Somebody: I agree that the progress in the countries you call developmental states, or what the business press calls the BRIC's is the major story of our time. On the other hand, there are enormous differences between these countries, obviously, that can be lost when we lump them together like that.
For instance, take Venezuela. Although there's been some attempts at what they've called "endogenous" development in the country, the expropriation of some industries, and the promotion of cooperatives, by and large there hasn't been much of an industrial expansion under the Chavez government compared to the previous regime. This gets very little attention on the left, but the boom that just ended there was consumption driven, and didn't lead to the sorts of high levels of fixed investment we've seen for instance, in China and other Asian nations. Actually, in some ways, I think China and maybe even Russia demonstrate better long-term economic planning compared to Venezuela, which is counter-intuitive since we associate the left with planning.
Take a look at this article by Mark Weisbrot in MR Zine:
Venezuela Needs an Economic Development Strategy
by Mark Weisbrot
Quote:
There has long been a double standard regarding fiscal policy -- one that the IMF and other multilateral lenders have often promoted -- which
says that rich countries like the United States or the UK should run large deficits to counteract an economic downturn, but that developing countries cannot. Or worse, that they must do the opposite -- cut spending and reduce public deficits during recessions. But in fact developing countries can successfully use expansionary fiscal policy to counteract recessions. China plowed right through the world recession with 8.7 percent growth in 2009, thanks to a large stimulus package. Of
course it helps that the Chinese government controls the banking system, and could force banks to lend; and that 20 percent of GDP is public investment. But even Bolivia, which does not have these advantages, used a
large and well-timed fiscal stimulus -- several times bigger, relative to their economy, than that of the United States -- to grow by about 3 percent last year. (It was the best performance in the hemisphere; most
of the other economies contracted).
The constraint that developing countries face in pursuing expansionary fiscal policy during a recession is that they must maintain
an adequate level of foreign exchange to avoid a balance of payments crisis. This is different from the United States, which can pay for its
imports in its own currency.
Venezuela ran a huge current account surplus in 2008 -- meaning that it was accumulating dollars. When oil prices plunged, this surplus quickly collapsed into a deficit -- but only for six months. The government dipped into its international reserves in order to pay for imports. But it did not need to let the economy shrink. It could have dipped further into reserves, since these have remained sizeable, reduced capital flight, or even borrowed internationally as much as necessary. Venezuela's foreign public debt is quite low, just 11 percent of GDP, and its total pubic debt is only 20 percent of GDP (as compared to about 100 percent of GDP in the U.S.). Remember, the government does not need foreign currency for the stimulus itself; it only needs enough to cover its imports in a growing economy (as opposed to a shrinking economy, in which imports also fall), and to maintain adequate reserves.
Link: http://mrzine.monthlyreview.org/2010/weisbrot160410.html