Unit 3, Lecture 1 - Perpetuating dependency or climbing up the ladder
For developing countries, GSC-related trade represents around 30% of their GDP. These gains have been largely appropriated by a few economic actors and most workers have not seen any significant benefits.
“East Asian miracle” – Japan, South Korea and Taiwan
strong role of the state
radical redistributive land reforms
substantial government investment in infrastructure for production
rapid and broad-based growth of the “home market”
relatively robust phase of labor absorption
Wage hierarchy result of large labor reserves in developing countries (excess supply of labor)
Sees the relocation of production to the developing countries did not lead to significant increase in employment opportunities or wage rates. Productivity gains transferred to buyers in global north (higher profits, lower prices for consumers)
Easy access to natural resources in developing countries
Export-oriented production – gsc draw on flexible specialization work + precarious working conditions
Export promotion (processing) zones (EPZ) – example of when/how governments work to weaken labor standards and violate collective bargaining ability
Agricultural gsc – development of monocultures, threaten food security of small scale farmers, gains appropriated by TNCs in global north
Since the end of the 1970s TNCs have changed the way they structure their production by creating global supply cabins. Production changed from large vertically integrated companies to production networks with a multitude of supplier from different countries.
TNCs moved to Brazil from the 1930s and 1970s seeking natural resources and building a manufacturing base largely for the internal market of the country. The state and TNCs played a central role in the industrialization of the country, focusing on expanding domestic market protected by tariff barriers and capital controls.
In the 1970s, the end of the Bretton Woods system of fixed exchange rates and capital controls led to a surge of capital mobility and private lending to Latin American countries. The increased debt burden in US dollars became unsustainable when the US massively increased interest rates to reduce the high inflation in the US. Latin American countries were forced by the international financial institutions and the creditors to adopt harsh structural adjustment and austerity measures to serve their debts. The policy of state-led economic development was replaced by a strategy of free trade and financial liberalization. This strategy provided less protection to develop infant national industries against advanced global competitors and liberalized capital markets required high national interest rates to stabilize the currency and avoid capital outflows.
The international commodity boom reinforced the trend towards commodity exports, which resulted in appreciation of currency, lower inflation and high dependency on international commodity market.
This macroeconomic stability allowed President Lula to open a space for social policies + gain support for redistributive policies and democratic developmental state (promoted infrastructure investment, invest in health and public services, eliminate poverty wage and use state development banks to support industrial development).
Under the conditions of liberalized trade and open capital markets policy space can shrink easily.