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Development Economics and Structuralist Macroeconomics

Development Economics and Structuralist Macroeconomics

Essays in Honor of Lance Taylor

Edited by Amitava Krishna Dutt

Lance Taylor is widely considered to be one of the pre-eminent development economists in the world and is known for his work on development planning, macroeconomics of development, stabilization policy, and the global economy. He has also been the major force behind structuralist economics, which is seen by many to be a major alternative to orthodox development economics and policy prescriptions. The essays in this volume, written by well-known scholars in their own right, make contributions to each of these areas while honoring the contributions made by Lance Taylor.

Chapter 13: Bringing the firm back in

Helen Shapiro

Subjects: development studies, development economics, economics and finance, development economics


13. Bringing the firm back in Helen Shapiro1 INTRODUCTION For five years at the Harvard Business School, I taught a required MBA course on international political economy. When discussing policy alternatives for less-developed countries, many students gave unqualified support to an approach in which market forces, rather than government intervention, determined the allocation of resources. They were typically critical of import substitution strategies and thought that a country’s productive structure should be determined by its comparative advantages, that is, low wages, natural resources, and so on. Even if they acknowledged that industrial policies may have had a positive role in the East Asian NICs, they were generally skeptical about the government’s capacity to intervene fairly and efficiently, and thought that state-owned enterprises should be privatized. In short, they were very much in sync with the neo-liberal approach or the so-called Washington consensus, assuming that once prices were correctly aligned and trade was liberalized, the private sector would invest enthusiastically and efficiently. I found this ironic, because at the same time that they were taking my class, they were also taking a course entitled ‘Competition and Strategy’ based on the work of Michael Porter.2 In that course, while wearing the hat of CEO rather than that of a public policymaker, they focused on how firms must create and exploit ‘competitive’ advantages. They emphasized how a firm’s strategy should be based not on ephemeral, ‘non-sustainable’ cost advantages such as low wages or depreciating exchange rates, but on non-price factors...

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