'Aid and the symbiosis of global redistribution and development: Comparative historical lessons from two icons of development studies', by A.M. Fischer
ISS Working Paper No. 618
AIDSOCPRO Working Paper No. 1
This study examines the question of aid effectiveness through a comparative historical analysis of the external financing constraints of two icons of development studies: South Korea and Brazil. The selection of these contrasting cases is based on a method of difference, designed to examine the predicaments of two countries attempting similar developmentalist strategies of sustained industrial policy through successive stages of industrialization, but with differences in amounts of aid supporting such strategies. This approach differs from the standard approach in the literature of examining economic performance among aid recipient countries and it is adopted as a means to highlight the challenges that some of the most successful and advanced late industrialisers of the post-war era have faced in the absence of aid. The comparison draws on an analytical framework that locates aid effectiveness in the interaction of both aid absorption (via current accounts deficits) and development strategy (via industrial policy), the latter based on the premise that unconstrained strategies of post-war late industrialisation have exhibited inherent structural tendencies to generate merchandise trade deficits. The interaction establishes an important, yet mostly overlooked, symbiosis between global redistribution and development.
This symbiosis is then demonstrated by the historical analysis of the external accounts of the two cases, which constitutes the original empirical contribution of the article given that inductive historical analysis of actual interactions between aid flows (or lack thereof) and external accounts has been essentially absent in the aid literature. Similarly, the literatures on industrial policy and developmental states tend to exhibit a domestic productionist bias that has also shunned serious analyses of the role of aid in supporting successful late industrialisation experiences. Accordingly, the case of South Korea clearly illustrates the crucial role that aid played in buttressing rapid late industrialisation against structural external constraints and financial vulnerabilities. The contrasting case of Brazil clearly demonstrates the constraints faced by late industrialising countries in the absence of generous supplies of aid and/or stable, secure and affordable finance. The conclusion reflects on some of the wider implications of these insights and also offers some comparative reflections on China as an alternative model for dealing with similar constraints.
Aid (official development assistance); redistribution; political economy of development; industrialization and industrial policy; international finance and development finance; balance of payments; structuralist macroeconomics; South Korea; Brazil