Why the 'Rest' doesn't need foreign finance
Luiz Carlos Bresser-Pereira
Texto para Discussão EESP/FGV 415, February 2016. It was published in Wladimir Popov e Piotr Dutkiewicz, eds. (2017) Mapping a New World Order: The Rest beyond the West, London: Edward Elgar 71-90.
The Rest will be able to catch up and grow faster than the West only if it goes against a "received truth", namely that capital-rich countries should transfer their capital to capital-poor countries. This intuitive truth is the mantra that the West cites to justify its occupation of the markets of developing countries with its finance and its multinationals. Classical Developmentalism successfully criticized the unequal exchange involved in trade liberalization, but it didn't succeed in criticizing foreign finance. This task has been recently achieved by New Developmentalism and its developmental macroeconomics, which shows that countries will invest and grow more if they don't run current account deficits, even when these deficits are financed by foreign direct investment.