↳ Growth

September 19th, 2020

↳ Growth

Shape in the Green

SPECIAL ECONOMIC ZONES

Since the first export processing zone was established in Puerto Rico during the 1940s, special economic zones (SEZs) have proliferated to number 5,400 across 147 countries and employ more than 100 million workers. While the zones have been lauded for generating economic growth and allowing for infant industry development, recent work has documented their concerning impact on labor markets and domestic regulatory frameworks.

In a recently published book chapter, PATRICK NEVELING analyzes the history of SEZs throughout the postwar period:

"The Roosevelt administration injected significant sums of money into Puerto Rican infrastructure after 1934, in response to massive strikes and riots across all economic sectors on the island. From the 1940s onward, Puerto Rico set up three crucial institutions: a planning board that oversaw the implementation of industrial standards, a development bank that supplied new industries with capital, and a parastatal development corporation that managed new import-substitution industries. However, the import-substitution phase in Puerto Rico was to be short-lived. Five years after those factories had opened in 1942, Puerto Rico lured mainland manufacturers with tax holidays and financial subsidies to relocate their production. As the Puerto Rican export-oriented industrialization programme coincided with the beginning of US international development aid for pro-capitalist allies across the Third World, the Truman administration’s Point Four programme made extensive use of the island’s success story. Thousands of officials from postcolonial nations were flown in and other European colonial powers in the Caribbean were pushed to embrace similar programmes.

The World Bank and IMF made EPZs an integral part of the many structural adjustment programmes that postcolonial nations had to sign up to during the 80s debt crisis. Subsequently many other nations across the world would sign SAPs and be forced to privatize national industries and establish tripartite institutions of the Puerto Rican kind, with national standard boards that now oversee compliance with the International Organization for Standardization’s ISO norms series, national development banks, and development organizations with private-sector majorities on executive boards. Why did Western nations promote SEZ in developing nations even though heart-lands of textile and garment production in the United States, the United Kingdom, Germany, and elsewhere went into rapid decline with deindustrialization? Emerging multinational corporations in the textile and garment sector and later also in consumer electronics, automobile production, and so forth could use their increased and low-risk capital mobility to play off manufacturing locations against one another by forcing trade unions to accept wage cuts in exchange for relocation waivers."

Link to the piece.

  • "While EPZs have flourished as a vehicle for globalized production, as an employer strategy for low-cost exports, and as a governmental strategy to absorb surplus labour and attract FDI, they have failed to create decent jobs." A 2011 ILO report by Jamie K. McCallum offers a comparative review of labor market impacts of EPZs in China, Honduras, Nicaragua and South Africa. Link.
  • Nathalie Picarelli on the distributional impacts of export processing zones in Nicaragua: "the policy benefited the upper-tail the most." Link.
  • Another piece by Neveling analyzes "Free Trade Zones, Export Processing Zones, Special Economic Zones and Global Imperial Formations 200 BCE to 2015 CE. Link.
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January 27th, 2020

Preparation

PATTERN MANAGE

Re-thinking industrial policy

Deindustrialization is a global phenomenon taking place more rapidly in middle- income countries than in high-income ones. Despite the global decline of manufacturing employment, "industrial policy" is increasingly salient in research and policy debates. But deindustrialization poses significant challenges for industrial strategy—particularly as it relates to direct state investment in productive capacity.

In a new article, "Industrial Policy in the 21st Century," Ha-Joon Chang and Antonio Andreoni lay the groundwork for a new theory of industrial policy:

"Since the 18th century, the debate surrounding industrial policy has been one of the most important in the political economy of development. We discuss a number of issues which cannot be accommodated within the neoclassical framework and which are also often neglected by evolutionary and structuralist contributions—namely, commitment under uncertainty, learning in production, macroeconomic management, and conflict management. We also address three new challenges for industrial policy makers in a changing world: the global value chain, the increasing financialization of the world economy, and changes in the rules of the global economic system.

Despite differences across countries in terms of their stages and levels of industrialization, their macroeconomic regimes and their political economy settings, the three sets of neglected issues we focus on are and will remain of paramount importance. The need to address long-term grand challenges like climate change calls for massive and coordinated investments in energy systems, production practices and mobility. The achievement of these global transformations still depends on micro-level structural changes in productive organizations and government interventions in creating new worlds of production as well as managing industrial and social restructuring."

Link to the piece.

  • "Industrial policy can no longer be about industry or manufacturing per se. As the world economy turns increasingly towards services, it is clear that we will need a conception of industrial policy that addresses the need to nurture and develop modern economic activities more broadly, including but not limited to manufacturing." Karl Aiginger and Dani Rodrik's introduction to the special issue of Industry, Competition, and Trade. Link. In the same issue, Nathan Lane presents a "New Empirics of Industrial Policy." Link.
  • In Industrial and Corporate Change, Mario Pianta, Matteo Lucchese, and Leopoldo Nascia assess the post-crisis industrial policies of the European Union and examine the potential for more active public investment policies in the years to come. Link.
  • John Waterbury's extensive comparison between the industrial strategies of Nasser and Sadat. Link. From 1993, Hajoon Chang on the importance of state intervention in the "political economy of industrial policy in South Korea." Link.
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