lecture eight, development

today rounds out solid discussion. after today a lot is educated guesses (because that's where the literature is)

where there is not educated guesses is a descriptive account of what neoliberalism meant

but we don't have the same set of analytical insights

underlying causes of implosion of the State-led model.

we now need to revisit the issue of the debt crisis, to discuss this in the terms developed in Vivek's book

as Rodrik argues, ISI interregnum (1950-1980) was actually a 'world-historic success' (high relative to normal growth rates in capitalism in first half of 20^th century, and high relative to what followed)

at the same time, ISI was a 'ticking time bomb'. it had certain internal weaknesses (distinct from what neoliberals thought, but still exist). these are political and economic in nature.

economically, ISI could be of discipliary and non-disciplinary nature. in E. Asia, you had the former. in LA and Sasia you had the latter. this generated two problems, which were self-reinforcing: (1) in the absence of discipline, ISI became a gigantic subsidization scheme. meaning it was an ever-expanding drain on the public exchequer. for this to be sustainable, it had to be complemented by steady increases in productivity, expanding the tax base, etc. this didn't happen. the demands on the State outpaced the gains from subsidization. there was, therefore, an ever-tightening fiscal crisis on the State; (2) external debt problem, as well. because the developmental State was not able to transform the external basket that they sold to the world. they didn't quite move up the value-chain, in manufacturing. because these countries were locked into buying capital goods, costs outpaced gains. this was already evident by the 60s; this is why Prebisch is arguing that the only way the development model would survive is if it went whole hog on exports (and, unlike what's stressed in dev. literature, country after country attempted to export; only a few succeeded). firms uniformly opposed because it was not something they could rationally accept to succeed

as a result of this, developing countries are desperate for cheap loans. from 69-79, you get a longer lease on life for ISI because of the very easy conditions on the capital market. by '82, the chickens come home to roost.

in '79 you get the Volcker shock, which means that loan payments being made by LDCs tripled or quadrupled. every one of them comes into serious crisis, etc.

the underpinning of this is the inability of the State to adequately transform the economy, in order to get sufficient revenue from their economy. SK and Taiwan were fine, even though they had large amounts of debt. but their revenues were in good shape, fiscal and export.

the weakness of State-led development, then, was a weakness of one kind of State intervention.

politically, when capitalists changed their preferences away from ISI towards neoliberalism, labour was so enfeebled that it was unable to gather the power to do anything about it. in India, for example, labour was demobilized; elsewhere, it was hemmed in by a maze of corporatist arrangements that made its organizational power moot to what it could give its constituents. official labour movements could do very little to avert it. the only way they could resist was by cutting further deals with political elites, etc.

in Korea, the dismantling of the developmental State occurs prior to the crisis of 1997, in the early 90s. the chaebols start to see the discipline as an encumbrance that they can cast off without threat to their profits.

1. cheap capital roots in petro-dollars?
2. capitalists changing their preferences towards liberalization?

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the smallness of size of mkt was not an inducement to SK firms to hazard export markets. Jamaica, Syria, etc. all stuck with ISI.

in Sweden, capitalists agree to keep labour in the coalition b/c there's not much planning, and no real public sector.

as early as late 19^th century, Sweden embarks on a high-technology export-based strategy. in the 1930s/40s it has a highly developed industrial sector already, despite having 30-40% agrarian strategy and being a 'developmental case.'

at the end of the day, you're dancing to capitalists' tune, and are always on a 'knife-edge'

late development vs. late-late development is important to understanding Sweden in the late nineteenth century. the latter face extraordinary pressures, remember, that the former simply don't face—they're oligarchies, etc.

capitalists never stop pushing for subsidies. in neoliberalism, they want regulations/impositions to be taken away, but not lose State assistance. behind the scenes capitalists are still lobbying States for assistance, etc. you have the luxury of a public posture of laissez faire, but the reality of getting significant structural assistance. they want done away, though, with obligations to labour, and obligations to invest according to plan requirements.

enabling condition for shift to neoliberalism will have to be stratified, but also global. you can't simply say that 'everywhere' you have a shift in the balance of forces. there's an underlying structural cause, which is the shift in the 1960s, through the 70s, early 80s, in the US. of course, independent of these changes, given the enfeeblement of the labour movement, it's likely to develop into something like neoliberalism. but the reason the US is important is because of the extraordinary simultaneity you see in the transitions to neoliberalism.

inflation in ISI—really only a problem in LA, wasn't as much of a problem in other parts of the world.

increased confidence for lenders owing to the fact that this is sovereign debt, not private debt. governments are good for it.