Spain’s Development vs. Korea, China: Finance & Industry
Spain (Developing Country Until 1982) and the Basque Country
Unlike Korea, other countries such as Spain, Brazil, and Turkey, were not as successful in implementing their developmental states. According to Evans (1995), this could be due to the lack of a competent bureaucracy and embedded autonomy, as already explained.
- Spain was an autarchy, an isolated country, during the most challenging period of the dictatorship, from 1941 to 1959.
- The Spanish government created many public enterprises under the INI (Instituto Nacional de Industria), which was established in 1941. The Spanish Stabilization Programme of 1959 could be considered a historical precedent of the measures contained in the Washington Consensus, following IMF and OEEC advice.
- Spain implemented Development Plans starting in 1964 to promote industrialization. However, unlike Korea, it was not a geopolitically strategic country.
- Spain didn’t receive as much aid from the US, nor was the aid as efficient in strengthening a healthy bureaucracy.
- The Spanish dictatorship didn’t adhere to proper criteria, and corruption, along with personal and political favors, were common. The Spanish government didn’t favor private initiatives that could be independent from the state and created public companies even where private enterprises existed: the steel industry, shipbuilding, etc.
- The Spanish government didn’t invest sufficiently in education, and therefore, high-technology sectors were underdeveloped. For medium-high technology sectors, Spain relied on foreign transnational corporations, which hindered national autonomy and the pursuit of its own technology. Furthermore, the Basque Country, the industrial powerhouse of Spain, was penalized, and high-tech and technology centers were primarily developed outside the Basque Country.
The Rise of China Before 1979: Closed Economy and State-Owned Enterprises (SOEs)
In 1979, China began to shift away from its closed economy by implementing an “open-door” policy. Under this policy, Special Economic Zones (SEZs) were established to attract foreign investment by offering tax breaks and other benefits to foreign investors. Decentralization of economic policymaking was a key feature of the foreign sector reform, and rural industry boomed through TVEs (Township and Village Enterprises).
Finance/Industry Relationship
- The Anglo-Saxon model is different, with firms relying more on capital markets for financing.
- In Germany, banks have been deeply involved with industrial capital in enduring relationships based on long-term success. The interlocking relationships between financial and industrial capital have provided stability and a healthy flow of information to financial institutions, which in turn has helped firms obtain the necessary financing for investment on better terms than in disengaged Anglo-Saxon systems.
In France and Japan, banks were nationalized after World War II to support industry. In many developing countries, such as Spain and South Korea, there was financial repression, compelling banks to invest in industry.