ABSTRACT
Crises in developing countries provide an opportunity for the ideological determination of capitalist transition policy. The objective in this chapter is to identify the main forms of crisis, their causes, and the policy options arising during crises. I focus on two dynamic crisis-prone models of political economy – ‘activism’ and ‘neoliberalism’. A characteristic of activist and neoliberal models is that they do not transit successfully between the Weberian sequences of institutional reform – markets to law, law to bureaucracy, and bureaucracy to democracy – which this book depicts as the ideal path for emerging capitalism in the developing countries. Nevertheless, activist and neoliberal models – and their corresponding crises – will be described here as ‘developmental’. They are not the best methods of transition, but do have potential to generate change in a capitalist direction. Each can be an intermediate mechanism in so far as, for a period of time, an activist or neoliberal model increases the scope or quality of market activity, promotes economic growth, and achieves goals of social development. Three preliminary observations can be made. First, activist and neoliberal ‘developmental’ crises, unlike the Schumpeterian ‘long-wave’ crises discussed in Chapter 4, are in principle more likely to be avoidable. They are similarly ‘structural’, however, in the sense that they reveal an incompatibility between existing institutional forms and the pattern of economic change. Second, each of the progressive policy models – activist, neoliberal, and capitalist – are ideological in Hayekian terms. By viewing them as ‘transition ideologies’ we can compare the relative soundness of their scientific foundations and prescriptive utility. Third, crises in the developing countries, like Schumpeterian crises in the capitalist countries, tend to be recurrent. Crises that repeat at intervals provide recursive opportunities for sequenced institutional change. Development crises are ‘revolving doors’ of opportunity rather than merely ‘windows’ of opportunity for institutional reform. Crises that can help to transform societies are not rare events. The plan for the chapter is as follows. The first section proposes a typology of crises. Its purpose is to classify the kinds of crises that dysfunctional institutions cause, and their comparative transitional prospects. Once the variations in development crises have been identified, it should be easier to assess the knowledge that policy leaders require in order to exploit periodic volatility and propel
capitalist transitions forward. The following four sections substantiate the theoretical claims and present an overview of activism and neoliberalism in East Asia and Latin America. The extended analysis of Latin America’s twentiethcentury economic-policy trajectory serves to illustrate several theoretical themes from earlier chapters, including state dysfunctions, government-business relations, and the role of leadership and ideology during policy transitions.
