About this Book of te es ceocney aod gobabton Ta eras the deg “Snampon win he mentor drop yen ‘Be boo, oo eesorin Joon Chung a let Grae, ‘pie th iominnt seal min sveroneaoat Sow ecto ‘Sone ad he pice tno ome ete pte Th mor ‘ten coin dt and» desing economia wih on aa of ‘he hiv specs of fang Weer and it Alan economies hire te deve ne gos he ay of th ie deepen med “Tring poly te sehr eon coc, paca area to seb sere th ey core et te 2 dea ty, pion elect propery gh, ena otrowig Point fore et vette mae Beane rept oi mogerent of exhge eco bk ed ony aly, fn gover rereve alent. dg they aoe {Se le eal propos tn ev aed eed he ol Song ‘in sme nsorsie sete oft "Ts enpeveie sd eee bok srs be of prac we sett wae of eons as gre al, Tking fr eocete poly Wen The boe tt vl mane easion of the wut hich eeopeen ale en be eed iy in ig pane mpl cre ft Cita Praise for this Book “rls manly et-rte,dc od sccc odk acbesoe Merl pain fly of ney Sgro snd empty tect pan sd dati ripe seat poe "hte ese seat of poll coor ad Entel on Seat Diseson of foc, mnt Site nd ey Fly aad tec! peop igh Spey songs ee te sod males import, rave cottons ts & at ‘Sealy ale scene’ whch woul ome hea th een sleet development whore the agi Jobe Langs Repent of he ILO tothe UN‘Cuag sad Gabe deni the ats foe eons eden ‘moll wee ta ronnie delet sl porte mee ‘incite gestions for ple ogg adds, [eoaton an eect popety hs nate capa move ‘Bens unc regustoe, and maccenoner Ren Done nie tt shoul bw om th ste of pokey ‘elon od sens wisi Tao Tir, Arnold Poesy New Seool Une, or of Rasy Maret ‘A groving mane of droping consis a ang tack conto ‘re ecotemie pry fm te IM a th Wot Bk, The wile ‘og of poly ngpeon conte in the Boop» ich fine of cnc std pace shemeve om hh cone [Eulngwfvange of hater oom poisson rl lous vdopng comme ad sap coo obey hl ome Mas Ky, Dia hd Weed New “Ti book eso oni spe anne wo the mening of cierto bt the «eon and smn peteton a the ‘ny one for kena nelbral come ley the be enya story pone poet ad sent of rcp “Tha Minden, Di Unie Nutone ewe nae for Sac Delopest UNBISD) “The dominant onl economic deste wnt ht re eran to foley prsnpon sen pone the foto {eevee ange of Ganon Ts book geo ae fe the eet ye ipl inthe sen nl aceeman tha gar bond mane eu of cil plac Thrash eto be comme fr fovitng ange of concrete and fle seaves ne poe ase tatehot ony on scent el wo ep ata one "Fah sich mie of sory oy ad ei: The eat ont rene nly tex dat both scat ad ee wil ‘hance al oan ou andes of can eter one. ‘Ste ple tthe hr coun of bean and veep Deepak Naa, Ve Chui, Ue of ethReclaiming Development ‘An Alternative Beonomic Policy Manual Ha-Joon Chang and Ilene Grabel Vali Pe Wie Lp "att Bo for Change “hee ing ‘Wold Bop Pakising ‘Si salt Enger Pee "eps TaHoss osu ain Dp ee pba we by 20044 Sal Blige ed CPR, PO Bo a, Dah sme 1 Suen, Canto Lo The sad Va sen F0 Br ay anid tad Senta ad, ge 1 0 isan, atin pe Ke gS ea Saati aes "lang Sear sam nn ip 9 Bo ey Hare Late wesc Te Mane Senitntrsonfewovh Deon IHD), Nol aia tn Sn ‘Bd Wi New GN, ar Jka Ua 0 Bg 1 Sur Ae: Dl Pip meio New Ac oh, 19 Sih icone, Sou Aa Io om, BED hey Nw Yo ot, me chsctat Capi © Hoe Cag a ese Gel 04 “Tra of Hoo Cg ee Gb ee el oe os Tre iten Sane rece ‘Spy Dig o Pet e Dele pe ee Co Hin Gost ‘editor BU ty Co Wan, eng ‘eeu er neal y Pl Moin, oe of DSIRE GU SiR Lea se re ‘Abi ret an im ‘Cala cl wa te Se Naat Libr of ana eae aur OP ery upaane Serna BuseContents us of Abrasion ‘Adnowledgements Introduction. Retiming Dvlopment ‘Maths and Realities about Development 1 Mah 1 “Tay wey cours aend succert though senc omminat to the ee mala a The My 7 12 Te Myth Bard 7 13 Te Mn Reeaed 10 2 Myth 2 ‘Nears wrk 2t Tet 4 22 The Mh Ealered 6 23 The Myth fected 16 3. Myth 3 ‘Neon gbstnton aoe and ‘oud not be sone BL Tie Mn 25 32 The Myth plored 25 33. The Meh Raed 27 Fa4a 3 n a @ Myth 4 "The neler! American model of ‘aptat reprecets the eal tat all devoplng ‘ures shold sec to replat? he yeh 9h The Myth pled 91 The Myth Rjced 33 Myth § The fat Adan mode owners the Ano-Amerean mode Is ners The ym 38 {he Mh Epleros 38 The Myth Rjeted 40 Myth 6 “Oesoping counties nest he daipne Frovied by iermaonl isons ad by pointy independene domestic poleymaking Freon The mh 46 Tne yh plored 46 The Myth Rejeed Ab Economie Polley Alernatves obey Alternatives | Trade ad ndry Tate Poey 55 Ini Poy 70 Pcy Alternatives 2 Priatzton ad Ineecil Property Rigs Primizton 2 nell Property Rahs 92 u = 6a 32 33 34 0 m4 na n3. Polley Alternatives 3 Iterator Pete Capt Flows Geral Anais 108 Feregn Bink Boring 115, Fertoto heszant 124 Frain Orect estrent 13 folleyAlernatves 4 Domesse Fane agltion Folly Alternatives 5 aeronconomi ales, ted Intione [change Rate and Carey Fler 164 Cl Bakr ard Monetary Poy 180 Fel Poey 188 “conclusion Obsaces and Opporsles for Fechining Demlpment aconmendad Farther Reade 10 20List of Abbreviations Soe et exci occ, ‘eonomnc Comins fr Latin Amar and the Corben inn Rep of he (9 esi in ocet Fret oon of te Ames Fret tde tomes Forge de inverment (Genel Agreonene on Ts and Trade ‘aman Devons Report ports eran Intec propery is Toveoatond Monetary Fund Tnvrnnoa Ebooe Onision EoegrTevm Copia Management ‘Minti corontons soo ieee of es Newly inden comic: ‘Nonporeamctl oreo ‘Nonts Ametean Fee Trade Agent ‘Onur Heooomie Cooperson and Boldepmest Ponto vetent Resear sn detlopmert Siac owned creamer ‘Suen sjntnenprgennes ‘Redevled sipece of cecil pope rhs‘INCH Tamnacoa omportont UN Shite Natlone UNDP Gated Nason Development Prganine Var seated WTO Need Trade OrpaationAcknowledgements “This book wos! ne oon writen wou he encouragement 408 adie of Rober Molen or wonder edor st Zed "Duncan Groen tend te ft daf of al the main apes and provided many nef comments on them. George Dedfarine viewed sre dali of the manszit, and hi comments Ines each venion inmesrunbly. is Joon Ching wise o tank the Koes Resch Founéoa, ‘which though ir BKse eogemme sopported bis Ws t0 the Depucnent of Econo of Keres Ulversiy, where he wat Vibting research profesor when the manuscript was Gnaize Tne Gael a he Fey Research Fund of the Usiverity fof Demet for the asia uprated hee work on tht ‘ook and Peter Za for trope revench asian. She Sho thanks het wonderful santa dhe Graduate Scho! of Tnvenational Studie a the Universi of Denver a et end in nongovramental organzuions forthe insicence dat she thik about concrete poly aherasves to neolier,For Hoe and GayIntroduction Reclaiming Development "There 99 akerative’ This the famove pronouncement by former Bash Pre Miniter Margtt Thatcher when she Wat faced wit widesprend oppolon to her programme of radial seltenl reform dung the io. Thatcher dtm capes ‘he empha, Bubrs 0d vende with which the olen orthodoxy har dominated ducuions of economic poly stound the wos dining the rt quater of 3 centny. "This ook bogie with te precy thatthe ‘ao alerted xan is fndmenaliy and dango lncoect As we den ‘nstnt ie pent deal throughout the book, faible aernatves to neotbeal pices ext at can peoesie mpd crore evelopmet the is site, rable and rte, Some of {hse ate propor for tegen not et adopted o be wre Bat ‘nary ote hare already proven tee woth in pracice ass the oe We offer them ern ode ost he Wen dha hee ‘io ahermtve, a wo conti to te vganonecanplgn no erway 2108 the gabe eo ee developmen "The ting of tie book is propitou for tee restons. Fi, there enw sbundane ad incesing evidence tha: the economic poles avoclted with dhe nealtcl agenda here fll to Schleve die chief gods, and have inzoduced seious problans, ‘spedaly-a the developing wold. Second, there get de Of histor ad current edence that there are mull oe ©2 Racing Ovetopmere evelopment. Me ange that racenfldevelopent te rest fof dese per of economic pli, the maory of which fun ovate to the ples advocwted by nab! economists *oday. Thi a he preset fnetre the unbeded confidence of| ecleal economiste seems tobe fale In ft, « good del ire been publahed of be by nib! economic who ell or that they have grown diencanted with cerain specs f the ele poles embodied in what is commonly known 8 the ‘Washigion Consens. Thi apart ten’ of the develop: ment agenda In el sore comets en an erent ‘pout-artington Cooter? or “poreneobed ply agen. Prominent examples Inca the Book by Pedto-Pal Knezyask and Jn Willamson ted Aj te Wasingon Cows (020%) fu x machdacneed stdy of franca globabaion by ears OF Intentional Monetary Fund (IMF) economist: Pred et sh, 3099) "Thee are tenons to be encouraged by effets 0 tthiak Aevelopmant pale by key achitects ofthe ofgal Washington ‘Conscnus ples! Howes, the spin on thin ew wos in curt hin thatthe architec ofthe Wathen Coosesis ‘ve now sen te igh, and have genuinely moved 10 4 new ‘may of thing that trruends thelr previo poy prec ors Thi, fa et sao at al he ese ested, hs mew way of ‘hiking merely sek to ave the cote tenets ofthe Wahlngron ‘Coneenut fram embarearrment and efeaton by enodifing + few of es cena poy prsepios Indeed the new think ing teal anderen exec te neobereharce in sees imporsnt pokey dorins (ch a the increased atenon tat is pal tthe promotion of Inbour male Hex). Hava Univesity economist Dani Rodi (40s) has apy coined the teem dgiented Washington Content refer to work slog thes nee "This book seks to provi el ermaes go the Wasaga CConeets = angen o others — in the developing word. ‘Omran i ting hr of Reining Dope ro he meeeIntroduction 2 beg Ht bs dined sie of depot ply dig he le uri § ay Me xpi bowen why aslo poe hve ale developing conus, td demons tat hee eit {rage of achirable ond dsabe poly aerate "We bp the book in Pr Ib prevetng ad ejecting he sc major Developeneet Mh dha at wed to july the ncoberal pallies tht ave been pursued with sch dasteows esl ia the evlping word ding he rt quar of = canary (Chapt 1-0) Pare che heat of the books Here we provid asi, pollens aod sadents of development pay with on aay 1 concrete poy optons that ate supe to thee neler feurtepari In thee chapters we look specify at poles tomnnde ede end industry (Chapter 7), protation ant itl etal progerty gts (Chapter, orig bak borzong and poole ed foreign diet lavstneat (Chapter), domentic Ean! rion (Chaper 1) and eachange tes seen es cenit banking and monetary poli md government even 4nd expendiare Chaper#)-In ech eae, we xpi Why the ‘altel pleysecomameadatins fa thete donna have fle, ‘ten wh dsatuoascoosoquencs for developing counties We then countepase an aay of aleinatve pokes that ean eo ‘note fatreeomic develope than an aber, wie Cerng Hat eis eqelele and suri "We en enpbaie at the out dat we petet di age of propos inthe spt of praise and hur. We do aoe ste {he ube 3 neoliberal spd hector dono ang dh thee i ‘Hel, spe approach to good py. We hope tat he wore wil contbate tothe promising new earch within developing unin, mule gece, aongovernments oxpeiations (NGOs) asd active communis for alternatives 10 neoherd poly reines ‘We hope thatthe book isn ado to che defen found mong may opponents of seater who do aot ehalage these polices, belleing that tere ae no cede akemates. ‘We ato pe dt our book empower dose who sea concete4 Racing Ovlopenent secoaies to neaer polly. Towards these cds, We pest (Gur Hen in clear aod sccrable rmaet 4 that Bot bay polymakers and hone while fm ning a eonomie ‘in make ut of thie hook. However, the hoot ence simply 4 “beginner pid’ to development pole. Profesional economist ‘wl ao nt dha cu agumens se Sealy grounded ~ even if Pilalyagied ~in Rone resench in development cconomscs ‘Our preset hope fortis oki share weil, enpoweing and accel, We hope tht ic atimaltesdecutsion ofthe wpe that develope poles can be tehimed by those seling t2 oie pd economic development sound the weed tha ie quale, stable and munis, Note 1 Inpeas we ae pl hatcee ook yeabereapies {Su ered eof Egle ca ed {oclineie and Genel cee dowtpng contePart -Mytas and Realities about Development “The chaps in Pre extinct rate Delp. ‘ment Mth. There myths form the bse of today’ contendoral ‘ism rang the pes of economic pies an intone that ae bth sppropeite and feuble for developing counties, ‘This diction serves atthe backdmopfor eur dicion of cosmic ply aeraives i Pate I Tach oF these chapters begins with a bit satement of ovelopot mh ie geneliysicated (The Mh). This i flowed by an expicton of the encens tht edvesen _scelyalance in support ofthe mh (The Mth Explored. ial enh chapter concen wih «deel refaion of the ryth (The ith ejered.1oMyth 1b “Today's wealthy countries achieved success through a steadfast commitment to the free smatker Ll Themen ‘Todays indsteaized counties have prospered beaste of ther stadast commiment 19 fee-mater esonomie pole, Unforenacy, many polices ia developing cous toy ove fle lee this Lason, and remain commie fst Intereetcim, Bat the ls of economics and hoy eanot be denied nd thi approach s doomed wo fale 12 The Myth Explored “The ech courses pospared You fee wade ar fe franc oma Many economists argue thet count ike Brin ad the USA beet world ecoremie lade because of thet goo com migoear © Gee-maeet polls” These poles pomote mar eather han sate-dieetion of tide and Snail Rows, Tie sstgy tiimines the scope of goverment seglton while ncooraga, pte omnenip of resource, ners and efe0 eae 1 his view ineteeth ‘hes, eb the soo cane of then problems tending other farther cae therefore be the sluion. ‘Senay aolberalam dose not prove governments with the moran or the means to compensate those Who Tose round ode this epme. Thief the exe fr seve exon.Destopnan Myth? 19 ‘Neer i based onthe pes ht the porernmeat beats nina reponniliy fr weil wee since cen och ‘pelle ply woud dor the incenve stocted with the fie Inet, The atnfaioary Bn of neste policy ho meant ‘that governments ae not ato eagage a adequate roc spon ling Mocever, he rope that ace denice ecco by ‘eaters sso gel nck sient pole powe to vetee ‘Compenaion from te government (Debatne 002). Ben If tppropite potical wil for comperstry schemes exe gor ‘nment ve fer raoures to expend for ti spore. Th breeutereolberalizn seduces the ax bse places «high peony on bulge blce, ad makes tcl to tx ltenatiaally tmobile Gms and investors ve Oper 41.3) "Necbarn appa nett rong ae! within is, Neolibenem induces ineraional unevenness and inesoaiy rather den widespred row, Most impor, pate epi flows tel to conceauate ia thoce coonter tat have aad Inaagerted 2 verour cycle of gvth imesment and nd produc (sce Chapter 9) Conny wo the neibeal diy fortign poate apa nfow fl male ha nat rif rot ‘Tajwne, South Koen and Chia ae excmplas of this pres (ont ofthe sucess of wel-desgned programmes of interven ‘sien Developing counties (ipecily the poosst of thes) ‘most thet lnsttte pies het init urinal grow path asa precondilos for pre exp infows See "Thee se by now mytind wes demontnting the cing of producive economic stv nd the smell conentaton Of privat capital Howe sero the globe ding the neler Peto, lat iyesteat by maison earpostons (INC), fermed foreign det investeat (oe FDI, i eperentative of| the Linde en Canny seme tony, eon a Is dened for aptatich counts i he Noth eet han capil poor cour ofthe Sout In 35, ft ian, only20 Raclsiing Devcopment 159 pee ent of total world FDI andy. pe cet of toa ers ‘onder invetnet in Gnanil ss, xed porfob avestne {P, rached the South, Moreover, the lows that do rech he ‘Sonh ae extreme eonentited Ie 20, for erp, China Alone sstved about 37 per ean of ll North-South FT, while {he top ten destintion counts gether eve 70 pe en of ‘he deoopng couny etl. In cone, he fr poorer counties ‘of sub Saran Af, where the needs womguably he preset, ectved onl 49 pet cet of ttl North-South FDI in that yet (Gee Chapter 5 "Neotiberasm ha duced deg Segway amang count, pry asa see of hs eoneeneaon oF pate capil fw [Fhe UNDP ads de io igo the couse with te best 20 fet ecnt of te wollspopuntion had appregte income go tines {hat of tute counter with the pooret 20 percent ofthe Wolds population By igo at the bepnning of the neoliberal et, tht fat ha ic 0 4 € by 1985S stood at $91 1s y 1997, ith dent 7 + (UNDE, sco, 199) Inthe neoliberal then, inuaty betwen the rebest and the poorest counties ‘ey doubled. Tt dvergence pats sppatent when one Took atthe station of rob Sehetaa. Ven counties. In 1, er cepa Income in sb-Saaran An waeabowt 11 per ent tpt pit incon fn odutintned counties By £99 had fallen total that gue (UNDE, 200% 16). "The ncolver rete kas also deepened inequity within unten A thorough emplsa study of 75 counties by Cola (Geos) finde that 33 of them expsened surge in income con- etn one th nto decades In eat to para gions Goria condides that "th inerase fi neome conentaon| ‘yes univer inthe economic in aio, sos tive in Tin America and the OBCD and ineresngly fequnt, if ese pronounced in the South, Souhest and East Ai’ (20: He elas that inch of ti incrense In inequality within ation ‘Pele to vaous aspects of ober eae (ost inportenty,Development Myth 2.24 ertaion of capil Rows, domes nancial and Isbout mie et and nx efor Tes pale notable that acme neu ha grown ate Jn counties that have mote Fly embraced che gebeaie, sch ar he USA and UK, than fa ose that ave not (ONDE, toot: #8) In the UK, the income sate of the top 1 per ent ‘nay dled fom 37 pe cen to 937 per cea between 1579 fd 1998 (Akinson 2001. Tas std of the US economy, Pal Kron observes that's pe ont of fs inthe US seceine shout 16 per cet of toa peta income, and have sot 4 per cent of afer ta income "That share har xougly doled rr the st 3 yess, ab I aow about lange athe hae of the Bote 40 per cot of te popltion (Reagan toy) Kagan abo nots (ing a sly bythe Congreso! Badge ‘Offe) sa, between 1979 ad 135, the afertx Incomes {he top «percent of fame roe 7 per cet, compared with ‘ony ato pe cet gsi for files near the mide of the US Inotme ditbuin” (6). More sing i the growing Rapin she USA beeseen the very sc, the sinking mide ce ad the very poor. We ea compare the US rcord of icesedineqaliy wih the expetence of Swaten,« nny that bas tained 4 god reat of vecaldemocre economic goveromcs eet we ‘pening is eeanony to iternaonal ade ad cp flows dhs ing this pod. Apsa quoting Krugman ‘Themen Su yb asc flag ug compare th of the mesan US fan wags ef apg her Sede nd hgh tx brn ht oy ue pon ee tiv ant gee bre pti nervien And Jou ove Fe ‘own te came ison Sweh Erg sandr oy ead of thsi the US Sed miles ae poe tna 3 of he popin re icomes 6 ger than he US comer nee ee pies tect open te pos a So wenn te US One meta a 9c Sh of Scar Heed ocean Ss pe uy compa wie ante US G6)22. Reining Deepen ery fas an may eons of the even wor ‘ing the ncibars er sl alr pares 0 BONE Sun contone hs been raved NNelbees often pont ov tat the ovell proportion of the ‘Covi populitin tat les never poverty bs allen over he Tae ro decay But they nec ction dat thi aleve rent lige dct the Stong econo performance of Chinn ni lad, two counties thar pursue disney non-ocolber Pes an altel scconnt fr more than hf of the wos pose ‘Beyond Chine and Ia, povery level (coding toa ay ‘of mente) have en io» great say counses dog che (eobea ee Tea, the UNDP (sot) poe that 28 bilion pope ve on fas than $2 pe dy whe 12 billon people ve Unless dan 8 pr dy. I sub-Saharan Aion alone, I ofthe ‘etioes popslation i poorer now than in 1990 ad af pee eat of the popuition Ler on lis than $1 per day CUNDR, 200: tos too, 1s In South An, 4 po ent OF the population now Tes en ler than $1 pes dy the comparable Bae 13 per ent fn Past Ai, the Pale and Lain Ameria (UNDP 200 1). IMoreotes, progress in inproving fe expectancy and edaaion tli elacngInfce moray ws Shower forage suber of une dang the earl es ae compared to the previous te decades (Weibel 200) Nectar doesnot promote cere ded in ore Tora reps uname: cout pon sre Fal on the level of plies, aeoberlism fs not ssocted sith tm increase in denen Ge eaaparcncy. idence hows Tha he elaioship beprsn ncotberali nd democracy tnore comple han neoees eeognit. vst, the markt sytem i comple with dvee poi testes, pg ton repose democrat eae. Te doesDeveopnent 4h 2-23 not neces serve 4 conesie on authortan segimes, ‘tary neaelecaim ‘Second got! ealiberian deems democracy by granting abl invests and eoxprmons veto pover over dome aie Shoes th they oppose. A fundamental spect of demecrnte [orerance ent the ight of thove affected by policy to pat Selpte meaningfully is decion-maling Under solemn, however, cones of itratonaly mobile feo of predation (bara age imestoes and the wey hve sce need ‘seo pow? over the leiatve rc poly domain ee Chapter )- By lrding thee ators feed do ithe Sunde from ‘hose courses tht pune tg hat thaten hl intrest, glo! neoiberaism effecively erodes atonal policy autonomy (DeMaria 19). This struct power seed at be exec to he effec; tody Ise invertor 0d fut can meselytveton wo lentes mesg to Block government and zen iianes tha hey eppone Therefore the High of investors, ot even the threat derof serves tr 4 powetfl deterrent o expasioney oF seditbutie economic an soi pls, and vo polices that promote Htour gh Gacading the tight to frm urons nd Sagan coer “hi te ineresed Fequeney of Sounder neo- beni Ine great iaceted the power of She IMF vei sonal goreamene IMP site cones wit ing tach ‘ital domestic decisions are ved by an inwiton that i dominated bythe USA aod server the iret of the label Saancal commaniey Neofbetsban this wadermines pao 0d poly independence in developing coves este rn aged iin nna! {See te reo eens ln ew nce hie ‘tent te ne pod govern ntcarapea men ‘ean goer propane and sty ene coe oat24 Reciing Delopent tuple cpio lowe Kec and WiBion (03) a eerie an perpen Tic ghia try So et See ll Wag Coron ut te a tn the eI plone, ol cmlemer he eter TES TaFL esi nutn eee hen (0 Bs eps 0 TERE Gh acrcometone a espe of ie wend Peeescon op lator casey nd pod ate) oad eT Stops ber ler qe This mae cemented Krely SSAP ney ers pone wih Agena 20 De Settee facia sian on the eon! pacags ober etn 1 Dinning ae rem Wet et a Bese Chang toch) om te growth Eres of si: 5. Mid in ths pamgigh at nen frm Wo Bak (us ys. 1 For sine dig on ton connie an ie UNDP Top. for Lan Armen where 9p eat ofthe poUltos 1a ea wih oti nen ee HCLAC to3 Myth 3 ‘Neoliberal globalization eaanot and should not be stopped” AL The Myth Globe is aa ineviube, unstoppable fore Ut promise temendow revanis Poleynaies, eel i developing coun tle, mot learn to cope with and fspon to gabon by acing nectberd economic police if they fe fo promote onomie seu and proses. 32 The Myth Explored Cltaaton I ven by tcp press CGiohizat is the res of she revoitions in consation sed tansportaton the beg in the sinetenth cent, Stating ‘ih the eso of the elegrph aad the wemaip technol {Ge of wanpor and communion have progemed tena, Aeswing vasous par of the mold ever slot Ti tok the en US eters ever! months to al aco the Aan in he ely seventeen cnt i took several wecke fr ely seas 10 wake the crossing i he seteenh ety andi takes only three hour for soptnai i teen indy roe to te log.stnee telegraph took Bye weeks 1 te 1 message rom London 19 Bombay. Lang dence tepophs26 Racing Dowopmert ded trinemison de to mates Sandgate 1999: 97) a ‘he Intemet as mde communication almost instantaneous ‘rach advance In communications a transport technology ‘anges the nate of buna ad production eis ony nasal that snepeencuts wood oc Beyond shez mom borers fr profitable opporunics and sew marke mae secs by ne fechnoleges Transporation cont resol tony ta apa an lnpore coal from Ali: Sweden cin inport frie pat fom loa; and Europe can import botled waster from Cada "The Internet le ineresed the speed snd fen of inten tional bons ie edbces the aeed for feet face contact Smong exeatnes nth fmt can arage ro outoute het ‘production to Taiwan apd Chena en export smoke smo {Keven bc upon dels attenged ovr the Interne, while Sangladsh mee ca kate ao pest anagerene echsgs through be Word Wide Web, Ta sofas glbalinaton sth en of school progres, ffs so sho vveee ae Stead acon. Those who {to olntet loalation toda ar eaught up in the ame mae fea aie project dat as endestaten by the Bap Losdites Abrng the ely de of the Indo Reval, The ase ‘convinced chemsce that tey cond fete indsiingon fd thetcby peter thet jobs and eled yr consmnies Uy meagog eacine oct octal gelation afer frm misplaced fas a scecrest Bust the degree that they ae ces these efors to sal balan noes rede gal ving anda by evening» more efx llcaton of resource Even woost {gobo satin ighincome counties eeaal prot fd perpetate poverty in the developing wou CGlobteton aes # etreray coy. at impose. Sor unrest rita anti but ait ny nectbera scone poles “The pressures and opportunites sssocised with baltic provide icenves for govemmen to pane the gt policesevpment Myth. a7 = tnt aclberl economic pols (ee Chapters 2 and 6. “his anpent it stalghforvan the befits of glablaaton ate tvalble ony 1 counties the permite fee market mediated ow of goods ae capital Counter hat reste inet depeve themed of the epportunity to purchase goods produced ele ‘olor 3 Ge woud at stncie price, This htm consumes tnd undermines export perfomance by forcing domestic eo. dices uae moce ony domes apt in the proicton peers, Moreover, countsee thet rent iveror ox bins Frewdoms (rough te, apa conto, excatve goverment replatos ec) wil be patie i itenaonlfncal mashes Iavestors wl demand a eel on thi ud ont neh ‘hosp counts, apd these higher capital cos wil rpc ‘concn rowth, Investors aleo shin counties tht have bx feel or menetry sumgement. "Ts este tht ounce dat cro att fosigninvetnent mut mais sound tse. "The che, then ica. lobia ed neobel economic pallies (heater neolher) gobalnaon) ae eset tothe promotion of high Iving stander and pomp. Wale the Toston to open markets aed poly depine may genemte shorsterm pla (rach a omorny ese unemployment he Tong tern tenet of there treet av nmnoe, ei hsefone swsupeing that paeymakers in neal counts (ve Nonth Kors and 3 fee oes) have come to embrace tte ey to prosgesie 33 The Myth Rejected Cobain i ot the able etre of tsi noel evidence does not suppor the claim dat advance | eansporaion and communictons tchnloges cerry Induce gtlston. Thee technologies have progres eost28 Racimirg Dewopment ontimonsly ver the last two cents, but the progess of ‘Gobalnadon dering tha tne hasbeen highly uneven: For ope, levels of ecenomi lebakzation ~ mead in rsy srrye wee comblery higher Inthe Ie beech et thon hen ineronl commerce depended on seanshipe and ‘api, than they were in the 19fou, tox and trom, We Trenporaton and communication teehologe were mich ft ther sdeanced® etic dco - re than tecogy ~ ae the preary (Bhing rc etd th pce ar fm of goblaton ‘oenoey mers dees be rea of poses “The pace and frm of glzaon that peal at ny point a ‘Gn the rule of delbate policy choles. Thus the 80- ical lotion of he ft two detades stems dite fom overeat infaies n indutalied and developing unser Fn ue ne agqon and cay ts, especie. Tzesnaona Tnetaons sch the IMP aed the WTO, have abo played verealy portant le in promoig pois that fife che api pace Ind olin character of lobalztion in mos ‘oping counts today Bete our, echology i not val pps in the lbs sion procs Tecology definita wha is posible such a5 ho ‘Ria snd under what condone goods and Gator ean ow “Tow somal borders Bue weber these flows wil be pect ‘ed depends on pole ecsns in the tei of ieaions Hee a enn policy For inxanee since the wn the exton Enema Eras! speclaon bas incsied dames ‘This depment b ant doe 1 the vent of de ners, © the technolo necernary fori lows of seca Sane (ach atthe eephone ae the fx machine) exited por 0 (pon Specalason ins Fecome more preralent beste 9pPOT lier act incense to spect have been creat by pole ‘Of Burl Hberkzto,Development yth3. 29 ‘he Ink between gobsiaton and rebel can be ‘While Heng ciel of the nea dscoune on lebanon, vs so sje the ci that goblion il atthe eat ‘of many ofthe economic snd soil peatleme observed in de- Swloping cantice I i the mil frm of libations Ing rote ay aay ~ anda gobton el! ~ hal is repel fo hor snc pean adh drain (fig and 9 may ste (oe Chae 9) [Nested malin that sczs i a lb wo ooo depends onthe xeon of + neaiberal poly envionment on he ‘domestic od ineeaonal lev Indeed hy chim teeta 4 comes will converge azound the poleysepine, snc sy ‘ther regane willbe reveely pnithed by glob mares “These tpuments are snp incoret. Glbalaton i pe sexy compile wi diferent dees and patterns of ope es ote nd epi Bow) athe ana lee. The 908 td 1560 cambied aid glbazaon wit etensive enorme ‘epi, in developing and inoilled counties ake, Thus {Habslaaon and acolberalsm ae nor nee two tds of the ame cin "The argument tha he compe pete ford by glo ‘ntsnion mae ie aecemay for al coats to convege to the ‘ame nella economic mode not bore out hy evidence (swe wile la Chapter, 7-1; re alo Bexger std Dove 1990). A comiderabie degee of paey and ineatonal diversity sarang indataled counties ty, dep the progress Of plobilaaton. For example, Sweden, Asti the Neeands nce sel Gereany hae ol maintained pots dso) rangement that at pte dates fom thse inthe neater conmis ofthe USA andthe UK. Larges and/or richer dve- ‘oping counter ~ epecally Chin, Ind, Taiwan and Moya “have ao enaged to maintain non acobers poly eps ‘Tobe sory muller sad/oe poorer deveoping counties coafont30. Rachiing Deveoprent mote svete retin on tel pi atonomy But even ee ‘huneles may enjoy gute polcy autonomy than bs geaerly ‘Rtopased Chie is an eample of 2 developing country tht ‘Saat’ geneyncoler ph in theron bo everest raged main ae iaget rene of expial comtls (ce Chapter 9 Toi the noice gain thas ba bee emer oe dt pst ee eens is bat one form of lebaieon. Dien [pu ta ua en ade and iil bie) et cep a hl ht wl tt eo cn Big ard end Pee Grup dciig suis, Numerous example of 8c hey arses are proiel in Vart TT of hs book, Notes te eg ean stem vie iui 14 at SOS tae he spe al aed Higa aode de wr AE Sat ested donate gi see ee on and Witrnon 9p 9yd. Te Ret ith ct net tn, Te fa eel a ‘Sere es eninnlon oo rnin ie USA 0 The Se See atietxpenh ae ws ld 068 OB alge 30. 1 ae eee ents of ben Fenty ed ent Pistia aie occ cates pi ee anes wl soar my, he ae eee nl popanon4 Myth 4 “The neoliberal American model of capitalism represents the ideal that all developing counties should seek to replicate 41 The Myth ‘iy now ics ler that American cols is outpesonmed alloserecnonte systems. Aaylngeing dave shou this at ‘er vere ented during the 12 when the OSA prospesed whe ‘thar economics fered, The demise of tees sens exposes the fille of al forms of ‘sain tnd ens the neve convergene of al madone pon the Ameri mel that em ‘ces neotberaia aed decry 42 The Myth Explored “The ne econo ofthe 1980 recs the dim ad super oft US econ noe rng the 2901 the US coon eapesensd sestined economic sd peedociy growth, ow werploynet an low nation The 101 Bionic Rr of the [US Pia ERP ch) rept hat ‘fom the fst quate of 1995 rough the hid quate of 20 seal GDP grew at an average annual te of 4 pr cent ~ which ‘as 6 percent far than the serge te om 3975 © 1995, Produodig le ourpu cated per us of worl of tera Jobe grew an average re of 2 per ent for yur, compas te an avenge of 1 pet cent per yest forthe previous tee years the manber of bs inceted by more hans ilion while32 ching Devlpent the unemployment te deine sadly (reaching 39 pet cent In toon, he lowest level in a gener} ad cote ination the ot of ination exciding pie inerenes in food and exergy) femmined at qlable 2) por cent. These achievements ae (idence of new economy’ that was Fle bythe information Sed tckcommuncaons technology rooion Tema even Be ‘hat this new economy not nese t the business cys Tint had plagued eapititdeselopmeat for cen. "The USA was the natural lunching pad for the new conan ven its innovation reply tenes the pve Fence of muse incentives, For example, inelectal propery fights UPR) are wel protected, balaess exes ae lo employee Compension is based om perfomance (ates th on sesonty ‘or feu), batnes senpateny ix promoted bythe lp ‘ivitonmens, tod the government doesnot dcourge pte Intiatine through exetve expen ‘ie the ‘ok? me production economy of the USA cea rumbled inthe 1970 ad Ios, the county bs demonstted {har its flee, compedve and prized economists ‘boknely opal of pnerting new techaologies and new fons fof commerce Ths pe of dyin aod adapably is the expe for success in 2 wold conomy shat pow charceried ty Blobalanon and diven by rp tecnologia progress (ee sho Chapter #9. "The ures adhe gob poics and economic envioa- ment that hve fliowed the erete of + September 200: have taken atoll onthe US economy, of eoune, But hese no cae for Fdamestl ccs, Hisar ae prove thereat ence ofthe US economIndeed, the Besblty of the US economy fas eeabled it to emerge tn snp difeales more qty than the fig and inlent economiee of Eutope and Japan. “Te spey of he US motel ao enced by the fins of Uo ecooriee of Content Earope ad pn. “The recent experiences of Cotnental Bazope and fpan cone the desinbiley of Avesian neoBberase. The interventionist3 Devgan M433 economics of Continental Burope have een plus by slow [gow andbigh unemployment vince the toe Fortney any Erte repens economics have een begun io andere bol ‘fmesse-ole econome reform. European natons have bebo te dereglt an pvt inde, open upto trade exptl td Iabour sows wih the region, and pusae monte) dtp Ader the bxdetship ofthe new Batepean Cental Banks Aa ‘inrequencs they Ive beget show. modest lg of economic covery (th tga t improved ineror confine, growth fe), Tn cont, pus suation remaios de. The county has been stad in recetion for over» decade, consequence of its overrated economy: Untotunte, Japanese paeyalers gpenr wong to dewlp a plan estote economic prosper iroogh deal dereglato, “The super of American nectar ako demonstated by ce erable performance of thre counties tht have pterned thee econones on that ofthe USA, namely the Anglo-Ameean ‘economies’ of the UK, Carads, New Zeaied and Asti, AL ‘ve pesfoened impeesvely daring the tpn Tn sum, he recon is clea: the neolben! Amescin model of cepitalam oxpertorme ll other economic tnodel I > wig pealioned w respond to new tecnologia chalga! Saver growth sod peospesty in today world economy. Though the antimacct economic syste of Bape an ast Asn neet ‘onsite Hea he peset junc fe them poe ‘utdated (ie aso Chapter 3. 43. The Myth Rejected ‘Aensice amp s based on wt thing eter han fon cance ana “Thece ae aed sana 6 jets forthe suport of [US capitan, parcel in ration to ke perfomance the g9eThe se fr exporting th model othe devaoping wkd {5 ie = word undecuhcing34 Sacsming evelopnent “There ever was 8 ne ecanoy the 1908! ‘Contry tothe chim of new economy entsiass, US economic formance ding the rpen waster wsimprenive. I ft TRC US grew moe slow i te "oew-economy’ 19901 than in {Be preceding ptiods, Focunng om the fst several yeas of ‘Dsncs ups in occenive decades, economist Dean Baber nds tha the average growth ate of GDP from #991 10 1995, ce ag per com wile growth averaged 44 percent fm «982 ges and a pet cent fom 970 to 1973 @aker sco US, ‘onomie pnw we souble only dug 1996-99 (8 ODP [rome aetaged 4 pet cent over the four yn fom 1995 © vio Bat these fe yar ston growth in the Inter portion Pie agg ony offerte aaemie growth of the peceing Sedo Moreover, ake ager tnt the impressive grows nthe [Be agg tardy an Sason storming frm a change in US overt mearuemcnt techni. "S inie ory ae be tld of US prodectiiy growth The sve anna et of product qowth was 19 pe en tng {he tog computed so an rere anual ate Of ose © 3 Pet ne the rene ve year at followed Woo War Ind 1.4 ‘Saree tor the Jets tgs to 198 A with economic growth, Psduty growth was ony ston dig theater yeas ofthe Mpgom pola grt avecaged 2 per cent fom 1995 12 cee aR ome of the apparent icine in producti owt ‘eRe wo cnge in mesurement Bakes aaj of US. Perfomance dosing te 19g conddes that eis for ces concmny ate enpinealy Unsupported ‘The 1905 boom di not bert the as foray Deri ‘US economic perfomance ding dhe 19901 hooks ited fener when one takes aesount of datbutnal ates Gee abo (Chapter) The US sock nee boom of the 19928 — oe» onsen f the new economy pe ~edounded to the boot ‘Sn wealeat zope ant and expecially the weaiest © petDevelopmen th 4 35 ent) of the popaalon, and proved oly mca benefits to ‘he average American fly (Wl 200. he ncetng Jnequalty ic US wages tha beg nthe por contoned though the 1990) 8 wage inreates went peopersonatl fo the most suet Baer 2000? “The economic hoo of the 19s dew erate poverty? Indeed, the US Census Boren reported in Jone soot tha he proportion of fans chssfed at poor relned vial ane hanged berween 1989 and toca (Naw York Tan, Jane soa) In 009, 92 per cent of US fails were sss poo ‘compared wo 10 por cent in #9, The cope of he US tock mart bbb of te 19505 reves tung pater of crpratscoroptin nd reese miatooion ‘Throuhotthe 199s economits led the ncenives oct sigh the US syne of execaive compentiton ar a spur 10 icincy a4 tpidincomion. Compote execxives pnered ‘ermal high elt, stock opins (wich gave them the sight, ber not the obligeon, to boy ot sc socks by afte dave a sn agesd-upon pie) and other pr ‘These compensiton packager seuked in att dapaies be ‘ween the compensation of excess and avenge workers within the tame frm Fr example a 197 the serge inion adjuted ssaual compensation of the top one bunded thief execute of fers (CBO) inthe USA was $5 millon ~ 9 tine the py of sm average worker. By 1999, te average ompensaton ofthe op ‘one huniee CHOs ha en to $57.) malin, more tan 1609 Aes the pay of an serge worker (Kraan 20 4). "These eaxetve compen packages ropreered matin iallcatonof resource sre weze manned with dhe ete {of maximising the sree vale of the sock options hed by Inghty paced insider (ee Chapters Rr and 10). The Bown and Corpor enviroment of the agg alo promoted yea fxm of conupton The US corporis corepton an etunting236 Reding Deseloent eandals of 2008 rr that many cororte ees boat Ser stenal sudan were ade bythe huge reads valle ogi atch sppeitin, They manned accounting and ober {hfe to Tel an nesta ie in stock sce Many her edie counts pred at ast we rite USA an eherAagl-Ameraneconrizs dr te 19905 us ccmomie performance dag the 19908 ao fis imprest leh one comers iin compacstveporpecve, Many ote Meine counties performed as well or beter dan he USA daring the topos Fox example, between 990 and 2006 Tielaad (uth rom ate of per ex, Singapore (3 Det Bee) Norway (et pet co, Avra (28 per con, Poop Cee eae ay ae Hela (ea po ex) grea ea 8 fst a EE BSAC ote many oer sch as Dena (25 pet een) {he Nethestnds (ep ea), Span (2 percent and dhe UK (ea pet cong almost fs “Ass the Aaglo Aeron economies i nt Se teil wel Gong he typos, New Zealand and the OK were atthe Tovefton of evel fom dug de st wo decade, Bot those seo seem to hare hed po dices effect on thee onus pertrmance, Inet, economic growih xe inthe USAT UN dnd New Zend were en} enti ding the neo Herd cof ty8e-nvo andthe interventions em of #960-79 (de tho Chapet The eben er i oweer, bing with 1S cing increas in inequalities ations. Notes The dt ian he fling pangagh ee iene Babs 1 Be age ics ding se igen wee gue moe. Bas (9) CRP uty sor fr tpl US wore eee a ESTs ofoy pecan tom Je to Mach 901 oohDevelopment Myth 4.37 een wage rove at an saan of 1 pet a 195 (Sito tay lore tee ate of pret nly om onl ss aie tench USA rain site nen af mae prnt tthe yo se eee {Se peo pone vce he yg5 Myth $ “The Fast Asian model is idiosyncratic; the Anglo-American model is universal” The Myth ‘Contrary othe convention wis of te eps the Bast Aan ‘conome mol ot eps cewhere Icons the Ang ‘Ameien deli evenly appeal, Paes in develop ing eounuies mast therefore scp the Anglo: Armen economic models te ony path to prospetity (ee alo Chapter 4 52. The Myth Explored “ho it Adan mate aot work tide of the eon 5 estos apes on wig tec pli a eat ‘The Rast Asn model depated quite malay Geom what we now to be te het prttce sasociated with the neler, ‘Anglo-American model, For several decades, the model ube ie generited italy unprecedented ineese in the rae of conomie grow, provers in ving sunday, ad econo ‘poderalation "hose achievements arly ply thatthe st Asn mode shoud or even ean be eaplctd to aer prs ofthe develop Ing wo, howoves Indeed th Bast Asan Branca i of 197,Dewlopment Mth $39 ad the psitnee of econcniestagpatio in Japan st evkence ‘of the models flings Most imporacly tbe East Aan tnoel ‘lepende on » umber of condone the cannot be eps thewhere "There ie five unique chances of Bart Asan cousecs ‘that wee pivotal fo the setts of the mode. Tier, te East Asan counts share» commen Conan ‘atte Ts coll henge ps0 espn the pronounced ‘rk ethic the devodon wring the commitment ol fa ‘dacion, andthe wilnges to abeyabointn poretnments [Absent ala ersge, ie vey fice to ng any coaney bing able to sccumalt pysl ad ran epi at ‘uly asi the Hast Aste courte The autho tdtion Te Bast Ai alto made ie pose t pure indo! policies tae were Highiyceatalized and to man spe about police Boal Confucian cle bested highly developed sate burencrces, which were necesty tthe shccvt of thie ‘cnplex made and indus plies ‘Second East Asian coutses ae fr more eicly homage coat thas mest other developing conti, Hie homogeneity ‘takes tr emi to bald cannenun ard inpleest poly. “Thiel, Ease Asian counter ae Heated with poor wseuts adores, and were therefore able to avoid what xe cal ‘he serouce ete lentil aout tendo dampen compet Sve peceee and olnduce warteful pola tuggles ovr the onl of sock resources: Une mary reeouce ich ou in [ain Amin and Afi, the East Asan antes were forced 1p wotk hid and to cess wath though mantacing, Fourth, Eare Avan counties benefited in vial ways fom Jspasese colori, Unlike itr Ween countspact, Japanese ‘colonials left behind tong ind Beran ected population, and an advanced infra Tse not bu lee, he Bast fan model bene frm po lous extemal decunstncen. The Col War allowed Jan ad ‘the "Romi sae’ spine Commniem &o prosper ander the40 Racing Delopeent brea of US defence spending end economic sd. Eat Aan ‘counties ao benefited from a ‘permis’ iterations poll {al eaveoet yp uo the 9808 that awed theo engage i messin ted polices (eg bing exports) and even to chet thee way to prospeiy by visting the wnderals od ent held by indstaaed coats, I conta, today's WTO Inks reiting subsides and TPR prctde developing counties fiom adoping key pets ofthe Bast Asan model Tha the ectet of the Ear Ain todel depended on this unigue set of tee and ext! condtons, This frees ‘combinion of crcumstnces cannot be repeated deewher Tha Anglo-American models consent wth wnverl Numan alee athe the Bist Asan mode, the Anglo-American model is concitent with aver arpects of ham este: namely the sat tendency fr enteepeenerti, the dese for Weal td the diving force of slGotre. The Anglo-Aneian models therfore appropiate to aod cen succeed in all societes. Its 0 coincidence tht 0 many cues ae rahing to aps th ‘bode these dye 53, The Myth Rejected “he civements of he East Asan etna del ae ot exlned by se ago spd endo Agaments tat xpi the sole of ug tena ad etal ‘droumatines la emcee of te Eat Asan model range fom ‘ragged to icoret. We conser thee agumeate i er ‘Conlaitn aa seen at a Hod of magi cules tht fox the development of + competent corp of ci sean, 1ugh etl of saving and edoadonal investment, aad a plat opaltn, Ths new view of Confcanim iffers marty rom {he view tha predominated wo the ros The later precentedDevelopment Myth $41 the elt nin eaoomiedrepnen. For example se ne was wily sed tar he Od Confcan sc Sentcy« Henry tt ped incamts athe op of the ‘oc ee a ann sd erent btm, need ‘ned pole to dans bara ove cs engine cpt is ‘view of Confucianism, civd servants in Korea and ‘abv wee wie repre Mgnt eo end ‘gfx By tate teeny Contarn nidn of mesocacy tf compete cranes pres had dees I a he Chl seve: corp had detested no rey in Rove that wl the ins he oun wae sending its pe mrt Plan tad the Pile fe aig Nene te ety ace wth he st Asian model (tet i ame Sot) st epend ne pence ofan extnocauly compet pl ee Tier on tee out iy oft tee ft ih el of pbiortorconpercy Bt ts compen fo al in aves Ts) war tel ough the tigen of ‘beam pliea ene and econ orcs hw ot 4 ley of be coms Ry orc "The chin a cb omogeety pled an inpora oe inthe ssc of th ant Aso ode eaggencd Sages fn in fc « ate soc In Tae ther hs bee 2 shee sey teson bron to jor she’ pups = he “Tusa he descendants ofthe niga fom Sout hi sie he seeds cosy and the Mn tose who mowed wh he Naot government fer deat by the Commas in s4p. aly, we stor dat Kore as te of th mor boogeneons Popes he we ses not inply ti flo to bn ati coseany on ey lnmes he tea cary The leer ics ila tie counzy: Tee saber rendre ba pein aoa ‘Surette een atten “The chin a st Ana Benet fom the sac of satan betaine Ah endowment of4 Raining Deslopent resources can craaly crete perverse pola and economic ‘ymca tis bud pes tat counties ae beer off HF they ate rexource poor, Dasing the Ite mieten and easly fwenleh conus the fst growing economic In the Word nd adans metre rious Among these wee count in ‘Noth and South Amerie, Oceania (Aneta snd New Zexand) sd Sed "The chim that Rast Asin cous emerged fom Japenese ‘colons ina fc beter poston than dd counties colonized ty Ween powers b misleading, For example, Kore lercy rio atthe end of Jpaneee elon in 1945 was only 28 per cont. Thi eacy no win ot mack beter dn hat of finay Afton counties when they emerged fom colons. By Conta, Argentows rey rao in p45 Yas ovr 90 per eet. More gently dere wee at esta denen Alan counts ‘whose post-colonial condos were eal or even super thors of Keres ‘On the mates of & propiows extemal envionment, iti cern re that Cold War pols bought large pols of ld from she USA to Kores and Tuan in the gee However, by the sgl thse levels of si fl signin and on eg ‘ree nt sch gree than te ere of ald it went to many {eveloping counties, Daring the 1608 andthe 197s, Cie and ‘he Pilpynay, for icone, weed US aid package hx wee fe panera athe given to Kees ad Taiwan, ba with mach et eet Alu, te esonomie Benes of Cold Wate ed ‘mat be blanco apie the cove of blag a omer sae aginst Communi. Ax fonte str, Kore sn Taian maintained tig level f defence spending (quaint o about § per eet or smote of asia income, compare 1 the wrk aeage of 2-5, pet cent) and bad» signe proportion of thelr able-bodied Soug woser inthe may service for ther years o onges. Tt [ales cation tat the Kovean Wa (570-8) destojed moe than hl of the conte manafctring ase and more than thee ques of the ex set nd ote infstroce,Development Myth § 43 Ie eve thar Hast Asian eoaomis elite fom » ore pormiive ecnatonal easement regheg wade protection fd IPRs Crain, the WO naw petals many of the pee: tee sssocated withthe East Asan model. at, having sid thi fame mast st view the pedecsor of the WTO, the GATT, to Tigh. My of the sates pared in Eset Ain were ako ‘Busine eels Ut at nrelted to export ae sil alowed ty the WTO. Pocymaker ean fd erendve ways to ensure tat broner bashes suis benefit export ptformance nee Bor example, govereats can eit an induct pack in epuet region and provide the busiaescs that loete thse ‘with subsidies forte development. Some Of these Kem Inght prodoce goods for de domestic maat with an ee ‘rune fee export tices, The government ending spenles in provide informtion and mackesng support for exporter, ‘spetily the staller firms. The goverment can 0 court Crporvorented TNC by exablablng expore-pocesrng Zones (Giz or can provide TNCa wth wbsir that are urelted to exports Qouever, se the cavens in Chapter 94). ‘ery poor counties with il tno Inds ase fae the moet signgean change, but alto have the great Inna ‘ita WTO rule. Very oor coun may bance erm eo {econ of and bides to mote base per of manucing Indus (th a tere, fod: processing, a een hese may ‘ot be iternadonally compete absent goveiment protection. Resources forthe sport of bile anf inst am be patent proceeds with the seach tat they fan ‘The government coul aso serve a 4 ceting howte fot sme ‘pet of mscatch might bing eset ogee for sep purposes ar pale penal apcson of erexch that hav ot been patente 1 cots where exiting RED capaies ae minal o onexta,the government cin enarize snd nice code ‘etearchen to Wenfy those spect af taitom hrowledge td local resoures that sn be patent. Natonal or tora soverme%s, local community orpanisnione er government Private sor pares could hold patent developed through ‘hi apron Govermants i devlpng cous can ue uss win ‘he eng TAPS ageemer to Cee ome patente The succes of developing counties in secuigconcesions on AIDS/HIV drops (ee above) sogests tat ts soapy coe ‘be wed inthe eases of other TRIPS Forsgn companies may ot ott exesptons to TRIP for restons of plese 5 developing counties press the nt. woth peng te sles th speak tothe public nts win the exsng TRIPS sqscement Developing counties might pure te ealenget to TRIPS colkvel in order to maximise the leverge and hare the cost of advancing aes ‘The iting TRIPS agreement provides for x grace peso’ uring, whi time developing counties are to move tne dopion of he TPR protections that preva i indostalned ‘oanek. This grace peiod ha expired for most doping counts, sod wil epite fr the poorest ofthese in aco. Ti heartening ‘tat the setvath of the dope vet HIV/AIDS rugs, many supporter of TRIPS bane suggested thatthe pace pstod be eee ele eel that developing counties pes104 Reining Devetoprent forwaed 09 the mater of obtlingsbstentilly longer and er- ible rice pesos for THUS “he TRS reine shu be calerged ay i ime to pes for eonsdeation of the ene TRIPS tejie, The dlsion of TRIPS aed the expansion of the con- ‘Eons under which eempons are gtd ate party word ‘hie deectons fr a new approach to TRIPS. Clete ction ‘reiting the TRIPS regime # more dan waeaned thie Notes 1. The cae for rina ply esol owene i ao ‘ste of pla nee oo) vse cdo egace rd spon of pnts propery # ere oll med ae crete mse 2. Sone ces nde be oan ate dee of competion [doy fom iri own wasene ager (au fcr eupee psoe 4. Fallosog the 596 pion, he Frac steal coma ‘Srl er ee of vig ses Even afer sm de ‘nme Poh sate atlod yr he rene see Inte company owed abut ype cet 9 mong se), 4 Thefgr sore Go dine Tae growths pote ‘ec betecn sound gh. The het coust ihe op sen ‘Sd pt eau gn pe cen rd We Germ ot caecum re the tate page a sete eee in ‘oaom sc tough SOR ec st ot ge Te oer ne onan he ay me, by eng ede of poh Bug Swedes, Dent, te Neher Snead fe UR, ‘us, mathe USA 1. Ine podocicnmsns SOBs scoot for ey lage proportion of rascal ice fesperve of te pc creat of he nay potcyeton, (6 OSC se pod ey eenPoy Ateratvs 2 108 7 staan he dil ot baw tht pep el he i a he 1. Some mnt f the golden dee sry dates pet gue Gate). 19, Boren sei snce many canis hve see sp of Pregrmme,bt havent psd et w aoe eb ‘hos the oun up he coment eon9 Policy Alternatives 3 International Private Capital Flows 9.) General Analysis. “Terminology Tovenationsl capil Bows const of pubic and pat Hows Publ loos se epi wns rade Between governments This can ae he form of biter flows, sec as one government ge ing aid or lending money another, of mute Bows, sch 18 ending fr mae! nttons the the IME, te Wold Bank se Aslan Development Bank and the Ince American Dereopmene Bank Teratioat perce capa ows cons of thee main pes fortign bask ending, porto investment (PP) and frcen di tec investment (FDO. Fog ank lending zfee co the Tons ‘xteaded by comet bunks or alltel isitons (ck the IMP andthe Weld Band) to dome publi or ptes tector borers PL sfers to the prchare of sock, bon Cleaves and other fina iosrament sued bythe pate scorn county other then one which the puschse ees. Tithe cae of bond, thee can ao be soved by the goverment {nd parce by pte inventom, PDI telers tote purlioe (of e"conling fret (lofined ata eae 1 po ett oF ie Secs ina bisnest in country oter than ne i Which thePolicy Aternatves 3107 lnvetor ede FDU ca tke sw forms ‘recail? investnent ‘which inoles the eration of new fly ~for example he consraeton of a fcery by fncign investor, ot “owl Investmer mamely mergers and asusons hat lvoe the tease of sets of exstng demenc fm ‘The com but purchase of el ete i ao cssifed as PDL. Epler ‘The compston of naruto cpt fave to devoing counties sited cramutly dng he 190, ‘The 19908 witnessed pronounced changes in capita ows to de veloping exact On the one hind, fregn allows gested fs conspence of changing patil tatinents? Om the het ‘nnd the composition of private capital ows sed, Hise orci lending by commer barks was te mon sign ‘9pe of pate capil ow to developing countie Bat ding ‘he 1904, commercial bank eu thi nding The wedacton {in lending stemmed fom two developments, Camnmeschl banks became wiry of king 10 developing counties following the “debt ess of the to Ghowgh the Ingest baaks were ale to ‘rss on the cos of thee une theugh vaso publ fomnced Inia) Bans ko fund he sere operas avalible Jn the tbe ancl envionment of the ign for mote sppeling tn lending The cine in bath foreign ing od tid to devping counties inthe tgoeeeved the importance ‘of atectng FDI and PI Sows, beth of which incre signi ‘any daring this pid. “These fandameral anges in he cmposton of intereational private epi flows to developing counties at std inthe folowing dt (World Ban, vous yeu) ae ow of loo term bank nding Goehdig bonds td ecg ens tne by he TMM co developing counties $US 7 Blion into, 55. bllonin spt, 34. Blo in 1985. io a eo, und “$y bilion in acer Net FDL and Poms to dereopa cousRecing Deloennt ‘were scant wnt the eggs but gre’ deans serie. Foe ‘ample, net FDL to developing counts wae $2. bilon in 97, Stu bllon in 180, Seq hllon 5 #97, $1606 billon in 2000, {ind Sug illo in 200, Net PT grew dente doing the Togo an we wa er in 970 and tg, $4.7 lon in 1990, 4320 hilion Jn zon, and Sy. in 100s There later dts eve tremendos vlliy a fctoe to which we rewrs belo Despite the rom of a FOL aeusepng cuts ‘Yer sare of gb! flows rahe sail an rams iy cocerited i ags mid name ou “Th aggegt igre psc above ser ey changes ia the Composition of lnnatinal pte ep Hows wo developing Counties ding the tyjor Hower, these data do not reveal feo inpostat facts The fit en developing counts recve {very tml proporson of all bal prvte capil Hows ven Since spp the sate of gal Poet hss gone to deel ‘ping counties has temsned eather low. Developing counties received jst 97 po cet of global PI ows in 199, 91 pet ent in typ, opr cet ln (98, a8 5.5 pe xa i 2000° The feeond i tut pave capt owe are highly concent in 2 all nuber of mide lacome, ge developing counts, The ‘rk Ba 005) septs that ower the et eon yea the top eight developing comnts have accounted fr 4 pe cent of tort nee Bows of PI eo the South, Ar with FD, the ges et ‘ecpent of PL has Been Chin, whlch has auraced 2 per cnt (of the developing county srl sce 198, China i flowed by ‘Mexico, Bred, South Aes, Ida, Than, Malai, and the Coech Repub By conus, the poorest counties reese very Le of the PI Rows tat go to she developing word In cor South Asin cous ade tan Ine (vith per cant of the Alevelopng wood toa) and gubSahurn couneiee other than South Atice ith 7.4 pe cat) tesived net PL. "Th plete for FD somewhat bg: developing counts sectved 13 pe cent of gabal FDI is 1991, 35 pet cent inPole Ataris 3 108 1994 489 percent in 1998, and t5.9 per cent in 2000. FDL ows to developing counties ae bly const i oughly ten luge midleincome counties howerer Dating 192-220, the ep en recipients of FDI dows were Gn descending ott (of importacs) Chins, Beas, Menco, Argent, Poland, Chis, ‘Malays, Tale, the Caeeh Republi sad Venere, These en ‘counties recived 70 pe eet 0 the FDI flows that went the deveoping world in 2001 By cont ow income develog- lng counties ecelve 2 very still amount of pevate cap flows. The World Bank defies low-income counties those in which per ean gios atonal income in aot wat 34) oF less) Lowincome developing counts recived js Sr lon ‘of net PDI ia 970, $02 billon In a98o, Sua billon in 1990, 59 bila in20co, ad 87 bilon in FDI in soe hey reece 10 Pin i979 and tg, $4 bllon in 190, Sb in 205, Sa $25 Kon in 200 espe uneverner ia the dhtibuion of cpt ows ant espe he sl share of global xpi lw that acl cere ‘0 developing counties, ncaberamitain hatply as age the atcion ofthese flows vis she ereton of open, erie ‘aes Gd other reforms), Ta sections 99.5 and 94 of ths ‘apes we discus the specie cine and polices advanced by edits a concerns eich ype of intecitona pate expel flow Before ding so, et ws review the general nein ete for the delopmental benefits of unfree Bowe “The neoleral ve on interning priate capil Rows “her are rumaros econo bets aocted wih sieeve mtrratnd priate cp Rows (Open eapal mainte give the public andthe private scotia Aevelopngcoanesseees to epi and othr eeaounen awh technol) that ae ot bag generated domes, Stier capil and other resources ae noe peered desea becase (of low incine, lw sings and/or ail gh. Ths nelbeasMO Redang Dereopment msn hat a iene in pie capa nos wil inmagurte 1 vetow ese by incensing te ain capita stock, product Ii and fncome Sar of govenment bonds to foreign invexo incense the eoures wane for pai expendi since these tie eather san thank to pblems wih a collection and the ‘ny demand 08 governmeae bales Tineroationa pene exp ows ean ao neeaseefiency nd poly dcp In devoping couse. "The ned Yo stct Fite capita flows and the het of capi igh by domestic /or foreign invest) ae owe incenvesfor the goer nent and ems total interational stds for paiey ‘Ssign, macrocconomi performance and corporate goverance. Forename govecumente ta ek oatac rae pital Hows ‘nl be tote ey to purrs andinfaonryeconomie polis (fee Chaps tna ad) and antcorapionmessies becuse investors pce a high ve on pce sei, easpeency and the rue of bw ‘Morcorer, the lberazaton of intrnasonal pate capital ‘ows meats thatthe flows wile alcatel by masks ther than by goverment ‘This shit ia te allocation mechanisms Increases efleney apd ears tha nance wil be dicted to nds thse pret thar promise the retest net comebuton to socal well. Thee, of cout, wl be he pojecs promising the highest ates of eu oral of the rons advanced above, te Sberlition of capital Bows is exental othe promodon of sound economic performance is developing counties, pata wi tga to Investment, cone and eonom growth Indeed, had the Aan ‘Enact of t97-98 ot intervened the IMF wat poled to oot is Article of Agseement to make the bration of all inernaooal private capil fows conta prpove of the and fd to eed join to capital movements ‘Wile we shoud eneie «carn cnn when ces to elton of iy Iq intend cpl flows be ‘irate goal shoul be compete ena account RealetonPoly Aterntves 3M ‘A growing umber of commentaon age that the Hbenisaton fof some sper of capital Bows shou be wdevaen only gr ‘eceaflberainon of other ser of the economy um ‘he indi scte, tainment of animal epee of fecal Aevelopmnt, and/or development of elem inom snd ‘equstory capac, This Known a the ‘equening gwen However this is aot a universally accepted vicw Macy well informed serves see the ete for sequencing ae tempor ‘pal cowols on the grounds that they inrvee problems (ech a errpson inet in rete, slow growth igh eel eae) that are far wore tha any oan tly seed th fala economic Horatio. ‘Advockes of sequencig eneily Gnd thc cse renga folowing nancial rises, a thee ate sin ae cotequees of prematre nani lbersaton. Not, following the Aan ‘isle sme studies (ren tome by INE sta have acknowkdged that ceran eypes OF conta Orr Interna eapal Bowe fo potest ued faa yay i dewloping counes proitel tht these contle ate temporry and that the te of the sconony ie Woeeased (Pad et al. toy, Kuceyni tnd Wiiaaon 205), 1s important co recat tat even song nivoctes of seuencing ther f 0 guest tht complete heaoaon tes he lima pu oral developing counties Rejection ef the gamer neceral lw on interationa capil fone ‘The re murerovs serous gener proteme sol wih untied intron priate cap fous All intrnnonl private cope dows are atocted — ale et ron tran dif mar ~ eth tv flowing tems Under» sytem of markerdcemined (cerned “tontng) eachange rs, lage, sudden inflows of cpl can pu peenate on the does eareney to apreiate (ee ao scion 9.) td2 Racing Deopment Caper +.) A age spprecintion ofthe domes cree problematic bene kt cn undermine the county bane of payments postion by causing imports wo tse (they become Teer expensive for donee consumer) and exports Gl ‘hey become mowe expensive for comumer a ther covet). Private ait infowr sv nese the potent for domest and foccign ives to have undue infence over domerse py raking (apt lowe depend on iver judgements tp Ing the strcneness of the exam and policy eavitoomen}) snd sie the spe of exceative fowsigncontol/ownerhip of Somes eoutes "The fips of tap inflows iy of cou, te posity of capital ostoms (eg dvidend parent frig veto ines ents wo frig nde, neato of stock portlin. ‘Soo, ge apa outs (med ‘cpa fight) can place ressre onthe dome currency to dee (teal zon 193 below and Chapter 1.1. Capital gh often induces ious ‘le of aitional ght ad eaeny depreciation, debesevice “ice and refucons in tock or other ae) vale This been parsed iestortend sal bases mae old ‘nw caplet brug aout by np fet depresdont ‘of eueacy 7 asset aes Ja hs ne, pital igh inedaces fr agra ening mcoeconome alerbies ad ean ‘neatly, Tice Cline in cana xi on ever tat resogiyeompromin ernoml performance ad ing ands (Garcalaly for the poo) and olen provides «channel or undue {otegninfence over domes don making, Fall, markets ae a ear ar ape ar governments to allocate inteneorl eal ‘lows ina ceficier, watt oe developmentally unpeedacve rmauner (we wl e blo). “The ase fr Keron of neta fo ok apparel by wince, [Numero eecent rose country and tose sels demoaseate concede ole enialelaioship betweenPoleyAteraties 3112 {he Ubeniston of capt foe and pvfonnance i terms of| Inflation economic goth or investment in developing counties (6a, Elcengren aor; Roda 198). Motcows, thet owt Inge boty of unambiguous emp evidence that shove tat the lisrtzaton of international prt capital Hew nrdees and/or aggravates importne problems la developing counts For eranple, numerous ste fnd that funciat Hecalieation is song asocnted with banking, cueney and Bene ret (Denisge Kan and Dergache 199; Welet 201), Otber ait ‘show tht Hberazation seo whan incre in povery td ine (Welle aed Hersh 200, ‘Thee seine fom a ety of cous hat wel ‘ee cnt contas haw ped an tera vle “rng cus pecs ote doeogment proce. pil entoswefer wo mesures a manage the ole, ome potion er allocation of capil Bows and/or maintenance of Festticion on investor eauance o exit opporsanises, Nem all indasinied counties wed epi! conte soccsfly ‘ove long petids Foe expe, Cotinntal Fup count ‘employe extensive ep canal ting the economic econ. ‘rudd followed Wodll War IL Even te USA ~arguly the home of fee capital Hows and alo eanty whose fee sytem hs benefited impor frm he est of ph pied fiom arornd the world wid senporsty capital cont a #963 ‘ecase thy were waceted by ecnomiecleumstnees Capi contols plied esidely Inporant even ding the igsgowth eas in Jape and South Koes and were sucessfully smployed in Basia the 19 and ison Ce and Colombia sctestfily wed exp contol dng the 15508 The lyon goreramett succesfally emplyéd sagen’ capital conte "994 and 1998 Despite te fc that epi conzls have fallen ‘tof faour («consequence of the egsnony of ncolberel views), some economical” sucesfl counties turh 47 Chian ‘tnd Tein conloue to employ extensive conto ver» vey4 Recining Delopnent of lavestnent dad omnia civ Among these exetience ‘he capil conte ie Chie and Cami az the on ones tat ‘many neoliberal lrg view ia postive ight (ee beow), Copal conch the potent chow eumarous tenes at pleas ve reson £0 vl Hig Titi andthe follming chapter, we ptt evidence frm av ‘ty of oun to saw that wel Seriged conta ofr vos ‘pps of foreign and dome epi ow can achiev important objective Fit, xp eontas can promote fancilsablyand prevent he ecnotic id sol devitaon thet ir aeocted Wh ‘conor eer, Seeond eapital comal an promote dese {ype of invertment and neg erngcmets (ha es ten/aaacing ta loge, sabe sad sustainable, crete: Cinployment opportunity, prot ivng andar, promotes ome egliy, and eneoinges tehasogy anaes eran) ‘hing and courage ler eile pes of investment oneing fates Third, ape conte an enlace democracy and ‘tonal stony by eduing the potential for specators and ‘slows ene actor fo excrete wadaeindunce over domestic {ecsioosmsing and/or contol over aon resouces General directions for skerratve poles teratoma fw held be managed va apt etre Capital contests shold target the specie wlnerbiltes coo: fronted by iferent economies ‘They ean be mntined on ‘note ot let permanent bas, or can be activate ws wateted ly economic ondions. The former type oF consol far more common betel. ‘Under # system of volsebiiry actioned contol, epi sonitls ae vied only when ecaname lndeatos eee hit ‘hey ate wate In the approach developed by Gubel (0 1500), padate, wnsperentepital eontle se atated when:Poly Ateraties 11S ver infrmation about the economy india tht controls we accesicy to prevent niseent mactoeconemic fagiies fom Celie in serious dicaliero¢exen ina tts, Thee se {tool evisined in this approach: “lp wer” and peed ‘bumps ip wites te simple meatoer that warn peers ‘nd investors thar «coun issppoaching high vee of isk in vaows domains (eg currency eae, the fight of foreign lenders orinvestors, the emerges of agi Banting neste, te) Once tp wie prado the coerpene of 2 pric wnebiy,poiymakers would thn inmate ep to coral hi ik by ating» ngetd, pated ea eon for what we ell speed bap, Develping conte a erat levee of wealth teguite ds tint p-ie sree. Tip wie wold hae fo be ppeoptitely sense subde changes in he dk environment and santa Seas kip wies would allow palleymatere to acta yradanted ‘ped burp a the ever sgh of belghtened tsk wel before oions fr ivestor pic had mater. Spc tip wes ‘and speed bumps fr foteign bak borowing and PI ae sco Jn secon: $2 and 93 belo, respectively The mn mason bohind dhs tp wre-apeed bump apposch to epi cntol i ‘ha eco slow ansible fancng and ivesent pte ly hey clint in seis economic difiuee 92 Foren Bank Borrowing ‘The nears! van Fore bank bars cary numerous mio an concn "The resources provided by form tank loins suplement the pool of cipal at it made avadabe by domesie lenders and faves. Foreign bask lane eereby provide the oppor fr level of fvesment and economic growth that a igh than16 Racing Owelpert ‘woud others be posible fa the absence of hi resource ‘Adakinaly these we eter developmental beset ssodhted ‘vt foreign tank borsowing Foreign backs often extend exit {lowe cv borrowers than do Somes banks. The lower Capital cons may tanalae ie higher levee of investment ad row Te conptiton betwen ogy and domestic aks may to fore the later to ofr lane a lower ets ond more gene tly tie tothe ellney and service standards oF thle freign Competitors Domest coarumes aod ems ted benef fom the compeiiion betwen foreign and domestic banks Toreign bank bonowang ako ace 2 Gcipning device on the macro: sed mcr-levels On the macroteel, foreign bank touring evant goverment and Sams for een sound Fnancl ervvnment and penalac hem for making por ches (Gough the widen of loans or the icreate in inert fae) Foreign bank boring therefore enforces the nce for appeopne ecosomic and acer) ply reforms. On the miele, the psformance of domestic Keme i enneed by Ue reansip ith frcgn lenders Domes fis that bor tow fom fog lenders ut meet the ingen standards for ‘suttworhnes and management competence ht forlga bas Impose on borrower. By encomping a pea harmonization of opening at management paces forcgn bark borowing Cotances esnomie iceney in developing coun. ejection ofthe necbera view ‘A good de of eg bank booing ha elle space ‘abtes and overmesernt thas agating trac Fale “The capital made aval by fori banks wl only promote podtve imestment and economie growdh if these fonds are Meat sppropeely Ga developmental ene). Thi ae gen rally aot been the ete. la counter thoughout te deveoping er, pate borrowers we fre Bank lows Gnance all Imannor of waprodeive or watt sce.Py Aternaties 37 Dining he spective bubbles hae common maura by find lisesi, age proportion of ftciga bank ane ance ays io speraive comercial lett development ani stock tnd (ee scion below and Chapter 49). This va ceniny the ce in many Lada Antetcan and Soubext ‘Asin cout falling final Hneration, In ion Providing fe! for spective bbbies, foreign bask borrowing, fn often danced investment a secon where tee sbi ‘overpay Inthe yas leading up othe Ain cial els, fonign lie financed good del of reravennet (eg in he reduc of amepher and elec) Excess capi Goi {the oucome of oveivestmen) places downvasd pra on| Des and expor earings In the absence of government tenure that infoence the alloction of lon proceeds, thee is tenon t expect tht foreign Inns wil ace investment projets of the highest evelopment oe soc vale, Te burly mates og Irs ‘complemen the scant volume of deme lua i thee loans se wed for developmentally unprocsve purposes Neotbr fe censlycorect ia thi chum tat frcign loa ate often taper tan loans extended by domestic lends. But the lower ost‘ ft lending ef dubious developmen benef this makes the we of these fade for unproductive purposes rmoce smc, which It ofa docs, ori lans ae alo soled with the intoduton and/or segrvadcn of problems of matuty and lcson iach Many mismatch sent the sian werner ines ‘ments at financed with short-term lorax. Theres borne ‘cele wo changer inthe pice snd aval of share {ret whenever try zs zneed alg osgn bank often fer shoreteam lune at very arc pce, something tha ‘cedlocontainedhoerowers it develping counties fd avant grout Bur severe Enon fc are crete ee when foe borrowes Fd ie aie or cont to tl ve’ the hot et debs for aew debe, Locational mismatch clers tothe sation10 Reding Deelopent when fossign deb mast be repel in crzney other san {Be borrower ome atonal errency. Locaoal iach the oem in developing cous sce the vat mao of fori loans most be sepa in asd eaten’ wach atthe US dol, the yen oF the etre. Lacon mizntch renders hoerowes in evcloping counties wubenble to depuediinge of thie own ‘oreny since thie ae the eos of debt serie. Both matty God lotta lsatch piped import roles in the recent oscil ees in Mexiee Bast As and Argeni. Foreign las ase moe poe to fight dk han are domestic loan, Foci lends ae ore pte cura dee ong In partir country t poset ches fom pteived sks ot {o pos eter opportuni Hewhere Not ee thse beau {overment in developing conte are at slew inoene the ‘ecstoe of foreign Indts in the same way eat ey might be tle oan domestic ban though pac dtetives or mora onion. A sudden witewal of foci lening on tiger ot ‘rscebate Sac insahiy, as was evden in many Eas A ‘Sune La 1997-98 and in Argenion i= 220-0. “Ther it 2 power end nd panty tonto een bark barr Thi of aur, ary recommends Neotel ate cet cote in thie assertion that foean loans provide incenver and rewards to govements and fre thar psue what they view a) "appoptne’ courses of ‘ion Gre Hkevine dacurage ot pene Snapeopite couse). ‘Given the previllg Melogel cite, form bank boro Ing therfore reiforces the necniy to purse the ecole! ‘uae sano other Que apt fom the inappepeaenes of ecber pce, fester suprising that neolbeas fl to cknowlge sui thatthe alcaton of fori loans (nd the decion to fergie them in ee of dtl is often high poled, Since the dawn of foreign lending, geopesis at ‘en played at last a import flea abeesve economicPoly Atenaties 319 sats in determining the alton and ere of bak lending to devecping counties Forign bank eng dots not fre does ast lover cal eats ar etanee tha ey, “There no anumbiguous evidence that compestion bewsen foreign sad domserie lender forces the ter to lower capa ‘ns Tis is beeuse damaric and ftegn Ieee do not seve the tame markets witha devopng counties, and therfore do ot acealy compete with one totherFosgn beaks general exe eit wo ger Gre (epi to ge fe ht are ‘50 ienina ck) len mall sod mes fe Aependet on domestic bak, In aon, hough domerc bunks temsehves are often ewstomess of fein banks it does ot generaly ante int eve cet for smal bouton ‘er Especially dung specunive booms, dome banks often ‘brain Ins fom foreign banks ee they ate to pate in spect epportniton ‘On i oom, intercon betwen forge and domes lenders oes gt rel in the tanner of sipetin operating proces tnd efeney sandieds. A erty rte fpla-opeang rgeemet might secomplih tis aim, but this abe often Drove © be else Frsgn lenders execs poor julgement fn weak overage dang specuave booms to et an extent than dowestie Indes. The afermath of recent onl eee in dewelping counties revel qe cay hat Forel bake sere partes to at mach onal exuberance! a wee domestic Danks Indeed, many ofthe recent spocltve bles in deve ‘oping ccutie woul Hel not have grown #0 precipita in the abwexce of the pation of frig lenders. “he haan of ering og dt cn he destin Toreign booing has sade counties honghout the develop Ing worl with a at ‘ebe overhang tha ean huge rvoee120° Rechining Deveopment vasfrs fom debios to eee counties Thee det badeoe hve fitted the pospets for lngeem exonomle growth, Inve wrought misery and vocal dewetaton, aod ave suseed Thespian af the majoty of te populition a he dewdoping ‘wold to the inperave of debt sevice The pene to sere Foceign debt bat sho couraged eavitrmental depedation 2 url succes ate offen depleted in a ace to ea sence fo ‘Gon change The IMP ses amet programmes Bat {often accompany det cies have induced vs economic nd tech ation n may egos ofthe developing wor Fly the condos aaced to fnelgn lng, especialy by the IME, ‘ode domesc pig nony tod even ck Semocriy. Pay aarratves “her are sever was o mange the permis ee! of feign de 1 is cred tha developing counties dratilly reduce dhe redanc on feign bank Joa There coutsies wl dey gia by ‘olathe permianble volume of foreign bank loan. Ie weld thetfore be of guns benefit polymers efercel suit callings on the volume of ae foreign lan that ea be inca Such elings might involve ati its on the allowable tio of Teesgn wo ttl lon, or might egal at Bets finance only 2 ‘rain prcetage of thls poets with foregone hat ave {cermin matty anor tocsdonal peo ‘Restetons en fon Dorowing could be deployed dynamic ‘ly cheamstnce wstran, following the up we-sped bam fponch (ee sstion 9.1 shove), Umer the apron, poly fake would monte tip wite that mesures the economy neat wo the cesaion of Forlgn leg. his invares ‘lesiting the ratio of te governmears hogs of exteney eserves fo fate aol publ forl-currency denominated bt {ih horses rece ester elt nthe cea Insoa). IF thn to approached an announced Usha’, plyPoly Atrios a4 ‘nik wold then sett gradu peed bun da prechded ‘00 inflows of foreign ant unt ccumstances proved Poli cans dacourage— rather tan prot he ue of ‘era lots sauce of ance, ‘The cx ystem cn be wed in snr of way to dcourge Aomesie borrowers from iacucng frcgn debt oblignons ‘Domest borovets might pay «fee to the goverment ofthe rl bu equa co «certain perentge of any forelg oen series, This corchage mighe vary bused on the stare ‘of the lou, rach that loans the inva loan tay Iminoich cata higher suchage. Abert the suchas ight vary bared onthe lve! of indebdaess ofthe parle borrower involved, such that Borovets who shen bold lege foreign debt cbligions face Ngherrrcaiges tha do es bed besroners, This tx based approach cold eneouage bot rowers tose domestic sours of finer sine thee wld ot ‘ory any surcharge, Another erate ght isle varying the sree according tthe spe of stv that wa being ened by forge loans. For instance, bower: might be ele for Data ett on foege loan srcharpes when loans are wed 0 Finance exporeasente praducton, ‘Note at polcymatts in Ce and Colaba employed tx Iued pois eo discourage frig Sonowing daring ch of the 1992. In Chil fogs las faced tx of 1.2 pe een pet yea pa by the Boowe) Chiesa pyaes leo pened 4 non-inrsebexting reserve segue of yo pet ent on all per of frcgn debts (od seed, on allow fnacal lnvesenes in the count. This ple, eed the teers te sqirement x, in phe frm May 192 to October 9 The ‘ete eres held agaist foreign oblgtions (and pac by the borove) were kept athe ental bua for ene pry tour Jest ofthe maaty of the obignon, Anchovies & Coombe sso employed reserve reguement tx specicalydesigoed +o dhcounge domestic borrower from ichting fori lows.122 Redining Dewopment ‘Begining in September 199, Colombian policymakers sequied ‘hat nn treat beating serrer of 7 percent be el for one pen aginst foreign lars wih ates of phcea months ot Jee (hin wat extended co Joan with « atuy ofp to Boe yer in August gp) Tn aon, foncign bortoming eted fo ml ext emsacions vas prohibied. Empied std of Chicas and Colombian poles conclude hat dey achieved thee inca abject, icing te edoetion in foreign borowing (ee Gabel seo, and references then “o be extent ti brroners sure a ast zoe fren leu otaon,# e meric tit he aac and es of hese fas be managed by the gore. Careful mangement of the allocation of foreign debe can caste that itr wred for proce, developmental purposes, Pir © fowselUbereaton in the types, any goverment ia Eat aed Souhent Asia tigi coordnted llcaton and cee 10 foreign tons, Poeymakers ia China ad India voy continue ‘ach practes (for deta, se Epc so), For example ‘mesic Chinese fame mart cbs gavernmentsppoval forty foreign borrowing undertaenThouph the Inn goverment hs bee steady Hotaling the nach sector dag the 19905, everthesrsnsine sc eteions over the lee nd erm OF the external dats hld yy domes me Responding he lestons of the 1997 Alan ely Tada continues to rete com mecl borowing i oegn cutee The Ministry of Finance rsnios annual eelingr on the te and interre rae on loans supe by domente Seine The Ministry ako rales om requests for fordig boroving on a caeby cane bas bing hs dternoe tho bated onthe mas scctte al ead of the proposed Ton, In the pprorl process, priory event longer era lon dt lane for party rectors. Fey in Choa an lea hve low level of extra indcednese and exer aoc fgity precisely bectse of government polices roads exteroal debt.Pole Ateravee 3123 In gerd poligmmakers shoud implement messes tat = sit otkernisedcourge domenic bortewer fom ing, Snnocng entice that involve locaton sd matty mama 1a addon to the ering, surchapes sed approval process Sscused above, policymakers can design tip wes and peed ‘bas dae ate designe to keep the lev of tatty alr locatoal mismatch below the ee theiolds Arp vite fr lccadonl mismatch i the roof fot sareney denominated 4ebr to domessccareneydenomionted debt wth shore tem blips redring agree weit in the elation A tp ‘ice fr matty mismatch i the ratio of shorecrm bt leagriern debt (uit forelg-cetncpdenoninuediigatons receiving gener weght eke eleultion). A gradated tees ‘of spec bumps tt requ borrower to rece tet entent of Joctoel or matuy mismstch wold be implemested whenere! ‘op wie revealed the extly emergence of these wulaeraiee comic rors could eplce the eer rita st 1y fe reaucion nen tering det dt clings Sirdar or speed tarps, itis ay counter tht economle owt wl come to «stand Af acces to frcgn leas (or any ether pe of capil tow) Is testieed, However reform that ae supped to be fenly 'o foreign invertors often sein clap af investment For cvampl, aftr the financial ei in Koen, neoliberal fae ‘efor ade the eounzy fr more open to forign capil infos However, these reforms didnot led to an ince i it ment. Intend the serge ‘ovement sao ie GDP i Korea Fal hom 374 pr ent daring 1990-97 to 139 po et dang By cones, governments that tke sep to testlet foreign booing cn epee atest ome ofthe nace tat forgone by tmplenentng mesures tat incene the poot of domende Sane. a this connection, measures that rei the ext op tions of domes sve end businees wos incease the po124 Recining Devoprent of capital valle domestly lace so much of iis presently Joe exp figs ee ection 93 Blow and Chapter). The ‘oornaton of ina poly and domente Snancl elton ‘Gn aso enue that domes Gem have nest o capa dat |r gomarated domentaly (or Chapters 3 an #9, rlorm is yet another means of inten the domestic resource base {Gee Chapter 113), More general many of te economic paiey ‘ef doe in Pr ace tended to geet higher lel ‘of invenent tnd ecoomlepowth I thee reforms ae cea fa the economy inthe medium 2 lng ter wi generate resource thet an be wed to Bounce sdiona oestne 92 Portiolo mvesement “he necberal we confers evn renter eva tan ober ors of xen ‘eal on recent counties. orto invesment (Pl) pues Sem and goveinmens aces to the vat po! of capital alabe on gba rani marke Therese cen to capital inmates too ee of increased investment and eonomie grows Pie compel pied and fliceaiplcaed by diveee and dlspered invertot in gba ‘apinl musket Acces to PI enhance the economy oer e- [isency and peformnce. Tht Deca tego eapal makes ‘hrowgh whieh Pe alcatel et len or non anal cies tha ae oot prone octrpton (af gorenmen bared Allocation of epi and some pes of bank ening, and these tnatet ate characte y rip pice acjrment. The reer iy of PT promoter dine and effceney on the pat of [govetent a msn ofr atc acters to capil depends (nvr confidence in thir opening paces, “Tho al of thete bene ae arocited with frign bake onowing ee econ ga above, they cbt tox moze sientPoe Aerts 3 125 depres in the case of PL becsse the pen pool of capi both giexer and mote gc Thos, axon dor PL have more potent promote economic growth, but also has let potential 0 serve a zewardpemly fanstion (ae tt hl Igy: Adaiooaty, PT promotes the dion of tak (nd thereby financials and invesnen) tough the wide dipper of set owsethip on capil mark. Pally, Pieper 0 foreign back bowel beste the formers associate ether wit cononsry not wih exe eon, Rojction of the nectiber! view Unreplied Pls rt condicie to development and cress cor agyontes port probi, ‘Thee i mo empiial suppor forthe agent tht PI indoces + viewous el of invesmeat and growth. As wth foreign bask bottoing ee seeon 9.x above) tee i no compeling tron to bekeve tat PI wl neceeaiye aed to Grane investent jet of the pstst development inporanee Ticontast to ianclfows tae ar mented by overeat, Lis sllocced on plabal capital mats in conan wih ae. errata Ta pci, shi meas hat spcalaive projects (each at comercial state development) ae more Sly to rece cpl tha are poets with = igh scl or developmen tal euch a the contraction of sou). These speculate projet ate ofen profiel tos group of domert and/or Tocegnivstors td eas inezeae Saves ad growth in he ‘ort and edi term. But pean a PI cotati fo broader economic devlpenent al often aggravates ineque ‘A high volume of uateputed Peto ao occas mat ‘conor beta. In» great many developing counteg the ellipse of specastve bubbles nthe set meet some Sigaicot to Baan eer (eg, Meso in ypu. Mali tnd Thad in 1957). Evidence shows tht Banca ees bare ‘eros, ating econo aed scl coy, the burdens of which126 Racing Development are borne dipropionate bythe poot. Stade find hae eer have een flowed by interes in porery ter apd income ineqully and by rdacdons in the Ite of economic growth (Wier and Hersh Soon and references thre) Fie not inherently perior other rms of ane “The pele can dha Ps sper oor forms of finance (partly domes bane borrowing) Se Inert. Porto Investor ate offen deme and diapered, But thee ates tue not necealy conducive to development. The hired record shows tat deveopment siete it fen stsocted with Cawited ~ eer tan dnteened investors This wat the (hue dering high gow ein Continental Europe, apy Base ‘is and atin Americ, Even Inthe USA ~ a county commonly sen © epitomize senseagh avesiment paces ~ eonomie, evelopment anil the Second Work Wae warfare by 16 Iason foence of varus srs, each at lnvesenenteoeson, publ-peate pata and even practices that would now be teed Sider tain” ‘herp price stan ascites economic arertary a sents franc gly ly bo acetates pelos rng to the exange re imation wade franca rsably nd ing onc [eaenls ae ko const in theca that te bal expt male that alecte Pl are characte by aap (enon ioe Stacaneos) price aijusiment mec. saa bene sr aset price voli ners uncersingy within perscult fron (e manager canvot be crn about the et of cba tng once ae ste tine), indues systemic esata en herby crate valet ofnancl es, Price ajormens fon eptal matte ae even ss much (mat mor) by inveor ‘him and market peyhology a hy eee sense eraknon OF invesimene prospect,Foley Akerstnes 3-127 Psi tigid to ence easy seve, The aden exit ‘of agen: quantity of PI Geld by either domestic o focgn Investor) can and hs Sndced avis eye of itn ight tnd eurencydepredaon debeservie dice and ase! pie eatin. Ax events Bast Aan in 997 make can, the ype Of viele yee ean cline In cy and pital mona financial asi As menioned ene, the nan cst of fn ‘tes ae dspropordonaely bone by the pote. lances ‘an be stile by the Mghe of say epe of capita, bt he igh ty of FY ender pace prone ih (his Ss nt to sy hn frig dec avesuent pace oF homogenate tection 94 sore) Teds ieporans to note that pla fight by domes pot Investor at problematic asthe exit of frcgner, even hog the ltec ae often east avin in ane eis scenarios, Indeed, domestic lavestors sometines eit eater than foreign Investors aeeute they ate mote swaze of probes intl own ‘economic, Capital igh by domes lvestor i pecblenate at Jose beatse of fx contusion to financial, but aso ‘bec nee the ingoranc of atti arcs mere van aeratve sou of facing and decent the dome tae base (nthe ltr ise, see Chapter +23) Tage, adden cute of PI ae notte only problem, Large, ‘sudden lnfows of PI are so problema nwo fa as they ae place the domestic citency under preerte to apposite i xchange ates are matket determined fee Caper) Inch se countrys sce in trating lage volumes of PI over Shor peti of tne a theace i export performance. Note ‘hat hese problem is inuoduced wheneet age FDI infos ome in cer 4 vey shor petod of tne ~ for example, Whe, Towign mesons pachae the mjoriy of set of sere lage domesc corporations) Ifthe exchange tei ed or pepe ‘within sone band, lage volume of portal or some Spe (of FDI ieiows can nevethces tax the rexorces of domestic.128 eciing Bewsopment monetary authors a they stuple to maintain the exchange fae wil a predecemied ang Fintoduces power abet inde costs en py 2eonomy, [Neotbeni cleate the dcpining eet of PI on gover ments We see the mater quite ferent, The constnins on polly sutonomy acted with PI equeniy exc « poveetal tol on developing econcmies,pueabay with egud © growth sn ving standats (Gabel 1996, ‘Governments say be hesitant t conser poles that might ape doecte or Eocign pti iets beni ey fet tha uch poles wil eigger 4 lng nse ene Ponto Inventors havea paral die for ny poly the they bleve sil indace or sega inftionbecnne thi rece he rte of {ete on thet ertnent. In the sealer view, gonerment ‘xpede (pedal when its dese faecal) wages ition. {See Chaper 1. for x age ofthe expenine-defc-infaton snenus) The perceived (howph incor) link berween Rovers ‘meat expenditures nfstion means that expanse) speadiag rogenmes become hanes vo astly once plymakers eck 10 ict PY at all eas, Bxpusionary money poy Ge, poley that rr in wed in domestic tere ne) ewe ‘nly problematic ight heen naire se «east forincesed speeding, ition and deceased economic own (Gee Chapt 112 for equ of this vie). I also becomes ‘more diffe foe governments to enact any poles tht ent investor fed beet thee wo are een te dicourage PL The range of contents on pleyatonomy ested het 6 ob ‘owaly nrc, But they are no Js power for ther wb "Not tht fei is ioduce eves and dec ovata ‘on poly soto Ina i environment, deme expense ‘educa aad inte ate fctntet ae often seo a heceety to restore the configenee {and induce the rem) of portfolio Inventor, The IMF condnser to press cotedonty Gl stdPokey Aterate 3129 ‘manent policy oa deveping couse when they aren tis ese te fc that empl evidence sgt hu th ste oes not wok. Catrconay poly fed wo covine porto inves tee wo South Kors ad Angnsns loving the recent finn ere, these elc nctened bakrapey ts And exibated over ik athe economy: Nowwittnading th ‘viene, my neohealsmlataln htsetorton of investor ‘onfideneneessiatseonctinary obeys rect the ine ‘when «mre expansionary pale i needed to promote econo ‘ecovey sd power vaneable socal groups, Polley aera Cont over Pl wart srt consider Tate cont ve conte inprtanty to cena devant nt ‘ange of cou. Careful management of PI can maxis the beefs and mii imine the cons asrocitd witht resource, Many counts aces relied PI forester periods of time: Fok stance, diag the evo deeder that followed Wad Wat 1 ll Jndatiled courts hes regulate PI infos and caows (aac 1999). The only exception was the USA, but even resoted © temperery cont ovr PI fr shor tne i the 19s when pobejmaters sought to enhance cenience inthe county’ Stein economy. deed, most Cone European ounte snd Japan mained etngeneconols ene pntobo fu ther capita Sows un the mie agtox “The ws of capital contol wat ot confined to indi tued counties. Conuols over PI wete the gotm in developing Counties ail neoliberal eonome reforms atined the stats of orhodoy: By any sexton sesount, controls ove porto Sot adher copa favs conibte import he teres of ‘numerous developing counter during the em of tee eager economic performance, samely se period between the tp} fd the eldzgyae Compated to the neoliberal ey, develop,130. Reding Deanne ‘counties «whole winexed impecasve econo performance ‘ring the tice deen ht flowed World Wa 2 dime when ‘spl consol wee use ther widely (ee Chapter 2), Coats ‘ve cpital movemats Ga addon to nde adwee ole) onthe signee to he stong economic performance of ‘many Bast aod! Southenet Asan coun ding he toe and fotos (ee Chapters ¢ and 7. Some devoying cunts cot tous er hve rey ed) ents oer Pinte sens of importa cies Bea ia the coment neolibencinute, «few lene developing counties have efetily tind consols over PI lnlos sad utiows Here we Mendy some recent examples of sich sae tes (or addins! examples, sce Gabel 20016 and Fein et 3009, Matin autores wie iponed resins over PI dating the cment neler en, The itech effort wa inex 2994 [AC dat ine, dhe Malis ceonomy recived dexmatc incense fn the volume of private apa indows Gluing, but not Tinted to, PD, Poteyakers were concerned that thee awe ‘wee fntng tn uneveneabe speculative boom in ral erate {io sock pies ond wet cretng preter onthe demenic ‘ten. In thi content, pleyal plemented stngent temporary inflow consol: These meatrsinhaded restietons on the maintenance of domesicureney-denomiated deposits Gd orzovig by foegn bal, conto onthe frsign exchange “xponue of domeste Banke and ee irs 2nd prions on the ale toforegners of domestic money markt secs wth marry of les than Ove yen, Renton eo hee meus spd nd rama 20 mach 20 hut shores were able to dante ther at planned in under 1 yea (they achieved hie gate dag thi tne). Daag he Pei tha the contol were in place, the volume of at priate ‘pial ingows aad shore ows fl sharply, the composPoy Atma 18 of thee ows wat dered signfcant,pressate onthe ereney ‘teed, andthe inaon of ck ad elevate pies Wet tae Psa 200). The ined, owe rextion vo ese femporay cattle wdercores th petal of speed bumps to stem inden dfs suesessaly ee blow ‘The Vaysan govern agin iplemented singer cone twols ovr capil infows and ontows in 1598 ding the Asan Sandal eis. This effet levohed versions on frig ees tthe dementie eatency on international air and edn of the carte, and on the convey of caren held out {he court The goverment aso erable » fed Yale for the domestic curtecy dosed the secondary mah io en, ‘nd peoibied nortesienes fom sein loa eles hel fo les then one yur By mumeros accounts, these mathe singent menus pe> ‘weed te fret fame impoion ofthe countrys moe ‘cblevrmns ne the county sao sipped ya svete pl ald scales doing hs tine. Comparing the ston of ‘Malis to other conncies Ua were pty tothe Asin cis, sods ft thatthe country’ capita ontls were respons forthe fter recovery of ft economy and sock make 2 well ‘the aaller redactions in employment ad wages (Kaplan ad Rods so) The er acherementy were oil eens epi ‘conta povided he govertment wth the abit to peat ‘efiony economic td socal poles uated by the hen Of addena! cpa fighe we IMP disapproval rom 1gp2 to 199 polymere in Chile and Colombia rogue Pathe extensively and suet Daring tht ne the Colombian govenment id oe allow focgn investors puicate debe instrument or eosporse esi Thi poly was signed 0 prevent the possiblity est Sac neti cout be indacl by the sudden exit of foreign over fm Bn inestnet holdings. However, thee wets no snicant contol, ‘on FDL “he ferential westent of FDI and PI wa nended ‘0 promo the ne of foreign lverent that the goveraeetdeemed importit to economic growth, wile protecting the ‘conony from dersiling Forme of Investment "The Chilean government hd ils motraons fr pcr towards Frsign invent in the country. By ing the revere reerent sx of yo pr eeat om foreign invextment, the gor Crament rouge to gen the time boton of investment ee ncourge mone stable For of sgn aver ee sects bys above), FDI and PL feed oneyeaeridece regener. “The gowerament also prevented peasionfand managers fom in vesting nore tha se pe cnt of thee atts abroad. Thi poly ‘rs lteded eo ech the poy of epithe by the most Imporane gpe of lige domestic inves ‘Numotos empl amar conchae tht fn contol in Chie and Colombia plaed «constr re in changing he omposion and many structure (howgh no he vole) of ‘er cpa lows pay afer the onzle wee stengthened in 19-95 (0 Grbel soo and reerences there) Following implementation ofthe poe in bth conten extra ane {agin general moved ror debt o FD, Poicyatr in bh Cle tnd Colonia were ale to implement grow alested polis ect the ik of foreign iver Spe ssn cad by thee Goa coouel. Pilly, the macroeconomic subliy Ebeeed thee franc contol conibated to the ancl ally exec by Chl nd Colombe Foming te Mexican ta the Asan finances For inetnce, while other counties in Late America were derastated by these vets et he eit ‘of invests fora egy and goverment bond marke), Cie ‘exe Ingely stable ad only Bogan to experience sigan ‘ection in prise capil iow In Aug! 1998 Tn the au of Chin, the paripton of fore eqly makes I dy lite ad the aces of is ley at ‘pene back emi phy ccameribed 6g lending to fori (eb prodded and aces t9 foreign curteney 8 reste). Ghinee residents alo face state cts t0 capt ex patton In fae, the Chinese goveroment ghtened exitingresins sod roduc new contol over Snance flowing the Asan cis As the exe unfolded, the Chinese gorerment somouncee new estition on fcgn exchange tenectiony ie ‘oving more thn Src, introduced new messne maing ‘mor dif for dome and nro cmmpanics Yo mae ‘money int and oat of the county and ntact acy Peles en Chinese companies ttt malaained egal Forel furry epost oveneae Smt, ding the Asi Sgn tts, Tatvinese suthoriee ao took meps to prevent egal trading of ands managed by Geoge Sonne (cca thee fee ‘were blamed for eusng the oc stock make to lh There 2 song ese retin heats of deme vests Us Foren ait! mara “The fg of domenicivetor im ndacefanclinsil soother economies, sch 8 eduetone nthe x bate For these resons, there ea tong ee for renting he ai ly of domes investors to bold forgn saings ants and ‘gag in pi fg, Th the aidagtay, dete being the fot lest Soren hor ia the word, Koren urate Gomme sei pathy beense of drsconisn contol on eal tows Chinn tnd India rowde more recent exiles Chinn mainanssiagent restos on the ability of domestic investor > engege in foreign PI (by nig che access to foreign cusenis in the frst place). nia 19, mlnalas fem contol over the ex Op ts of deere investors by rst tt acess to Free ‘ate Indian seen 0 fem ove snplyprehded om ‘manning feign curency acount abron, td Ten banks fannoe atest deposits oF extend loess in foreign cateace, $ecen ates bev shown that the combined effets of reste ‘Sno ape igi cneney specacon ed cen Wo Fre furrecy and Toms protected Chinn tad Indi fom tty arog the Asan ania cre134 Reding Development States Ge manag "The dacunsion above nugget tha hee are reveal econ for ‘managing PL. The sucons of blot sestscons PL ia Ch, Inds, Chile and Colombia sogests that foreign Investors do ‘ot necesty shan counter ith minimamstay eget ‘on foreign Investment oe ther Beane contola We rest ‘cen thatthe tar system can be wed to iene the comps fon and/or matuky Hretre of international epital Bows. "The potential for fight by dome investors and stress can Be tcdaced via hyplemetation of exe tien, probiions on ght, ‘or resticons on acess to fucign eaten. Finally Mata ‘experience soggests that temporay eons on PL can be efee- fea wel "The tp wice-speed bump apposch lends el othe design ‘of temporary contol over Pre secon 91 aor) Ap Wie ‘hat would revel the vlnerbity to Pgh ik hema of total acmmuatedforsgn PL to grows equity make apie ‘or pross domes expt formation. IF the lp wie reveled that. ‘county was paid vunenbe w Whe eer of PIaoos, 1 graduated series of speed bumps would sow the etree of ‘ laows und the rofl er became domentc capital Teuton gross egy maker espitlation incressed su ‘Sem or bec fereign Pt Fale Ths ped bump on P wuld Slow unnuanabe Snatcng pater etl anger proportion of fay Incense In investment could be anced domeneall, We ‘empha the inporanee of speed bumps governing afer of PI bra ehey eet thefts amet when the economy stente to frcgn investor advo ee ot at Hel x outow restriction to tigger invesor pie. hough not a mba for outflow conwoly iow resco aso reduce the Kequeney sh which they most be sed a dee magitde, Te bets mendoning tit ose ype of Plas ot amenable 0 the up wite-sped bunpappoach The dk ltoduced by what tre tema ofF lnc shee aces, such a date, cot be revealed by tip ites and hence cana be cubed by speedPoly Auras 3135 ‘bumps. This is becuse Sem are noe tote to rept dat on offline: sheet esis the balince sheet). The tke of offbalsncesher aces ae ft fom ti Sever sles emote de sigan ae payed by offs set ni ern he Asian full exis odd tos), ‘Tip wes and speed Dump for off balince sheet actives could be designed I pleyakers compel airs to ake these sires wanstent rough the Smpostion of porting te Ggatements In the abrenc ofthe wil to enfowe tansy polar ia deeoping counties wold be well advised to Ford donestic aor om engi in of lanceshac ct es. The Ia gorerment waely manne stngent rexcons tore saneicone in deiniven 94 Forelgn Direct Investment ‘The neater vw oregn duect investment (PDI) ie benef to developing counties bese f povies them wih aces 1 cia an anced ecologies inteuces supetie manager techie fnd business peste, ad provider Tk with and aces to foreign mates DI al other aston corporation acivites (ich tcchaology lecosng and proving cttact management without Investment promote he integuaton of developing cots no the global conom. FDL ia "en-wi!propoien for develop {ng countcks. What i good for the INCe that undee ese Investment I ako god for the coors that hot hem "The revive polices towary TNCs tut were poplar a developing couneies in the apéor and ignor ate products of ‘pide iologjen. In the ere nf evn bine ‘canoe no longer ppt ose tt goverment fd corpoatecbjecvr confit vs 1928). An ts eon ection, the former Bish European Conmisiont Leon Ban136 Reding Development ‘is comeet to note dha i frente tay dha ‘Sovsement i recognized for what source of ext apa, coun toa heathy exaemal ane,» basis for intense produc, dion] employment, effcdve competion, raion produc tion, technology tans, ada toute of managed knowhow” (Gitar 29913) thas ays been port to economic dewtopnnt Bt 1s inpecturee gestern tara othe gobainon of proaiaion snd corporate oni, Dating the last ow0 decades, ineenaional ede, prod Son proeaaee and compote ongaiation hare all unexgone Anime waseformitin, The combined ete of thee changes tender traction of FDI ll he move importante developing Up ni he 190g, the proion proses for a ingle om tmadty tok place mostly within the confines of singe cobatey (though necessary techsology and/or saw materials may have heen impor). "radon eterratonal wade consisted of nde in gods produced within the eonfas of sage aon Since the 98a the prodacon proces fat been broken down ino umeroue tae, mary of hich ze perc lolly fo what has been youl vrmed s gba production we, global ‘poducion network gal abe cain, and gl ase Ine 1 developing counties arc eneft from the newly ene eros of lnteratonal podacion and tee, they most eee 3 place inthe bal produton we ‘Cospraans have ko changed dig de lt two decades, "They ae 9 longer stance wih 2 pateaé ration. National oporatins ae incensingy becoming mannan or tele nresngly, cote corporate stir ch a0 RAD) anderen the corporate headguarten of TNCs are Joated outride the teonal home of was were formely eins comporsons “The emergence of wht termed a world car oc 4 global eat sd the eublishment of R&D cents In the USA or EuropePlc Aerts 3137 by Japan: of Korean-owaed computer fms exiphiy the few foun of eorporte exfaniaton. The sate matte of todays cexponton helps to expla thi pvr effets on developing counties, TNCs have no reno to expt tet has ‘conomia: beens the corporations hive moma inert ‘ats Bea out the inpotnce of thee change in ade pate proctionprocestes 4 orp crpuaaton Since 198s, FDI Int been going shout four mes fate han Gedo ater ‘ational ead, Since the 19725 the combed ouput of TNCS tas excel the woke of Intraoa ele. The eet at tv ineese in FDI Bowe to developing coanis uggs hat 4 preter number of counties ae being denn into te gal production web. Aboot 75 pe ent ofall world tae fn nan Faetured goods is conduted tough TNCs, and well oe hind ofthis avi is int-em Ge addon to inercounty ade FIs sapere to al athe fr fine pate i ows “The sub of HDI vende i fr preferable to forsgn bok ortowing to PL estab is parry inptnt,pen the recent insets in financial andthe cies tat have been auocsted withthe sen evel of Bgl, lac ows of foreigabsak Tess and Pr ‘Cunes tat ve unonnaty wconed FI hav permed imprein ‘The histo and emp! second shows st sever cous hve reaped the hones of » eral stnce towards FDI ad ‘other forme of INC involvement. The East Asan mice! ‘conomies and some latin Amescan counties one the lat 100 decades Gariclaly Mexico) ate exiles of the way Ost ‘open ate towards HDI (nd other ENC acy, a wel ‘© inemithnal ade) can promote indus! deveaprent export secs sol growth198 Recining Devaopment Covers tht rst FOL oe Stir OF TNCE ler (om baiten oF apt gh “TNCs wi wot leet in cour ta este te aie, sad wl exe counties haiti tection on exiting TNCs The {ration of bal production neworks andthe incensed Her timtion of FDI pales acs the worl have made xy or “TNCs to tloente any aspect of the production proce if the late in the host county becomes hose. As we have seen (sections 9 a9 above), the treat of et can Beep for tment poly towinde EDL and TNCs lo ine with appeopeine interoaonsl standude of openness, Rejection ofthe necbera vane sory FDI ond eter TNC aces fe bean ected ‘th rrnerou proba inte deedapey work These rotors ve tot dapper, Ta the rgoe and toe es adeaned many amen age FDI and the acter of TNCs in developing ents Fist ‘ee arp that INCe tanfereed abrlte ad napproprine! technology to developing coun, often ainfiated pies Second, TINGS execved enormous monopoly power ove poll and ‘ccnomie conditions within hos economies Tir TNCs eva tates hy engaying te prcice of "eal ping’ bere thet soba. Tense ping eles to a tae setegy tat Inviver manpulg the Aneel pce’ beeneen subd fof the same Hem 20 hat profir ate recoded in counter hat tana wer tes on foci Se, ome te recoded ‘in counties tat minal higher tee) Fourth TNCs cour ‘aged domes invesmeatbeease lel Kens could not compete ‘wih fregn fms. In ome instances, TNCs were ctied for Thee ivalement i expen tm dele goverment dt ‘were unfendly wo their nerete The most famous sch ex ‘le invaved che support by TINCS in the copper indy forPolicy Ateratives 319 ‘he mit coup of Chiles General Pinochet again Preidet ‘Alle. ein Alle ad tne te copper ines fl emi elestion. fe our view (ad hat of many he), these oncetns oat TNC remain vad ada though we lee hey ‘an be managed Hough appre poi seine Sats mangennt of 7) can asin ne bers Sr evepig cours. [Nowithaning the important problens dscited dove, PDI a be beret wo developing courte peopel managed by hot {governments Thi waive he desi of» pclae of incenes, rewards sel contol Thee ate many fcr t conser when designing poy tovarde FDL ~ mae the parcle mix of ‘outs invaed (as source counties ad boat count), he ‘9p of usr and er, ad the elon ad the tx regimes In ehich ie investmene undertaken ce belo), FOI ole shoul cea a integral component of « countrys nator develope seg, ‘The devebping cour that hare ended mote digsifandy fom FD he ks with TNCs ate tne tha have managed ‘hese inetents in 2 manne hae eonsient wit x ona development stg. Within thie parte, there ew range of poles tears FDI and TNCs tht hive proven effec la Promote inden and ther economic pola ‘po, Korer and Tafwin bl the nda foudeons on the basis of resteive pole towards FDL? Thete counter permite FDI onlin ena sco and exepin ph ees) Droibited more than malorty frelgn ownership in hey vectors Polcyrales inthe thre cote mented cl comer Te qreeno (ht specie, for expe, the proportion of le [Spore wel in the production proces) lo suas of THC ‘These requemens were ini atx ow eve aad hen ete increased oer tine ‘The goverinent ao eablsedlnie