Victor Krasilshchikov The Rise and Decline of Catching up Development An Experience of Russia and Latin America with Implications for Asian ‘Tigers’ ENTELEQUIA REVISTA INTERDISCIPLINAR The Rise and Decline of Catching up Development An Experience of Russia and Latin America with Implications for Asian `Tigers' by Victor Krasilshchikov Second edition, July 2008 ISBN: Pending Biblioteca Nacional de España Reg. No.: Pending Published by Entelequia. Revista Interdisciplinar (grupo Eumed´net) available at http://www.eumed.net/entelequia/en.lib.php?a=b008 Copyright belongs to its own author, acording to Creative Commons license: Attribution-NonCommercial-NoDerivs 2.5 made up using OpenOffice.org THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT (The Experience of Russia and Latin America with Implications for the Asian ‘Tigers’) 2nd edition By Victor Krasilshchikov About the Author: Victor Krasilshchikov (Krassilchtchikov) was born in Moscow on November 25, 1952. He graduated from the economic faculty of Moscow State University. He obtained the degrees of Ph.D. (1982) and Dr. of Sciences (2002) in economics. He works at the Centre for Development Studies, Institute of World Economy and International Relations (IMEMO), Russian Academy of Sciences. He is convener of the working group “Transformations in the World System – Comparative Studies in Development” of European Association of Development Research and Training Institutes (EADI – www.eadi.org) and author of three books (in Russian) and many articles (in Russian, English, and Spanish). 2008 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 2 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT C O N T E N T S Abbreviations 5 Preface and Acknowledgements 7 PART 1. XX CENTURY CAPITALISM AND THE DESTINY OF LATECOMERS 1. The Echelons of the Capitalist Development and ‘the Managerial Revolution’ 13 2. Russia and Latin America at the Start of the Great Experiment 33 3. Realities and Illusions of the Successful Development, or Emergence of the Modernisation Trap 59 4. The Crisis of Statism and Neo-liberal Reaction 95 5. Latin America: The Limits of Successful Neo-liberal Reforms, or Neo-liberalism as Limit to Development 119 6. The Case of Russia: Decline as Pattern of Development in the Conditions of Globalisation 149 Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 3 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT PART 2. THE ASIAN ‘TIGERS’ FROM SUNRISE TO AFTERNOON 7. The Background and World Context of Wonderful Transformation of ‘Kittens’ into ‘Tigers’ 179 8. Conservative Modernisation and the Developmental State in Asia: Confucius and Lenin versus Weber 197 9. Internal Mechanisms of the Last Miracle in the XX Century 223 10. Great Achievements as Premises of the Crisis, or Miracle as Background of Debacle 247 11. After the Crisis: What Did Happen and What Was Done to Prevent New Storms? 279 12. Beyond a Realm of Economy 307 CONCLUDING REMARKS 329 Bibliography 337 Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 4 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT Abbreviations BID – the Spanish abbreviation of IADB (Banco Interamericano de Desarrollo) CEPAL – the Spanish abbreviation of ECLA(C) (Comisión Económica para la América Latina y el Caribe). CIS – the Commonwealth of Independent States (the Community of republics of the former Soviet Union, except the Baltic states). COMECON – the Council for the Mutual Economic Aid (the economic organisation of the former ‘socialist’ countries belonging to the Soviet block). CPSU – the Communist Party of the Soviet Union E/SEA – East and Southeast Asia(n) EA – East Asia(n) ECLA (ECLAC) – the United Nations Commission for Latin America (and the Caribbean). EU – European Union FDI – foreign direct investment(s) GDP – gross domestic product GNP – gross national product IADB – Inter-American Development Bank IFC – International Financial Corporation (affiliated with the World Bank) IMF – International Monetary Fund ISI – Import substitution industrialisation LA – Latin America NAFTA – North American Free Trade Agreement (Canada, Mexico, and the US). NGO (NGOs) – Non-government organisation(s) NIC – Newly industrialising (industrialised) countries Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 5 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT NIE – Newly industrialising (industrialised) economies NU – Naciones Unidas (UN in Spanish) OECD – the Organisation for Economic Co-operation and Development PPP – parity of purchasing power (of currencies) R & D – research and development (scientific-technological) SEA – Southeast Asia(n) S & T – science and technology(ies), scientific and technological TNB – Transnational banks TNC – Transnational corporations UN – United Nations (Organisation) US – the United States of America USSR – Union of the Soviet Socialist Republics WTO – World Trade Organisation Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 6 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT Preface and Acknowledgements A stay in India not only excites interest to fascinating sights and romantic adventures but also is very favourable for writing of scientific papers and books. My preceding book, “Catching Up with the Past Century”, was written to 50% during my stay in India in 1996, when I delivered a series of lectures under the general title “Russian Development in the XX Century in the Context of World Modernisations” for students and staff of the Centre for Russian, CIS, and East European Studies, a subunit of the School of International Studies, Jawaharlal Nehru University. Then I used the drafts of lectures prepared previously in English writing the book in Russian. The present book has begun to be written, directly in English, in India, too, during my three months stay in the context of my position as visiting fellow at the Maulana Abul Kalam Azad Institute of Asian Studies, Kolkata (Calcutta) in January – March 2004. It deals with the general problems of catching up development that have been considered through lenses of the concrete cases studies of the former Soviet Union and post-Soviet Russia, Latin American and East Asian countries. The book is subdivided into two parts. In the first part, I consider some general problems of development in the past Century and draw attention to the cases of Russia and Latin American countries. The second part is devoted to the NICs of E/SEA. One of the questions, which inevitably emerge in the process of studying the called three regions’ catching up development, is the following: why the models of development that enabled to overcome a social-economic backwardness over almost a half of the Century, failed in the end of the XX Century? Indeed, the regions chosen as subjects of analysis were ‘heroes’ of the catching up development in Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 7 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT the past Century. There were periods, when each of these ‘heroes’ was apparently reaching the strategic goal, namely, attaining the level of social-economic and technological development of the West. However, then something wrong suddenly occurred to them, and the distance between ‘catchers up’ and the world economic leaders widened again, depreciating their colossal efforts and expenditures aimed at realising ‘their historic dream’. All three regions achieved undeniable accomplishments in the process of industrialisation, but in the last quarter of the XX Century suffered deep crises and appeared as victims of new, post-industrial trends in the West, although, of course, to different degrees. In particular, the ‘socialist construction’ in the former Soviet Union allowed the Big Russia to become the second super-power, which was considered as a pattern of successful development for many peripheral and semi-peripheral countries. Nevertheless, the Soviet Union collapsed, and today ‘flotsam and jetsam’ of the former second super-power drift to a periphery of the world. Moreover, some parts of the former USSR are now under jeopardy to fall out of the world system altogether, joining the global zone of exclusion from development. Since the mid-30s of the XX Century, several Latin American countries attempted to win in their ‘second war for liberation’ – in their struggle for deliverance from the economic dependence on the West through an accelerated industrialisation under the strong state guidance. An illusion that they were capturing ‘fortune for tail’ and joining a group of the developed countries arose for no one time, but it was only an illusion, even if previously it had some real foundations. Despite of the growth of Latin American industry, the economic dependence on the West did not weaken but had been strengthening, and, as a consequence, a vulnerability of the continent to fluctuations of the world market did not decrease while Entelequia.Revista Interdisciplinar Victor Krasilshchikov / 8 THE RISE AND DECLINE OF CATCHING UP DEVELOPMENT a qualitative gap between Latin America and the world leaders had not been narrowed. Such a race continued until the 1980s when the deep crisis overpowered the continent. Illusions were dissipated, and a serious revision of the development practice and theory had been set up on the agenda. Over forty years, until the beginning of the 1990s, Japan had a very fast rate of the economic growth, but since 1991, the Japanese economy suffered stagnation, and its recent revival does not allow us to speak about a stable resumption