Political Economy of Growth: East Asia and Latin America

Compared

Political Economy of Growth: East Asia and Latin America

Compared

Bert Gilbert

3/16/2006

Bert Gilbert

3/16/2006

Haggard: Explaining Developmental Strategies

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

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

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

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

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 The International System Domestic Coalitions Domestic Institutions Ideology

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 The International System Domestic Coalitions Domestic Institutions Ideology

Comparing East Asian and Latin American NICs

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.

Haggard uses these analyses in order to explain variation across Korea, Taiwan, Singapore, Hong Kong, Brazil, and Mexico.

The International SystemThe 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

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 CoalitionsDomestic 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

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 InstitutionsDomestic 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 market-

oriented system of adjustment

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 market-

oriented system of adjustment

IdeologyIdeology

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.

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

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

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

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

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 & TradeAid & 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

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

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

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 DevelopmentInequality 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

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 -- ConclusionsEvans -- 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.

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

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.

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 ChangeStructural 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

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

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

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

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

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

QuestionsQuestions

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?

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?