Globalisation; Interdependence?
Industrialisation: Choice of Techniques: ISI, EOS. Implications and postscript.
As we discussed during the last session the notions of modernity and it's apparent synonyms industrialisation and development is by no means unproblematic.
However it does seem for the nations and populations of the developing world that any alternative definition or for that matter development policy option has been foreclosed.
Industrialisation is an imperative not a choice. If that is the case how is to be achieved; what has been attempted in the past and with what results?
The dominant model which has been used as both a guiding principle and as an exemplar for the International Fiscal Organisations has been called Export Orientated Industrialisation and is often viewed as being dichotomous to the policy of Import Substitution Industrialisation.
As we saw Latin America tended, at least until the global crisis of the early 1970's, to try to implement ISI rather than EOI policies. Put simply SIS will normally include the following economic measures:
Large Scale State investment and involvement in the Economy.
Tariffs or other barriers to the importation of manufactured good and services.
Price subsidies on good manufactured for the domestic market.
Artificial control of currency rates to aid the export market and/or impede imports.
Broadly it comprises what was known in the past as "protectionism", which is of course antithetical to the doctrine of "Free Market, Free Trade" which is now being enforced by the WTO.
Import Substitution will, for example, attempt to protect key sectors and industries from the insecurities of the World market. During certain periods all the Advanced Industrial Nations have used import substitution notably during national or international crises. In many cases external events govern and make imperative the use of import substitution. Most obviously direct periods of conflict when there are physical constraints on the free movement of goods and services, key industries have been protected and supported. Key sectors would include Energy, transport and of course munitions. Indeed conflict may not have to be open and armed, during the final two decades of Apartheid rule in the Republic of South Africa the white minority government poured resources into energy generation and the arms industry, often in collaboration with Israel!
As we have discussed this was the favoured strategy until the early 1970's in Latin America and is still influential as a model in both ECLA and UNCTAD. Indeed it was the experience of economic growth during the isolation of Latin America due to world conflicts that lent credence to the strategy.
What is not recognised in the dispute between the proponents of the competing strategies is that ISI was never complete and could not be. In common with all peripheral economies the nations of Latin America were and remain dependent on a limited range primary commodities for the major part of their export earnings and it follows for revenue to service external debt. This is patently obviously not conducive to a successful withdrawal or the vagaries of the global market place.
The opposing strategy, that of Export Orientation is at the core of the prescriptions and policies of the International Fiscal Organisations whose specific brief is to promote stable economic growth and social development in the periphery. The World bank in particular made great play, until last year of the role of export orientation in the success of the Newly Industrialised countries. The set of policies at the centre of their operations has even been described as the " Washington Consensus" (Rodnik, 1997)
The Newly Industrialised Countries, and their "successful" industrialisation, have been at the centre of much of the debate in development theory over the last three decades. Whilst their is some disagreement which countries should be included in the list of NICs, four East Asian nations are always part of the list which may or may not also include Brazil and Mexico. They are South Korea, Taiwan, Hong Kong and Singapore but additionally some recent studies also include Malaysia and the Philippines.
The economic performance of the key four Southeast Asian nations is dazzling. Together with Brazil they achieved growth rates in GDP of between 8 and 11 percent per annum in the period 1965-78, annual increases in manufactured exports of between 20 and 40 percent, and increases in manufacturing employment rose by between four and eight percent annually during the same period. To many conventional economists they represent a practical example of what can accomplished by the implementation of the right policies at the right time.
To the World Bank they represent a vindication of the ethos of, and the detailed prescriptions imposed on heavily indebted nations that together make Structural Adjustment Programmes, despite the dire social consequences these programmes have wrought of the populace of the periphery. Structural Adjustment Programmes explicitly set out to create the conditions that allow for full participation in the world trading system, that is to globalise the economy of any nations state.
STRUCTURAL ADJUSTMENT REFORMS
as imposed by the WORLD BANK AND the IMF are a form of MACROECONOMIC ADJUSTMENT. The measures will include some attempt at MARKET DEVELOPMENT OR LIBERALISATION and deregulated or FREER TRADE. This will almost always involve CURRENCY DEVALUATION, making imports more expensive and exports "more globally competitive". The State will be withdrawn as far as possible bringing swinging CUTS IN GOVERNMENT SPENDING - ESPECIALLY ON SOCIAL SERVICES - E.G. EDUCATION, HEALTH. The prescription will also always call for the PRIVATISATION OF STATE OWNED ENTERPRISES. Just as importantly AN END OR A DECREASE IN PRICE SUPPORTS will be imposed. The State will also be told to make CUTS IN THE SIZE OF THE PUBLIC BUREAUCRACY and
IMPROVE the QUALITY OF GOVERNANCE to bring about TRANSPARENCY and hence impose CONTROL OVER CORRUPTION. Conversely their will be an insistence on DEMOCRATISATION and the observation of basic HUMAN RIGHTS.
The DRACONIAN NATURE OF MEASURES however tends to operate against the political dimension of the reforms since the IMPACT ON THE POOR and INCREASING INEQUALITY will tend to promote POLITICAL INSTABILITY in many occasions leading to a repressive reaction by the State.
The key point, of course, is that the Asian Tigers did not follow an exclusively export orientated development policy, just as Latin America did not exclusively follow a narrowly implement ISI system.
In fact in all of the Asian "Tiger" economies the State was and is heavily involved in the economy and key sectors were and are protected from foreign competition. Japan, the second largest economy in the World, has one of the most restricted domestic markets in the world (and in any event is rapidly sliding into recession).
The NICs are important in development theory primarily because it is asserted that they provide "proof" that with the right actions any nation can modernise and become fully participant in the world economic system. Like the late industrialisers they can be emulated with a very high likelihood of successful industrialisation.
Just as importantly geopolitical and historical factors may have been just as important is directing the "successful" industrial development of these economies. Strategic position in relation to the world political system cannot be ignored. All of the Asian NICs are the near neighbours of nations recognised at one time at least to the ideological political and economic enemies of the West. It is obvious then that if the position of the NICs was in many ways a unique historical, economic and political construct then any exemplary function that they may seem to have becomes very dubious, especially since they all also have in common repressive political regimes at least at the outset of the modernisation process, and are all in crisis currently.
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