Critical summaries for 9/15 class
Howard H. Donnell (hdonnell@mail.utexas.edu)
Sat, 19 Sep 1998 00:58:14 -0500 (CDT)
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>From: Evangelina Morales <emorales@mail.utexas.edu>
>Subject: Critical summaries for 9/15 class
>Mime-Version: 1.0
>Status:
>
>Hi class,
>
>Below is our critical summary for Tuesday's class. I've also attached the
>word document for those of you that prefer to access it in that way.
>
>Evangelina
>Howard
>
>
>****************************************************************************
>********************
>
>Week 3: Varieties of Capitalism, Growth and Adjustment
>9/15/98
>Evangelina Morales / Howard Donnell
>
>Barbara Stallings, ed. Global Change, Regional Response
> Stephany Griffith-Jones and Barbara Stallings, "New global financial
>trends: implications for development" (ch. 5) (also reading
>from packet
>by the same title);
> Stallings, "The new international context of development" (ch. 11).
>
> In a detailed discussion of IMF Balance of Payments data for the
>periods
>1980-82, 1983-86, 1987-90 and 1991-92 for Africa, Asia and Latin
>America--in relation both to each other and to other world regions--the
>authors find four major changes in international capital flows. (1) The
>overall volume of flows increased significantly. (2) A major change in
>recipients shifted money away from the developing countries and toward the
>industrial nations during the 1980s, a trend that was partially reversed in
>the early 1990s. Within the developing world, from the mid-1980s Asia
>replaced Latin America as the largest recipient of foreign finance and
>investment. (3) Direct investment and portfolio investment displaced
>commercial bank credit as the major types of capital flows. (4) Japan and
>Germany displaced the United States as the largest supplier of capital as
>of the late 1980s. By the early 1990s, the three were at a roughly even
>level, as U.S. capital exports rose and those of Japan fell. The authors
>explain the causes for these interrelated trends through a narrative
>discussion of events such as the debt crisis of the 1980s (which impacted
>Latin America first and foremost).
> Griffith-Jones and Stallings go on to contrast patterns of external
>finance in the three developing areas mentioned above. Following the
>analytical categories used in the IMF data, they distinguish the
>fluctuating roles of official transfers, direct investment, portfolio
>investment, "other long-term capital" (including bank loans), and
>"exceptional financing" (such as that provided by international financial
>institutions, often in the form of low-rate, long-term concessional loans)
>in each region over the same twelve-year period (1980-92). In Latin
>America, bank loans were the primary source of foreign capital in 1980-82;
>"exceptional financing" for the rest of the decade, in the wake of the debt
>crisis; and portfolio investment in the early 1990s. In Asia, the "other
>long-term capital" category (including bank loans) was predominant from
>1980 to 1986, while direct investment became most significant in the
>1987-92 period. In Africa, which went from bad to worse during the period,
>"other long-term capital" led in 1980-82; official transfers and
>exceptional financing were of roughly equal importance thereafter.
> The authors go on to discuss three types of influence of foreign
>capital
>and their implications for development and development strategies: (1)
>explicit conditionality, (2) implicit conditionality, and (3) influence on
>policy success. They argue that these will affect the different regions of
>the developing world in similar ways, but that the results will differ.
>They predict that foreign capital will play a somewhat more positive role
>in Asia than in Latin America, while Africa will remain too mired in
>structural problems to take advantage of nominal gains.
> In the concluding chapter of the volume, Stallings brings together the
>main themes of the preceding parts of the book. First she presents an
>analysis of trends in IMF and OECD data, using Kenichi Ohmae's
>"tetrahedron" model, which integrates global and regional patterns of
>interaction, in order to quantify and demonstrate the significance of (1)
>the end of the Cold War, (2) increasing competition among capitalist
>powers, (3) globalization of production and trade, (4) shifting patterns of
>finance, and (5) new ideological currents. Next Stallings presents an
>explicit comparative analysis of policies followed in East Asia, Southeast
>Asia, Latin America and Sub-Saharan Africa, and contrasts their growth
>trajectories. Then she links the different levels of performance by region
>to the different international influences which each experiences, such that
>some become winners (i.e., East and Southeast Asia) and others losers
>(i.e., Latin America and especially Africa). In the final section
>Stallings draws comparisons with other developing regions--South Asia, the
>Middle East, and Eastern Europe.
> These two chapters evince the insightfulness of Stallings and
>Griffith-Jones' synthetic analysis of development-related data.
>Unfortunately, the volume also amply demonstrates that, in the field of
>political economy especially, explanation is easier than prediction, due to
>the volatility of trends. The book's analysis ends prior to its
>publication in 1995, and the latest data is from the period ending 1992.
>Were the book only now forthcoming (i.e., in 1998-99), given the deepening
>economic crisis in Asia over the past year, Stallings might reconsider her
>admiration for the Japanese model of capitalism and her argument that "the
>Japanese-dominated Asian region has provided a more supportive environment
>for development than has the U.S.-dominated Western Hemisphere" (350).
>
>John Zysman, Governments, Markets, and Growth: Financial Systems and the
>Politics of Industrial Change, (ch. 2) ìFinance and the Politics of Industryî
>
> In this chapter, Zysman explains the argument central to his book
>and how
>it will be tested in the chapters to come. The central argument is that
>discretion in the provision of industrial finance in the selective
>allocation of credit is necessary for the state to be an economic player,
>i.e. to enter continuously into the industrial life of private companies
>and to influence their strategies in the way that a rival or partner would.
> This argument claims that the structure of the national financial system
>affects the capacity of the national political executive to intervene in
>the industrial economy, and that since the financial system is a constraint
>on action and an influence on the power relations in the economy, it is an
>element shaping the arena for industrial and economic politics.
> The basis for Zysmanís argument is his assertion that there are three
>distinct types of financial systems, each of which has different
>consequences for the political ties between banks, industry, and finance,
>as well as different implications for the process by which industrial
>change occurs. These are: (1) a system based on capital markets with
>resources allocated by prices established in competitive markets, (2) a
>credit-based system with critical prices administered by government, and
>(3) a credit-based system dominated by financial institutions (because
>government does not have the apparatus to dictate allocative choices to the
>financial institutions).
> Two hypotheses suggested by the argument are to be explored in the
>book.
>First, that credit-based financial systems with state administered prices
>will facilitate intervention and ease the political problems of mustering
>support for state-led industrial promotion. Second, that in a system
>characterized by financial allocation according to market-established
>prices and limited industrial dependence on long-term debts (an elaborated
>capital market), the state will encounter financial institutions as rivals
>defending the existing organization of the financial system and will
>confront financial markets as barriers to state influence in industry. To
>test these hypotheses, Zysman will first argue from case studies of France
>and Britain, and then he will add the Japanese, German and American
>experiences and correlate more formally the financial system and the
>process of industrial adjustment. In conclusion, he proposes that a
>ìstate-ledî process of adjustment is tied to the credit-based, price
>administered financial system, a ìcompany-ledî adjustment is tied to the
>capital market-based system, and a ìtripartite-negotiatedî adjustment is
>tied to the credit-based, institution-dominated financial system.
> Zysmanís book is a response to common arguments that the increasingly
>elaborated international financial markets make it more difficult for
>governments to pursue autonomous economic policies. The premise is that
>unless international developments undermine the differences in how
>resources are allocated through domestic financial channels, the structure
>of the national financial system will be an autonomous influence on the
>political relations between business and government. As an introduction to
>the bookís main argument and to the procedure to be used for
>hypothesis-testing, the chapter is well organized and comprehensive,
>addressing alternative arguments and clearly stating the premises and
>limitations of the analysis. Zysman also refers to elements in the
>existing literature that might test the fundamental proposition that there
>are three structurally distinct financial systems. Finally, Zysman does
>well to acknowledge that his analysis is based on a small set of countries.
> Yet, he claims that it is large enough to effectively isolate the
>financial system from other characteristics of the countries that might
>confound the analysis.
>
>Attachment converted: Hard Disk:Read1.doc (BINA/MSWD) (00001BF5)
>
>******************************************************************
>Evangelina Morales-Orozco
>M.P.Aff./M.A. Candidate (1999)
>LBJ School of Public Affairs/
> Institute of Latin Amercan Studies
>University of Texas at Austin
>
*********************************
Howard H. Donnell
Ph.D. Student
Department of Government
The University of Texas at Austin
Burdine Hall 536
Austin, TX 78712-1087 USA
Tel.: (512)471-5121
FAX: (512)471-1061
e-mail: hdonnell@mail.utexas.edu
Campus Mail: BUR 536, A1800