State and Industrialized Underdevelopment: A Critique of the Neoclassical and Marxist Theories of Development

Introduction

In this book, Luiz Carlos Bresser Pereira presents a critique of the neoclassical and Marxist theories of development. He argues that both theories are inadequate in explaining the process of industrialized underdevelopment in Latin America.

The Neoclassical Theory of Development

The neoclassical theory of development is based on the assumption that the market is the most efficient mechanism for allocating resources. According to this theory, economic growth can be achieved by increasing investment, improving technology, and reducing government intervention.

Bresser Pereira argues that the neoclassical theory is inadequate in explaining the process of industrialized underdevelopment in Latin America because it ignores the role of the state in promoting economic growth. He argues that the state plays a crucial role in providing infrastructure, education, and other public goods that are necessary for economic development.

The Marxist Theory of Development

The Marxist theory of development is based on the assumption that the capitalist system is inherently exploitative and that it leads to the impoverishment of the working class. According to this theory, economic growth can only be achieved by overthrowing the capitalist system and establishing a socialist society.

Bresser Pereira argues that the Marxist theory is inadequate in explaining the process of industrialized underdevelopment in Latin America because it ignores the role of technology in economic growth. He argues that technology is the key to increasing productivity and improving living standards.

An Alternative Theory of Development

Bresser Pereira proposes an alternative theory of development that is based on the concept of "industrialized underdevelopment." He argues that industrialized underdevelopment is a condition in which a country has a high level of industrialization but a low level of economic development.

Bresser Pereira argues that industrialized underdevelopment is caused by a number of factors, including:

• The lack of a strong state: The state plays a crucial role in promoting economic growth by providing infrastructure, education, and other public goods. In Latin America, the state has often been weak and unable to play this role effectively.
• The unequal distribution of income: The unequal distribution of income in Latin America has led to a lack of domestic demand for goods and services. This has made it difficult for industries to grow and create jobs.
• The dependence on foreign capital: Latin America has historically been dependent on foreign capital for investment. This has made it difficult for countries to control their own economic policies and has led to a lack of economic sovereignty.

Bresser Pereira argues that industrialized underdevelopment can be overcome by implementing a number of policies, including:

• Strengthening the state: The state needs to be strengthened in order to play a more effective role in promoting economic growth. This can be done by increasing tax revenues, improving public administration, and reducing corruption.
• Reducing income inequality: Income inequality needs to be reduced in order to increase domestic demand for goods and services. This can be done by implementing progressive tax policies, increasing the minimum wage, and expanding social safety nets.
• Reducing dependence on foreign capital: Latin America needs to reduce its dependence on foreign capital in order to gain more control over its own economic policies. This can be done by promoting domestic investment, increasing exports, and reducing foreign debt.

Bresser Pereira's theory of industrialized underdevelopment provides a new way of understanding the economic problems of Latin America. It offers a number of policy recommendations that can help countries overcome industrialized underdevelopment and achieve sustainable economic growth.

Conclusion

State and Industrialized Underdevelopment is a must-read for anyone interested in the economic development of Latin America. Bresser Pereira's critique of the neoclassical and Marxist theories of development is insightful and persuasive. His alternative theory of industrialized underdevelopment provides a new way of understanding the economic problems of Latin America and offers a number of policy recommendations that can help countries overcome industrialized underdevelopment and achieve sustainable economic growth.