Actually existing developmentalism

A vitally important consideration in understanding the trajectory of a particular country’s development strategy is the nature of the domestic political economy. As the existence of so-called ‘autonomous liberalisation’ (Chang et al., 2016, p.117) (whereby countries liberalise to a much greater degree than is strictly necessary according to any external pressure) illustrates, it is domestic not global drivers that may ultimately propel countries to embrace their existing comparative advantage and eschew manufacturing development (and thus embrace a pauperising form of global integration). Work on the transnational capitalist class (Robinson, 2001; Sklair, 2001) (even if the notion itself attributes too much coherence to this social formation) usefully highlights that shifts in global capitalism also reconstitute the material interests of nationally embedded political

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and economic elites. Indeed, powerful domestic interests may push for the embrace of neoliberal policy measures for a number of reasons, including bankers advocating central bank independence, deficit rules and inflation targeting to “lock-in” so-called

“prudent” macroeconomic policies; wealthy elites pushing to end capital controls to ease the movement of money out of the country; and exporters pushing for deeper trade integration to further their access to foreign markets (Chang, 2006). Socialisation through education and professional association membership between elites in developed and developing economies frames worldviews in which other options come to be seen as undesirable or unviable, which may also contribute to the ideological alignment of domestic elites in developing countries with neoliberal policy norms (Gathii, 2011).

Thus even without direct external compulsion or pressure, national social forces, in light of their shifting international articulation, incentives, and linkages, may use their power and influence to facilitate deep forms of integration into the global economy (Robinson, 2005, p.5).

Importantly, such forces also hold the possibility to understand the space which remains for alternative developmental strategies. Indeed, the (potentially) significant role played by domestic elites in articulating economic strategies, suggests the need to examine the balance of social forces, including material and ideational structures in which local economic and political elites are embedded, in order to understand the relationship between domestic and global economies. As Haggard (1986) argues, a country’s relationship to the international economy is shaped by decisions taken within that context (and their outcomes) such as: the balance between the import-substitution oriented and export-oriented aspects of the development strategy which help to shape trade relations; the production structure and patterns of foreign investment; the degree of dependence on foreign borrowing; and broader balance of payments dynamics.³⁹ All of these factors can play a central role in determining the impact of global capitalism on late development.

Instead of a determinist relationship, therefore, the national and global should be considered co-constitutive in the sense that the global economy is also itself dynamically

39 It is for this reason that Haggard (1986, p.346) argues that ‘[d]ependency is too frequently portrayed as a determinant international structure rather than as a set of shifting constraints within which states seek to manoeuvre’.

Whilst global conditions may be broadly similar country-by-country, the very existence of divergent outcomes, suggests the necessity of attention to how states respond to these circumstances, and therefore demands attention to domestic policies and political processes.

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produced through the strategies adopted in different spaces and times. Indeed, the broader system of global capitalism itself impacts the modality of integration of all economies within the international division of labour (not only by the decisions and interests of super-powers and hegemons), wherein development strategies of even peripheral economies help to constitute the global ‘whole’. The fallacy of composition argument (UNCTAD, 1996; UNCTAD, 2002c) cautions that if all countries were to simultaneously adopt the same strategies, doing so will impact the prospect for success of each of them. This means, contra mainstream analysis, that not all countries can simultaneously adopt EOI light manufacturing strategies since doing so would intensify competition in such a way as to undermine the possibility of success. It also means, contra the heterodox strands of the literature which emphasise the importance of emulating the strategies of those that came before, and deriving catch-up prospects from the ability to replicate past strategies, that this takes the global context to be too fixed and settled to provide a useful guide to development prospects. Not only does the global context change over time, but policies which may be feasible in one place may not be in another, due to differences in their political economies (Selwyn, 2011; Fine, 2013).

Whilst small and marginal economies undoubtedly exert considerably less influence on the global context than advanced economies, channels of influence nonetheless flow both ways since the global context is transformed by the integration and development strategies (of groups of) developing states.

Together this suggests that the way a country’s development strategy is shaped, constrained, and/or enabled by the global economy will be shaped by its development strategy and the social forces that go into producing such a strategy, and therefore cannot be read-off from the global economy in the abstract, nor the architecture of political and economic realities stemming from it. Methodologically, in order to understand the links between the domestic and global economies and how they interact to shape specific economic development strategies and constraints, particular attention to the state is required. As Bienefeld (1982, p.25) argues, to understand how the international and national spheres are linked – and through which mechanisms – it is necessary to study the nation state ‘because it has the capacity, albeit a variable and limited one, to define those links’. Indeed, it is this ‘bridging’ role between domestic social forces and the global capitalist system that makes the state the major countervailing force against the unequalising tendencies of the global economy (Kiely, 1998a). Furthermore, given the

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larger distance to the technological frontier between first and later developers, the later the development occurs, the larger the state’s role is likely to need to be, particularly in mobilising financial resources for the development of capital-intensive industries characteristic of developed economies (Gerschenkron, 1962). Mainstream approaches offer no guide to understanding these dynamics, as without automatic convergence,

‘outcomes [will] depend on circumstances, domestic policies and global constraints’

(Saad Filho, 2014, p.579). Thus the mediation between national development and the global capitalist system is thereby fundamentally shaped by historical processes of state formation and class relations within a given context (Kiely, 1994), which in turn can only be understood methodologically from the study of this context.

The implication of this analysis is that instead of the dominant mainstream and heterodox approaches, the relationship between national development and global economic and political conditions, following Kiely (1994), needs to be considered to be both dynamic and contingent, and the product of (undoubtedly) powerful tendencies, as well as context-specific counter-tendencies. Rather than a set of predetermined “rules”

of the system, global forces should instead be seen as “laws”, which are subject to a multitude of countervailing forces, mediated – amongst others – through the state and which ‘influence, but do not completely determine, the industrial (and wider development) strategy of peripheral capitalist countries’ (Kiely, 1994, p.147).⁴⁰ Notably, these laws should not be understood as immutable abstract tendencies of the capitalist system, but are specific to the particular configuration of global capitalism at a particular historical conjuncture. These tendencies should thus be considered to emanate from a global-level system of accumulation which is a historically specific configuration of capitalism associated with a set of specific constraints to growth. This approach shares an understanding with some strands of the dependency literature, which treated this as a flexible methodological approach rather than dogmatic theoretical framework, and called for what Palma (1978) dubs the examination of ‘concrete situations of dependency’ (see also Kay, 1989; Kiely, 2010; Leys, 1996).

However, instead of presupposing and then demonstrating dependency, the framework utilised in this thesis instead seeks to explore the relationship between national

40 As Kiely (1994, p. 153) points out: ‘[t]he specific effect of these tendencies on a particular country (or group of countries) in the world economy will depend on how that nation, and its institutions (especially the state) and social actors respond to these “laws”’.

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development and global conditions through case studies of “actually existing developmentalism”.⁴¹ The motivation for doing so is to explore concrete strategies directed at structural transformation under current global conditions (strategies which seek to push against the powerful tendencies of the current global political and economic order), in order to understand just how constraining the global economic and political forces are for efforts directed at contemporary late development. Such case studies, it is suggested, can reveal the extent to which alternative development trajectories are possible by exploring – rather than taking for granted – the links between the global and national domains (and their development implications).

Whilst direct replication of past experiences is not a helpful way to construct the development challenge for the reasons discussed above, the past offers some guide to the sorts of strategies which might prove effective in triggering structural transformation potentially capable of generating catch-up. A useful sketch of the domains of state-led intervention in support of developmental trajectories conducive to stable, sustainable and equitable growth is offered by Chang and Grabel (2004b; 2014). This work suggests that transformative strategies capable of powering the transformations needed for late development are likely to involve policies located in five broad economic domains:

trade and industry; privatisation and intellectual property; international private capital flows; domestic financial regulation; macroeconomic policies and institutions.

According to this framework, heterodox trade and industrial policies should broadly seek to eschew free trade. Instead protection and selective industrial promotion (mixing infant industry protection of domestic industries and export promotion) should be deployed, attached to appropriate performance requirements. Privatisation, meanwhile, should be resisted for its own sake in order to utilise state enterprises for development objectives (including in natural monopolies and large industries). Innovation and technological adoption should be promoted over the protection of intellectual property rights. International private capital flows should be carefully managed, through the use of capital controls, ceilings on foreign loans, careful management of portfolio inflows

41 This usage is inspired by the approach to examining cases of ‘actually existing development’ deployed by Kiely (1998b, p.37), which, as he points out, draws on a lineage coming from the idea of ‘actually existing socialism’ used by Bahro (1978) and adapted by Sutcliffe (1984) into ‘actually existing industrialisation’. In the context of debates about neo-developmentalism in Latin America the term ‘really existing developmentalism’ has been recently deployed to distinguish between theoretical and empirical uses of the term, although these uses are broader than that here, since it is used to characterise the more general process through which capitalism develops in concrete times and places (Bresser-Pereira, 2016).

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and FDI management strategies, all targeted at employment creation, living standard improvements and knowledge transfer. Domestic financial regulation should seek to provide credit at appropriate prices for investments likely to yield stable, sustainable and equitable investment. Financial liberalisation should therefore be secondary to these more important goals. Finally, macroeconomic policies and institutions may entail restricted currency convertibility, adjustable exchange rate pegs, central banks integrated with the wider development strategy, growth-enhancing rather than inflation-targeting oriented monetary policies, and growth-promoting public investment underpinned by expanded tax revenues.

Yet whilst these policies are likely to be important to any contemporary late development effort the global economy also throws up some challenges for their implementation. The heterodox literature highlights two categories of shifts which demand attention in any study of contemporary late development: the neoliberal architecture of global rules and institutions (the IFIs and WTO and broader trade and investment regime); and shifts in patterns of global accumulation (specifically effecting global production and finance). Each of these “laws” is briefly examined to understand the specific mechanisms by which each typically impacts late development trajectories by constraining (although not eliminating) the scope to apply alternative economic policies of the kind discussed above. Such specificity is critical to framing the empirical enquiry which follows, allowing the analysis of global economic and political forces to be incorporated into the case study analysis in a way that eschews the risk of

“pessimistic determinism”.