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The European Union at 50
paradigm of politics in the USA, the UK and many other places. For the
transformation countries of Eastern Europe it had a paramount importance.
There are certain myths and fallacies involved in the interpretation of these
theories.
First of all, - and this might be perhaps surprising to many - there is a certain
structural similarity between many of the arguments from dependency
theory and liberal development theory, once you 'translate' one theoretical
language into the other and vice versa. As the Economist paper put it on October
26, 1996:
'although some investment can be financed by foreign money, high savings rates
will be needed to pay for the accumulation of capital and thus to boost growth
rates'
For a true liberal economist, dependency is a special situation of the typical
constraints, caused by a policy of import substitution and export discrimination.
Policies that create double deficits (huge current account balance deficits + large
state sector budget deficits) and discriminate against internal savings, will lead
to a high propensity to import foreign capital, often still aided by de-iure or defacto
policies that prevent enterprise creation and savings mobilization. The
growing peripherization of the United States of America should be also
mentioned in this context. According to the World Bank World Development
Report, 1996, the current account balance of the United States in 1994 before
official transfers was the largest single negative current account balance in the
world ($136.484 thousand million); the current overall central government deficit
per GNP in 1994 was 3%. Neo-classical economists would agree with
'dependentistas' in their critique of import substitution strategies, currency
overvaluations, and - hence - the discrimination against exports in benefit of the
urban sector and to the detriment of rural society. The basic argument of such a
sophisticated version of the neo-liberal school further runs as follows: in world
politically stable countries with long recognised international borders, narrow
distribution coalitions emerge in the wake of too big a state sector influence, and
they will thwart growth perspectives and bring about stagnation and
unemployment. High real appreciation of the national currency (Poland + 9%
1990-94) declining private savings rates (Poland: 12.4% growth rate of private
consumption), inadequate investments in the tradables sector, low export growth
rates compared to imports, high official current account balance deficits per GDP
(estimated by some economists to be unsustainable when twice the numerical
value of the export growth rate or more), a growing reliance on short-term
capital flows and large currency exposures are well known to both neo-classical
economics and dependency theories alike (Dadush and Brahmbhatt, 1995). In
addition, the state and its economic activities will be most harmful in older
democracies due to the unhalted workings of the mechanism of narrow
distribution coalitions.
Measured in terms of central state sector expenditures per total GNP, the
average European Union country today (50.9%) is more 'socialist' than most
former communist states. Even in the UK, after years of conservative rule,
39.9% of GNP in 1994 was controlled by the central government in London, a
figure, which does not include expenditures by government in the broader sense
in the municipalities et cetera. One of the reasons, why the central government
share in the USA (22.2%) is lower than in most European countries is simply that
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