Development, Institutions and the Vested Interests

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, St Gallen 2
Hosted By: Association for Evolutionary Economics
  • Chair: Richard V. Adkisson, New Mexico State University

The Concept of Development Conventions: Some Suggestions for a Research Agenda (Street Scholar Address)

David Dequech
,
University of Campinas

Abstract

This paper discusses development conventions, focusing on conceptual and theoretical issues. The term ‘development conventions’ was coined by the Brazilian economist Fábio Erber and has been used by a few other authors, especially in Brazil. As the paper shows, however, Erber does not adopt a coherent concept of convention. Moreover, it is not clear why Erber uses the term ‘development conventions’ instead of more general terms, like ‘conceptions’, ‘ideologies’ or ‘shared mental models’. The paper then offers some suggestions for the formulation and elaboration of a proper concept of development conventions and some basic theoretic propositions. Development conventions are broadly defined as socially shared systems of rules of thought or of behavior (institutions) regarding development, with the properties of conformity with conformity and arbitrariness: the fact that others have adopted a convention, or are expected to adopt it, plays a role in leading someone to also adopt it; and a non-inferior alternative exists or is conceivable. The paper identifies several social mechanisms through which the conformity of others leads one to conform. It also relates arbitrariness to uncertainty about future consequences and to the possibility of assessing development from various viewpoints, using various standards or metrics at the same time.

Vested Interests and the Common People in Developing Countries: Understanding Oppressive Societies and Their Effects

Lane Vanderslice
,
World Hunger Education Service

Abstract

The standard economic model of how economies work is that people produce and exchange goods. Governments exist to provide “government goods”— things that people cannot provide for themselves, such as national defense. Thus the standard economic view is that activities are essentially productive. This is not a correct view of reality. The principal difficulty is that there is economic activity that is unproductive and harmful (from the point of view of those being harmed). This is a central feature of the economic organization of these societies, and creates poverty.
The first section set out a brief description of how societies are run on this basic set of principles: Take and maintain control of the government (and other aspects of society, and use powers of the government to obtain income. Key elements of this process are: Obtaining income, keeping people oppressed/preventing revolution, avoiding overthrow, and restricting entry. Institutional structures of society arise from, and support, this process.
The second section describes how this system, where the institutional structure is designed to benefit the few, and these elements specifically, create poverty. This section draws on theoretical work in economics and other social sciences, especially game-theory-based conflict theory, as well as empirical studies and evidence. Topics include corruption, expropriation of land and natural resources, harm as a factor in wage determination, discrimination, conflict, and the weight of the past.

Industrial Policy in Africa: An Exploration of Institutional Dimensions

Howard Stein
,
University of Michigan

Abstract

Economists have long known that manufacturing expansion has a multitude of economic benefits for common people including potentially generating large scale employment opportunities. Sadly, sub-Saharan (SSA) has moved in the wrong direction with manufacturing as a percentage of GDP falling to around 9-10% from an already low 15% in the 1980s. SSA has largely returned to an extractive colonial style economy with its reliance on the export of unprocessed raw materials with terrible consequences to the quotidian struggles of the broader population. Raw material based expansion has very low employment and poverty reducing elasticities and vulnerable to the vicissitudes of international commodity prices. To reverse this pattern, governments will need to come up with new strategies to support industry. Some literature on industrial policy focuses on interventions to deal with perceived market failures. Others point to institutional failures where poorly operating markets is seen as one example and where purposive state actions can be used to deal with the institutional gaps that impede industrial growth and development. However, less has been written on how these actions can achieve the outcomes and why, in some cases, interventions in industrial policy have failed or led to less than desirable effects. Drawing on examples from a variety of African countries the paper will explore the institutional imperfections and static and dynamic institutional failures that have impeded industrial policy while pointing to key institutional constructs that can lead to the more effective operation of industrial policy organizations on the continent.

Growth Miracle or Development Catastrophe? Vested Interests, Institutions, Policy and Human Development in the Dominican Republic

Svenja Flechtner
,
University of Flensburg

Abstract

The proposed paper addresses the issue of power, policy and institutions studying the case of the Dominican Republic (DR). The DR is usually considered among the most successful developing countries, based primarily on its high and relatively sustained growth rates over the last two decades. On the other hand, indicators of human and social development, health, and education have been particularly poor. This paper addresses this apparent puzzle from an institutional perspective, arguing that the polarization of economic and political power is at the origin of this development. I first analyze the structure of the Dominican economy in order to show that the country has relied on tourism, services, and special economic zones to obtain relatively high growth rates. These activities do not require high-skilled labor and will not allow the economy to generate high incomes for the population, but benefit a few families who control most conglomerates. I then analyze economic policy-making since the 1950s and trace back how business interests and in particular these few families have been able to shape policies according to their needs. This explains extremely low investments into education and social spending on the one hand and extremely low taxation rates on the other. Moreover, the elite has benefited from poor institutional quality. I close with a discussion of civil society initiatives aiming at countering the concentrated economic and political power of the narrow elite in the areas of education and housing.

Extending Veblen’s Notion of “Vested Interest” in International Relations: A Special Case of Nepal-India

Kalpana Khanal
,
Nichols College

Abstract

Nepal is a land-locked country that shares open border with India. In addition to the economic relations across the border, people of Nepal and India share cultural and social ties. Recently Nepal promulgated its new constitution and it has led to a souring of ties with India. The main crux of the problem lies in the agitation of the Madesh/Terai origin people in Nepal demanding certain rights in the newly drafted constitution. India showed its displeasure publicly by cutting off essential supplies to Nepal. India’s trade embargo over the past month has stagnated Nepal’s economy and is causing genuine hardship to Nepali people. One interesting thing to note here is, this embargo is not the first one imposed by India on Nepal.<br /><br /><br /><br />
In the given context, the first section of this paper will shed some light on India-Nepal diplomatic relation in a historical context. The second section will shed some light the unequal footing in Nepal-India relationship using Veblen’s notion of “Vested Interest”. The third section will elaborate on the socio-economic impact of India’s repetitive trade embargos to Nepal. The fourth section will offer pragmatic solutions to bring institutional change consistent with instrumental values within Nepal so as to improve the diplomatic ties.
Discussant(s)
James T. Peach
,
New Mexico State University
JEL Classifications
  • O1 - Economic Development
  • O2 - Development Planning and Policy