The political economy of industrial policy in Peru and Ecuador: 1980-2010

This dissertation focuses on industrial policy in two developing countries: Peru and Ecuador. Informed by comparative historical analysis, it explains how the Import-Substitution Industrialization policies promoted during the 1970s by military administration unravelled in the following 30 years under the guidance of Washington Consensus policies. Positioning political economy in time, the research objectives were two-fold: understanding long-term policy reform patterns, including the variables that conditioned cyclical versus path-dependent dynamics of change and; secondly, investigating the direction and leverage of state institutions supporting the manufacturing sector at the dawn, peak and consolidation of neoliberal discourse in both countries. Three interconnected causal mechanisms explain the divergence of trajectories: institutional legacies, coordination among actors and economic distribution of power. Peru’s long tradition of a minimal state contrasts with the embedded character of Ecuador long tradition of legal protectionism dating back to the Liberal Revolution. Peru’s close policy coordination among stakeholders –state technocrats and business elites- differs from Ecuador’s “winners-take-all” approach for policy-making. Peru’s economic dynamism concentrated in Lima sharply departs from Ecuador’s competitive regional economic leaderships. This dissertation paid particular attention to methodology to understand the intersection between structure and agency in policy change. Tracing primary and secondary sources, as well as key pieces of legislation, became critical to understand key turning points and long-term patterns of change. Open-ended interviews (N=58) with two stakeholder groups (business elites and bureaucrats) compounded the effort to knit motives, discourses, and interests behind this long transition. In order to understand this amount of data, this research build an index of policy intervention as a methodological contribution to assess long patterns of policy change. These findings contribute to the current literature on State-market relations and varieties of capitalism, institutional change, and policy reform.

Cape Breton Provides Pointers for the Adjustment Programs Required by the Decline of the Old Economy (Working Paper 14)

The Cape Breton Development Corporation need not, should not, be dying in the way it is. “Devco” has been widely represented as a failure dragged out too long. In fact it had for a time considerable success in a role too difficult to be often attempted. The main failure was in the political will to stick to its purpose. This commentary is in three parts. The first, major section discusses the purpose of Devco and the policies that served the purpose quite well but were maintained for little more than a decade. It suggests that the benefits would have been greater if Devco had been started earlier in the period of postwar prosperity. The second section comments on the enfeeblement of Devco in the 1980s. The removal of its development function also weakened, and has eventually led to the abandonment of, Devco’s social purpose in the operation of coal mining. Third, a short epilogue pointing out that, while the Cape Breton case is extreme, there will be increasing need to moderate the socially disruptive consequences of accelerating economic change. There are lessons from the Devco experience: the longer remedial action is delayed, the more difficult and expensive it becomes, and the more necessary for its effectiveness is a steady political will.