Ludwig Hehl

Kurzexposé zum Promotionsvorhaben von Ludwig Hehl

Institutional Traps and Developmental Coalitions in Mexico and Turkey

There is a consensus among different institutionalist approaches, that the successful structural transformation from a poor agricultural society towards a highly developed industrially and technology advanced economy depends on successful developmental coalitions. The efficient functioning of institutions to foster efficient policies must be reflected in the underlying power dynamics of such stable coalitions. There is some common ground in Neoclassical, Marxist, and Postkeynesian Institutionalist approaches regarding the assumption, that for development to be successful, policy coalitions need to mobilize rents to channel parts of the surplus into yet uncompetitive sectors, to transform the comparative advantage of a country slowly from labor- to technology intensive sectors. Nevertheless, there is a disagreement among the three approaches concerning what links efficient rent channeling to a developmental coalition. Neoclassical authors such as Stephan Haggard emphasize how market failures can create negative complementarities leading to collective action problems preventing human capital development and efficient industrial policy. Marxist Institutionalists like the SOAS school around Mushtaq Khan developed an Institutionalist approach where political settlements determine if rents are used productively beyond political power purposes or if inefficient rent seeking occurs solely following political logics. Post Keynesians like Richard Grabowski criticize, that rents are also not used productively because of an overall deficiency in demand, domestically in most developing countries but also as a result of financialization in the global economy.
To analyze which of the three theories has the most explanatory power, the comparative sequential method will be applied. In the tradition of comparative historical analysis this method assumes, that a good scientific practice contains of illustrating the observable implications of a theorized mechanism and showing a causal chain of explanations and whether each step is supported by the empirics, remerging causal chains in differing contexts may then illustrate comparable patterns – pattern matching then enables the scholar to determine if and how a mechanism is central for a process in differing contexts. The process I want to trace is structural transformation and the underlying political process of critical realignment, hence, the political power struggles behind (failed) policy shifts. The sequences I subdivide are firstly, urbanization, secondly, industrialization and thirdly, financialization. The mechanism I want to analyze is the effect of demand increases on the stability and success of developmental coalitions and how the demand structure affected the productive use of rents for developmental ends within those sequences. If my theorized mechanism is true, we should find, that transforming power relations and solving coordination problems visible in the efficient utilization of rents was depended on increase of demand and employment – if coalitions failed to increase demand– they failed to become developmental. The aim of my method is therefore to refine theories with insights from other theories – in this case, to show how Postkeynesian demand concerns are also central for Marxist concerns regarding power transformations and Neoclassical ideas of market failure.
The complementary nature of the three theories will firstly be illustrated in a path dependent analysis. A Latin American (LAP) and East Asian path (EAP) will be constructed as illustrative examples to show how the demand structure impacts power and market structures within the urbanization, industrialization, and financialization sequence. The central insights are that active industrial policy, functional finance, and inclusive labor market policies implicate that privileged, extractive groups need to share power and enable participation in the interests of the lower income groups. For active labor market policies, the elite needs to accept a decline of the reserve army of labor, for functional finance the elite needs to accept higher taxes and a decline in private investment decision dominance, and for effective industrial policy, the elite needs to accept a state that not only rewards but also punishes if funds are misused. Applying the theoretically and methodologically informed insights from the path dependent analysis on my two cases Mexico and Turkey will reveal, that both countries can be
interpreted as `limited` success stories, when it comes to critical realignment and efficient rent use. Mexico’s industrialization successes in her northern parts ripping the gains from NAFTA have by some been interpreted as deviation from the LAP, even more so was Turkey interpreted as emulating some EAP features with its `Anatolian Tigers`. But a more detailed view on both countries through the lens of the comparative sequential method, comparing their features with the EAP and LAP, shows, that Mexico and Turkey are not so exceptional in their developmental success. Regarding Marxist concerns of power transformations, both countries underwent some significant power shifts since the late nineties which marked the end of the PRI dominance in Mexico and respectively the decline of Kemalism in in Turkey. Regarding neoclassical concerns, both countries were also able to address some market failures in their liberalization periods and experienced in part impressive growth rates in the last 20 years. But the overall deficiency of demand resulting from suboptimal developmental coalitions dominated by inefficient parts of the oligarchy made both countries institutions` fail to become fully developmental.