Lessons of a ‘Good’ Crisis: Learning in, and From the Third World

Abstract

The current crisis has implications for the structure of world power. Some parts of the developing world have enjoyed a very ‘good’ crisis, with sustained economic growth and even increasing equity. Similarly, during the Great Depression, Third World countries that adopted less-orthodox policies did better than core countries. These relative successes helped shape a generation of thinking about economic policy. Unfortunately, policies that made sense when the core was weak made less sense when the core again became strong, yet some states continued to follow them. A generation from now, some of today's successful states may find themselves confronting different changed circumstances with policies that have become equally problematic. Chinese policy makers may learn a lesson that will prove incorrect: that the centralization of authoritarian government in the hands of a small, pro-capitalist clique is good for economic growth and global power. In contrast, the lessons learned during the crisis by successful states that are more democratic may still be valid.

La crisis actual tiene implicaciones para la estructura del poder mundial. Algunas partes del mundo en desarrollo han disfrutado de una muy ‘buena’ crisis, con crecimiento económico sostenido e incluso aumento de ecuanimidad. En forma similar, durante la gran depresión, los países del tercer mundo que adoptaron políticas menos ortodoxas les fue mejor que a los países principales. Estos éxitos relativos ayudaron a perfilar a una generación para pensar sobre la política económica. Desafortunadamente, las políticas que tuvieron sentido cuando el centro estaba débil, tuvo menos sentido cuando el centro volvió a ser fuerte, no obstante, algunos estados continuaron siguiéndolas. Después de una generación, algunos de los estados exitosos de hoy, pueden encontrarse a sí mismos enfrentando diferentes circunstancias cambiadas con políticas que se han hecho igualmente problemáticas. Los creadores de las políticas chinas pueden aprender una lección que comprobará ser incorrecta: que la centralización del gobierno autoritario en las manos de un círculo pequeño, pro capitalista es bueno para el crecimiento económico y el poder global. En contraste, las lecciones aprendidas durante la crisis por los estados exitosos que son más democráticos, pueden ser aún válidas.

Keywords:

• financial crisis
• recovery
• Great Depression
• Brazil
• China
• democracy

Acknowledgements

I am grateful to Barry Gills and to two anonymous reviewers who provided helpful comments on an earlier draft and to my Wellesley colleagues Julie Matthei and Patrick McEwan (in economics), Larry Rosenwald (in peace and justice studies), and Laura Grattan (in political science) for sharing public forums in which these ideas were first discussed.

Notes

One of Frank's great contributions was to note that this was a repeated pattern; he found no fewer than five instances in which the weakening of the core led to an opening for internally-directed, relatively autonomous development in the history of Brazil alone (Frank, 1967, p. 166). Gills' article in this issue points to the much larger pattern in which old cores decline and peripheries rise, a central theme of many social scientists as far back as Ibn Khaldun (Gills, 2010).

It is a sign of our times that Kearney's report appeared on his Facebook page. It has not yet been published in any other form due to his tragic and untimely death by heart attack a week later in Bangladesh where he was meeting with local organizers and manufacturers who adhere to global voluntary labor standards. I am grateful to Neil for helping me think through the argument presented here, and join so many others in mourning his passing.

On the unexpectedness of this outcome see Candland and Nurjanah (2001) on the somewhat surprising role played by the United Nations and democratic assistance from India in the longer transition see Murphy (2006, pp. 332–334).

As was clear at the recent UN Department of Economic and Social Affairs, Division for Social Policy and Development, UNDP, and Government of Ghana conference, ‘Practical Strategies to Promote Social Integration: Lessons learned from existing policies and practices’ (Accra, 17–19 November 2009) where the focal presentation was a reflection on the Brazil's experience by one of Lula's major advisors (Borges-David, 2009).

Many other scholars have pointed to the relevance of Smith to our understanding of the recent economic crisis and to the larger question of the balance that is needed between the state (and a state that is not dominated by capitalists) and the market. See Sen (2009), McClean (2006), Arrighi (2007, ch. 2 and 12).

An economy based on relatively free trade among British and French colonies and dependencies, but one that, of course, gave core countries monopoly markets for their industrial products, restricted local industrialization, and often required producers of tropical products destined for Europe to sell only to the home country.

Both the theoretical and the historical literatures on ISI are vast and it is not possible, in this short article, to develop a comprehensive, critical analysis of either. My point is only to note that the global conditions that made more effective policies possible during and after the Great Depression reversed at a later period, not to argue that the original policy was inherently unviable. It is not, something that has long been understood by mainstream economists, despite some of the cant directed against Third World governments throughout the era of structural adjustment. Alice Amsden's (2001, pp. 145–151) balanced discussion of South Korea's use of both import substitution and export promotion is an excellent introduction to the basic truth that this is not an ‘either–or’ policy choice.

Gilley and Diamond's (2008) recent collection provides as fascinating, if sobering assessment of recent changes in China and Taiwan. Because the UN's work in supporting democratization in China (including local elections and the development of the civil service) emerged alongside and with the same purpose as its engagement with liberation movements and revolutionary governments in southern Africa, Iran, Palestine, and Vietnam, I have investigated it in that context (Murphy, 2006, ch. 7). There are some interesting parallels that might make observers hopeful about further change in China, although the scale of that society compared to any of the other cases may make the comparison invalid.