The new developmentalism and conventional orthodoxy
Luiz Carlos Bresser-Pereira
Texto para Discussão n. 156, EESP/FGV, novembro 2006.
The failure of the 'conventional orthodoxy' and its macroeconomics of stagnation in promoting macroeconomic stabilization and economic growth in Latin America opened room in each country for the rise of national strategy of growth which we call 'new developmentalism'. Capitalism, economic development, nation and nation-state are interdependent historical concepts. Capitalist development depends on a national strategy that relies on a nation capable of formulating it. Old developmentalism was an effective strategy in promoting growth in Latin America since the 1930s, but in the 1980s got distorted and surpassed by the facts. Differently from it, new developmentalism is export oriented, rejecting protectionism, and instead of emphasizing industrial policies, criticizes conventional orthodoxy's macroeconomic policies. While conventional orthodoxy macroeconomics is based on high interest rates and overvalued currency, new developmentalism asks for a moderate average interest rate and a competitive exchange rate. Since there is a tendency to overvaluation of the local currencies in developing countries, to manage it, promoting investment and savings, and making viable the gradual transference of labor from low to high per capita value added is key to economic growth.