Abstract
This chapter provides a summary of the structuralist critique of free-market capitalism, focusing on the tendency of the global market to keep peripheral countries underdeveloped. Also, it will describe the historical-structural method of Latin American structuralists, arguing that this method enables an understanding of the interactions between peripheral countries and the world economy from a political economy perspective, and thus allows analysts to avoid the conventional static and economistic interpretations.
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Notes
- 1.
- 2.
Colclough (1993: 1).
- 3.
Economic liberalism holds that the expansion of markets is not only the source of individual freedom and peace, but also the main cause of economic progress. While political liberalism refers to the central roles of the division of power and the rule of law in restricting the power of the state, economic liberalism puts the emphasis on the progressive role of markets. This research will focus exclusively on the arguments concerning the benefits of trade, liberalization of capital, and the protection of IPRs. For the justification of this, see footnotes 10 and 11.
- 4.
Even though Mill focused exclusively on free trade , in relation to indirect advantages, capital liberalization (in terms of Foreign Direct Investment (FDI) and short-term capital) and IPR protection will be included as well, since, following Wolf (2005), they are considered sources of dynamic advantages.
- 5.
Cited in Irwin (2002). However, Mill was not necessarily a representative of this liberal view. His well-known defense of infant industry protection and his views on socialism indicate his complex theoretical approach and the problems with classifying him as a liberal.
- 6.
Smith and Ricardo analyzed the advantages of free trade , without consideration of the impact of free flow of capital or enforcement of IPRs. However, following the World Bank (2002), this chapter will consider the free flow of capital, FDI , goods, and the enforcement of IPRs under the label of the “free market.” This is something far from obvious. As Chang (2001b) indicated, many liberal economists in the nineteenth century were against IPR but in favor of free trade , while the neoliberal approach assumes this broad view of “free market” and includes the topics of IPR and the free flow of capital in the FTAs. This chapter will present the debate from this contemporary perspective (see Baumol 2004; World Bank 2002a, b).
- 7.
It is true that neither financial liberalization nor strong IPR are directly associated with economic liberalism . In fact, many liberal economists consider patents to be monopolies (see Bhagwati 2002, 2004; Srinivasan 1998; Wolf 2005) and financial liberalization to be a source of instabilities (Bhagwati 1998; Wolf 2010). However, most of the leading international organizations embracing free trade and bilateral trade agreements have actively encouraged these measures (as the IMF did with capital liberalization from the 1990s until just recently) and considered them “trade-related topics,” thus including them in the “free trade” discourse and agenda (as the WTO with the GATS and TRIPS and the wave of FTAs signed since the 1990s).
- 8.
Backward linkages refer to the induced effect that the establishment of a firm generates on the provision of supplies to other firms, permitting an increase in their production that would not have been possible otherwise. Forward linkages, on the other hand, refer to the positive effect a firm has on connecting an output to the consumer.
- 9.
This is, of course, not exclusive to peripheral countries. However, it is possible to make the point that their productive profiles (dependent on natural resources ) have smaller “product space[s]” or “cone[s] of diversification” than developed countries, making economic change more difficult (see Leamer 1984).
- 10.
- 11.
In fact, Ocampo (2003) argued that capital flows from core to peripheries have been not only pro-cyclical, but driven by portfolio decisions de-linked from the demands for capital investment from peripheries, becoming key determinants of the business cycle of the later.
- 12.
Even this is not necessarily correct. For Krugman (1998), most of the mergers and acquisitions in Asia after the crisis of 1998 and in Latin America during the 1990s did not imply better performance. In most cases, in fact, the national firms were more efficient than foreign investors.
- 13.
- 14.
In fact, the technological spillover effects derived from FDIs can be considered an externality that the MNCs are constantly trying to restrict, while peripheral states are trying to obtain it. This implies a power relation between both agents centered on the control and use of technology. It is thus far from being a natural outcome of FDI (see Evans 1979).
- 15.
- 16.
Latin America also had its developmentalist period, and tried to build its own strategic pattern of integration . However, even though its project had important victories (the most dynamic economic period in the region’s history), it has stagnated since the 1970s and has undergone a massive debt expansion that exploded during the 1980s. This is not the space to discuss about what East Asia did right and Latin America wrong, but an important element was the character of the protectionist measures. While East Asia ’s protectionist measures were oriented toward technological learning and shaped by a strong developmental state and a weak business sector, in Latin America the protectionist measures were “frivolous,” implemented by a fragmented state and a strong rentier landlord-capitalist coalition (see Fajnzylber 1983; Evans 1995; Kohli 2004; Kay 2002).
- 17.
- 18.
In their words, “the concept of dependence tries to give meaning to a series of events and situations that occur together, and to make empirical situations understandable in terms of the way internal and external structural components are linked. In this approach the external is also expressed as a particular type of relation between social groups and classes within the underdeveloped nations ” (Cardoso and Faletto 1971: 15).
- 19.
For example, taking other things as constant, complete free trade would benefit exporters in sectors with comparative advantages, but damage the import-substitutive firms, small firms with no capacity to export, as well as both business and labor in sectors with no clear advantage in the world market (see, for example, Hiscox 2014).
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Ahumada, J.M. (2019). The Political Economy of Development and Integration: A Structuralist Perspective. In: The Political Economy of Peripheral Growth. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-10743-7_2
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