Developmental States & Uneven Growth in GS
According to Evans, what are "developmental states"?
Peter Evans defines the developmental state as a type of state that plays a central and strategic role in guiding economic development, particularly through close cooperation with the private sector while maintaining autonomous bureaucratic capacity.
What was the IMF’s “mission creep”?
The IMF's "mission creep" refers to accusations that the organization has expanded its activities and focus beyond its core mandate of promoting global monetary cooperation and financial stability. Critics argue that the IMF has increasingly allocated resources and attention to issues like climate change, gender equality, and social issues, which they believe are outside its original purpose
According to Clapp, what are four key forces that have helped produce the expansion of the world food economy?
1. Spread of industrial agricultural model and transnational trade of food
2. Agricultural trade liberalization
3. Rise of TNCs
4. Financialization of food
What is the Dollar Wall Street Regime? When did it begin? What did it offer to the US?
Originating in the 1970s with the collapse of the Bretton Woods system, the DWSR refers to a new
international monetary order dominated by the U.S. dollar and Wall Street. This system positioned the U.S. as the dominant economic and financial power, with its dollar at the center of global trade and finance.
The regime provided the U.S. with significant advantages, including economic leadership, the ability to run trade deficits by printing dollars, and the benefit of seigniorage, allowing it to effectively tax the world through its currency. U.S. financial institutions, particularly Wall Street, gained immense global influence, while the system also enabled the U.S. to exert geopolitical power.
What led up to the Mexican Peso Crisis and what was the response?
Low US interest rates and high Mexican interest rates encouraged US investors to flood capital into Mexico. Once the US raised interest rates again slowly, US investors got scared and pulled their capital out and decided to reinvest in the US. Mexico, desperate not to lose this capital, told US investors to keep their capital in Mexico and that Mexico would back their investment with USD, not in pesos, due to fear over the over-valuation of the peso. Then, due to the Mexican Peso crisis, the US organized a loan through the IMF for Mexico, because if the peso crashed, Americans who had invested over the border would lose their life's savings, their social security, etc. This created a moral hazard where investors could take risks in investments that were effectively risk-free, because the US couldn't let those markets crash.
Explain the characteristics of the "predatory state" and the "intermediate state".
Predatory states: a state that is personalistic, clientelistic, in which public officials exploit power for personal gain rather than fostering national development.
Intermediate states: some predatory state behaving pockets within the state, the degree of embedded autonomy varies over time, some sort of mix. (Ex. Brazil, India)
Who were the Chicago Boys? How did they come to have a role in economic policymaking in Chile?
The Chicago Boys are a class of Chilean economics students who went on an education exchange through la Universidad Católica to U Chicago to study free-market principles under Milton Friedman (1950s–60s).
Their role in policymaking began when they were prompted to write "El Ladrillo" and, shortly thereafter, the 1971 CIA-backed coup marked the beginning of the Pinochet regime under which they were appointed economic roles in the administration.
What does Clapp use the hourglass metaphor to explain?
- Corporate concentration accelerated since the 1980s and 1990s
- TNCs extract the most value from food markets
- Farmers are paid little
- TNCs have increased their control over the food system while farmers have lost control. They can set prices, set standards producers must meet (size, color, shape, blemish-free), shift responsibility and cost of food safety and quality onto farmers.
- TNCs shape national and international policy
What was the logic behind financial liberalization? What are some of it's outcomes?
The logic was grounded in a belief that removing government controls over financial markets would lead to more efficient capital allocation, increased savings and investment, and increased economic growth.
There were mixed outcomes. Some countries experienced high growth while others faced significant instability. Inadequate regulation led to speculative bubbles, banking crises, or capital flight.
What does Gowan argue were the two potential threats to U.S. power in the early 1990s?
1. The potential for the European Union to develop into a rival financial center.
If Europe succeeded in building a strong, integrated financial system, it could undermine the U.S.’s ability to act as the central hub of global capitalism.
2. Japan’s state-led economic model
In the 1980s and early 1990s, Japan’s model of capitalism, which relied heavily on state coordination, industrial policy, and tight control over financial markets, was seen as a serious alternative to U.S.-style free-market capitalism.
Explain "embedded autonomy" according to Evans.
Embedded autonomy means that a
government is both independent and
connected at the same time.
It has autonomy to make its own decisions
without being controlled by powerful
businesses or elites, but it is also embedded
in society, meaning it works closely with
industries, workers, and other groups to
create good policies.
What are the various factors that led countries in Latin America to take loans from the IMF in the 1980s?
- Excessive external borrowing in the 1970s to fund development
- Global interest rate hikes (early 1980s)
- Collapse in export commodity prices
- Deteriorating balance of payments
- Currency and inflation crises
- Lack of investor confidence
- The IMF was seen as the lender of last resort, and turning to it became necessary to unlock other bilateral or multilateral aid.
Why were food markets linked to financial markets? When did deregulation of U.S. agricultural futures markets occur and what has been the outcome?
Food markets have been linked to financial markets through financialization of food, as investors began treating agricultural commodities as assets for speculation. This trend accelerated following the Commodity Futures Modernization Act of 2000, which deregulated US agricultural futures.
The result was that capital flooded commodity markets, contributing to increased price volatility ands food pricing spikes.
How did the Brady Plan change the way countries borrowed money?
The Brady Plan, introduced in 1989, fundamentally changed how countries, particularly in the Global South, borrowed money by facilitating the conversion of existing debt into marketable bonds with reduced face values, lower interest rates, and extended maturities, making debt servicing more manageable. It shifted borrowing from bilateral loans and loans from commercial banks to publicly traded sovereign bonds, increasing countries' reliance on global capital markets. This transition linked a country's borrowing capacity to its economic performance and credit rating, and reduced the direct role of multilateral lenders like the IMF and World Bank.
While it helped alleviate the debt crisis by making debt more sustainable, it also exposed countries to the vagaries of financial markets, increasing their dependence on investor sentiment and global market forces.
What are currency speculators and what were they doing in the 1990s?
Currency speculators are investors who profit by betting on currency value fluctuations, often without regard for trade or investment in the country. During the 1997 Asian Financial Crisis, they intensified instability by shorting overvalued currencies, like the Thai baht, after identifying vulnerabilities such as fixed exchange rates, large current account deficits, and heavy U.S. dollar debt. As speculators sold off these currencies, panic spread, leading to capital outflows and eroding confidence. When countries abandoned their currency pegs and devalued, speculators profited by buying back the currencies at lower prices. While they didn’t cause the crisis, their actions accelerated the collapse and deepened the economic damage.
According to Evans, what are 4 types of relationships that the state can have with economic actors in order to promote economic growth?
1. Regulate producers
2. Become producer itself
3. Assist new entrepreneurial groups in establishing businesses
4. Support and encourage emerging economic actors
Describe at least 3 neoliberal reforms that occurred in Chile under Pinochet and describe their impacts.
Examples:
- Privatization of State-Owned Enterprises (SOEs)
- Labor market deregulation and labor flexibilization
- Pension system was privatized
- Trade liberalization
- Financial liberalization
- Education reform (voucher system)
- Partial privatization of healthcare
Impacts:
- The Chilean economy experienced macroeconomic stabilization and high growth rates in the late 1980s and 1990s.
- However, these reforms also resulted in high inequality, weakened social protections, and social unrest—issues that have persisted into the present.
When did China begin implementing economic reforms that began to move the country away from a centrally planned economy? What reforms were initially implemented?
Reforms began in 1978. Some of these reforms included:
- Dual track system: economic reform strategy introduced in the 1980s that allowed market forces to gradually coexist alongside the planned economy.
- Household responsibility system in agriculture
- State-Owned Enterprises (SOEs) could sell surplus beyond planned amount in market
- 1979: creation of the SEZs to which foreign capital can enter.
What is Gowan’s argument about productive-capital and money-capital?
Gowan distinguishes between 2 poles of capitalism:
1. Productive capital (employers, industry) that
generates value through production, and
2. Money-dealing capital (finance, rentiers) that
seeks royalties and short-term returns.
- He explores how the financial sector has gained
dominance over the productive sector, reshaping
capitalism's development logic.
Explain the cause and effects of the Asian Financial Crisis.
The Asian Financial Crisis (1997-1998) was triggered by a combination of factors: overleveraged banks, unsustainable currency pegs to the U.S. dollar, large current account deficits, and speculative attacks on currencies. Countries like Thailand, South Korea, and Indonesia faced economic vulnerabilities, including heavy borrowing in foreign currencies and an overvalued exchange rate. When currency speculators bet against these currencies, panic ensued, leading to mass capital outflows, sharp devaluations, and economic collapse.
The crisis resulted in recession, high unemployment, and severe social and political instability across the affected countries, prompting widespread economic reforms and IMF intervention.
What are the East Asian NICs and what factors have been identified to explain their success?
1. South Korea
2. Taiwan
3. Hong Kong
4. Singapore
Their success can be explained by being strong Developmental States, Export-Oriented Growth (EOG), emphasis on land reform and investments in human capital (like literacy), conservative fiscal and monetary policies, and access to U.S. aid, markets, and security during the Cold War.
According to Fairbrother, why do we see a populist nationalist backlash to free trade and what does that mean for the future?
Michael Fairbrother argues that the populist nationalist backlash to free trade arises because many people—especially in deindustrialized regions—feel it has harmed workers while benefiting elites. This resentment is fueled by job losses, wage stagnation, and a sense that experts and politicians ignored the downsides of globalization. If these concerns aren’t addressed, he warns, the backlash will grow, leading to more protectionism and distrust in democratic institutions.
What have China’s economic relationships been like with Sub-Saharan Africa and Latin America?
China's economic relationships with Sub-Saharan Africa and Latin America have been characterized by significant growth in trade, investment, and debt financing, particularly in recent decades. China has become a major trading partner and creditor for both regions, with a focus on resource extraction and infrastructure development.
What are the “vulture funds” and how did they go about making profit?
Vulture funds are investment firms that specialize in buying distressed sovereign debt at a significant discount, typically when a country is in financial crisis. They then wait for the country to recover or undergo debt restructuring, often negotiating for the full face value of the debt, plus interest, through aggressive legal action or settlements. If the country refuses to pay, vulture funds can sue in international courts, securing judgments that force repayment with high interest or penalties. Ultimately, they profit by purchasing debt cheaply and then claiming the full amount, making substantial returns on their initial investment.
What is the contradiction that Gowan argues the U.S. faced?
Peter Gowan argues that the United States faced a central contradiction in its pursuit of global dominance through financial globalization. In promoting open capital markets and financial liberalization around the world, the U.S. sought to expand its structural power and reinforce the central role of Wall Street and the dollar. However, these very policies created an unstable and crisis-prone global financial system, vulnerable to speculative attacks and sudden capital flight. As a result, the U.S. repeatedly had to step in—often through IMF interventions—to manage crises that stemmed from the system it had helped design. This contradiction lies at the heart of what Gowan calls the “globalization gamble”: the U.S. bet that it could maintain control over an inherently unstable system without being overwhelmed by its volatility.