New Developmentalism

Abstract

New developmentalism is a theoretical framework that has been developed since the beginning of the century, mainly in Brazil, and is aimed at understanding and offering policies to middle-income countries. It is a second moment for “classical developmentalism” or the development of 1950s’ and 1960s’ economics. Its political economy implies widening of the concept of developmental policy regimes, arguing that developmentalism is historically the alternative form of economic and political organisation of capitalism to economic liberalism. Its microeconomics is borrowed from classical developmentalism and asserts that economic development is structural change or industrialisation. Its macroeconomics is associated with post-Keynesian thought, but it is from the start open and development oriented. In the analysis of the aggregate variables, it privileges the five macroeconomic prices (the interest rate, the exchange rate, the profit rate, the wage rate and the inflation rate), and focuses on the determinants of the exchange rate and on the current account. The exchange rate tends to be chronically and cyclically overvalued owing to a non-neutralised Dutch disease and the high interest rates associated with the usually equivocated policy of growth with foreign indebtedness.