> I like the idea that the industrializing periphery can borrow on a large
> scale from the industrial core in order to cut perhaps a generation off of
> the time needed to go through the industrial revolution (and--perhaps more
> important in the very long run--the demographic transition).
But the successful late industrializers -- South Korea, Japan, Taiwan, Austria, Italy and the like -- didn't really borrow from the industrial core, so much as export to it. Their debt structures were, until recently, mostly internalized (firms owed money to state-run banking systems, etc.). The development state basically printed the money and locked it up in long-term bonds and debt instruments of various kinds, thus preventing runaway inflation and giving domestic firms the capital needed to compete and succeed in ferocious world market competition. It's not so much that basket cases like the Philippines and Brazil borrowed too much or anything, it's that such countries never developed internal financing systems to fuel capital accumulation. In Brazil's case, they never developed a coherent national automobile industry; the technology, management, financing etc. came from Ford, GM and VW. Mexico has no national car producer, unlike Malaysia's attempt to create such with the Proton, and so forth.
> We should try to have our cake because the benefits of
> international capital mobility truly are mammoth. Between 1994 and 1996
> some $200 billion of international capital flowed into Malaysia, the
> Philippines, South Korea, and Thailand... [text cut] if
> the economic history of the past two centuries teaches us anything, it
> teaches us that investments in modern machine technologies are a very good if
> not the best way to upgrade the skills of the labor force and gain the
> organizational expertise necessary for high total factor productivity.
Yeah, and that capital is flowing right back out of Asia, leaving devastation, unemployment, massive foreign debt and empty skyscrapers in its wake. Again, where is the evidence for your claim that capital mobility is so wonderful? Growth in the OECD was highest in the 50s and 60s, when capital mobility was almost nonexistent, and FDI in its modern sense was barely invented. Ever since then, capital flows are up, but growth has slowed, and the follies of rentiers and global punters have necessitated one gargantuan state-led bailout after another (the S & L bailout in the US, the current banking bailout in Japan, and, somewhat further afield, West Germany's bailout of East Germany; Scandinavia was also bailing out banks aplenty in the early 90s). Capital mobility gave us the Latin American debt crisis, the Mexican debacle, and now the Asian meltdown. Heaven only knows what catastrophes are being readied by global finance capital in Eastern Europe and a neoliberalizing China -- in fact, one of the reasons China has done so well is that it's consciously avoided deregulating its capital markets the way South Korea did in the early Nineties. Non-market forces like the developmental state and capital controls do seem, if history is any guide, to be the best friend of market growth.
-- Dennis