Wednesday, March 20, 2013

On Reading Prebisch

by Carl Stoll

Raúl Prebisch: La crisis del desarrollo argentino. De la frustración al crecimiento vigoroso Librería El Ateneo Ed., Bs. As. 1986, pp. 100-113 on import substitution policy.

Prebisch defends himself ably from the charge of having encouraged a wasteful import sub policy in his native Argentina. He points  out that in the  early 1960s, when the import substitution policy that Prebisch had encouraged in the 1950s had become dogma, ECLAC started touting manufactures exports.

In reply to another frequent charge brought against his school of thought, he acknowledges that protective import tariffs long outlasted the industry’s infancy and dragged on into its young adulthood or even middle age. His proposal? Some kind of international agreement among Latin American countries to gradually reduce tariff protection.

Now I respect Prebisch, but this proposal marks him out as an incorrigible fuddy-duddy, an economist-bureaucrat of the old school, lacking understanding for the mainsprings of economic progress.

The Argentine industries that benefited by tariff protection naturally did their utmost to prolong such protection. Examples If the national government was incapable of imposing raison d'état discipline on import-substituting sectors of industry, what hope was there that some international agreement among nation states would accomplish that purpose?

Robert Wade, in Governing the Market, narrates the Taiwanese KMT government’s barracks-disciplinary approach to manufacturers who failed to toe the government’s economic development line: huge consignments of faulty goods were publicly destroyed, to the  disgrace and ruin of their manufacturers. The Kuo Min Tang however occupied a position on Taiwan similar to that held in Britain by the Dukes of Normandy after the Battle of Hastings: they were there by right of conquest. Argentine governments didn't have the same measure  of discretion. [check: how about all those military governments in the 1930s to 1960s?] Taiwanese import substitution industrialisation was the real McCoy – it worked like a charm. But it was controlled by a powerful and autonomous state, that did not depend on the local capitalist class for political support. 

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