David’s Reviews > The End of the Third World: Newly Industrialising Countries and the Decline of an Ideology > Status Update

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.

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.