Economics Research Seminar - Keston Perry (EVENT CANCELLED)

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Date: 02 April 2020
Venue: 3B56, Frenchay campus
Venue Location:
Time: 13:00-14:00

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Between a rock and a hard place: 'new' industrial policy and political rents as enablers of financialisation inLatin America and the Caribbean

This paper examines the role of political rents as a tool used by the Inter-American Development Bank in circumscribing and reformulating how governments in Latin America and the Caribbean should intervene to tackle certain market failures in the economy.

The paper employs 'political rent' as an analytical tool to describe the nature, process and effects of income transfers and rules set by regional development banks, in particular the Inter-American Development Bank, for 'new' industrial policy in Latin America and the Caribbean. These rules limit liquidity to domestic firms, eschew industrial targeting and long-term finance to productive sectors, and public enterprises as mechanisms for industrial capability exapansion. By focusing on human capital, enterprise and private sector development via clusters, internationalisation and public-private partnerships, new industrial policy is increasingly being (re)framed and used to encourage firm participation in global value chains.

These chains in turn undermine employment and labour standards, set the market-promoting conditions upon which domestic economic policy making is premised and aim to address, and ultimately extract value from weaker countries and participants in the chain through expansion of international finance and financial markets in developing countries.

We also show how this process of financialisation has varying manifestations and effects in these political economies, and on the framing and content of industrial policy in the region today. The structural power of the Inter-American Development Bank in using carrot-and-stick measures, in particular diverse financing instruments, its market legitimacy, and technical oversight to leverage new financial flows in Chile and Trinidad and Tobago has come to the fore as a result. The Bank has advanced this new industrial policy on this basis employing these political rents that represent a double-edged approach - an outcome that 'crowds in' new financial instruments and accumulates debt and conditions the role and efficacy of industrial policy.

Contact: Professor Felix Ritchie

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