Volume 44, Number 174,
July-September 2013
Why is History Important?
A Debate on Economic Development Policy
Pablo Andrade *
Date received: September 17, 2012. Date accepted: March 6, 2013
INTRODUCTION

Fernando López Castellano’s article, “The Political Economy of Development, Post-Colonial Analysis and Bad Samaritans,” (López Castellano, 2012: 27-50) opened up a much-needed debate for Latin Americans working in the area of development theory. His essay invites readers to reflect on the role of historical reconstructions in efforts to rethink development. Since development theory was effectively turned upside down, in the institutional sense, in the mid-1990s (Evans, 2007: 187-189), this field has reincorporated concepts and methods that are central to the study of history and culture. This transformation revitalized the approach to the political economy, a perspective long under-valued by mainstream economists starting with Marshall. It is precisely this process and its results that López Castellano invites readers to criticize. To do so, he uses arguments common in post-colonial studies and historical economic comparisons of industrialization experiences in the nineteenth and twentieth centuries.

López Castellano writes that the current political economy is the “new orthodox school of economic development” (López Castellano, 2012: 29). However, similar to other old orthodox methods of thinking, it lacks both explanation and policy recommendations. There are two reasons for this. First, the current theory of the political economy does not take into account the colonization process of (currently) developing countries, and, second, it puts “too much emphasis on the relationship between institutions and development.” This text will establish that López Castellano’s argument is theoretically weak and is a distorted version of recent updates to development theory. His way of thinking directs readers towards a non-historical perspective of potential development in Latin America.

THE NEW THEORY OF POLITICAL ECONOMY AND AND HISTORY: METHODOLOGICAL CONSEQUENCES

The text that perhaps best summarizes the new theory of the political economy is Why Nations Fail (Acemoglu and Robinson, 2012). The authors of this book write that overall, the difference in poverty levels and standards of living between developed capitalist countries and still-developing (capitalist) nations, is that the latter group are poor because, “they have been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated and has been used to create great wealth for those that possess it” (Acemoglu and Robinson, 2012: 3). This explanation indicates that factors to be studied in the realm of the political economy of development are rather different than those proposed by mainstream economics science. In other words, the focus is not on economic growth and the distribution of benefits, per se, but rather on how these are obtained. Historical reconstruction and analysis are central to this idea. The focus of the study is examining two sets of major historical processes. The first is the rise of the elite to power – or to be more precise, the people that have gained control of the State apparatus – within a certain institutional framework. The second includes the means and tools that have been used to maintain and create the concentration of wealth and power. A second general assumption underlying this sort of approach is the way in which citizens acquire political power. Analysis of the political economy has focused on the political transformations that a poor society needs to become rich (Acemoglu and Robinson, 2012: 4).

Although López’s statement that some contemporary studies of the political economy of development are based on the perspective and methodology of rational choice theory is true, it is also correct to say that this theory has been applied to other special theories in specific ways, such as: the explanation of the fragility of contemporary African states (Besley and Persson, 2011: 8-10), the paths to democratic or authoritarian forms of government (Acemoglu and Robinson, 2006: 24), or initiatives to reform the state administrations of Latin America (Geddes, 1999: 30). It is useful to note that although these efforts share a focus on how institutional patterns are generated and maintained, inspired more by structuralism than by rational choice theory (Evans, 2007; Chang, 2009), it is also true that this approach is neither excessive nor necessarily anachronistic. Nor does it repeatedly recur to the “counter-factual of possible worlds” (López Contreras, 2012: 43).

When political development economists use mathematical models to simulate the choices and decisions that people in government must make, they maintain a historical constant (“endogenize,” in their words) the fact that leaders normally find that their own power – and the chance to use it to increase the wealth of those that support them – depends on maintaining an inherited set of configurations, “systematic shared expectations, given assumptions, accepted norms and interaction habits with strong effects on the configuration of motivations and the behavior of interconnected social actors” (Change and Evans, 2001, cited in Evans, 2007: 189). In other words, governments maintain their own benefits in an inherited institutional framework.1 The methodological approach of political economists certainly tends to present simplifications. Even so, the arguments developed, even by those that take mathematical modeling to the extreme (for example, see Besley and Persson, 2011: 6 and Besley, 2006: 11), force followers of the new political economy of development to take into account the history of political decisions of leaders and the fact that these people do not control the effects of the decisions. In light of unintended results, those who seek non-functionalist explanations of development processes are simply unable to ignore the complex patterns that arise from a combination of simple factors, such as asymmetrical information between leaders and citizens, the establishment of virtuous cycles and the reinforcement of dependence, opportunity and sequence and the rise of long-term processes, as well as plain luck (Pierson, 2004: 15-16).

Two methodological consequences result. First, analysis of the political economy remains open to the test of history. Even the most highly formal models can be refuted by a careful study of historical evidence. Second, taking into account chronology and time requires the political economist to carry out historical research and pay attention to the specific sequence of continuity and change, as well as what can be learned from this in contrast with other situations. The lessons that can be learned from historical reconstruction are immediately tested by a comparative exercise. These two methodological consequences are a health reminder for scholars against anachronism, and not, as López Castellano would say, an incentive to project the conditions of the nineteenth and twentieth centuries on pre-modern States (López Castellano, 2012: 43).

* Coordinator of the Latin American Studies Program of the Universidad Andina Simón Bolivar, Ecuador. E-mail: pablo.andrade@uasb.edu.ec

1 This statement could be considered trivial, but when governments drive institutional change – even radical transformations – the logic of benefit continues to operate.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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