Development strategies and the Brazilian’s new-developmentalist school abstract

Abstract

This paper aims to present different strategies of economic development mapped in Rodrik’s (2013a) seminal work and correlate them with central propositions of the Brazilian’s New Developmentalist School. According to Rodrik, it is possible to outline at least two development strategies from current literature about economic growth. One consists of human capital accumulation and social capabilities, which would allow an increase of potential productivity in the service sector and, consequently, a gradual increase in the productivity of the economy as a whole. This strategy is based, therefore, on the construction and development of “good institutions” in line with the thesis presented in Acemoglu’s and Robinson’s work (2012). Another strategy consists of economic structural transformation, with the transference of productive resources and labor force in the traditional sector or subsistence to the manufacturing sector. This strategy allows an accelerated growth in labor productivity due to the “special” nature of the transformation industry, which consists in being the only sector of activity that is subject to positive overflow effects from the technological frontier. In order for the industrialization effect on development to last, however, is necessary to adopt the so-called “neo-mercantilist” policies (RODRIK, 2013c); which induce an increase in the labor force participation in the total labor through mechanism – for instance, the maintenance of a competitive exchange rate – generate a surplus in the trade balance of the manufacturing sector. This second development strategy is in accordance with central propositions of the New- Developmentalist School, presented in Bresser-Pereira’s, Oreiro’s and Marconi’s (2016) work. In this context, the main issue for viability analysis of the development strategy proclaimed by the new-developementalists concerns the capacity of using the real exchange rate as economic political instrument. Contrary to what orthodox economists think, the real exchange rate can be seen as exogenous variable, being under control of economic policymakers. The main challenge for adoption of this strategy consists of convincing the workers and political parties that represent them that the reduction in the real wage level resulting from the exchange rate devaluation will be largely offset in the future due to the acceleration of labor productivity growth and, consequently, real wages.