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Challenging Neoliberalism

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

Neoliberalism, which advocates free markets without government interference, has become increasingly utilized and controversial over the last three and a half decades. This book presents case studies of Chile and Taiwan, two countries that seemingly prospered from adopting neoliberal strategies, and finds that their developmental histories challenge neoliberalism in fundamental ways.
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Neoliberalism and globalization: the puzzle of Chile and Taiwan

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

The controversial terms, ‘neoliberalism’ and ‘globalization’, have become increasingly utilized, both as academic concepts and policy packages, over the last four decades. This book presents case studies of Chile and Taiwan, two countries that have apparently prospered from adopting neoliberal strategies which advocate free markets without government interference, and finds that their developmental histories challenge neoliberalism in fundamental ways.

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Neoliberalism and the paradoxes in economic theory

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

This chapter develops the theoretical framework that will be used to analyze how neoliberalism and globalization affected the economic miracles in Chile and Taiwan. The first section focusses upon our two central concepts of neoliberalism and globalization, presenting their definitions and the major controversies about them. The second section then summarizes a series of paradoxes in economic theory and demonstrates that they raise fundamental challenges for both the advocates and critics of neoliberalism. In the third section, we move from the level of abstract economic theory to an empirical description of the pattern or sequence of development, again showing how this analysis creates problems for arguments about neoliberalism. Finally, we provide an introduction to institutionalist theory which, we believe, explains the major differences between Chile and Taiwan and strongly suggests that neoliberalism is not the economic panacea that its advocates claim it to be.

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The stereotype of the economic miracles: free markets

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

Taiwan opened its economy to the forces of globalization in the mid-1960s, and Chile followed suit a decade later. Both nations’ strategies were seen as producing “economic miracles” even by some scholars who had little sympathy for the political regimes that implemented them, suggesting that we should examine marketization in these two political economies closely. This chapter begins by describing the neoliberal “shock treatment” in Chile during 1975–81 since it provides a benchmark for assessing market-opening in Taiwan during the 1960s and early 1970s.

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An overall model of development in Taiwan

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

This chapter presents an overall model of economic and social development in Taiwan. In particular, we identify four stages in the country’s postwar development: (1) a stage-setting period during the 1950s that created the foundation for (2) the export-led boom based on light industry during the 1960s and early 1970s, which created the resources for (3) industrial upgrading from the late 1970s to the late 1980s, which was followed by (4) slower growth as economic maturity was achieved but also a “political miracle” in the form of a fairly rapid democratic transition and consolidation over the last 25 years. As we shall see, there are strong but complex linkages among these four stages. For the first three stages and for the democratization in the fourth, resources that were created in one period helped promote the transformation to the next. During the last period, in sharp contrast, the legacies of past successes have contributed to economic and political problems.

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An overall model of development in Chile

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

This chapter presents an overall model of economic and social development in Chile. As with Taiwan, we start with a stage-setting period for the economic miracle of major market-opening reforms. This period is very different than the Taiwan case in two important respects. First, Chile set the stage with a much broader import substitution that included both light and heavy industry. Second, the period of import substitution in Chile lasted for four decades (the 1930s through the 1960s) and, unlike Taiwan, was shaped by previous economic structures in the country. The next stage from the mid-1970s to the mid-1980s was based on Chile’s integration into the global economy, similarly to Taiwan’s a decade earlier. Again, though, there was a fundamental difference from Taiwan in the Pinochet regime’s explicit intention to create a neoliberal economic system. The third stage, from the mid-1980s to the present, parallels Taiwan’s experience in that it encompassed a democratic transition and significant signs of economic maturity, although the linkage between economic and social development was very different in Chile than in Taiwan.

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Neoliberalism and the economic miracles in Chile and Taiwan

Globalization and the Economic Miracles in Chile and Taiwan

Cal Clark and Evelyn A. Clark

In this concluding chapter, we apply our comparison of the political economies of Chile and Taiwan to evaluate neoliberalism. The first section examines the fundamental differences and parallels between Chile and Taiwan; the second develops an institutionalist model to explain why the developmental trajectories of the two nations diverged so significantly; and the third considers the implications of our analysis for neoliberalism and globalization. In general, we conclude that, although opening their markets to the global economy stimulated successful export-led growth in both countries, this only occurred because of very significant deviations from the fundamental tenets of neoliberalism.