Reclaiming Development: Exploring the Data and Disclaiming Fallacies

Reclaiming development is yet another collaborative work featuring some of  Ha-Joon Chang’s ideas.  Many of the concepts introduced in Kicking Away the Ladder were mentioned and expanded upon.

Neoliberalism has crowded out all other “legitimate” economic theories, in this case, specifically related to economic development.  This is because neoliberalism mostly, if not only, benefits the countries at the top (also known as “developed” countries).  The benefits of neoliberal policies are not even universal among the people within the “developed” world.  In theory, we all benefit as consumers, both from planned actions as well as coincidental situations (ie: minimal transportation costs due to the low cost of petroleum).  However, we lose as citizens when governments become increasingly unable to implement coherent industrial policies and avoid undertaking projects that only yield benefits in the medium and long-term.  Most of the financial gains from completely dismantling financial restrictions ends up fueling short-term speculative projects that serve no benefit to greater society in the best of situations.  Usually these actions produce instability, general negative externalities, and increase the inequality gap within all countries.

Neoliberalism advocates a set of top-down policy guidelines that can prevent developing countries from ever obtaining success.  Removing all of the barriers on trade and capital flows is not in the interest of developing countries.   Furthermore, all of today’s industrialized countries developed by protectionist measures that were implemented to execute very specific developmental and industrial policies.  These measures were undone when these industries became competitive.  Capital controls were also widely used outside the United States for the sake of long-term developmental stability. Even patent protection in certain industries such as the chemical and pharmaceutical have only been recently enforced.  (Among these countries are: Canada, Spain, Japan, Italy and Switzerland (p. 97).)  I will write more about this in the future.  I have summarized some of my thoughts previously in a previous blog post  here.

In short, neoliberal policies that ignore the developmental interests of the state are not only erroneous, but they prevent the very thing they are meant to promote.  After finishing this book I will outline a few of the concepts in more detail.  In the meantime, I wanted to explore some of the possible associations between sets of variables using data from various accredited institutions, some of which are staunch promoters of neoliberalism in the developing world.  The list of data sources can be found here.  The graphing platform I am using is

Even though the existence of a statistical correlation does not prove causation, it is interesting to casually observe the following results:

[Note: I have not checked that the data follows a normal distribution nor that the y’s have a constant standard deviation for each x value (in agreement with the homoscedasticity condition).  I have also not found the residuals (errors in the data), made residual plots, or standardized them.  Lastly, I have also not used the coefficient of determination r^2 to interpret what percentage of variability from the y variable is explained by its relationship with the x variable.]

1) Exports (% of GDP) v. foreign direct investment (% of GDP).  At a glance, relative increased percentages of FDI as a percentage of a given country’s GDP does not seem to be correlated to increased export capacity (as a % of GDP).

See graph:

2) Economic growth over the past 10 years v. foreign direct investment, net inflows (% of GDP).

See graph:

3) Economic growth over the past 10 years v. foreign direct investment, net outflows (% of GDP).  Notice there is more heterogeneity between countries in regards to FDI net outflows versus inflows.

See graph:

4) Foreign direct investment, net inflows (% of GDP) v. Inequality Index (Gini).

See graph:

5) Foreign direct investment, net inflows (% of GDP) v. number of patents in force.

See graph:

6) Foreign direct investment, net inflows (% of GDP) v. percentage of roads paved (% of total in country).

See graph:

One response to “Reclaiming Development: Exploring the Data and Disclaiming Fallacies

  1. Pingback: MERCOSUR y la Unión Europea: la evolución del acuerdo comercial y su racionalidad | peterabraldes

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