Massachusetts lost one of its more important thinkers earlier this month. The economist Alice Amsden passed away suddenly just as colleagues thought she was on her way to recovery. Like many intellectuals who have contributed much to our understanding of the world, hers was not a household name, certainly not in her homeland. This is no accident for several reasons: her work focused on the economic growth of other countries and, perhaps more significantly, Amsden debunked much of orthodox economic development theory. As a public intellectual, she will be missed in a presidential election year when we are sure to have our fill of free-market platitudes (see for example the conversation opened up by Representative Paul Ryan).
Getting Prices Wrong
Amsden’s research shows us that the Asian “tigers”—especially Korea and Taiwan—grew their economies by turning the “free-market” prescription for development on its head. Rather than retreating from the economy, in those countries, the state actively promoted economic development adopting an industrial policy, protecting the domestic economy from competition, subsidizing strategic sectors and, underlying it all, “getting prices wrong.” Put differently, the government shaped "market" decisions by distorting the prices of two key elements: foreign-exchange rates and long-term interest rates. This provided the incentives and capital needed for domestic industry to develop in an otherwise hostile global climate. For current startling negative affirmations of this policy approach, see the recent WTO seminar on the impact of floating currencies in South Africa and Brazil. Both countries are experiencing sharp de-industrializing pressures in response to their currency volatility relative to the dollar.
To be sure, there are deeply objectionable components to the state-led development strategies that Amsden studied. Most of these "tigers" have severely repressed their labor movements, delayed and compromised the emergence of democratic institutions, contributed to environmental degradation, and undercut industry in other countries. However, the same is true of the “free market” economies without any of the benefits (including a robust industrial base) of the state-led strategy.
What makes Amsden’s passing a tragedy for Massachusetts is that her counsel would be wisely followed in this state were it to address the serious challenges posed by both climate change and the relative economic decline of the United States. Neither of the price mechanisms referenced earlier are available to the Commonwealth, however, other policy options surely are. For example, to impact interest rates, both Taiwan and South Korea nationalized their banks. Of course, on the Chinese mainland, banks were nationalized to begin with.
In her last book, Escape from Empire, Amsden demonstrates that development banks were used throughout the Global South to identify successful investments, build a technically competent layer of managers, and emphasize appropriate technologies. While we may prefer other priorities and investment targets, for example facilitating cooperative development in working class communities ravaged by capitalism, Amsden helps us make the case for publically owned banks.
For Massachusetts’ peace movement, Amsden’s voice would have been particularly helpful as it embarks on a statewide initiative to end the wars immediately by reducing the military budget, taxing the rich, and funding communities through renewable technology investment, saving programs that matter to everyone (like Medicare, Medicaid, Social Security) and targeted ones like housing, veterans benefits. One venue to build a conversation on these topics is the upcoming Global Teach In (on April 25, 2012). More details next week at the Majority Agenda Project's website.
Looking forward at these issues and conversations, it is clear that Amsden's passing opens up a space that urgently needs to be filled.
Suren Moodliar is a coordinator of Massachusetts Global Action and a member of the encuentro 5 collective. He is also an organizer of the Majority Agenda Project.