Also by Philip Arestls THE POLITICAL ECONOMY OP ECONOMIC POLICIES (co-editor with Malcolm Sawyer) Issues in Finance and MONEY AND BANKING: Issues for the Twenty-Pirst Century (editur) MONEY, PRICING, DISTRIBUTION AND ECONOMIC INTEGRATION Industry RELEVANCE OF KEYNESIAN ECONOMIC POLICIES TODAY (co-editor with Malcolm Sawyer) WHAT GLOBAL ECONOMIC CRISIS? (co-editur with Michelle l1addeley and fohn McCombie) Essays in Honour of Ajit Singh POST-BUBBLE US ECONOMY: Implications for Financial Markets and the Economy (with Elias Karakitsos) FINANCIAL DEVELOPMENTS IN NATlONALAND INTERNATIONAL MARKETS (co-editor with Jesus Ferreiro and Felipe Serrano) Edited by ADVANCES IN MONETARY POLICY AND MACROECONOMICS (co-editor with Gennaro Zezza) Philip Arestis ASPECTS OF MODERN MONETARY AND MACROECONOMIC POLICIES (co-editor with Eckhard Hdn and Edwin Le Heron) and ON MONEY, METHOD AND KEYNES: Selected Essays by Victoria Chick (co-editor with Sheila Dow) John Eatwell IS THERE A NEW CONSENSUS IN MACROECONOMICS? (editor) POLITICAL ECONOMY OF BRAZIL (co-editor with Alfredo Saad-Filho) FINANCIAL LIBERALIZATION AND ECONOMIC PERFORMANCE IN EMERGING COUNTRIES (co-editor with Luiz Fernando de Paula) Also by fohn Eatwell AN INTRODUCTION TO MODERN ECONOMICS (with Joan Robinson) WHATEVER HAPPENED TO BRITAIN? KEYNES'S ECONOMICS AND THE THEORY OF VALUE AND DISTRIBUTION (editor with Murray Milgate) THE NEW PALGRAVE: A Dictionary of Economics (editor with Murray Milgate and Peter Newman) THE WORLD OF ECONOMICS (editor with Murray Mi/gate and Peter Newman) THE NEW PALGRAVE DICTIONARY OF MONEY AND FINANCE (editor with Murray MUgate and Peter N,'Wman) GLOBAL UNEMPLOYMENT (editor) UNDERSTANDING GLOBALISATION; The Nation-State, Democracy and Economic PoliCies in the New Epoch (with Elizabeth felin, Anthony McGrew and lames Rosenau) GLOBAL FINANCE AT RISK: The Case for International Regulation (with Lance Taylor) INTERNATIONAL CAPITAL MARKET: Systems in Transition (editor with Lance Taylor) GLOBAL GOVERNANCE OF FINANCIAL SYSTEMS: The Legal and Econom'ic Regulation of palgrave Systemic Risk (with Kern Alexander and Rahul Dhumale) macmillan , Selection and editorial matter <0 Philip Arestis and John Eatwell2008 Foreword © F. M. Scherer 2008 Contents Individual chapters iC contributors 2008 AU rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. * List of Tables and Figures vii No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Prime Minister of India: A Letter to Ajit xi Copyright, Designs and Patents Act 1988,. or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Foreword by P.M. Scherer xiii Saffron House, 6-10 Kirby Street, London Eel N 8TS. Notes on the Contributors xvii Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. 1 Introduction: Ajit Singh 1 The authors have asserted their rights to be identified Philip Arestis and John Eatwell as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. 2 Principles versus Rules 8 First published 2008 by John Eatwell PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, 3 Finance and Growth in Developing Countries: registered in England, company number 785998, of HoundmiUs, Basingstoke, Sound Principles and Unreliable Evidence 29 Hampshire RGZl 6XS. Valpy FitzGerald Palgrave Macmillan in the US is a division of St Martin's Press llC, 175 Fifth Avenue, New York, NY 10010. 4 Micro-Finance, Macro-Finance and Egalitarian Development 52 Robert Pollin Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. 5 Financial Liberalization: The Current State of Play 74 Palgrave® and MacmiUan® are registered trademarks in the United States, Philip Arestis and Malcolm Sawyer the United Kingdom, Europe and other countries. ISBN-13: 97B-1)-230-55360-<; 6 Global Financial Regulation versus the Engines of ISBN-10: 0-230-55360-5 Financial Instability 94 Robert H. Wade This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. logging, pulping and manufacturing processes are expected to conform to the environmentaL regulations of the 7 The Developmental Potential and Political Economy of country of origin. Private Remittances: What Do We Know, and A catalogue record for this book is available from the British library. What Do We Need to Know? 115 Ilene Grabel A catalog record for this book is availabLe from the Library of Congress. 10 9 B 7 6 5 4 3 2 8 Ownership, Institutions and Technological IntenSities: 17 16 15 14 13 12 11 10 09 08 Automotive and Electronic Component Firms in East Asia 137 Rajah Rasiah Printed and bound in Great Britain by (PI Antony Rowe, (hippenham and Eastbourne v vi Contents 9 Competition and Industrial Rates of Return 167 Anwar Shaikh List of Tables and Figures 10 Accounting for Business Combinations 195 Geoff Meeks and Geoff Whittington Tables 11 Takeovers after Takeovers 215 3.1 Financial development by income group, 1990s }O Andy Cosh and Alan Hughes 3.2 Financial depth worldwide, 2003 36 3.3 Financial structure worldwide 37 Appendix: Ajit Singh Publications 237 3.4 Net sources of finance, 1970-94 41 4.1 Sources of start-up credit for Kenyan household enterprises 61 Index 251 4.2 Numerical example on collateral and escrow fund 68 7.1 Migrant remittances to developing countries 118 8.1 BaSic and high-tech infrastructure, 2001 143 B.2 List of variables and their relationship with the dependent variables, 2001 143 8.3 Breakdown of automotive and electronic component firms, 2001 148 8.4 Two-tailed t-tests of means, automotive and electronic component firms, 2001 150 8.5 Technological intensity regressions, automotive and electronic component firms, 2001 152 B.A1 Correlation coefficients of independent variables, 2001 157 9.A1 .Fulllist of excluded industries 190 11.1 Differences between acquired and acquiring companies, 1955-60 and 1967-70 218 11.2 Changes in normalized profitability after merger in the UK, 1964--83 224 Figures, 3.1 King and Levine measure of financial depth, long-run, UK 32 3.2 King and Levine measure of financial depth, long-run, Mexico 33 3.3 Claims on the private sector, UK 33 3.4 Claims on the private sector, Mexico 34 3.5 Private creditjGDP and GDP per capita, 2000 35 3.6 Financial market capitalization and savings rates (shares of GDP), 2003 40 B.A1 Relationship between HR and IS, local auto component firms, 2001 156 vii 166 Ownership, Institutions and Technological Intensities Rasiah, R. (1996) 'Institutions and Innovations: Moving Towards the Technology Frontier in the Electronics Industry in Malaysia', Industry and Innovation, 3(2): 79-102. 9 Rasiah, R. and Y. Lin (200S) 'Learning and Innovation: The Role of Market, Government and Trust in the Information Hardware Industry in Taiwan', Competition and Industrial Rates IntemationalJoumal of Technoiogy and Globalization, 1 (3/4): 400-32. Reinert, E. S. (1994) 'Catching-up from Way Behind: A Third World Perspective on of Return First World History', in]. Fagerberg, B. Verspagen and N. V. Tunzelmann (eds), The Dynamics of Technology, Trade and Growth, Aldershot: Edward Elgar. Anwar Shaikh Reinert, E. (2007) How Rich Countries Cot Rich ... and Why Poor Countries Stay Poor, New York: Carroll and Cra! Publishers. Romer, P. (1994) 'The Origins of Endogenous Growth', Journal of Economic Perspectives, 8: 3-22. Rosenstein-Rodan, P. N. (1984) 'Natura Facit Saltum: Analysis of the Disequilib­ rium Growth Process', in G. M. Meier and D. Seers (eds), Pioneers in Development, New York: Oxford University Press. Introduction Saxenian, A. 1. (1994) The Regional Advantage: Culture and Competition in Silicon Valley and Route 128, Cambridge, Mass.: Harvard University Press. Scherer, F. M. (1980) Industrial Market Structure and Economic Performance, Chicago: I first met Ajit in 1978 when I spent a year at Cambridge as a visitor to Rand McNally. the Faculty of Economics. It was a heady time in the economics pro­ Scherer, F. (1992) International High Technology Competition, Cambridge, Mass.: feSSion, and it was personally gratifying for me to meet Joan Robinson, Harvard University Press. Nicholas Kaldor, Richard Kahn, Richard Goodwin, Geoffrey Harcourt Scitovsky, T. (1964) Papers on Welfare and Growth, London: Allen & Unwin. and Luigi Pasinetti, among others, not to meniion the young turks such Singh, A. (1989) 'Third World Competition and De-industrialbation in Advanced Countries', Cambridge Journal of Economics, 13 (1): 103-20. as Ajit, Francis Cripps and John Eatwell. Karl Marx had once again been Smith, A. (1776) The Wealth of the Nations, London: Strahan and Cadell. 'rediscovered' as an economist, as happens periodically, and Piero Sraffa's Solow, R. (1956) jA Contribution to the Theory of Economic Growth', Quarterly famous little book (Sraffa, 1963) had helped to spark a revival of interest Journal Of Economics, 70(1): 65-94. in the classical analysis of competition. Taiwan (2004) Investment Statistics, unpublished (Taipei, Central Bank of Taiwan). The analysis of competitipn has always played an important role in UNU-MERIT (2002) 'Unpublished Malaysian Industrial Firm Surveys', Maastricht: UNU-MERIT. Ajit's work. A quick look at his homepage showed that fully one-third of UNU-MERIT (2003) 'Technological Capability Building and Economic Perfor· his listed articles refer to that subject, dated from 1968 to as recently as mance Survey of Firms', funded by the Maastricht Educational Institute of SOCial 200S. And within this subject, the analYSis of profit rates has always been and EconomiC Research and Training Centre on Innovation and Technology one of his central concerns. This is also the topic of my own contribution (MERIT), United Nations University (UNU), Maastricht. to this volume, which I hope will help to further Ajit's ongoing project.