Political Economy of Growth: East Asia and Latin America Compared

1
Political Economy of Growth East Asia and Latin
America Compared

• Bert Gilbert
• 3/16/2006

2
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

3
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

4
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

5
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.

6
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

7
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

8
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 market-oriented system of adjustment

9
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.

10
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 Asias different history than Latin America
  allows us to apply dependency theory elsewhere,
  test the theory

11
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

12
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

13
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

14
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

15
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 dont 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.

16
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.

17
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

18
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

19
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 societys 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

20
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 countrys
  development strategy?
• What is the biggest problem in comparing East
  Asian development to Latin American development?