Harvard Government 20 Week 3 Handout 2

Government 20: Week 3, Lecture 2 From State to Market-led Development in the 1980s and 1990s I. The Costs of State-led Development A. Lack of human rights, democracy B. Greater propensity for corruption and inefficiency over time C. Better for catching up than for innovating or leading II. Can the East Asian Model be Generalized? A. The difficulty of creating an autonomous state B. The special conditions of post-World War II East Asia a. Military conflict b. Massive US aid/access to US markets c. Expanding global economy III. The Rise and Fall of State-led Development in Latin America A. The Import-Substituting Industrialization (ISI) model a. State-led industrialization b. Inward-oriented c. Less authoritarianism/less labor repression d. Less state autonomy and state capacity B. The results of ISI: modest growth in 1950s-1970s; crisis in the 1980s IV. The Resurgence of Market-Oriented Development Models in the 1980s and 1990s A. The global shift to the Right B. The Washington Consensus of the 1990s 1. Free markets: deregulate, end subsidies, price controls, industrial policy 2. Limited state: privatization of industry, banks 3. Free trade: return to comparative advantage 4. Openness to foreign investment C. The Case of Chile: Radical Market-Oriented Reform and Export-led Growth D. The Prospects for Market-Led Development in Latin America 1. Modest results outside of Chile 2. The problem of Institutional Weakness VIII. Final Thoughts A. A futile search for a single model? B. The need for an effective state C. Does development require authoritarianism? Terms to Know State Capacity Import Substituting Industrialization (ISI) The Washington Consensus Augusto Pinochet The Chicago Boys