This book explores the coevolution of firms, sectors, regions, and national economies in the Global South and explains their economic performance as a dynamic outcome of interactions between the multiple levels of innovation systems. This book counters prevailing views on economic development and offers a unique contribution to the literature on economic catch-up. Whereas the traditional linear view of development has taken a “more is better” approach, this book advocates that latecomers should pursue detours or leapfrogging, which conforms with a “less is better” approach. Instead of the conventional prioritization of manufacturing, this book proposes prioritizing domestic ownership and knowledge in specific sectors and regions and asserts that no country has successfully developed a high-income economy without generating a certain number of globally recognized big businesses. Instead of placing priority on free markets as the Washington Consensus does, this book argues that economic catch-up is only possible with active and planned government interventions, which are needed to overcome latecomers’ disadvantages regarding barriers to entry at the middle-income stage.

This chapter introduces comparative lawyers to the field known as law and development, which in turn examines the uses of law for developmental objectives. The chapter attempts to relate the two fields and indicate the relevance of each to the other. In the course of doing this we also introduce a general theory of law and development that can be used as a bridge between the two. We submit that law and development is itself developing in ways that involve new ideas and the processing of varied experiences; these in themselves are preoccupations of comparative law too.

Chapter 1 unpacks the traditional framework that shapes how scholars and policymakers think of corporate governance and its role in financial development and market growth. It reviews the main strands of literature that have nourished legal scholarship in the field of economic development law and development studies and the new institutional economics tradition. It describes how these strands connect with the main theories underlying scholarship on corporate governance and financial market development and explains that the literature highlight the importance of investor protection for the growth and development of markets.

This chapter describes the end of the cold war, the Washington Consensus that drove efforts to reform the institutions and economies of the states that previously had pursued autarkic economic policies, and the counternarratives that pushed back against the Washington Consensus

Mexico’s 1982 announcement that it would be unable to make its debt payment set off Latin America’s “Lost Decade.” All over the region, economies stagnated and millions of people suffered. The international response, spearheaded by the United States, International Monetary Fund, and World Bank, initiated market reforms that would cut state spending, privatize state-run industries, dismantle tariffs, and construct free trade agreements. The neoliberal era had been launched. The reforms and trade agreements that accompanied this new era reflected continued U.S. hegemony but also the ways in which economic power was supplanting military power. Latin America initially found few alternatives to the neoliberal model. At the end of the twentieth century Latin American economies were growing once again, but in many cases they were only returning to where they had been before the crash. With millions feeling economic pain, neopopulist leaders gained momentum. Commitment to free trade agreements also waned as leaders like Donald Trump questioned their benefits. This chapter explores the region’s political economy of the last 50 years.

This chapter outlines potential failures of privatization and presents a sequence of steps to successfully design, implement, and monitor privatization processes. Regarding cases where proposals for offering privatized services face strong opposition and become unfeasible, the chapter also examines how various reform initiatives can lead to better and more effective public organizations, which may also interact with and complement the services of private firms. The chapter concludes by observing that, over time, societies have learned to propose and build on diverse experiences, often exploring multiple paths of improvement where public and private organizations coexist and experiment with plural solutions.

Chapter 1 introduces new Asian regionalism as a paradigm shift in international economic law. It discusses three waves of global regionalism with a focus on the Third Regionalism and its unique characteristics. To promote interdisciplinary dialogues, the chapter explores theoretical debates on regionalism and the normative framework of the New Regional Economic Order, which explains the changing North-South relations in the multilateral trading system. In the post-war era, Asian regionalism has been based on the ASEAN-centered regime known as the ASEAN Plus Six framework. Finally, the chapter provides an overview of the structure and objectives of the book.

Economists and political scientists tend to explain China’s rapid rise from the institutional perspective. There are two contrasting schools of thought: the free market school and the active government school. Both schools acknowledge that market reform has been a key factor in China’s rapid economic growth, but the active government school also attributes it to China’s strong government and its active economic intervention. These two contrasting institutional views are evaluated in Chapter 3. The short conclusion is that neither view can properly explain the Chinese growth puzzle. The free market view cannot because China’s market is not much freer than that of most developing countries. The active government view cannot either because China is not particularly well ranked in terms of government effectiveness. There are many other institutionalists who hold more fine-grained views than the above two schools. Some of these views are also evaluated in the chapter, which concludes that institutional and policy factors may be important contributors to China’s economic growth, but they are not the differentiating factors that have made China grow faster than all other countries.

Ideas provided the ballast for the continuity of the economic policy commitments of this era. Developmentalism – the notion that underdevelopment can be overcome “through capitalist industrialization, planned and supported by the state” (Bielschowsky, 1988) – served as a long-term constraint within institutions, pointing toward particular equilibrium outcomes, prioritizing between conflicting alternatives, and providing guidance that drove diverse and uncoordinated actors toward particular preferences and behaviors.As a consequence, even under the most reformist of governments, including at the height of the “Washington Consensus,” Brazilian policymaking was far more gradual, inward-looking, and accepting of an active role for the state in regulating and shaping markets than its large Latin American peers. Using Argentina and Chile as comparisons, the chapter illustrates how developmentalist ideas remained relatively embedded in Brazilian policymaking, academia, and popular thought, even as the “old’ developmentalism was supplanted by a “new” variant.

This chapter is a review of the early debates on how best to do the transformation from socialist central planning to a market economy with private capitalist owners sets the stage. It is noted that the popular euphoria generated by the fall of the Berlin Wall permeated the world academic community with numerous papers and conferences on the subject, and a broad consensus on the main changes was reached; however, a wide rift occurred on two key points: should this be done rapidly or gradually, and what should come first: market liberalization or development of new institutions? An important clarification is made that criticisms of the Washington Consensus for ignoring social costs of liberalization and institutional development were unfounded straw-man depictions. All relevant documents or statements of international institutions clearly include both of these elements; at most, such criticisms could justifiably note IMF and others paid insufficient attention to these elements.

Chapter three examines Egypt’s embrace of a neoliberal policy paradigm through the adoption of a comprehensive package of structural adjustment policies proposed by the International Monetary Fund (IMF) in the early 1990s. This neoliberal shift was a gradual process that was contested by the conservative faction within the ruling National Democratic Party who were primarily concerned with the preservation of social order. Over the course of the 1990s and 2000s, an ideologically committed neoliberal faction, aligned with transnational capital, emerged within the party and was able to establish its hegemony and form government in 2004. Under this ‘government of businessmen’, the implementation of the neoliberal agenda was accelerated by means of an increasingly disciplinary state expropriating customary and public property and enforcing capitalist property rights, resulting in rising income inequality and growing popular discontent.

In terms of being able to grasp the scale and scope of the systemic earthquake we are experiencing today, it is crucial to gain an understanding of the spiral of ongoing crises and aftershocks in the wake of the geopolitical (with the dissolution of the Soviet Union, 1991) security (post- 9/11, 2001), economic (with the global economic crisis, 2008) and structural (Arab Spring, 2011) earthquakes of the post-Cold War era. The international order today is subject to the impact not of a single process, but rather a number of intertwined processes.

Although the starting dates of these periods/processes are chronologically sequential, there is no neat sequence in which one ends and another begins. Rather, the ongoing impact of each maintains its individual effect as well as triggering more complex developments that impact one another.

From this perspective in the second chapter of the book the geopolitical, security, economic and structural earthquakes that have generated a spiral of crises in the post-Cold War period that have laid the ground for the chaotic environment of today are analysed.

In the framework of a critical illustration of the contemporary history of economics, this chapter illustrates the various streams of neo-liberalism, from Ordoliberalism to Mises’s new Austrian school and Hicks’s Austrian capital theory, from Friedman and the Chicago school to rational expectations and supply-side economics, from the public choice school to political economics, from the Mount Pélerin Society to the Washington consensus and the idea of expansionary austerity. Step by step, the feeble theoretical and conceptual foundations of this set of theories are critically discussed.

The focus of Michael Spence in this chapter is economic development and the evolving relationship between developed and developing countries. In exploring these issues, Spence highlights the centrality of economic growth. In this perspective, he argues that economic growth is not sufficient to generate sustainable development. What is also critical is good governance. In the conversation Spence recognizes as well that the gap between rich and poor is a major problem, in part accounting for the rise of populism. This problem has to be addressed.