Tuesday, August 13, 2013

About the importance of policy stability in the path to development

Opinion article by: David Ricardo Murcia*.  (dmurcias@gmail.com )
*Political Sciences student at Universidad EAFIT, Colombia.

One crucial component of development paths in the 21st century has been the share of a country in the value given to a product during its process in a global value chain (GVC). Using the formers modes of production Transnational Corporations (TNC) distributes among various nations the process of production seeking lower costs according to the characteristics of the nations, id est: TNCs assemble each part of a final product in the state where it is cheaper. It, indeed, hazards developing countries because most of the value will be given to the economy that commercializes the final product. The remaining value splits in each hosting nations according to the step of the production in which it participates. According to the UNCTAD WIR for 2013, nations involved in the primary sector of the economy gain a little percentage of product profit that comes from their commodities.
A way to take advantage of the GVCs, and, therefore, dodging the obstacle described above, is to canalize or specialize a nation’s economy in a sector that gives a bigger share of the value added in the process. These could be seen in the reason why Asian nations gain better revenue of the TNC operations than the Latin-American or African countries, as for the first got involved in high added sector such as technology or high profile services, while the second are stuck in the extraction and production of commodities. One should think that, it will be a simple problem to solve, but it is not like a state could easily change its current economic activities, more, if it is taken into account the political culture of each region.
Let’s take Singapore and Colombia to make the comparison. Singapore took a clear highway to development since the independence from its metropolis. In the head of Lee Kuan Yew, who governed during 25 years (1965-1990), the nation torn itself into the most important merchant port of the South-East Asia and therefore to a prosperous economy. After the Yew Singapore government there has been just two political authorities: Goh Chok Tong with 14 years in office (1990-2004), and Lee Hsien Loong since 2004, who have nothing but continued the same path. This shows a scenario of a politically stable country, although a soft-autocratic, nevertheless, a highly competitive country in the global panorama.
By the other hand, there is Colombia. Since its independence from the Spanish Empire, the Latin-American country has seen no continuity or establishment of a state policy. Each president who climbs in office tries to impose its own view to a very skeptical political class and its interests. That makes every policy proposal a government policy; with no continuity in the future administrations. The former instability turns into a non-specific economy in land with high capabilities to exploit. That is why the various sectors with growth potential can be easily weakened by the lack of institutional support. There was, for sure, a big deal with coffee, minerals, or oil, but there were no state policy giving a stable and endurable frame to any sector to thrive. But that policy instability through history takes place in what could be described as a democratic environment, where each class has, successfully or not, fought for their rights.
The comparison should be extended, but the space is short. In a gross résumé, the former analysis left bitterness in the mouths when it suggests a question for how patience should a democratic society (like the Colombian) be with democracy, if a soft-autocratic government has given such good revenue to the Singaporeans. Or how should we arrange the political system to give policy and economic stability so we could get a better deal out of the TNCs and the current dynamics of GVCs..


UNCTAD. (2013). World Invesment Report 2013. Geneva & New Yor. United Nations

Le Monde Diplomatique. (2012). El atlas geopolítico 2012. Valencia: UNED. 

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