Is ‘dependence’ a useful concept in analysing underdevelopment?

The concept of ‘dependence’ is being increasingly used as a comprehensive explanation of the state of underdevelopment. It is, however, impossible to define in terms either of static or dynamic criteria, and most of its arguments are aimed at the capitalist system in general rather than dependence as such. Many of its conclusions about the effect of dependence on development may apply to particular cases but cannot be generalised, and as an analytical tool ‘dependence’ is not conducive to a useful analysis of underdevelopment.     

Increasing the financial integration of U.S. and Japanese markets

The term ‘internationalization of finance’ has been in general use for many years now. The term simply means that the financial systems of various countries have developed relationships that extend across national borders. Another term, ‘globalization of finance’ takes the concept one step further. Generally speaking, there are three reasons behind the steady progress of financial globalization: (1) interest rate deregulation and securitization since the 1970s have proceeded in a similar form in the major countries, which has made financial globalization easier; (2) the increased volume of international capital flows in recent years; (3) the development of telecommunications and computer technology has facilitated the increased international transaction of goods and capital and their settlement using various currencies and 24-hour trading.     

A search for leading sectors over the business cycle: The case of Korea

This paper studies the sectoral mechanism of shock propagation in business cycles by performing a case study. After we transform business survey indices of different industries into comparable metrics, we trace and compare them before and after reference dates. From these observations, we show that manufacturing industry leads the peak and the trough of the most recent business cycle in Korea; and six sectors are major players in manufacturing industry, i.e. ‘food products and beverages,’ ‘chemicals,’ ‘machinery,’ ‘motor vehicles, etc.,’ and ‘basic metals,’ and ‘fabricated metals.’ In conclusion, the heavy and chemical sectors may be the key to understanding recent business cycles in Korea.     

Asia/Pacific Regional Trade Agreements: An empirical study

At the same time as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) have been encouraging trade liberalized, there has been a proliferation of Regional Trade Agreements (RTAs). These RTAs also aim to reduce trade barriers, but they do so it in a preferential way. There is continued debate as to whether such RTAs are an effective way of achieving free trade, or if increased trade among members causes less trade with non-member countries? If RTAs increase total trade, this is known as ‘trade creation’, whereas if the extra trade occurs at the expense of non-members, this is called ‘trade diversion’. Trade creation implies improved welfare, whereas ‘trade diversion’ may adversely affect welfare. This paper examines five different RTAs using a gravity model to see if they have been trade creating or trade diverting. Annual data from 26 countries covering five RTAs in the Asia and Pacific region for the years 1980–2000 was used.The results show that the effects of the different RTAs varied remarkably. The Association of South East Asian Nations (ASEAN) and the Australian and New Zealand Closer Economic Relations (CER) fostered greater trade with trading partners and with the rest of the world. While the Asian Pacific Economic Cooperation (APEC), the Southern Cone Common Market (MERCOSUR) and the North American Free Trade Association (NAFTA) tended to be trade diverting, that is, they expanded intra-bloc trade at the expense of trade with others.     

Necessarily welfare-enhancing customs unions with industrialization constraints: The Cooper-Massell-Johnson-Bhagwati conjecture

This paper demonstrates that welfare-improving Customs Unions can be guaranteed even if we are constrained by specific non-economic government objectives, thus proving the Cooper-Massell-Johnson-Bhagwati conjecture. We consider a ‘production’ objective here, where a member country requires the output of a particular sector (e.g. a target level of industrialization) to be maintained at the pre-union level, and show that welfare-improving Customs Unions can still be achieved. It is straightforward to show that this result can be extended to other non-economic objectives as well.     

Coffee, money and inflation in Colombia

The purpose of this paper is to analyse the relationship between coffee, money, inflation and international competitiveness in Colombia. The basic hypothesis being investigated is that higher (lower) prices of coffee will tend to result, through the accumulation of international reserves, in higher (lower) inflation. In turn, this higher inflation will generate, for a given rate of devaluation of the nominal exchange rate, a reduction of the real exchange rate, with the consequent loss of competitiveness in the non-coffee tradable goods sector. A ‘Dutch-disease’ type of model is developed to discuss analytically the relationship between coffee prices, money creation and competitiveness in the short and long run. Empirical results for 1952–1980 are presented. These results support the hypothesis that there has been a positive relationship between the price of coffee, money creation and inflation in Colombia.     

Fiscal disequilibrium in developing countries

Fiscal equilibrium necessitates that ‘permanent’ government expenditures be covered by ‘permanent’ government revenues. The concept of ‘permanent’ goverment expenditures and revenues takes into account future revenue from capital investments as well as temporary windfalls. Hence, equilibrium may exist despite temporary imbalance between revenue and expenditure. The causes of disequilibrium can be classified into five categories: export boom; price-inelastic tax system; public enterprise performance; increased expenditure produced by political exigencies or administrative weaknesses; and worsening terms of trade. In practice, unrealistic customs valuations, specific as opposed to ad valorem taxes and administrative difficulties have been the most common sources of declining government revenue as a percentage of gross domestic product. Increased subsidies both to consumer goods and to public enterprises as well as inadequate control mechanisms have been the most frequent causes of rising government expenditure.     

Oil demand in the US and Japan: why the demand reductions caused by the price increases of the 1970's won't be reversed by the price declines of the 1980's

This paper analyzes the imperfect price-reversibility (‘hysteresis’) of oil demand in the US and Japan. We test econometrically oil demand data, disaggregated into transportation oil and non-transportation oil uses.The oil demand reductions following the oil price increases of the 1970's will not be completely reversed by the price cuts of the 1980's. The responce to price cuts in the 1980's is perhaps only one-fifth that for price increases in the 1970's. This has dramatic implications for projections of oil demand, especially under low-price assumptions.We also consider the demand effects of a price recovery in the 1990's, especially whether the effects would be as large as for the price increases of the 1970's or only as large as the smaller demand reversals of the 1980's. On this the results are inconclusive.     

Sri Lanka’s Rural Non-Farm Economy: Removing Constraints to Pro-Poor Growth

We use a survey of rural enterprises from Sri Lanka to explore characteristics of the informal non-farm sector and identify obstacles to its expansion and productivity. Value added in this sector amounts to 80% of agricultural GDP participating households’ incomes are significantly higher than those of households who do not participate. Barriers to entry are low and the impact of non-farm development on inequality modest, implying a large potential contribution to growth and poverty reduction. Infrastructure constraints negatively affect new startups, investment in, and productivity of existing enterprises, with small enterprises being particularly affected.     

Open economy and financial burden of corruption: theory and application to Asia

We discuss why corruption remains high and show that corruption contributes to the Banking distress and to the rapid transmission across international stock and currency markets. Undeveloped ‘derivative securities’ markets make the risk from stress-induced volatility difficult to manage. Vinod’s (1999) closed economy model is extended to indicate the asymmetry of ‘home bias’ and the effect of corruption on the value at risk (VaR). Our theory predicts that capital flight controls will be many, foreign direct investment (FDI) will be low and cost of capital will be high in corrupt developing countries, which is supported by Asian data. We include some policy recommendations regarding financial institutions and markets.     

The Colombian plan 1971–74: A test of the leading sector strategy

The Colombian case is interesting for two main reasons. It involved a choice between two recommended but contradictory strategies: one of creating work through income redistribution and the selection of labor-intensive techniques, and one of spurring the ‘leading’ sectors of exports and building. The latter was chosen. The second interesting feature is that to give an impulse to savings and building it utilized voluntary indexing in one large sector of the economy. The article argues that the experience of 1971-4, if not a conclusive vindication of the chosen strategy, at least verified the basic assumptions and was in conformity with expectations. Time did not permit a test of the accompanying design for urban growth, which was, however, developed in various studies.     

The influence of policy on the roles of agriculture in South Africa

This article provides a framework for the analysis of the relationship between different macroeconomic, sector and commodity policies and the multiplier effects of agriculture. It starts with a listing of the macroeconomic, sector and commodity policies that have been included in the analysis. These should be considered in conjunction with the likely roles of agriculture along each of the dimensions of the social, poverty and cultural roles of agriculture. These policies and roles should be conceptualised as the vertical and horizontal axes respectively of a ‘policy role’ matrix. The ‘cells’ of this matrix – the policy role interactions – are discussed with respect to the immediate macroeconomic, agricultural, economic, institutional and social impact of the policy change on the agricultural sector at farm, regional, national and multinational levels, and thereafter on the role of agriculture in terms of each of the dimensions identified above.     

The Washington Consensus: A post-mortem

After guiding development policies for nearly 20 years, the “Washington Consensus” lies in shambles. Although selected components remain relevant for development policies around the world, some specifics of the broader policy “package” and, more generally, the concept of a standardized package of policies applicable to all developing countries has clearly been discredited.Criticism has been directed at the assumed link from economic liberalization of international trade and financial flows to more rapid economic growth. Apart from a handful of developing countries, admittedly including some large and important ones, most of the world saw little of the promised economic benefit from widespread and on-going trade and financial liberalization, initially. Many countries actually regressed, when evaluated against broader socio-economic development goals, including income inequality. We conclude that differences in initial conditions (history, culture, geography and levels of industrial and institutional development) preclude any single development policy package from being universally effective.     

Agricultural pricing policy in Kenya

This paper examines Kenya's agricultural pricing policy, its role in the development of key sectors of the agricultural economy during the 1970s and its impact on different classes of producers. Toward this end, the paper describes the process of agricultural price determination in Kenya, and examines trends in real producer price indices for selected crop groupings and by size of holding.The most important finding of the paper is that agricultural pricing policy has been used in Kenya to create incentives for the growth of marketed agricultural production. In addition, the paper shows that the Government of Kenya has also used pricing and marketing policy instruments to achieve its goal of promoting the agricultural development of smallholders, who constitute the dominant mode of agricultural production in Kenya. Significantly, these findings are contrary to the widely accepted notion that pricing policy in developing countries has uniformly been biased in favor of the urban sector and against agricultural producers.     

Intermediate technology in China's rural industries

China's rural industries, which make extensive use of intermediate technologies, fulfil a number of different functions, some strictly economic and others more broadly socio-political in nature. After a brief history of rural industrial development since 1952, this paper identifies the principle of such functions via analysis of some common arguments for intermediate technologies in the development literature. Certain cases, e.g. those of sub-optimal savings, ‘walking on two legs’, and self-reliance, are examined in some detail. Given China's objectives, its rural industries seem to have been developed in a manner appropriate to existing conditions and to the tasks they were intended to accomplish.     

Mexico's development strategy for the 1980s

In examining the problems and prospects of the Mexican economy in the 1980s. the main concern of this paper is whether Mexico will use its new found wealth to correct some of the major deficiences of past policies or whether the development of the energy sector will further increase the dualism between the modern and traditional sectors. This paper surveys the major problems now facing the economy (poverty and unemployment, declining agricultural production, a weak industrial base, inflation) and then discusses the framework in which Mexico proposes to deal with these problems, in particular the priority allocated to development of oil and gas. The policies are then compared briefly with the experience of Japan and Iran. The conclusion takes a critical view of current Mexican policies and suggests that a more equity-oriented and efficient growth strategy is required.     

Corporatism, Trade Liberalization and Sectoral Responses: The Case of Venezuela, 1989–99

The Venezuelan manufacturing sector, unlike agriculture, cooperated with state’s efforts to liberalize trade in the 1990s, despite the economic costs it absorbed and the political opportunities to sabotage the reforms. This paper offers two explanations for this, which modify and conciliate traditional interest-based and corporatist theories of state-society relations. High levels of sectoral autonomy from the bureaucracy and political parties (and hence Congress), together with low levels of involvement in profit-making on the part of the associations representing the sector, encourage sectoral cooperation with costly and risky state policies. In addition, traditional corporatist instruments used by states—inducements and constraints—hurt rather than enhance state-sector cooperation.     

The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience

This paper evaluates the developments in the Turkish economy in light of the Central Bank of Turkey’s (CBT) policies during a recent period of floating exchange rate system (March 2001–July 2003). It is found that the CBT was effective in containing volatility and reducing the average inflation rate while there was a strong recovery of output. However, there are accumulated risks in the economy. Particularly, the extreme appreciation of the Turkish lira during this period and the record level of real interest rates give the impression that the current state of the economy is fragile. Unless the government accelerates the structural reform process and pursues sound fiscal policies to reduce the public sector borrowing requirement and the debt ratio, an adverse shock to the system may trigger a reversal of fortune.     

台湾产业升级过程中人力资源的开发

在台湾产业发展和产业升级过程中,产业人力资源结构发生很大的变动,出现结构性的人力资源紧缺与流失。为此,台湾当局大力发展职业技术教育、促进海外人力资源回流、加强产业人力资源培养、推动产业创新等一系列推动产业人力资源发展的对策措施,具有一定的参考借鉴意义。     

RESOURCE FLOW BETWEEN AGRICULTURE AND INDUSTRY —The Chinese Experience*—

The author has previously been engaged in a series of comparative studies on the role of the agricultural sector among the developing countries, being in doubt about the validity of the generally recognized view that in those countries much of the capital for industrialization has been supplied from this sector. For the purpose of re-examining this view, in this article the author analyses the resource outflow-inflow position of the agricultural sector in the Chinese economy and presents a grave question: Can the agricultural sector provide sufficient capital for industrial development in developing countries?