Volume 44, Number 174,
July-September 2013
Why is History Important?
A Debate on Economic Development Policy
Pablo Andrade

It would be unfair to say that López Castellano’s criticism is entirely off. It is clear that the new political economy of development – especially in its more econometric sense – has contributed to the orthodoxy of recommendations regarding “good practices” and “institutional transplants,” which made up the nucleus of the policies of international financial institutions in the 1990s. López Castellano does touch on this, although only superficially.

Structural political economists, such as Rodrick, Evans and Chang, have shown that these economic policy recommendations reveal how economic orthodoxy is extremely blind to real historical processes that have allowed advanced capitalist countries to rapidly industrialize. In fact the historical reconstructions of this orthodoxy certainly suffer from “amnesia” with regards to the level of state participation in the First World to support industrial development – even given the supposed colonial fact.

Structuralists do not expect that development economists imagine anti-capitalist, post-capitalist, or even worse, “de-colonial,” policies. Rather, they call attention to the fact that the analysis and recommendations of international financial institutions ignore the institutional factors that increase the global competitiveness of local capital in developing countries vis-à-vis advanced capitalist countries. Structuralist studies show that these institutional factors depend on at least two major components: achieving fiscal capacity to collect taxes and have the tools to discipline capitalists by orienting their investments towards industry and not towards speculative activities, and, the conquer of bureaucratic capacities that would make it possible for states to direct their economies by providing stimulus for industrial investment, promoting endogenous technological innovation, coordinating among capitalists and supporting them in gaining international market share. In this sense, structuralist criticism complements, rather than refutes, the discoveries of the new political economy of development. A third factor of successful capitalist development, which Evans highlights, is the creation of policy institutions that open the doors to common citizens as decision makers. They build “inclusive institutions,” as they are known in the language of the new political economy. A development path presided over by a state allied with businessmen is certainly important for economic growth – look to contemporary China, for example – but to the extent that this growth is concentrated in providing extraordinary earnings for local capitalists, it can easily throw off the course of industrialization towards forming a highly protected economy with low technological innovation and business leaders that are more interested in maintaining and growing their revenue than in productive investment. An example of this would be in India before the Singh reforms (Chibber, 2003: 170-192).

To put it briefly, it is not merely about how capitalists in a developing countries react to the project of industrialization and building the State (for example, expanding state capacity), but also about whether or not they have the means, rules and political values to allow those in charge and the citizens to counterbalance the political influence of the capitalists. This point, which is undoubtedly ignored at least partially in the majority of studies of the new political economy, is fundamental and has policy implications for the capitalists as a class, but not necessarily for capitalism as the economic system. Capitalists must be politically weak in order to guarantee minimal resistance to the disciplinary measures – or merely guidelines – of the State. Alternatively, there can be a very strong capitalist class (such as in South Korea, India or Brazil, to mention a few of the most significant contemporary international examples), but their power must be balanced by the presence of popular organized sectors, such as the labor movement in the transition to democracy in South Korea, the social base of the Congress Party in India and the power of unions in the Brazilian PT party.


Contemporary analysis of the economy of development must take history into account, based on the institutions that emerge and define the development paths of each country. As has been shown, this need forces the political economy to engage in intense dialog with historians (economists or not), development economists and political scientists. The debate on institutions, as seen throughout this work, is basically a bridge that has managed to communicate between these disciplines. It would be reasonable to preserve it, at least until there is a better and more explanatory conceptual framework. There are risks in trying, but as Barrington Moore noted in his classic work (Moore, 2002), paying careful attention to specific historical developments, taking into account studies on processes without guaranteeing their results, and the presence of international contexts whose transformational dynamics may contradict the formation of institutions that in the past favored the correction of the devastating social, political and cultural effects inevitably brought on by capitalism, should guide this effort.

The alternative path suggested by López Castellano, however, is rather unpromising. If development economics were to embrace post-colonial ontology without criticism, it could produce a baroque theory that lacks historical perspective. The epistemological currency of adopting the ideal development models in economic development is a commendable recommendation, but as shown, the most appropriate path would not be through the difficult trail of philosophy and cultural studies, but rather through the means of historical contingency.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 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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