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Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Myth and Poetics)

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Haggard writes in opposition to the neoclassical and dependency perspectives regarding economic development. The neoclassical perspective argues in favor of market-regulated export-led growth development strategies. They argue that the state intervention which accompanies import-substitution industrialization strategies leads to inefficiency. However, Haggard argues that export-led industrialization is "accompanied by economic, legal, and institutional reforms that the neoclassical interpretation has generally ignored" (p. 15).

Dependency theorists argue that the international economic system plays a strong role in shaping national policy in NICs. Haggard offers a number of critiques of the dependency perspective: (1) the problems attributed to the international economic system are actually the result of various other national policies; (2) they fail to examine the politicization of the international trading system; (3) dependency theorists are apolitical; (4) domestic politics and state responses vary between NICs. Dependency theorists tend to lump them all together.

Haggard argues that we need a theory which looks at the political incentives facing political actors in order to understand economic development in NICs.

Haggard examines the economic development of East Asian and Latin American NICs through extensive comparative analysis. He finds that both groups originally undertook similar development strategies (ISI), but around 1960 the East Asian NICs moved towards export-leg growth strategies while Latin America remained using ISI. Haggard seeks to explain these policy choices/changes using four causal variables: international factors, domestic coalitions, political institutions, and ideas.

The author argues that international factors (composed of market pressures, i.e. price shocks, conflicts between trading partners and political pressures, i.e. control of market access, military or colonial occupation, etc) are the most powerful causal variables in regards to policy change. In the case of Korea, declining aid and increasing US pressure forced the hand of the Korean elites to pursue more liberal policies (export-led growth). In the case of Brazil, major balance of payment problems forced the nation to look inward, thus subscribing to ISI policies.

Also, domestic coalitions (agriculture, labor, and capital) "can constrain or widen the feasible set of policy reforms" (p. 28): (1) industrialization is often accompanied by weak agricultural interests; (2) in regards to industrial labor, the timing of mobilization and its relation with politics shape policy choice. In Latin America, labor was mobilized early, along with the emergence of leftist governments. The coalition support ISI. The longer ISI is pursued, the more engrained labor becomes in politics. This makes it more difficult for economic policy to change. However, when labor is weak, we may find export-led growth. This is because: (a) it grants freedom to business and state coalitions; (b) the government purposely represses labor to achieve its specific goals; (3) the interests of capital also shape policy choice. In the case of Asia, the government used a lot of instruments to lower the risks of capital investors. It steered industry into areas where it had comparative advantage by reducing costs and risks to investors. In the case of Latin America, ISI and the subsequent protectionist interest become entrenched which makes a move towards a more outward looking policy difficult.

Haggard's third variable, political institutions, addresses the interests of politicians and the structures which shape what they can do, thus shaping policy formation and change. For example, in the Korean case, Park maintained a very strong government. He centralized decision-making, bureaucratized the economic policy-making machinery, and created measures to steer industry into specific areas. In the case of Latin America, the politicians were committed to ISI - they couldn't change it because their support base was composed of disparate interest and the elite had to maintain ISI to keep their support.

Haggard also sees ideas and ideology shaping policy choice and change. The ideas available to political actors shape policy. In the case of Korea, Park turned over control to technocrats who pursued export-led policies, while the opposite was the case in Latin America, "technocrats brought the `structuralism' ideas...that sanctioned and active state role to promote secondary ISI."