Transcript Political Economy of Growth: East Asia and Latin America

Political Economy of Growth:
East Asia and Latin America
Compared
Bert Gilbert
3/16/2006
Haggard: Explaining
Developmental Strategies
 Developmental Strategies
 “Packages of policies aimed at steering
economic activity into a particular mixture of
ownership and sectors (23)”
 Based on more than factor endowments
Comparing East Asian and Latin
American NICs
 Three Patterns of development
 Import-Substitution (ISI)
 Mexico, Brazil, several other large LDCs
 Export-Led Growth (ELG)
 Korea, Taiwan
 Entrepôt Growth
 Singapore, Hong Kong
 Virtually all developing countries begin
international trade as exporters of primary
products
Difference Between East Asian
and Latin American NICs
 Industrialization through exports versus
industrialization through import substitution
 Haggard uses comparative analysis to:
 Weigh competing explanations of policy change
 Generate some contingent generalizations
 Develop more convincing explanations of particular
cases
 Four levels of analysis
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The International System
Domestic Coalitions
Domestic Institutions
Ideology
Comparing East Asian and Latin
American NICs
 Haggard uses these analyses in order to
explain variation across Korea, Taiwan,
Singapore, Hong Kong, Brazil, and Mexico.
The International System
 Table 2.2 pg. 33
 Constrain state choices in two ways:
 Market Pressures
 Depression of 1930s hit Latin America but not Korea and
Taiwan
 External economic shocks likely to influence outward-oriented
policies
 Political Pressures
 Latin America independent for longer, increased freedom to
maneuver
 U.S. more concerned with East Asia, importance of aid flows
on foreign policy
Domestic Coalitions
 Weak private sector combines with export-led
policies to provide opportunities for national
firms.
 MNCs and Local Firms coexist without threat of
denationalization
 Latin America
 Role of FDI involved greater potential for political
conflict
 East Asia, labor controlled for the purpose of
pursuing export-led growth
Domestic Institutions
 Characteristics of the State as an Institution:
 Degree of autonomy from social forces
 Corporatist structures in democracies have proved successful
in extracting restraint from labor and business
 Cohesion of the policy-making apparatus
 Larger states of Latin America more difficulty than East Asian
NICs
 Available policy instruments
 Hong Kong, few instruments of intervention, relied on marketoriented system of adjustment
Ideology
 Table 2.5 pg. 48
 Chicago Boys in Chile
 Korea and Taiwan
 Declining U.S. aid
 Various ideas about how to respond
 American advisors influenced developmental
thinking.
Evans: Class, State, and
Dependence in East Asia:
Lessons for Latin Americanists
 Using analysis of East Asia to further the
dependency approach
 Insights of East Asianists may lead us to a
better understanding of dependent capitalist
development
 East Asia’s different history than Latin
America allows us to apply dependency
theory elsewhere, test the theory
Differences between Dependence
of East Asian NICs and Latin
American NICs
 Most important difference: Role of FDI
 Latin American Industrialization maximized the
consequences of FDI
 Foreign economic domination
 East Asian Industrialization occurred during a
period of little FDI
 Flows of FDI to East Asia still significantly
lower than to Latin America
Aid & Trade
 East Asian countries highly dependent on
international trade
 Does not seem to have slowed down their economic
growth or distribution of benefits
 East Asian NICs, aid has little to do with the
interests of U.S. transnational corporations
 Strengthen ability of states to confront Communist
neighbors
 Consequences of trade between rich and poor
countries depends on the specific social structure
in which trade takes place
The State and the Local
Bourgeoisie
 Japanese colonialism left little space in East Asia
for the emergence of even the relatively weak
industrial bourgeoisies found in Latin America
 Relations between state and local bourgeoisie
make it more difficult for the state to smoothly
impose such policies as EOI
 Absence of rural elite influence from the
formation of state policy unites East Asian cases
and seperates them from those of Latin America
Inequality in East Asian
Dependent Development
 Latin America characterized by large scale
inequality
 East Asian development has been very
equal
 Long unbroken historical experience of FDI
produces a greater likelihood of inequality
 Confirms suspicions regarding the negative
welfare consequences of transnational
dominated industrialization
Evans -- Conclusions
 Triple Alliance
 East Asia: State is dominant partner
 Latin America: TNC and Local Private Capital more
important
 Suggestions
 Latin Americanists should be careful not to
overemphasize industrial class relations
 We don’t really understand the consequences of a
relatively more autonomous state machine
 Avoid false parallels
 Careful analyses of concrete historical situations must precede
any expectations about results from policy.
Silva: State-Business Relations in
Latin America
 Latin America
 Political and Economic calamities culminating
in debt crisis of early 1980s
 Replace state-led, ISI, populism, and
authoritarian regimes with free-market
economic reform, fiscal sobriety, and political
democracy.
Structural Adjustment and
Business-System Change
 Common view: Developmentalist state generated weak,
state-dependent private sectors
 Free-market reforms: fiscal restraint, macroeconomic
stability, privatization, financial-sector liberalization, and
opening to international competition
 Personal and Family Ownership, closed-property firm,
interlocking directorships in conglomerates prevail. Banks
more than capital markets for financing long-term
investment.
 Privatization: 1) Adopt Anglo-American business practices
2) Conglomerate expansion too rapid 3) expand in regional
economic blocs 4) difficulty in extracting state from some
enterprises
Economic Change and Recasting
Business-State Relations
 Management of economic change benefits from
centralized state that is autonomous from social
and political forces
 Business-state relations founded on established
conglomerate more stable than newly created,
competing conglomerates
 No “Latin American” model of business-state
relations
Business and Democracy in Latin
America
 Absence of state control of organized interests creates
space for a vibrant civil society which is a crucial feature
of democracy
 Institutionalized Tripartite negotiating system of societal
corporatism provides a meaningful channel for the civil
society’s participation in public policy
 LA not ripe for societal corporatism
 Institutional element underdeveloped
 LA closer to U.S. pluralist model
 Exclusionary business-state relationships that work now
may contribute to economic and political difficulties in the
future
Questions
 How applicable is the developmentalist
model to East Asian development?
 From what we have seen, what is the most
important factor in predicting a country’s
development strategy?
 What is the biggest problem in comparing
East Asian development to Latin American
development?