Vol. 40 No. 2 (2020): Apr-Jun / 2020

Vol. 40 No. 2 (2020)

Apr-Jun / 2020
Published April 1, 2020


Principles of New Developmentalism
Luiz Carlos Bresser-Pereira
Brazilian Journal of Political Economy

These principles proposed by Luiz Carlos Bresser-Pereira were originally presented and discussed at the 4th International Workshop on New Developmentalism, São Paulo, July 26, 2019, held by the Center of Studies of New Developmentalism of the São Paulo Business School of the Getúlio Vargas Foundation. 

The New developmentalism and productive sophistication
Isaías Albertin de Moraes, Hermano Caixeta Ibrahim
Brazilian Journal of Political Economy

The purpose of this article is to present the New developmentalism school and its production about productive sophistication. The technical methodological procedures prioritized by the research, in this way, were bibliographical and documentary. The methodology is predominantly descriptive, so the research aimed at structuring and defining a theoretical model, mapping it. The article is divided into two sections. The first section presents the main precepts of New developmentalism; the second section focuses on the production of the school about productive sophistication. In conclusion, the research sought to contextualize and to explain the described studies, exposing some hypotheses and questions.

JEL Classification: B20; O11; O30.

Determinants of real exchange rate movements in 15 emerging market economies
Thomas Goda, Jan Priewe
Brazilian Journal of Political Economy

Previous work has established that an appreciation of the real effective exchange rate (REER) contributes to premature deindustrialization, less productive investment and dependence on commodity booms and busts in emerging markets economies (EME). From the literature, it is less clear, however, what the most important drivers for the cyclical REER movements in EME are. The aim of this study is to provide empirical evidence about the determinants of the REER movements of 15 emerging markets during the last two decades, using statistical analysis and a dynamic panel fixed effects model approach. Our analysis shows that although “commodity” and “industrial” EME are heterogeneous, REER volatility tends to be higher among the former. EME that had more stable REER fared better than those that had a depreciating or appreciating trend (with the notable exception of China). As theoretically expected, commodity prices are an important structural driver of REER movements in “commodity EME”. Moreover, the results confirm the existence of the Harrod-Balassa-Samuelson effect, and show the importance of financial inflows. Further, the interventions of central banks were partially successful to avoid more substantial appreciations (depreciations). Finally, we find that lower country risk and, at least in some periods, growing broad money in OECD countries has led to REER appreciations in our sample countries.

JEL Classification: F6; F31; F41; O11; O57; P52.

New Developmentalism: beyond competitive exchange rate
José Luis Oreiro
Brazilian Journal of Political Economy

The aim of this article is to show that the achievement of a competitive level for real exchange rate is a necessary, although not sufficient condition for the catching-up of middle-income countries to developed countries. It is also required a change in the long-term expectations of real exchange rate by entrepreneurs which requires the elimination of the underlying causes of the tendency of overvaluation of real exchange rate, that encompass the Dutch Disease and capital account liberalization. Due to the existence of technological gap, industrial equilibrium exchange rate in middle-income countries may be higher enough to compensate domestic firms for their technological backwardness relative to firms of developed countries. This means that there is a space for Industrial and Science and Technology Policies in the New-Developmentalist theoretical framework.

JEL Classification: O11; O25; O40.

Structural change and productivity growth in Brazil: where do we stand?
André Nassif, Lucilene Morandi, Eliane Araújo, Carmem Feijó
Brazilian Journal of Political Economy

The aim of this paper is to discuss the evolution of the Brazilian labour productivity in the 1990s and 2000s to shed some light on the resilience of the Brazilian economy to recover growth. Labor productivity growth in Brazil, after showing positive annual rates between 1950 and 1979, became stagnant after 1980. Following McMillan and Rodrik’s (2011) methodology, this paper at first decompose labor productivity growth in the period 1950-2011, according to “structural change” (which is considered growth-enhancing) and “within effect” (which is growth-reducing, if not accompanied by significant structural change while the country is still pursuing its catching-up process). Next, an econometric exercised is presented to explain the determinants of the structural change component of the labour productivity since economic opening in the 1990s. The results show that the stagnation of the Brazilian productivity is explained by the overvaluation trend of the Brazilian currency, the reprimarization of the export basket, the low degree of Brazil’s trade openness and the high real interest rates prevailing in the period.

JEL Classification: 010; 011; 014; 047.

South Korea’s and China’s catching-up: a new-developmentalist analysis
Luiz Carlos Bresser-Pereira, Elias Jabbour, Luiz Fernando de Paula
Brazilian Journal of Political Economy

The purpose of this paper is to analyze the catching-up processes of South Korea and post-1978 reforms China, based on a new-developmentalist approach that considers four fundamental factors: 1) a complementarity relationship between the state and the market as a dynamic process that changes over time; 2) necessary complementarity between macroeconomic policy and industrial policy; 3) the key role of public and development banks in attacking the problem of “development financing”; and a particular focus on 4) the centrality of exchange rate and balance of payments administration for the development process in these countries. The paper’s fundamental question is to what extent the catchingup process in these countries can be understood as the application of a new-developmentalist strategy, taking each country’s particular historical traits into account.

JEL Classification: O1; O5.

Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017
Nelson Marconi, Guilherme Magacho, João Guilherme R. Machado, Rafael de Azevedo Ramires Leão
Brazilian Journal of Political Economy

This research seeks to understand the relationship between the rate of profit and the exchange rate and how this relationship can impact the productive structure. We construct a theoretical model in which the exchange rate influences the rate of profit, and we argue that although an overvalued exchange rate could benefit sectors with high imported input coefficients in the short term because it reduces costs, it negatively impacts the demand for their products and also reduces the aggregatedemand; hence, an overvalued exchange rate could shrink the profit rate of these sectors in the medium term. In the Brazilian case, these sectors are the high technological-content manufacturing sectors.

JEL Classification: F41; F63; L16; O11; O14.

On the role of the exchange rate as a tool for industrial competitiveness
Ariel Dvoskin, Germán David Feldman, Guido Ianni
Brazilian Journal of Political Economy

By means of a two-tradable-sector model for an open, price-taking economy inspired by the Classical-Sraffian tradition, which conceives the pattern of trade as a technicalchoice problem, we examine some difficulties with the recourse to exchange-rate policy as a tool to promote sectorial competitiveness. To this aim, we distinguish among economies that only produce manufactures from those in which the most profitable sector exploits natural resources under conditions of differential rent. We show that, when both tradable sectors produce industrial goods, conventional devaluation does not generally allow one domestic sector to reach international competitiveness without damaging the other. While when the prevailing sector operates under conditions of differential rent, even though the development of a new sector – by setting the exchange rate at its “industrial-equilibrium” level – is possible, this requires that the policymaker determines the effect of changes in the exchange rate, both in direction and magnitude, on the other distributive variables.

JEL Cl;assification: B22; E11; F43.

“Developmentalist Brazil” (1945-1964) as a concept: historicizing and (re)periodizing development in Brazil
Alexandre de Freitas Barbosa
Brazilian Journal of Political Economy

The paper presents an alternative periodization of the debate and practice of development in Brazil. It starts with a brief depiction of Rômulo Almeida’s trajectory. It states that during the second Vargas government, a group of bureaucrats – coined as “State organic intellectuals” – occupy a new social position. As the process of economic development unfolds, new contradictions arise, so as other social positions. In the second part, new categories are constructed in order to describe the different conceptions of development during the period 1945-1964. Then, after presenting the many uses of the concept of “developmentalism” over history, the paper delves into the concept of “Developmentalist Brazil” in order to get into the inner dynamic of the period. The purpose is to integrate ideas and social positions, on the one hand, and structural processes, on the other, by addressing the conflicts over development strategies. The “Post-Developmentalist” period (1964-1980) is characterized as a rupture in its attempt to put in place a new development pattern to solve the rising contradictions faced during the “Developmentalist Brazil” period (1945-1964). At the end, we put forth a research programme that could possibly lead to the understanding of Brazil’s structural changes in the context of the post-1980 new capitalist world-economy.

JEL Classification: B-25.

Coalitions for development: a new-developmentalist interpretation for the abandonment of industrial capitalist from PT political coalition
Tiago Couto Porto
Brazilian Journal of Political Economy

The paper uses a socioeconomic framework to understand what is behind the dismantling of PT political coalition. First a theoretical discussion presents the interconnections between Developmental State and class coalitions. Second, PT political coalition is described by connecting the interest of different social classes with macroeconomic, industrial and social policies implemented by the government. Finally, it is provided new interpretation and evidence for the abandonment of the industrial capitalist from the dominant coalition. For that, the new-developmentalist argument of the lack of satisfactory profit rate and Furtado’s argument on development-stagnation dichotomy is presented and empirically supported.

JELClassification: P16; D74.

Pragmatism as a pillar of the New Developmentalism
João Paiva-Silva
Brazilian Journal of Political Economy

The scholars of New Developmentalism have generated a substantial body of knowledge regarding structural transformation and the policies that should be adopted to foster its achievement. Nevertheless, as is argued in this paper, New Developmentalism, by contrast with Neoliberalism, lacks a strong philosophical foundation to legitimise the policies it favours on grounds other than their ability to generate prosperity. It is also argued that new-developmentalists should explicitly adopt a pragmatic philosophy in order to become a more serious alternative to other political economy doctrines.

JEL Classification: A13; B5; O10.

The Iconomics of New Developmentalism
Gilson Schwartz
Brazilian Journal of Political Economy

Current reviews of new developmentalism from a Political Economy perspective present its novelty in terms of a paradigm shift, a comparative analysis and a historical-ideological reconstruction. This paper reviews these complementary approaches so as to initiate an alternative, critical review of the new developmentalist agenda taking into consideration the emergence of yet another post-structuralist theory, namely, “iconomics”. The grounding of the iconomic perspective is a semiotic-sociological method inspired by the works of G.L.S. Shackle, Bernard Stiegler and Joseph Schumpeter. Knowledge-based theories of value, resilience and disruption are the key concepts that emerge out of this “iconomic” theoretical-methodological review which may lead to propositions in the field of economic policy, growth theory and political philosophy that extend the structuralist-developmentalist legacy. We propose an approach to the identification of developmentalism that supports a critical approach to the political economy of the ultraliberal, positivist and rational choice visions.

JEL Classification: B; 0.

The liberalization trap: Why did Latin America fall behind in the 1980s while East Asia continue to grow?
Luiz Carlos Bresser-Pereira
Brazilian Journal of Political Economy

In the 1980s, while the East Asian countries continued to grow, the Latin American countries stopped, and since then are falling behind. The cause was not the “middleincome trap”, but the “liberalization trap”. Differently from the East Asian, the Latin American countries suffer the Dutch Disease, but were able to industrialize because they used high import tariffs on manufactured goods to neutralize this long-term overvaluation of the exchange rate. In the 1980s, however, trade liberalization dismounted this mechanism. The ensuing competitive disadvantage produced deindustrialization and low growth.

JEL Classification: O11; O24.

The responses of the authoritarian national developmentalism to the structural economic crisis (1973-1985)
Carlos Eduardo Santos Pinho
Brazilian Journal of Political Economy

This research analyzes the Brazilian structural economic crisis throughout the 1970s and 1980s and the political responses of the Authoritarian National Developmentalism (1964-1985). Firstly, the study highlights the nature of the international oil crises of 1973 and 1979, showing an unexpected rise in interest rates by the US Central Bank and the tightening of external credit after 1979. Rising interest rates meant the end of liquidity in the international credit finance market and the beginning of a drastically recessive policy in Brazil. These factors contributed to the erosion of the growth model based on external debt, a model reflected in two main paradigms: the “economic miracle” (1968-1973) marked by high GDP growth rates; and the II National Development Plan (II PND) (1974-1979), focused on deepening the import substitution industrialization (ISI). The collapse of authoritarianism led to hyperinflation, external indebtedness, and the state’s fiscal crisis, exposing the hegemony of rentier, nonproductive financial capitalism. The second part of the article investigates the negative externalities of the structural economic crisis at the social level, such as concentration, centralization, and closing of the decision-making process, hindering workers’ participation; the intensification of union mobilizations for wage recomposition; the spread of  nemployment/underemployment in metropolitan regions; the wage squeeze; the increase in unhealthy labor relations and, therefore, the thinning of the social fabric.

JEL Classification: E44; F33; G15; N26; O23.