Modelling the demand for foreign savings in developing countries: Testing a hypothesis with Latin American data

The demand for foreign savings is an important feature of the economy in many LDCs, and it would be helpful to have a better understanding of its determinants. This paper considers one approach to modelling the demand for foreign savings in LDCs. If the demand for investment shifts out more buoyantly than does the supply of domestic saving in response to current macro‐economic conditions, persistent demand for foreign savings will be generated as a normal feature of the development process. We test this hypothesis with elasticities computed from the parameters of investment and domestic saving equations estimated for a sample of 21 Latin American countries. The empirical results show that in approximately half of the countries in the sample (and most notably in Brazil and in Mexico), the demand for foreign savings is rooted in the parameters of the investment and domestic saving functions.     

A method of estimating the distribution of farm incomes in Turkey∗

The ‘naive’ idea current among many of the older nationalists of the Third World regarding the de‐industrializing effect of western capitalism on their countries is confirmed by the analysis of occupational data relating to the State of Bihar in India. Similar evidence is also available for Egypt and China. If we shift from models of what can ideally happen under capitalism in its international aspects and look at what actually happened until, say, 1914, we find that it often had opposite effects on the advanced capitalist countries and their overseas offshoots, and on the colonial or semi‐colonial economies of the Third World in respect of industrial employment, investment in productive assets and distribution of income. Technological change even today often carries highly disruptive and inegalitarian consequences for Third World countries. In the light of such experience with market‐orientated growth, an alternative model is suggested in which development proceeds by localized economic activities, distributing incomes and opportunities equally and keeping out ‘backwash’ effects on other regions. One major task of the economist in the future will be to explore the inner logic of such a ‘paradigm’, suggest the means of implementing the model, and ferret out possible contradictions. The Chinese (and perhaps Vietnamese) experience may serve as an example or laboratory for such explorations.     

Investment demand in early stages of growth: The case of Philippine manufacturing

Theories of economic growth have traditionally minimized the problem of effective demand by assuming that the only limit to investment is the volume of savings from all sources. We explore this assumption by investigating the nature of the investment demand function for a cross‐section of 160 manufacturing companies in the Philippines. We regressed investment on a number of variables suggested by theory, such as the rate of profits, lagged sales, etc. The major conclusions are as follows: (1) For small firms, investment is mainly dependent on the rate of retained earnings. (2) The dominant importance of internal fund sources for small firms is due to their view that maintenance of complete control is a primary constraint on investment policy. (3) Large firms’ investment, in contrast, depends mainly on accelerator affects, and and their investment behaviour is generally similar to firms in developed countries as described by Eisner and others. (4) Foreign firms generally exhibit behaviour similar in many respects to small firms, partly because of their reticence to share control with local residents. (5) Depreciation is not nearly as important an explanatory variable for gross investment as in developed countries, partly because of the difference in the relative sizes of capital stock and investment. (6) In numerous industry regressions we investigated the impact of tax exemption on investment, and conclude that tax exemption is not an effective policy tool for achieving significantly different investment rates. (7) A plausible general inference from our findings is that as development proceeds and the size composition of firms changes in favour of larger, possibly publicly owned enterprises, the economy‐wide investment demand function is likely to become more accelerator‐oriented in its behaviour.     

Political instability and savings in less developed countries: Evidence from Sub‐Saharan Africa

A four‐equation model is used to investigate the effects of political instability (PI) on the savings rate in Sub‐Saharan Africa. Utilising a comprehensive measure of PI, we find that political instability has a deleterious effect on the savings rate both directly and indirectly through a reduction in investment and economic growth. The negative effects of PI on savings rate occurs contemporaneously as well as with a lag. We also find that economic growth has a stabilising effect on the political system and that not accounting for these effects through a simultaneous equations model results in biased coefficient estimates. These relationships are robust with respect to model specification. The implication of our results is that ‘economic factors’ alone cannot explain the development process in Less Developed Countries.     

Economic Fluctuations and Growth in Sub-Saharan Africa: The Importance of Import Instability

The traditional thesis that export instability (XI) is deleterious to economic growth in developing economies has received mixed empirical results. For African countries, recent research suggests that the effect of XI is weak, but that capital (investment) instability (KI) adversely influences economic growth. The current study argues that in many of these nations, imports are likely to be critical to the growth process, while exports represent only one of the various sources of investment resources. Hence, import instability (MI) may pose a more serious problem than XI in hindering economic growth. Employing 1968-1986 World Bank data for 33 sub-Saharan African countries, XI, KI and MI variables are calculated for each country as the standard errors around the respective 'best-fitted' trends over the sample period. These instability measures and additional World Bank data are then used to estimate an augmented production function that controls for the effects of labour, capital, and exports. The study finds that although KI is still a relevant argument of the production function, MI appears to be even more important, while XI is extraneous.     

The growth of multinational banking,the Euro‐currency market and their effects on developing countries

This paper describes the recent rapid growth of transnational banking and lending, as well as it causes. Since the early seventies, a growing proportion of this lending has been oriented towards developing countries. The principal causes for this trend are outlined, and the changes in the mechanisms of the ‘Eurodollar market’ which made access to it easier for developing countries are described. The trends prevailing in developing countries’ financing throughout the seventies are then examined. Finally, the economic and political effects of the rapid growth in lending by private banks to the Third World are discussed.     

Financial liberalization in developing countries

This article shows that higher interest rates increase the extent of financial intermediation while increased financial intermediation raises the rate of economic growth. Further, increases in interest rates have favorable effects on investment efficiency and on economic growth. It is noted, however, that excessively high interest rates will have unfavorable economic effects. Such a situation can be avoided if the liberalization of the banking system takes place under conditions of monetary stability accompanied by the government supervision of banks. Bela Balassa has been professor of political economy at the Johns Hopkins University and consultant at the World Bank since 1966. His recent books includeNew Directions in the World Economy (Macmillan, 1989) andComparative Advantage, Trade Policy and Economic Development (Harvester Wheatsheaf, 1989).     

The queer Third World

This article attempts to align ‘queer’ and ‘Third World’ – grouping them in their common inheritance of subjugation and disparagement and their shared allegiance to non-alignment and a politics aimed at disrupting domination and the status quo. In assembling both terms one is struck by how, in the mainstream discourse of international development, the Third World comes off looking remarkably queer: under Western eyes it has often been constructed as perverse, abnormal and passive. Its sociocultural values and institutions are seen as deviantly strange – backward, effete, even effeminate. Its economic development is depicted as abnormal, always needing to emulate the West, yet never living up to the mark (‘emerging’ perhaps, but never quite arriving). For their part, postcolonial Third World nation-states have tended to disown and purge such queering – by denying their queerness; indeed often characterising it as a ‘Western import’ – yet at the same time imitating the West and pursuing neoliberal capitalist growth. I want not only to make the claim that the Western and Third World stances are two sides of the same discourse but, drawing on Lacanian queer theory, also to suggest that a ‘queer Third World’ would better transgress this discourse by embracing queerness as the site of structural negativity and destabilising politics.     

Economic development and population

Conclusion Neo-Malthusian analysis that high and increasing population density hinders economic development and results in poverty has been demonstrated to be false. The two major structural variables negatively associated with rate of population increase are wealth and socialism, and the major determinants of economic growth are level of economic development and economic organization. If our analysis is correct the various campaigns supported by AID, the major U.S. foundations and other groups to discourage population growth in Third World countries in order to increase their rate of economic growth are misguided. Every baby born is not only a new mouth to feed, but also within a few years two more hands to work. There are great potentialities for economic growth in the Third World that await only the proper economic organization to be realized. That is, if the two hands are used efficiently, they will more than feed themselves. Attempts to reduce the birth rate by propaganda and making contraceptives readily available, ignore the structural causes of high fertility and so are not likely to succeed in reducing the birth rate. Our data suggest that only when the structural causes of high fertility—the poverty and economic insecurity associated with capitalism—are removed is the birth rate likely to fall significantly.     

Budgetary Impacts of third world arms production

One of the more intriguing empirical findings in recent years is evidence that a number of Third World economies experience a positive relationship between military expenditures and overall rates of economic growth. While this result has been found in a number of individual studies, no satisfactory explanation has been put forth - presumably defense expenditures have both positive spin-offs, tending to support growth, and a number of negative aspects such a crowding out of private sector investment which tend to reduce overall growth. It is something of a tautology therefore to argue that those countries experiencing net positive benefits from defense expenditure simply have an environment where the net positive effects predominate. The purpose of this paper is to show that Third World arms producers differ considerably in terms of budgetary priorities from their non producer counterparts. More importantly it can be demonstrated that differences in budgetary priorities between these two groups of countries is consistent with the fact that arms producers tend to obtain net positive benefits from military expenditures while non-producers find their overall rates of growth declining with increased allocations to defense.     

Denial and Distancing in Discourses of Development: shadow of the ‘Third World’ in New Zealand

Abstract

Anxieties about development in New Zealand show up in a deep-rooted fear of the ‘Third World’ in the country. We examine how the term ‘Third World’ is deployed in media discourses in economic, social and environmental contexts and how this deployment results in a ‘discursive distancing’ from anything associated with the ‘Third World’. Such distancing demonstrates a fragile national identity that struggles with the contradictions between the nation's desire to be part of the ‘First World’ of global capitalism and the growing disparities in health and wealth within it. The shadow of the ‘Third World’ prevents New Zealand from confronting the realities of its own inequities, which in turn comes in the way of a sound development agenda.     

On the problem of identifying the engines of economic growth

This article investigates the empirical relationship between sectoral growth and income growth and in so doing casts doubt on previous studies which have argued that either export or agricultural growth enhances total income growth. It is shown that the evidence from the correlation and regression models used to date is inconclusive and that much of the measured impact of sectoral growth on overall income growth may be spurious in the sense that it can be explained by growth in the underlying inputs. Professor Rittenberg’s research interests include sources of economic growth, stabilization/liberalization policies, and Third World debt, with particular emphasis on the Turkish economy.     

Enhancing food access in Africa: The Botswana experience

A combination of drought and misguided economic policies have resulted in decreased food security and frequent famines in many African countries in recent years. Botswana is a rare exception that has survived its worst drought without a single death from hunger. It has adopted a National Food Strategy that has both long term and short term policy dimensions. The long term goal is to increase food security through improved agricultural production and diversified rural economy. In the short term, the goal is to provide food security to the most vulnerable segment of its population. The two components of the food access program are human supplementary feeding and cash for work. The article examines Botswana’s experience in enhancing food security, based on an exploratory case study of the public employment program (cash for work) in the South East District of the Republic of Botswana. Sisay Asefa is associate professor of economics at Western Michigan State University. His current research is in country development studies, African (economic) studies, and rural/agricultural development studies. He is the author of “The Role of the Government of Botswana in Increasing Rural and Urban Access to Food” inSouthern Africa: Food Security Policy Options, edited by M. Rukuni and R. H. Bernesten, 1989 and editor ofWorld Food and Agriculture: Economic Issues and Problems (W. E. Upjohn Institute, 1988).     

Interest rates,saving, investment and growth in mexico 1960–90: Tests of the financial liberalisation hypothesis

The theory of financial liberalisation argues that rising real interest rates induces more saving and investment and therefore acts as a positive stimulus to economic growth. This hypothesis is tested for Mexico over the period 1960–90, making the important distinction between financial saving and total saving. Financial saving is found to be positively related to real interest rates partly through capital flows and partly through domestic asset substitution, but total saving is invariant with respect to real interest rates. Investment is positively related to the supply of credit from the banking system, but the net effect of interest rates on investment is negative. Furthermore, taking McKinnon's ‘virtuous circle’ model of economic growth shows no favourable effects of interest rates on economic growth. It is concluded that any favourable effect of financial liberalisation and higher real interest rates on economic growth must come through raising the productivity of investment.     

Food security politics and the Millennium Development Goals

This article reviews proposals regarding the recent food crisis in the context of a broader, threshold debate on the future of agriculture and food security. While the MDGs have focused on eradicating extreme poverty and hunger, the food crisis pushed the hungry over the one billion mark. There is thus a renewed focus on agricultural development, which pivots on the salience of industrial agriculture (as a supply source) in addressing food security. The World Bank's new 'agriculture for development' initiative seeks to improve small-farmer productivity with new inputs, and their incorporation into global markets via value-chains originating in industrial agriculture. An alternative claim, originating in 'food sovereignty' politics, demanding small-farmer rights to develop bio-regionally specific agro-ecological methods and provision for local, rather than global, markets, resonates in the IAASTD report, which implies agribusiness as usual 'is no longer an option'. The basic divide is over whether agriculture is a servant of economic growth, or should be developed as a foundational source of social and ecological sustainability. We review and compare these different paradigmatic approaches to food security, and their political and ecological implications.     

International assistance and democracy: Assessing efforts to assist post-communist development

This article surveys political development frameworks for analyzing the post-Communist transition to political democracy. Parallels with postcolonial events in Third World countries should caution against overoptimism about the prospects for mutually reinforcing economic and political development. In general, the study of Third World political development suggest that rapid regime transition with low mass participation is unlikely to result in sustainable democratic politics, especially where severe economic dislocations are present. High rates of participation during regime change may lead to rapid disillusionment with the performance of postrevolutionary government. It is thus argued that states wishing, for various reasons, to assist in smoothing the transition from communism should pay heed to the cautionary experience of Third World development assistance and monitor the political dimensions of the transformation, such as the stability of coalition governments, electoral turnout, ethnonationalism, as well as the orthodox economic indicators like inflation and rates of domestic investment. With respect to international assistance to the former Communist countries of Eastern and Central Europe, the article shows that the capacity of the Group of Twenty Four (G-24) donors to aid economic recovery is well below what is requested, or needed. Despite hosting a donor summit, the United States is taking a far less prominent role in the post-Cold War donor community than was the case in the analogous program for post-World War II recovery. This is having an impact on both volume and coordination of assistance. Finally, a strong, possibly ideological, preference among donors for finding private sector recipients for the bulk of assistance may erode the capacity of the post-Communist states to provide both infrastructure and political stability needed for investor confidence. Those making decisions about levels and modes of Western assistance should look beyond economic indicators of privatization as criteria for continued support and retain, where possible, political development objectives in both financial and project assistance. While we must not assume that the record of supporting democracy in Central and Eastern Europe will prove to be any better than in many Third World regimes, the greater security salience of Eastern Europe’s stability adds urgency to the task of applying political development lessons to the post-Communist experience. Malcolm J. Grieve specializes in political development and international political economy and in his current research is exploring the connections between the two fields with regard to analysis of the post-Communist transition. Recent publications include “Economic Imperialism”, in D. Haglund and M. Hawes, eds.,World Politics: Power, Interdependence and Dependence (Harcourt Brace Jovanovich, 1990) and “Debt and Imperialism: Perspectives on the Debt Crisis,” in S. Riley ed.,The politics of global debt (Macmillan 1993). ...in Central and eastern Europe, we are seeking to demonstrate in practice the idea that free government can mean good and stable government, and that free enterprise can mean economic opportunity for all.U.S. Deputy Secretary of State, Lawrence S. Eagleburger, 27 February 1991. There is nothing more difficult to arrange, more doubtful of success, and more dangerous to carry through, than to initiate a new order of things.Machiavelli, The Prince     

‘Subsistence’ Readings: World Bank and State Approaches to Commercialising Agriculture in Post-Communist Eurasia

This article explores the World Bank’s project of ‘returning agriculture to the market’ through land titling reforms. It describes how World Bank and national government strategy papers distinguish between a ‘commercial’ or ‘entrepreneurial’ sector of farming and a ‘subsistence’ agricultural sector in post-communist Eurasia. The extension and growth of the former represents the desired goal of policies since the 1990s, while the latter’s numerical prominence in many countries constitutes a source of concern for authorities. The article argues that ‘subsistence’ represents a misreading of the rural population that confounds self-sufficiency with the size of farms, and casts millions of smallholders as non-economic and alien to markets. It focuses on two post-communist countries (Romania and Ukraine, extremes in terms of the introduction of property rights over agricultural land) to argue that efforts to reduce ‘subsistence’ translate into measures that increase the households’ monetary needs and are therefore going to be resisted. The article relies on analyses of World Bank and national government’s strategy papers as well as ethnographic data collected in 2013–2017 in the Ukrainian-Romanian border region.     

From national bourgeoisie to rogues,failures and bullies: 21st century imperialism and the unravelling of the Third World

The East Asian financial crisis, the bursting of the dot.com bubble and the launching of the war on terrorism can be seen as three aspects of a single historical moment that marks the passage from one strategy of US imperialism to another. No longer based primarily on financial globalisation as the means through which the power and control of the corporations and government of the USA is extended over the world, as it was in the 1990s, US strategy is now more openly based on the direct control of productive assets and territory. This historical moment has also marked the definitive end of the idea of the Third World and its associated ideology of Third Worldism. Although this end has, of course, been repeatedly proclaimed, and contested, over the past two decades, this article argues that the idea of the Third World, and the associated ideas of development and non-alignment, were predicated upon the core concept of the national bourgeoisie and associated notions of the inherently progressive potential of nationalism. It traces the historical emergence of this idea in the work of Lenin and its subsequent trajectory during its cold war heyday. I emphasise that the idea of a united and rising Third World had a greater reality as a hope than it had as an objective historical possibility. The present moment in US imperialism is one where even that hope cannot be sustained—thus the definitive end of the idea of the Third World.     

Small-Scale irrigation and income distribution in Ethiopia

Abstract

Irrigation stimulates agricultural productivity and economic growth, but this may come at the cost of growing inequality. Using data at community and household level, this paper analyzes the distributional impacts of irrigation in Ethiopia. Regression analyses reveal the direct effects of irrigation on expenditures and labour demand, and the indirect effects of irrigation on food prices and expenditures of non-irrigation households. The results indicate that past development of irrigation stimulated growth without deepening inequality, and that irrigation decreased dependence on food-for-work programs. Thus, irrigation has played a positive role in the development of Ethiopia.     

Modernist discourse and the crisis of development theory

The field of Third World studies is thought once again to be in a state of crisis, thanks largely to disillusionment with the once-dominant dependency “paradigm.” Amidst renewed interest in developmentalism and the clamor for an alternative to dependency, this article argues, first, that the major achievements of dependency theory remain largely unrecognized because the approach has been so frequently misrepresented or misunderstood. Whatever the ultimate status of dependency’s theoretical claims, it contains elements of a countermodernist attitude which ought to be retained in any new approach to the study of Third World development. Second, the article argues that, despite these accomplishments, dependency remains trapped, along with developmentalism, within a modernist discourse which relies on the principles of nineteenth century liberal philosophy; that it treats the individual nation-state in the Third World as the sovereign subject of development; and that it accepts the Western model of national autonomy with growth as the appropriate one to emulate. The final section of the article discusses the efforts of a number of scholars to ground knowledge in local histories and experiences rather than building theory through the use of general conceptual categories and Western assumptions. Although these ideas currently remain on the margins of Third World studies, it is to be hoped that dependency’s loss of intellectual hegemony has at least opened up a space for them to be taken seriously, in the same way that dependency was itself taken seriously in the late 1960s. Kate Manzo is assistant professor of political science at Williams College in Williamstown, MA 01267. Her research and writing interests focus on theories of development and on the nature of South African change. She is currently at work on a book entitledAfrikanerdom and Race: The Nature of Ideology in a Changing Society.