Political Rents As Critical Levers of Deepening Financialisation: An Assessment of ‘New’ Industrial Policy and the Role of the Inter-American Development Bank

Posted: 5 Dec 2019

See all articles by Keston K. Perry

Keston K. Perry

Williams College; Williams College

Date Written: August 1, 2019

Abstract

This article employs ‘political rent’ as an analytical tool to describe the nature, process and effects of income transfers and associated rules set by regional development banks for new industrial policy in the Latin American and Caribbean region. While existing literature on financialisation explains certain effects of increased market-led intermediation on the macroeconomy, less is known about the institutional mechanisms by which new finance affect industrialization. The paper highlights the structural power of the Inter-American Development Bank in using carrot-and-stick measures, in particular diverse financing instruments, its market legitimacy, and technical oversight to leverage private capital flows in Chile and Trinidad and Tobago. After the virtual dismantling of erstwhile industrial policy institutions, the Bank has advanced a new policy agenda based on financial logics. After examination of two dozen policy-related documents, we find that political rents represent a double-edged approach - an outcome that ‘crowds out’ domestic resources and a process of creating the conditions for further accumulation. These rents have adverse effects on manufacturing exports given the extent of already existing financialisation and the organization of power that favor external forces, debilitate local problem-solving capabilities, increase the power of financial markets, and finance in particular that limit productive transformation.

Keywords: political rent; industrial policy; financialisation; development finance; reprimarization; Inter-American Development Bank

JEL Classification: F65, F63, L52, L71, L78

Suggested Citation

Perry, Keston K., Political Rents As Critical Levers of Deepening Financialisation: An Assessment of ‘New’ Industrial Policy and the Role of the Inter-American Development Bank (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3486995

Keston K. Perry (Contact Author)

Williams College ( email )

Williamstown, MA 01267
United States

Williams College ( email )

Williamstown, MA 01267
United States

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