The Aptly or Wrongly Named Development Economics: An Introduction to New Perspectives and Models

Introduction

Since the inception of development economics in the post-World War II period, most of its proponents have prescribed the adoption of western institutions as the path for prosperity; the unequivocal solution for poverty, illiteracy, hunger, inequality, and violence in the world. Seventy years of attempts, or at least the pretense thereof, to reproduce the western model in completely different historical and cultural contexts have proven to be no more than a mirage for most.

Theoretically, the shortcomings are many. To name a few: development has been viewed as a linearly staged path to a determined end: the market economies of the United States and Western Europe (Furtado [1973] 2021; Loureiro, Rugitsky, and Saad Filho 2021); institutions are treated as structures, that is, emptied of their substance as ongoing processes (Waller 1988; Khanal and Bracarense 2021); and the relationship between development and institutions are seen as unidirectional (i.e., from structure to development), ignoring that ‘development’ (i.e., cultural, economic, and social factors) also influences institutions (Bracarense 2012; Palludeto and Borghi 2021).

In practice, the failures are not fewer. The level of inequality among and within countries, for instance, has a tendency to skyrocket (Furtado [1974] 2021). While world leaders resistlessly face the pressures of a conceivable environmental collapse, famine provokes violence and massive emigration waves (Reuveny and Moore 2009). The setbacks are not only present in countries that have actively engaged with development policies aimed at replicating the western capitalism, both developmentalist and neoliberal, such as Argentina (Lampa 2021),

Brazil (Alencar, Jayme, and Britto 2021; Mendes 2021), Nepal (Khanal and Bracarense 2021), Mexico (Molina and Peach 2005), India (Borooah 2005), Bolivia (Bracarense and Gil-Vasquez 2018). They are also felt by a large part of the population of countries like Greece (Kaplanoglou and Rapanos 2018), Portugal (Ferreira 2008), and the United States (Peach and Adkisson 2020).

Faced with this scenario, why do economists insist on the ideas of development, convergence, and emulation of the lifestyle of western countries? Is it possible to disassociate development from multidimensional instability, dependency, subordination, and exploitation? Is the current social, political, ecological and economic organized destabilization observed in the western countries a model to follow, a desirable end of history? Questions earlier raised by some of our fellow economists, but ever more pressing in the present context of generalized instability. In fact, how ethical and professionally responsible is it for economists to continue to undiscerningly prescribe miraculous one-size-fits-all market-oriented models to solve socio-economic problems everywhere?

The articles in this volume invite the readers to consider these questions and further similar inquiries in the future. On that note, the volume starts with two unpublished articles by Celso Furtado, one of the most remarkable Latin American economists of his generation, whose thought has influenced policymakers and social movements in the region since the 1950s (Loureiro, Rugitsky, and Saad Filho 2021). Furtado’s ([1973] 2021) first piece presents his views of underdevelopment and dependence vis-à-vis the reconfiguration of international division of labor prompted by multinational corporations, who had then just started to outsource their capacities to non-industrialized countries. Furtado foresees that this new configuration does not promote development, but rather reinforces a heterogeneous process of industrialization, where there is an incongruence between the productive capacities of traditional manufacturing goods for the majority of the population and luxury goods for the consumption of the elites who wish to mimic the patterns of consumption of industrialized countries. For Furtado, this diversification is one of defining feature of capitalism and requires an income which is highly concentrated. This tendency leads him to conclude that the process of development recommended by traditional economists becomes the very source for the perpetuation and reproduction of inequality and dependency of peripheral countries.

In the second article, Furtado ([1974] 2021) discusses the impossibility for underdeveloped countries to emulate the pattern of development of countries in the core of the market system. According to him, the impossibility is due to both the structural inequality on which the market economy depends, as described in his first paper, and the constraints delineated by natural resources. The exclusion of the big majority of the population of the Third World of the fruits of the present form of development, therefore, is not a simple accident, but rather a necessary condition to cope with the increasing inelasticity in the supply of non-renewable resources. Consequently, the style of life created by industrial capitalism will always be a preserve, accessible only to a minority, as any attempt to generalize such a style of life would precipitate a collapse of the system as a whole. The inevitability of this outcome leads the author to argue that economic models that assume away the imbalance and heterogeneity of distribution, assume away the defining feature of the world economy. In effect, Furtado ([1974] 2021) insists that ‘it is now apparent that what we have been calling economic development—namely a policy aiming at bridging the gap between the standards of living of the poor and rich countries—is nothing more than a myth’ intended to maintain current conditions of exploitation and dependency. Namely, ‘the notion of linear progress and the closely related myth of economic development provided a meta-narrative holding the capitalist system together ideologically and anchoring economic thought’ (Loureiro, Rugitsky, and Saad Filho 2021). The author, then, prompts countries, who have been subordinated to industrial capitalism to reimagine ‘development’ through a bottom-up, democratic process in order to escape the dependency trap.

Furtado's original papers are followed by Pedro Loureiro, Fernando Rugitsky, and Alfredo Saad Filho's (2021) article, which presents the Brazilian economist, analyzes and places his two unpublished contributions in theoretical and historical context, and emphasizes their current relevance. Regarding the latter point, the authors focus on two of Furtado's contributions: firstly, his call for a disaggregated analysis of production and consumption and, secondly, his invitation to democratically rethink ‘development’.

With relation to the first point, Furtado argues that enabling economic theory to grasp sectorial heterogeneity results in models that more realistically deal with the conditions of subordinated countries, showing results that contradict ‘common wisdom’. For instance, ‘higher rates of economic growth tend to imply aggravation of both external dependence and internal exploitation,’ deepening existent inequalities rather than promoting economic and social prosperity (Furtado [1974] 2021). Other papers in this volume supports the observation, Douglas Alencar, Frederico G. Jayme and Gustavo Britto (2021) and Marcos V. I. Mendes (2021), for instance, present results that contradict predictions expected from traditional economic models.

Discussing the matter of exchange rates, balance of payment constraint growth, and income distribution, Alencar, Jayme, and Britto (2021) elaborate a Post-Kaleckian model to analyze the impact of wage-led and profit-led regimes on economic growth in Brazil. The applied research shows that, when external constraints and distribution considerations are included in the model, context-specific results that contradict ‘generally accepted ideas’ (i.e., exchange rate misalignments) may emerge. For example, between 1960 and 2011, despite its negative impact on investment and productivity growth, real exchange rate devaluation in Brazil boosted the economic growth through the export channel.

Mendes's analysis of Brazilian academic and practical participation on the new digital economy, on the other hand, reinforces Furtado's concerns that industrialization and technological advancement are incapable to lead a country like Brazil to catch up with core countries of industrial capitalism. Effectively, combining a bibliometric analysis with literature review, Mendes points out that the potential negative effects of current trends in global value chains and investments brought up by digitalization on the Brazilian economy is twofold. First, it may dislocate foreign direct investment from the information and communication technology sector back to developed countries. Second, it may increase the technological requirements on Brazil's software industry to an unachievable level, leading to a loss of international competitiveness and eventually to a deindustrialization in this sector. That is, economic advancement and the increased productivity that it brings along may, more often than not, lead to economic divergence and increased global inequality.

The insistence on basing economic models and policy on ideals of convergence is even more startling when the history of economic thought shows that questions of increasing inequality, even within rich countries, have long been tackled by some economists. John Maynard Keynes's evaluation of negative impacts of untamed industrial capitalism on the distribution of the fruits of increased productivity is well known. Why is Keynes differentiation between economic growth and technical advancement, on one hand, and development, on the other, often ignored? Fabio H. Terra, Fernando Ferrari Filho, and Pedro Cezar Fonseca (2021) show that, for John Maynard Keynes (1932), development did not unfold naturally from the evolution of market institutions but had to rather be actively and collectively pursued. Keynes's faith on State bureaucracy and technocracy prompted him to propose an Agenda, where the State would lead socialization of investment and the euthanasia of the rentier in favor of the establishment of full employment (Keynes 1936, chapter 24). Subsequently, once economic concerns, such as inequality and unemployment, were lifted from the mind of all members of society, individuals could abandon their love for money and occupy their minds with higher concerns, pertaining the art of life itself (Keynes 1932).

While most economists today are not familiar with most, if not all, of Keynes's work, Furtado, along with others economists in the post-WWII peripheral countries, believed that Keynes and his followers had made important contributions to economics, but, that economic theory needed to deal with historical specificities if it were to understand the reality of poor countries (Sunna 2015; Boianovsky 2010). Keynes focused mostly on the center of industrial capitalism to build his theory with no claim of universality (Crotty 1990). It is, thus, not a surprise that his vision of development as ‘the stage where humankind overcomes its economic concerns, which are no longer a major problem for the general populace’ is not non-teleological.¹

That brings us to the great importance of Furtado's second contribution to current debates: intellectual, social, and political autonomy are necessary to think what we mean by ‘development’ and how to redesign the means and goals of social prosperity (Loureiro, Rugitsky, and Saad Filho 2021). He believed that historical specificity and non-teleological framework are fundamental to rethinking and redesigning societal goals other than emulation of rich countries. Along these lines, Raúl Prebisch—a mentor and then colleague, despite theoretical and personal disagreements, of Furtado at the United Nations Economic Commissions to Latin America and the Caribbean—vents ‘Keynes had gone only half the distance in explaining the dilemma of countries outside the core economies’ (Prebisch 1947 cited by Dosman 2009, p. 218).

Prebisch was an important contributor to Latin American Structuralism and a strong advocate of an economic theory that grasps the historical specificities of peripheral countries. Specialized in business cycles and determined to analyze the impact of international monetary structures on Latin American economies, Prebisch incorporated the existent asymmetries between developed and underdeveloped countries to the economic debate. In the sixth paper of this volume, Roberto Lampa (2021) reintroduces Raúl Prebisch's contributions to discussions of monetary hegemony and currency hierarchy to show that, in Latin America, monetary authorities have perceived liberalization of capital flows as detrimental to economic development due to its volatility and consequent instability. As international liquidity increases, incoming capital is, thus, not converted into productive investment, but rather left idle instead. As a result, capital inflows from core countries yield an interest to their investors, without a counterpart benefit to the peripheral host countries. In his conclusion, Lampa echoes Prebisch by questioning the validity of traditional economic development theory and calling for the elaboration of context-specific policy prescriptions in Latin America to revert this situation and confront the dominance of the dollar.

Prebisch, much like Keynes, however, trusted an important role to bureaucracy and technocracy as the receptacle of ‘development’ and to a State Agenda (Keynes) or Programming (Prebisch) as a ‘locus of conciliation between the democratic wills, government intentions, society's needs, and technical knowledge to execute the public policies’ (Terra, Ferrari Filho, and Fonseca 2021). Furtado ([1974] 2021), on the other hand, hints at the weaknesses and hindrances of a top-down agenda, which underestimates the role played by the general population in determining how history unfolds; that is, institutional transformation involves interactive actions between agents and structures (Lawson 1997). He calls, therefore, for a democratic, i.e., bottom-up, redefinition of, not only how to achieve societal prosperity, but more importantly, what it looks like. In other words, understanding institutions as processes entails a multidimensional and multidirectional interaction between agents and structures.

Alex W. A. Palludeto and Roberto A. Z. Borghi (2021), authors of the eight paper of this volume, discuss the interactive action between the Brazilian Development Bank (BNDES), economic theory, and Brazilian economic agents from 1952 until the present. It becomes evident that while BNDES had an institutional role in promoting development in Brazil, it was also influenced by the country's economic performance and by the many swings—between liberal and developmentalist mindsets—in economic policy in the past five decades. This article defies the theoretical view of new institutional economics—the new consensus in development theory and policy (Tamanaha 2015)—regarding the relation between institutions and development as unidirectional, which neglects the impact of social actors and realities on institutions. The historical analysis, moreover, demonstrates that the institutional capabilities of the BNDES to promote development were curbed during periods of economic liberalization—contradicting policies prescription that favor market-oriented policies to foster economic prosperity.

The final paper of the volume studies Nepal's experience with both liberal and developmentalist policies in the past century from a feminist institutionalist perspective to demonstrate that policies based on universal models tend to fall short from reducing inequality and social injustice (Khanal and Bracarense 2021). Regardless of their nature (liberal or developmentalist) the polices sustained by these models tend to benefit specific groups at the expenses of parts of the population whose subordination, at least initially, is not necessarily related to the process of commodification. Embracing the reformulation of Karl Polanyi’s ([1944] 2001) theory proposed by feminist institutionalism (Waller and Jennings 1991; Fraser 2014), the paper discusses Nepal's 1996–2006 Maoist Revolution as a triple movement and the need for a critical economic theory able to grasp with the social, environment, political, and economic complexities of the 21st century.

The papers in this special volume shed light on the current relevance of the discussions around the meaning of development as well as forms of breaking away from cultural, economic and political dependency. Not only people in subordinated positions across and within nations continue to resist the negative impact of markets on their livelihood and struggle for their social wellbeing, but also the western model has shown clear signs of economic, social, political, and ecological exhaustion. Rethinking and redesigning the meaning of, and means to achieve, societal prosperity seems, thus, propitious. One needs not to abandon the love of money to enjoy the art of life itself if they never acquired a taste for its adoration. Hence, regarding social transformation as an open-ended, non-teleological process is crucial to renounce ideals of mimicking core countries and independently reimagine the various ways social prosperity may resemble and how they may be achieved.

Finally, I would like to acknowledge all the authors who contributed to the volume as well as those who responded to all related calls for papers. I would also like to recognize Steve Pressman for the continued support and mentorship throughout this project as well as Louis-Philippe Rochon for the final motivation and push to complete it. To conclude, I extend special thanks to all the referees, who voluntarily contributed to the production of this volume, as well as all members of Taylor and Francis and universities staff and faculty who supported and guided the authors.

Notes

1 Teleological is used here in an analogous way to Thorstein Veblen's perspective, where teleological means an understanding that history unfolds towards a determined end (Hodgson 2001).