Sorting Out the Mixed Economy: The Rise and Fall of Welfare and Developmental States in the Americas

Abstract

How much do rich countries influence the development path of the so-called Third World? Does this influence only flow in one direction? Perhaps the answer to such questions lies in thinking about the nature of economic intervention itself.Amy C. Offner argues that neither full-scale economic intervention nor laissez-faire can describe the development of capitalism in the twentieth century. She proposes “mixed economy” as a useful concept to describe the evolution of modern capitalism. This concept recognizes intervention in a market economy while keeping the forces of the market economy in charge of the bulk of production and simultaneously emphasizing the redistributive demands prevailing across marginalized groups. The mixed economy is a middle-ground arena between dirigisme and unregulated, unsupported private initiative that is best understood in historical context. Offner's book speaks about how the ideas and practices of the welfare and developmental states transform together and reinforce each other within the mixed economy. As she writes, “the developmental state incubated quite unexpected processes of intellectual transformation” (p. 8). One learns from this book about the actors and the nature of economic intervention rather than the endless—and somewhat useless—debate around whether an economy ought to be intervened in.As an attempt to create an arbitrary and incomplete taxonomy of the book's main arguments, one can think of three different waves of influence with regard to economic intervention: the New Deal, the influence of former New Dealers outside the United States, and the influence that the developmental states had back in the United States. The key element that binds together these waves, despite their important geographical and institutional characteristics, is the ongoing process of decentralization. Indeed, it is paradoxical that the developmental and welfare state's engine was bolstered by the creative promotion of autonomous spending and profit delegation to perform public tasks. This is the process that Offner's book sheds light on.Offner describes in detail the changing intellectual environment around the welfare and developmental state. In the aftermath of the Great Depression, the New Deal supported broad development programs in the United States, although the line separating recovery from development is blurry. Clearer, however, were the large-scale infrastructure projects that promoted growth, employment, and poverty eradication. This mindset changed after World War II, when the United States perceived itself as a wealthy country with pockets of poverty rather than as a country in need of development programs beyond welfare assistance.The post–World War II reorganization separated the world further into rich countries with poor and marginalized citizens and poor countries in need of development projects. It was in the latter where the New Dealers found new ground to experiment. Colombia emerges in the book as the most illustrative case of US foreign experimentation.Using an unparalleled wealth of primary evidence that includes (but is not limited to) the archives of Colombian business associations, regional corporations, and universities, Offner delivers new insights on US influence in the emerging developmental state of Colombia. Chapter 1, entitled “Decentralization in One Valley,” is perhaps the strongest chapter because it deals with the political influence of David Lilienthal, former chairman of the Tennessee Valley Authority, in creating a regional autonomous corporation in charge of irrigation and extending support to large-scale capital-intensive agriculture. These large-scale development projects in the countryside are of the utmost importance on their own for a country with a political economy equilibrium protective of small-scale agriculture that has impeded true agro-industrial development in other parts of Colombia, including the coffee regions.Importantly, Offner's book is not about agriculture, nor is it a collage of development programs. It is a quest for understanding a country's development path. This is confirmed with her subsequent inquiry on urbanization in chapter 3, entitled “Private Homes and Economic Orders,” as workers displaced from agriculture pose to the reader (and the policymaker) a challenge. Is there any policy that should, or could, be implemented in urban areas to support the workers coming from the countryside? Offner's investigation sheds light on how ideas and policy interact while experimenting for answers—through original development projects—to this puzzle. The chapters on urban development in Colombia and the United States are perhaps the strongest illustration of the influence of untested theories initially deployed in experimental settings and constantly seeking broader legitimacy. One observes the arguments of Lauchlin Currie and Albert O. Hirschman constantly intertwined while navigating the challenges of political economy that surrounded the transition from the dictatorship of Gustavo Rojas Pinilla to the genesis of the National Front in Colombia.The argument that is perhaps the least clear is related to Colombia's own influence on US policy, beyond the fact that Latin America as a whole, rather than the particular experience of Colombia on its own merit, did sway public discourse and policy across the Western Hemisphere. Whereas Offner expands in detail on the actors involved in the political economy of the developmental state in Colombia, she also indicates that Puerto Rico's Operation Bootstrap was the critical flagship program that inspired in the United States new modes of intervention beyond welfare. Perhaps in the future similar archival work on Puerto Rico can help us to disentangle this question.