Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia

by Gary Gereffi (Editor), Donald L. Wyman (Editor)

Overview

Few observers of Mexico and Brazil in the 1930s, or South Korea and Taiwan in the mid-1950s, would have predicted that these nations would become economic "miracles" several decades later. These newly industrializing countries (NICs) challenge much of our conventional wisdom about economic development and raise important questions about international competitiveness and export success in manufacturing industries. In this volume economists, sociologists, and political scientists seek to explain the growth of the NICs in Latin America and East Asia and to reformulate contemporary development theory through an in-depth analysis of these two dynamic regions. Gary Gereffi and Colin I. Bradford, Jr., provide an overview of national development trajectories in Latin America and East Asia, while Barbara Stallings, Gereffi, Robert R. Kaufman, Tun-jen Cheng, and Frederic C. Deyo discuss the role of foreign capital, governments, and domestic coalitions in shaping development outcomes. Gustav Ranis, Robert Wade, Chi Schive, and Ren Villarreal look at the impact of economic policies on industrial performance, and Fernando Fajnzylber, Ronald Dore, and Christopher Ellison with Gereffi examine new agendas for comparative development research.

Originally published in 1990.

The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Product Details

ISBN-13:	9780691606743
Publisher:	Princeton University Press
Publication date:	07/14/2014
Series:	Princeton Legacy Library , #1189
Pages:	434
Product dimensions:	6.10(w) x 8.90(h) x 1.20(d)

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Manufacturing Miracles

Paths of Industrialization in Latin America and East Asia

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By Gary Gereffi, Donald L. Wyman

PRINCETON UNIVERSITY PRESS

Copyright © 1990 Princeton University Press
All rights reserved.
ISBN: 978-0-691-07788-8

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CHAPTER 1

Paths of Industrialization: An Overview

Gary Gereffi

Industrialization has been the hallmark of national development in the twentieth century. Development studies in a variety of disciplines have focused on the determinants and consequences of the domestic changes that take place as agricultural and natural-resource-based societies have moved into the industrial world. The process of industrialization, although rooted in national societies, is also a global phenomenon, and it is shaped by the dynamics of the world-system.

The United States rose to a position of unparalleled economic and political dominance in the two decades after World War II. The postwar economic expansion of the United States was fueled by a decade of reconstruction in Europe and Asia. The revitalization of direct foreign investment (DFI) and international trade that followed reconstruction laid the groundwork for a new international division of labor, based on increasingly complex networks of industrial production and sourcing and new forms of geographical specialization (Fröbel et al., 1981; Gereffi, 1989a). A number of newly industrializing countries (NICS), which have been especially prominent in Latin America and East Asia, succeeded in significantly expanding their world share in the production and export of manufactured goods, which allowed them to penetrate key markets in the advanced industrial countries and rival the global dominance of manufacturing firms from these core nations (see OECD, 1979).

Industrial development in the Latin American and East Asian NICS is the central focus of this book. The timing, strategies, and consequences of industrial growth in the NICS have been uneven, however. The phrase "newly industrializing countries" actually is a misnomer when applied to Argentina, Brazil, and Mexico since they established their first major wave of import-substituting industries in the 1930s and 1940s in response to the international economic dislocations caused by the Great Depression and World War II (see Hirschman, 1968; Thorp, 1984). These Latin America NICS sought to deepen their industrialization in the mid-1950s by opening their doors to new waves of DFI from the United States, Western Europe, and eventually Japan. Whereas foreign investors in Latin America traditionally had concentrated on natural resource exports in the mining, oil, and agricultural sectors, postwar DFI emphasized import-substituting investments in advanced manufacturing industries—such as automobiles, chemicals, machinery, and pharmaceuticals—whose output was destined primarily for the relatively large domestic markets in Latin America.

The East Asian NICS (Hong Kong, Taiwan, South Korea, and Singapore) followed a contrasting sequence. Taiwan and South Korea did not begin their rapid economic growth until the mid-1960s, after an extended period of colonization by Japan prior to 1945 and with a heavy infusion of American aid during the next two decades. All four of the East Asian NICS pursued policies of outward-oriented industrialization in the 1960s in order to generate foreign exchange via manufactured exports. During this initial phase of export expansion, the rapid growth of these East Asian nations was founded on light, labor-intensive industries like textiles, garments, and consumer electronics. In subsequent phases, however, South Korea, Taiwan, and Singapore achieved success in much heavier industries like steel, petrochemicals, shipbuilding, vehicle manufacture, and computers that were further removed from their original factor endowments (i.e., limited raw materials, unskilled labor, and small markets).

The Latin American and East Asian NICS are now among the most industrialized nations in the developing world, but they have followed different paths of industrialization. In addition, their industrial growth has had disparate economic and social consequences. During the 1980s, Latin American nations found it difficult to maintain their previous levels of economic expansion as they confronted staggering external debts, high rates of inflation, shortages of investment capital, and the growing social and economic marginalization of large segments of their population. In the social realm as well, the East Asian nations have performed significantly better than their Latin American counterparts in terms of standard indicators of development such as GNP per capita, income distribution, literacy, health, and education (see World Bank, 1989a, tables 1, 28–30).

Their current differences notwithstanding, the NICS in both Latin America and East Asia have been motivated by the principle of turning their diverse initial comparative advantages into dynamic sources of competitive advantage. This book will explore how this has been accomplished, with an eye toward identifying the obstacles that have been overcome in these two regions and toward the challenges that lie ahead.

Uniting Regions and Disciplines

The cross-regional comparison of Latin America and East Asia raises a number of critical issues about contemporary development. How did the NICS in the two regions become so industrialized? In what ways are their development trajectories similar and in what ways different? What role did government policies, domestic institutions, social actors, and cultural factors play in the development process? Is the current development crisis in Latin America a short-lived phenomenon, or is it symptomatic of profound structural problems that will require a major reorientation of these economies? Is the superior economic and social performance of the East Asian NICS in the 1980s a result of their outward-oriented development strategies or of unique historical and national conditions? Are the East Asian NICS models to be emulated by the rest of the developing world, or do they represent just one of a variety of viable paths of industrialization?

The essays in this volume seek to provide answers to these and other questions. The task is a daunting one, and it has led us to adopt an analytical approach with several distinctive characteristics. Our perspective is simultaneously cross-regional, multidisciplinary, and historical, since the global parameters within which national development is taking place are constantly shifting.

Cross-regional research is especially difficult. Although all national comparisons entail a variety of well-known problems, studies within a specific geographical region tend to be more tractable because the researcher is likely to encounter similar cultural backgrounds, related languages, and shared historical experiences. Cross-regional studies, on the other hand, demand the inclusion of a broader range of outcomes and possible explanatory variables, and the coverage of widely varying research literatures. In spite of these difficulties, we believe that a cross-regional perspective is invaluable because it affords greater theoretical payoff in trying to understand the diversity of development experiences in the world today.

The majority of the chapters in this volume are cross-regional studies of several countries in Latin America and East Asia. The essays that are not explicitly cross-regional compare nations within a single region. These regional chapters usually have been paired, however, so that the same topic is covered by different authors for both Latin America and East Asia. While the contributors to this volume certainly do not claim a mastery that would be required to do exhaustive cross-regional work, we believe that the effort to extend our analysis to include both the Latin American and the East Asian cases can help avoid the parochialism that often plagues the generalizations based on development research in just one country or a single region.

The essays in this volume are not only cross-regional, they also are interdisciplinary. This is because our examination of the determinants and consequences of the development paths followed by the Latin American and East Asian NICS covers a wide range of alternative explanations. The factors that will be analyzed include the comparative advantages of the NICS in the two regions; the impact on regional and national development of major historical events, such as the Great Depression of the 1930s, World War II, the Chinese Revolution of 1949, the Korean War, land reform, the OPEC oil cartel, and the economic recession of the 1970s; the role played by geopolitical factors, including the hegemonic influence of the United States in the early postwar period and Japan's subsequent emergence as a premier world economic power; the legacy of distinct cultural heritages; the effect of domestic institutions and local class structures on the mobilization of protest and repression; the influence of government policies on economic outcomes; and the character of national political regimes.

The authors are trained as economists, sociologists, and political scientists, yet it would be difficult to identify any of their chapters with a narrow disciplinary perspective. All of the authors have felt compelled to be interdisciplinary in their treatment of development issues. It is precisely the connections between economic, social, and political factors that need to be understood in order to come up with a realistic appraisal of the accomplishments as well as the challenges facing the NICS.

The broad historical perspective of this volume, which is its third distinguishing feature, allows us to focus on three categories of comparative outcomes in the Latin American and East Asian NICS: (1) the similarities that characterize all of the NICS; (2) the cross-regional differences between the NICS in Latin America and East Asia; and (3) the sources of intraregional or national variation among the NICS.

The most striking commonalities among the NICS in the two regions have to do with their relatively high levels of economic growth, their industrial diversification, and their prominence as exporters, especially of manufactured goods. On the other hand, the Latin American and East Asian NICS frequently have been taken to represent two contrasting paths to industrialization: Argentina, Brazil, and Mexico are seen as having given primacy to an inward-oriented (import-substituting) mode of development, while the East Asian "Four Tigers" are associated with an outward-oriented (export-promoting) model. These countries vary not only in the timing and trajectories of their industrialization efforts but also in the ways they are linked to the world-system. Geopolitical alliances, foreign aid, DFI, international debt, and foreign trade have played very different roles in each region's development experience. Each of these factors will be analyzed in the chapters that follow.

While these regional patterns are of considerable importance in helping us understand Latin American and East Asian development, national diversity among the NICS often overshadows regional similarities. For example, Brazil, Mexico, and South Korea all have contracted substantial amounts of foreign debt, but Taiwan has not. Brazil, South Korea, and Taiwan are major importers of oil, while Mexico is a major oil exporter. Mexico and Taiwan are similar to the extent that a single political party (the PRI and the KMT, respectively) has been dominant in each for the past four decades, while Brazil and South Korea share a common experience with more overt forms of military authoritarianism. Finally, there is substantial national variation in the industrial structure of the NICS in terms of the role played by foreign-owned firms, state enterprises, and different types of local private capital.

This introductory chapter will attempt to set the stage for the remainder of the volume. First, I will summarize the main economic achievements of the Latin American and East Asian NICS. This is the point of departure for all the essays, since the similar level of industrial development attained by the NICS in both regions serves as a baseline for their comparison. The main focus of the volume is on four countries: Mexico, Brazil, South Korea, and Taiwan. However, other nations are frequently dealt with in individual chapters in order to elaborate these comparisons.

Secondly, this chapter will identify the broad development patterns and strategies embodied in the historical trajectories of the Latin American and East Asian NICS. In contrast to the preceding emphasis on what the NICS have attained, the discussion in this section will indicate how their industrialization has taken place. Of concern here will be the timing and sequencing of distinct phases of inward- and outward-oriented development, the leading industries in each phase, and the changing constellations of domestic actors that assume primary responsibility for local industrialization.

Thirdly, I will outline the organization of the volume in terms of central questions, the comparative scope of each author, and the relationships between their chapters.

The Latin American and East Asian NICS that are the focus of this book frequently have been described as economic miracles. This metaphor, like all others, has the potential to mislead as well as enlighten. It is true that few observers looking at Mexico and Brazil in the 1930s, or South Korea and Taiwan in the mid-1950s, would have dared to predict that these nations were destined to become industrial powers several decades later. Nonetheless, these are not unadulterated success stories, nor should we accept the facile connotations of the term miracle.

The "manufacturing miracles" in the Latin American and East Asian NICS are no windfall achievements. They involved state planning, numerous entrepreneurial initiatives, and the sacrifices of millions of workers. Furthermore, economic growth in the NICS has gone hand in hand with authoritarian political regimes that often rose to power through military coups and the violent repression of dissident groups. Industrial progress in Latin America and East Asia, past and present, is not the result of divine grace, nor is its continuation inevitable. Rather, it is the product of the sweat, tears, and blood of the people who live in these nations. Only they can say whether they have been beneficiaries or victims of the miracle.

The Setting: The Scope and Pace of Industrialization in the NICs

The East Asian and Latin American NICS are a very heterogeneous group, with major differences in population, land area, resource endowments, cultural legacies, political regimes, social structures, per capita income, and economic policies. Nonetheless, these nations tend to have several dynamic features in common that lead them to be widely perceived as industrial success stories: rapid and relatively sustained economic growth based on a sharp increase in the manufacturing sector's share of total output and employment, a growing diversification of industrial production that permits each nation to make ever broader ranges of manufactured goods, and a fast expansion of exports with an emphasis on manufactures.

(Continues...)

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Table of Contents

• FrontMatter, pg. i
• Contents, pg. vii
• List of Figures and Tables, pg. ix
• Preface, pg. xiii
• CHAPTER 1. Paths of Industrialization: An Overview, pg. 3
• CHAPTER 2. Policy Interventions and Markets: Development Strategy Typologies and Policy Options, pg. 32
• CHAPTER 3. The Role of Foreign Capital in Economic Development, pg. 55
• CHAPTER 4. Big Business and the State, pg. 90
• CHAPTER 5. How Societies Change Developmental Models or Keep Them: Reflections on the Latin American Experience in the 1930s and the Postwar World, pg. 110
• CHAPTER 6. Political Regimes and Development Strategies: South Korea and Taiwan, pg. 139
• CHAPTER 7. Economic Policy and the Popular Sector, pg. 179
• CHAPTER 8. Contrasts in the Political Economy of Development Policy Change, pg. 207
• CHAPTER 9. Industrial Policy in East Asia: Does It Lead or Follow the Market?, pg. 231
• CHAPTER 10. The Next Stage of Industrialization in Taiwan and South Korea, pg. 267
• CHAPTER 11. The Latin American Strategy of Import Substitution: Failure or Paradigm for the Region?, pg. 292
• CHAPTER 12. The United States and Japan as Models of Industrialization, pg. 323
• CHAPTER 13. Reflections on Culture and Social Change, pg. 353
• CHAPTER 14. Explaining Strategies and Patterns of Industrial Development, pg. 368
• Contributors, pg. 405
• Index, pg. 407

Editorial Reviews

Economists, sociologists, and political scientists compare Latin America and East Asia to explain the impressive growth of the newly industrializing countries and to reformulate contemporary development theory through the analysis of these dynamic regions. Annotation c. Book News, Inc., Portland, OR (booknews.com)

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