Status Updates From The End of the Third World:...

The left in both more and less developed countries retained a view that almost anything was possible if the state were under socialist control. But the power of the state was, in all circumstances, constrained. The external context imposed one set of limits - the government’s credit rating, import capacity, strength of currency, trade and capital balances.

Import-substitution industrialization strategies were the offspring of world slump, as well as attempts to overcome slump. But the strategies were not general prescriptions for development. Only some large countries could pursue such policies, and only for limited periods of time in given historical circumstances. Sooner or later the domestic accumulation process would have to be reintegrated in the world process.

Neo-imperialisms there were, but they did not direct the world economy nor could they predetermine the outcome of competition. The theory of ‘unequal exchange’ foundered upon this reality.

In the 80s, the process [of neoliberal transformation] had become part of the world economic structure. Slump in the more developed countries intensified the search for newer, lower-cost sources of production just as it was the debt crisis, not high rates of growth, that turned Mexico and Brazil outwards. However, victories in the long march of capital accumulation should not be confused with the conquest of hunger.

A world car, assembled from parts made in many different countries, provided substantial export opportunities for the collaborating countries, but only on condition that they permitted increased imports: as production and exports rose, domestic content must fall. The trend collided directly with the imperatives of import-substitution industrialization.

In the 80s, neither Brazil nor Mexico retreated into autarky as they had done in the slump of the early thirties. The two governments recognized that the world was a different place and realized that interdependence had become the condition of survival.

South Korea, Taiwan and Singapore are triumphs of state capitalism, but Hong Kong and Singapore are also triumphs of free trade. By most historical criteria, the four did develop economically, and they did so, contrary to the postulates of development economics, through the promotion of exports; and, contrary to the pessimistic outlook of development economics, through the export of manufactured goods.

In 1985, two thirds of local savings had gone to fuel the property boom. It was a radical indictment of the social-democratic recipe for Singapore’s development; the recommendations made included wage reductions, ending the central settlement of wages (in favour of local productivity-related deals), reduced government intervention ... The long record of success did not protect Singapore from enforced liberalization.

Although the heart of Korean development was as state capitalist as any East European economy and as Keynesian as any West European social democracy, it was distinguished from both by the flexibility of approach and speed of change. Exports required an opportunism normally excluded from state planning.

South Korea was, as regards the role of the state, as ‘socialist’ as most of the countries so identified.

Yet while Hyundai made spectacular losses, they expanded capacity (capacity increased some 55 per cent between 1979 and 1981 - when it was said to be only 24 per cent utilized). The magic of this exercise was achieved courtesy of the national treasury.

Between 1973 and 1983, gross world output of ships declined by about a half (and Japan’s output by more than a half); South Korea had increased its output by 15,000 percent, to take, in the first half of 1983, 23 per cent of the world market. To put it in another way - in 1973, Sweden’s output was 230 times South Korea’s; in 1983, Korea’s output was five times larger than Sweden’s.

Planners in many backward countries were fascinated by heavy industry; it was always the key, it was thought, to economic independence, to full development. Elements of the first Russian Five Year Plan were emulated in the first Chinese plan, with its emphasis on the growth of steel output, and in the model which was the inspiration fof the second Indian Five Year Plan.

Prebisch’s 'healthy protectionism' was also not as novel as it seemed. Indeed, it could have been identified as no more than a rationalization of what had already happened. In the case of Latin America, the world slump of 1929-33 cut the purchasing power of the continent’s exports by 60%. Most countries were obliged to suspend the convertibility of their currencies,cut imports radically and take autarkic measures.

Imports from Latin America had expanded their economies, making it possible for them to service their borrowings from Europe and to import manufactured goods as well. The division of labour, an exchange of agricultural for industrial goods, had been mutually beneficial. ... But by 1944, Prebisch was warning of a long-term disequilibrium in the world economy as the result of the ‘inner-directed development’ of the US.