inostrani kapital kao faktor razvoja zemalja - Ekonomski fakultet u ...

Being that model characterized, to some extent, by a strong influence of a
‘Developmental State’, that added bureaucratic coordination to market competition,
a revision of that model is presented here, to take into account the different
conditions of ‘transition economies’. In particular, Section 1 discusses the ideal
optimal liberalization sequence, and the reasons why it was so difficult to pursue.
Section 2 focuses on the relation between foreign investments and local
institutions. Section 3 recalls the main features of those Asian ‘Developmental
States’ that were so successful to speed up economic development in the past.
Section 4 provides a few suggestions on how those features could be adapted to the
case of ‘transition economies’ in Europe.
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1. Optimal liberalization sequences
A first condition for achieving positive effects from foreign capital inflows - it
is argued - is to envisage an optimal liberalization sequence. Conventional wisdom
suggests that, to get the most out of external finance, a country should first of all
put his books in order. As fiscal imbalance is amongst the most important sources
of macro-economic instability, a reduction of the fiscal deficit is thus considered a
pre-condition for liberalization. First of all because it shows the willingness of a
country to behave according to ‘market rules’ rather than ‘Keynesian economics’
or ‘planning’; but also because it would help reduce the ‘crowding out’ of private
investments by public expenditure, an event that is considered detrimental for rapid
growth. After fiscal discipline, price liberalization should take place. This measure
is particularly important for ‘transition’ economies, as these economies have long
experienced administered prices for most basic commodities and a number of
mechanisms, for the allocation of resources, that were not based on the ‘capacity to
pay’ of undistinguishable consumers. As a third step, a certain deregulation of
financial institutions should be put in place, to help the country allocate its own
savings more efficiently, and finance those domestic investments that would start
to develop, once profits would build up, as a result of the shift from subsidized to
market-prices goods and services. At this point, the balance of payment should be
liberalized, to allow foreign capital to flow into the country and pay for trade
deficits, or build up from trade surpluses. Eventually, the whole sequence would
allow all investors (both domestic and foreign) to enter profitable ventures, and the
country to grow according to ‘market rules’.
In practice, however, this ideal sequence faced a number of impediments, in
‘transition’ economies. Initially output fall dramatically all over Central and
Eastern Europe (CEE) (World Bank, 2002). With a sharp negative rate of growth,
unemployment grew significantly with inflation, wiping out national savings, or
diverting them into illegal activities. Former equipments and production processes
soon became obsolete, in comparison with those available in Western economies,
even when the real capital stock was abundant, as a result of a long industrial
tradition. In that situation the flow of foreign capital was sometimes considered