In the context of a neo-colonial dependency this chapter examines governmental “bargaining” with producer groups and “bidding” for consumer group support at the polls from 1969 through 1984. We concentrate on the period from 1978, when industrial policy hit its highwater mark, to 1984 when the Telesis Report signaled the end of the strategy. Samuel Beer argues – or says he is tempted to argue – that just “as great retailing organizations manipulate the opinion of their markets, creating the demand of which in economic theory they are supposed to be the servants, so also the massive party organizations of Collectivist politics create the opinion which in democratic theory they are supposed merely to reflect.” Parties shape and condition the voters' sense of possibilities and alternatives. Anderson describes “paradigms of public choice” which specify the grounds appropriate for making claims within a given political order, defining the boundaries of admissible argument, and which are themselves at stake in political struggle.

In the 1980s Irish governments imposed austerity with remarkable political case and in a uniform fashion that culminated in 1987 with Fine Gael's endorsement of the economic aims of the minority Fianna Fail government – virtually a declaration of “a national unity regime.” The debt crisis was understandably the first priority; it also obscured, if not eclipsed, debate over the shortcomings of development policy. This chapter explains how consent was gained for a particular diagnosis of crisis and for an extenuation of an ebbing developmental orthodoxy.

The next section surveys the economic difficulties and political liabilities of the industrial policy path which in effect was declared void but not nullified. For want of an authoritative successor this policy continued with minor modifications. Next I examine emergent alternatives within and outside the state's formal boundaries, which all met political and conceptual barriers during the administrations of a Fine Gael-Labour coalition, a minority Fianna Fail government, and since July 1989 a Fianna Fail–Progressive Democrat coalition. Fianna Fail would revive corporatist-style bargaining via a program for national recovery signed, sealed, and delivered in October 1987 despite the severe deflationary Budgets enacted at the time.

In a radio broadcast on Easter day 1943, Eamon DeValera, patriarchal Prime Minister of the Irish Free State, described his vision of a self-sufficient Gaelic nation replete with comely maidens, cosy homesteads and, presumably, a reunited Ulster. “The Ireland we dreamed of would be the home of a people who valued material wealth only as a basis of a right living,” the Fianna Fail party leader intoned, “of a people who were satisfied with a frugal comfort and devoted their leisure to things of the spirit. It would, in a word, be the home of a people living the life that God desired men to live.” In 1958 the autarkic policies Fianna Fail had promoted since it first assumed political power a quarter century earlier were abandoned without fanfare or remorse. A “post-revolutionary” generation of self-proclaimed pragmatists steered their fraction of the island into Europe – by which they meant the common market – and the era of push button technology. God evidently desired that the Irish enjoy more prosperity.

Banishing the donkey-and-cart age to Tourist Board posters the Irish Republic industrialized by introducing economic planning – cuphemized in the accurately timid term “programming” – and, more importantly, by converting itself into a haven for footloose capital. These two tactical strands interwove in a frayed way in the export-led development strategy by which policy-makers commenced “chasing progress.”

The Common Market vote in 1972 expressed a resounding recognition of circumstances perceived by the electorate to be beyond national control. Few Irish believed that their island could thrive outside the Treaty of Rome. An official mission to Brussels became the economic equivalent of a pilgrimage to Lourdes. Thereafter an infirm economy should revive, shriveled regions flourish, and benign investors spread capital abundantly in the fair hills of Eire. So said the major parties and virtually all the media.

This chapter delves into the motives and interests underlying the enormous pro-EEC vote, which reaffirmed the legitimacy of the export-led industrialization strategy; then we examine the political and ideological role of the Industrial Development Authority, the de facto central planner. The chapter concludes by treating issues of the late 1970s: the disposition of new-found mineral resources, and the revealing furor stirred by the closure of the largest foreign manufacturing employer in the Irish Republic. By the end of the decade the consensus favoring the development scheme began to crack – but not crumble – and neo-corporatist experimentation flickered out.

During a visit to Dublin in the late 1970s John Kenneth Galbraith paused in his analysis of the “two-tiered economic system” and critcisms of free market lore to reassure an audience of financial executives that “the multinational corporation is not multinationally wicked.” Asked to appraise the Irish industrialization strategy of export-led growth via injections of foreign direct investment, he replied soothingly that “the notion of outside control should not be too alarming. While multinationals are a menace to weakly governed countries, they present no threat to those strongly governed.”

Yet apprehensiveness was justifiable. In contrast to Galbraith's upbeat assessment, one could find at that time an Irish prime minister promoting his nation's industrial advantages in a Fortune magazine advertisement. “The main thing,” he emphatically explains, “is that we impose as few conditions as possible.” In this courteous and hospitable English-speaking milieu, prospective investors may rest assured that “policies never change” in the transition from one government to another and also that “Irish products are politically acceptable everywhere” in a fitting finish to an elegant plea.

In the wake of a recital of impeccable investment criteria, the managing director of the Industrial Development Authority in 1975 noted finally that “we have not experienced the luxury of turning away viable industrial projects because they could not use native raw materials or because their potential linkages were not fully to our liking … we cannot afford to shut out any source which is currently supplying viable industries.”

Summary

Thailand has been a latecomer to industrialization in general, and to clothing and textiles in particular, largely as a result of the free trade policies that followed the Browring Treaty (1850–26) and subsequent attempts at public investment in industry. The policy served the country well in developing agricultural and raw material exports in the 1950s and 1960s. Thailand concentrated on exporting agricultural products such as rice and teak, while it imported manufactured products. A change in policy in favour of promoting private investment in the 1960s was inaugurated with the introduction of tariffs, an Investment Promotion Act and subsidized credit for industry. Clothing and textiles were among the first industries to be affected by these policies. Initially, manufacturing was largely for import substitution.

Clothing and textiles have become increasingly important since the mid 1980s because of their successful export performance. They have become the highest foreign exchange earners and the major source of employment in manufacturing.

Government intervention in clothing and textiles has been considerable, but often confusing. There has been both promotion and protection, as well as attempts to restrict the industry's capacity.

Although tariff protection has been high, especially at the more capital intensive end of the industry (notably for man-made fibres), the level has been moderate when compared with many other developing countries. Promotion granted to the industry has been intermittent. The government has also tried to control the supply of textiles by prohibiting capacity expansion from 1978–86.

Fluctuations in clothing and textile policies reflect the effectiveness of lobby groups within the industry. From time to time interest groups have lobbied: for the prohibition of expansion, against the establishment of new textile capacity, for protection, for an export quota allocation system that favours large firms, and for other forms of public assistance.

The prohibition of expansion of textile capacity has a major impact on the organization of the industry and on the effectiveness of protection policy.

Parameter Lists and Data Sources

Demand and supply parameters are required for the model. The demand parameters are income elasticity of demand, price elasticity of demand, elasticity of demand for domestically produced products, elasticity of total demand for imports, elasticity of demand for imports from restricted and unrestricted products, and substitution demand for imports by source in restricted and unrestricted markets. The parameters have been gathered from this study's estimates as well as from several other studies. These include: Houthakker and Taylor (1970); Moshin (1974); Stern, Francis and Schumacher (1976); Tan (1978); Stone (1979); Lee and others (1980); Grossman (1982); Kirmani, Milajoni and Mayer (1984); Hufbauer, Berliner and Elliott (1986); Koekkoek and Mennies (1986); Cline (1987); and Erzan and Karsenty (1987). Where the elasticity of demand for a particular country is not available, a formula has been derived from the data available and market shares. Estimate of the elasticity of substitution is not available by source. It is assumed to be low (0.5) in developing countries, as there is limited access to these markets and thus low degree of substitution is allowed, and higher (2.5) for developed countries in both restricted and unrestricted markets, where a higher degree of substitution is allowed from different sources because these markets are more open despite the MFA.

Data on supply parameters were difficult to obtain. The elasticity of transformation between clothing and other products was close to 1 for industrial countries and the ROW, and lower in other developing countries. Other elasticities have been assumed to be equal to 1 in all countries/country groups following Cline (1987).

World Trade in Clothing and Textiles

In 1986 clothing and textiles represented about 9 per cent of world merchandise trade and they grew at 5 per cent a year (GATT 1987d). Clothing and textiles had approximately equal shares of about 4.5 per cent each in this total, with values of $61 billion and $66 billion respectively.

World trade in clothing and textiles has been dominated by the industrial countries. In textiles, industrial countries are both major importers and exporters, with a share of 65 per cent in the world market in 1986. Half of the world textile trade takes the form of intra-industrial countries' trade. Industrial countries account for 85 per cent of the world clothing trade; 41 per cent is intra-industrial country trade.

The EC is the world's largest importer and exporter of clothing and textiles. It accounts for 42 per cent of world textile imports and 40 per cent of clothing imports. However, most of these imports take the form of intra-EC trade (Table 4.1). The United States is the second largest importer of clothing with an import share of 29 per cent.

For all the attention given to developing countries' clothing and textile exports, industrialized countries are still the major exporters. The EC is the world's largest exporter of clothing and textiles, accounting for 52 per cent of world trade, followed by the Asian NICs with 18.4 per cent. Italy is the world's largest individual exporting country (when aggregating both textiles and clothing) with a market share of 13.5 per cent (Table 4.2). For textiles, in 1986 the Federal Republic of Germany, Italy and Japan were the major exporters in the world market with shares of 8.1, 5.1 and 5.6 per cent, while for clothing Hong Kong, Italy and the Republic of Korea were the major exporters with shares of 8.4, 7.6 and 5.8 per cent (GATT 198d).

The simulation model of global clothing trade presented in this chapter evaluates the effects of trade distortions on world trade in clothing, with special reference to the effect on Thailand. Like the model presented in Chapter 6, this mode is global in nature and hence captures terms of trade effects. It also incorporates differentiated products by country of origin. The differentiated product models have been widely applied to community trade, particularly to agricultural products. Honma and Heady (1984) examined the trade flows of the international wheat trade, and Pearson and Babula (1988) applied the same type of model to the effects of Japanese monetary policy on U.S. agricultural exports.

Model Relating to Clothing and Textiles

Several models have dealt with clothing and textiles. Wallace, Naylor and Sasser (1971) presented an econometric model of the textile industry in the United States in an attempt to explain the behaviour of U.S. producers. Hamilton (1981) developed a model to analyse the effects of import quota restrictions on the Swedish textile industry. Cline (1987) constructed a model of clothing and textiles for the United States to explain why imports into the United States increased sharply in the early 1980s. He concluded that the major reason were overvalued exchange rates. All of these earlier models were partial equilibrium models of the homogeneous product type rather than global in nature, and hence they were unable to deal with the implications of the arrangements for world prices. Partial models tend to emphasize the rise in domestic prices brought about by restrictive arrangements. These provide gains to developing countries. But the models cannot capture price depressing terms of trade effects in other markets.

The most recent model for clothing and textiles was constructed by Trela and Whalley (1988). They applied a CGE structure to global trade in clothing and textiles to evaluate the welfare effects of the MFA on exporting countries.