Volume 45, Number 177, April-June 2014


EDITORIAL
CAPITALISM, DEMOCRACY AND FINANCIALIZATION:
THE POWER OF IDEAS AND THE STRUGGLE TO IMPOSE THEM

revista164 There is no greater consolation than that meeting point where ideas and their justifications come together in the “Davos man:” the paradigm consists of sacrifice, austerity and the suspension of economic human rights. It would seem that we are in the twentieth century inter-war period, similar to the current Great Recession. Post-crisis, a sui generis period, but much like that described in The Great Transformation, by Karl Polanyi. It is worth wondering whether capitalism in its current state is still based on democratic principles, or if the lack of jobs and stagnation are finally casting doubt upon the ideals of the International Monetary Fund, the Central European Bank, the European Commission, and so many more. Their policies have been a straitjacket, not only for European Union countries, but also for emerging economies, whose commercial relations are closely linked in this region. This type of thinking is subsumed in the principles of financialization, the imposition of a central bank that does not finance its government, as it favors the balance of public finances and continues to thwart economic recovery.

As governments gradually renounce the fundamental tasks intrinsic to their own functioning, such as currency and security, the central banks are ceding their monetary sovereignty to financial markets. The hegemonic-financial ideal has brought enormous and unquantifiable harm to society in the exercise of public policy, eroding the social life and pushing human dignity to its limits. At the same time, financial businesses and banking organizations obstruct any repositioning of a democratic regime that does not answer for its earnings. Therefore, in the context of high financial concentration and extreme social vulnerability, debating the democratic regime and capitalism should be a concern of development theory.

Financialization through the financial system, whether shadow or parallel, not only caused the 2008 collapse. It also destroyed lives, families and jobs, but it has emerged strong once again. The book From the Great Transformation to the Great Financialization, by Karl Polanyi, challenges the utopia of market universalization and globalization. All deregulation and financial liberalization of financial markets has not only deepened financialization; it has also made emerging countries more fragile. Financialization is concentrated in commodities, both in food and the extraction sector. Securitization and derivatives have led to new spikes, aggravating volatility. Structured finances would seem to once again be the path to big rewards for large financial conglomerates, while Southern countries experience declining prices for their export products and the withdrawal of lower retentions in light of falling demand for their products. How can we break the runaway cycle that leads to situations of nationalist rebirth and the loss of dignity?

Undoubtedly, the economy is a social construction of laws and institutions, as others have demonstrated, notably, Galbraith and Polanyi. Taken as a whole, the power of democracy should be able to subsume market globalization to meet societal and employment needs, which are an essential part of human dignity and economic development. Reforms implemented in favor of the people make it necessary to change our ideas of sacrifice, sanctions and awareness. Now, ideas must be debated to find a path to growth that respects nature, traditions and cultural roots.

“The Convergence of Biotechnology Paradigms and the Strategies of Leading World Groups” is the first article in this journal, authored by Pablo Lavarello. It analyzes the technology diversification of major companies in light of the emergence of new technology paradigms. Using data from patent databases, this work wonders whether this results in converging knowledge bases and the emergence of a new industrial biotechnology paradigm. It also uses data from major international companies to discuss whether or not this diversification produces a coherent knowledge base, or if it is just conglomerate growth, and whether there are still opportunities for companies in developing countries to enter these markets. The author explores two options: one, that as a result of this tension between technology convergence and divergence, we are facing a new biotechnology paradigm common to various industries, or, two, that diverse sectoral paradigms coexist, highly specific (and complementary) to the pre-existing trajectories of each industry. Because complexity increases with the coexistence of various technologies, a second question would be to ask whether or not leading companies in the biotechnology distribution sectors have managed to consolidate coherent knowledge bases that allow them to turn technology opportunities into new products and processes, or whether they have limited themselves to conglomerate expansion in which different technologies are merely assets in a financial portfolio.

In “Prospects for Universal Social Protection in Latin America: A Contribution to the Current Debate,” Luis Beccaria and Roxana Maurizio address informal employment, a key issue in Latin America, a situation in which workers do not have social security as a basic social and economic right. Consequently, achieving universal rights would require social protection policies that guarantee full formal employment and regulations that ensure universal access to basic social services and a decent income throughout the life cycle. Welfare inequality in the region means that we must support those in the informal economy, which describes a broad swath of the population in fragile situations. The authors propose guaranteeing universal access to services, including health, education and other inalienable human rights.

In his essay “Jobs, Salaries and Inequality in Argentina: An Analysis of Distributional Determinants,” Fernando Groisman demonstrates how, following the 2001-2002 crisis, the economy of Argentina experienced strong recovery that continued from 2003 to 2011. The labor market also experienced favorable results, judging by job creation levels and salary dynamics. One of the distinctive features of the labor market in those years was the marked increase in the relative participation of individuals with high levels of education. However, this did not increase salary dispersion; on the contrary, there was an ostensible reduction in salary inequality.

The author concludes that the evolution of jobs and salaries between 2003 and 2011 experienced opposing trends. On the one hand, the educational profile of private sector salaried workers shifted in favor of those with greater education. The relative increase of the proportion of the workforce with medium and high education was rather greater than the increase observed in the same time period for the overall adult population. The bias in job demand for this segment of workers, however, did not translate into an increase in their salaries with respect to wages received by workers with low education. On the contrary, the period is notable in that it saw a decrease in the salary differential. The discrepancy between job dynamics, measured by certain features/attributes of the workers, and salary evolution, as described, was not exclusively limited to education. Similar patterns were found in other variables, such as skills. The number of operational and technical jobs increased, while salaries did not reflect this greater dynamism. And, while the number of jobs fell in small companies, average salaries in small companies did not fall behind the general pay structure.

“The Role of Foreign Capital and the Insertion in South America,” by Paula Belloni and Andrés Wainer, delves into South American integration into the global market with contributions to Latin American thought in the social sciences area. The Economic Commission for Latin America and the Caribbean (eclac), using the idea of central and peripheral countries, analyzed Latin American exports and the import of industrial goods in the terms of exchange as a deepening of the structure that is subordinated to the dynamics of industrialized countries. Along these same lines of thinking, “dependency theory” emerged in the 1960s. This theory explains that the lack of capitalist development, like in industrialized countries, was due to a particular mode of development. The Marxist perspective, another line of thinking in dependency theory, explains under-development in the framework of capitalist relations of production as a generator of the prevailing asymmetries. The ideologies of these two major schools of Latin American thought were overshadowed by globalization and free trade. There have since been efforts to recover critical thought in the “post-neoliberal” era regarding the global transformations that present challenges to economic development.

Juan Pablo Mateo and Santiago García, in “The Oil Sector in Ecuador: 2000-2010,” begin with a hypothesis regarding the productive dimension of the oil sector, divided into two periods: 1) the phase before the current government and 2) the way in which productive and fiscal resources are channeled from the oil sector to the economy in Ecuador, keeping in mind that the economy of Ecuador is essentially involved in the global market through oil. With an account of historical, institutional and macroeconomic aspects regarding the oil sector, they reveal the productive, fiscal and external dimensions of a country that does not have monetary sovereignty. Therein are the roots of the relative under-development of the Ecuadorian economy. Oil constitutes the basis of taxation and the type of external insertion, which does not mean the authors assume unidirectional causality here.

“The Non-Linear Relationship Between Inflation and Economic Growth in Mexico.” To what extent is the role of the central bank in controlling inflation helpful to long-term growth in a country? In this work, Óscar Pérez Larrabaquio uses theoretical and methodological criteria to describe how monetary policy is employed to achieve desired stability. One of the objectives of the political economy is to achieve macroeconomic balance. From an ideological perspective, this article studies the implications of economic growth that have come with the current monetary scheme. In summary, price control is the only mission of the Bank of Mexico, and, according to the author's results, this has indirectly benefited real macroeconomic growth. Keeping inflation low and stable may be an advantage that stimulates the Mexican economy in the long term, as long as price reductions are not at a rate that sacrifices the national product. However, from a post-Keynesian perspective, the debate would look rather different, something the author does not mention.

“Journey to Development in Yucatan,” by Esther Iglesias, explores a topic that fits into theoretical concerns on local and territorial development. She uses recent specialized contributions regarding imbalances and disparities in Mexico and applies them to the regional space. Yucatan is an example of limitations and inequalities and is the mirror that reflects the transformation of a “national” state in a period of worldwide economic globalization. The country is reflected in this state, which is falling behind in employment and education. It has a significant urban concentration, as people leave rural spaces. There is also increased outsourcing in the maquiladora industry and local capital is fleeing the weak manufacturing industry. The author concludes with a critique of this type of development. Although it is a state with an important source of the outsourcing sector, people are still migrating to intermediate cities in other states.

The reviews section recommends five books: The Challenge of the Twenty-First Century: Regulating the Global Financial System, by Alicia Girón and Eugenia Correa (cords), reviewed by Aderak Quintana, Migration and Development: Debates and Proposals, coordinated by Ana María Aragonés, reviewed by Josué Zavaleta, Agriculture and Water Contamination, by Rosario Pérez Espejo and Alonso Aguilar (coords.), review written by Marisa Mazari, The Current Problems of the National Economy, by Gustavo López Pardo and Verónica Villarespe (coords), reviewed by José Luis Maya, and, finally, Fractures and Crisis in Europe, by Ignacio Álvarez, Fernando Luengo and Jorge Uxó, reviewed by Antonio Palazuelos.

Alicia Girón
Journal Editor
unam, March 2014

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March 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,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
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