adjusted for relative inflation rates at home and abroad.

recurrent expenditures Expenditures in a given year that occur periodically from continuing programs.

regional integration A grouping of nations that reduces or abolishes barriers to trade and resource movements only among member countries.

regressive tax A tax in which people with lower incomes pay a larger percentage of income in taxes.

remittances Money that foreign nationals and immigrants send to their countries of origin.

rent seeking Unproductive activity to obtain private benefits from public action and resources.

replacement-level fertility The fertility rate in which the average woman of childbearing age bears only one daughter – her replacement in the population.

reserve army of the unemployed In Marx’s analysis of capitalism, a cheap labor source that expands and contracts with the boom and bust of business cycles.

residual That part of an economy’s growth in output per worker not attributed to increased capital per worker.

risk A situation in which the probabilities of future net returns occurring are known.

risk premium The interest-rate spread for LDC borrowers in excess of the London Interbank Offered Rate, a virtually riskless interest rate.

rules of origin Under free trade areas, regulations necessary to ensure that a majority of the value-added originates in member countries. For example, in the North American Free Trade Area (NAFTA), these rules prevent Asian and European companies from establishing assembly operations in which less than 50 percent of value-added originates in Mexico, using that country as a back door to U.S. and Canadian markets.

seigniorage The ability of the government or sovereign to extract resources from the

Glossary

financial system in return for controlling currency issue and credit expansion.

shadow price A price that reflects the true opportunity cost of a resource.

sharecropping A tenure arrangement in which the landlord provides the land, some equipment, and a proportion of seed and fertilizer in exchange for a proportion of the final crop.

“shock therapy” An abrupt transition by a former socialist country to adjustment and the market.

single factoral terms of trade The commodity terms of trade times change in output per combined factor inputs.

social benefit–cost analysis A standard investment criteria that states how you maximize net social income associated with a dollar of investment.

social capital “Features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit.” Social capital, similar to other forms of capital, enhances individual productivity (Putnam 1995).

social goods Goods or services that bestow collective benefits on members of society. Such goods are characterized by nonrivalry and nonexclusion in consumption.

socialism The economic system in which government owns the means of production.

socialization The process whereby personality, attitudes, motivation, and behavior are acquired through child rearing and social interaction.

social profitability Differences between social benefits and social costs.

social safety net Social spending on food and other income subsidies, health, and education that enhances a person’s economic security.

soft budget constraint An absence of financial penalties for enterprise or project failure, more likely to occur under a socialist or postsocialist transitional government.

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special drawing rights (SDRs) Bookkeeping entries in the accounts of member countries of the IMF used as an internationalized currency by central banks for official transactions with the IMF and other central banks.

stabilization Monetary, fiscal, and exchangerate policies to attain an optimal tradeoff between domestic economic growth and price stability (internal balance) and between internal balance and external balance, that is the international balance on goods and services.

stagflation When the overall price level (inflation) rises rapidly during periods of recession or high unemployment (stagnation).

Stalinist development model The centralized planning undertaken with Communist Party dictation of preferences, state control of capital and land, high rates of investment in the capital-goods industry, collectivization of agriculture, the virtual elimination of private trade, a state monopoly trading, and a low ratio of foreign trade to GNP used by Soviet leader Joseph Stalin from 1928 to his death in 1953.

standard deviation Square root of the variance.

state failure See failed state.

state legitimacy The recognition by the society of the government’s right to rule and the inclusion of all its members in decision making.

state-owned enterprise (SOE) An enterprise

(1) in which government is the principal (not necessarily majority) owner or where the state can appoint or remove the chief executive officer (president or managing director) and (2) that produces or sells goods or services to the public or other enterprises, in which revenues are to bear some relationship to cost.

stationary population A population whose growth is zero.

stationary state An unchanging economic process, before the entry of an entrepreneur or innovator, that merely reproduces itself at a constant rate (Schumpeter).