The False Dilemma Between State or Market

The False Dilemma Between State or Market

Joaquin Gomez Amato
Illustration by TNGO Sara Massidda – TNGO

The globalization process has been cataloged as one of “the most important features in the international system” and the clearest consequence is the new standards and forms in which the capital moves throughout the state’s borders. Despite the several analytical perspectives trying to understand this phenomenon, since 1970, the economic, financial, and productive capitalism platforms have acquired more and more degrees of globalism. The social, economic, and political linkages between countries, multinational companies, and non-profit organizations are increasingly deep.

Within the studies of globalization or the international economic system, there has always been an inherent tension between the market’s search to generate more transnational flows, while the State seeks to circumscribe them and limit their global movement. Nowadays, this tension continues to exist, but given the complexities of global risks and global interconnectivity, the Nation-States must reformulate their capacity, scope, and organizational structures toward new modalities of public-private insertion.

In order to have an accurate picture of how certain countries and multinational companies have developed, it is important to comprehend their economic and social growth. Inside the entrepreneurial and free-market rhetoric, there are several well-known examples such as Silicon Valley, Apple, and Meta, as well as the economic evolution of the United States, Great Britain, South Korea, et sim. but what is behind those experiences? Was the private sector the only one in charge of economic development? What role does the state have in social-economic trends? Are the well-known examples only private interventions or do public-private alliances explain the success? From this perspective, how can we think about the Global South?

COVID-19’s Outbreak: The Emergence of Public-Private Alliances

The complete asymmetry between the reception and administration of COVID-19 vaccines demonstrates a problem in the international political economy, given that it can be read as a faithful reflection of a North-South disposition from a critical perspective. Likewise, from a more eclectic reading, we can understand that in many countries the management of the pandemic has consolidated the low degree of state capacity and its low organizational creativity with the private sector in thinking of more complete solutions. Source: Our World In Data

The COVID-19 pandemic has showcased high levels of asymmetry worldwide. Not only is the total percentage of the population vaccinated per million inhabitants −especially in Africa− but also the socio-economic impacts derived from economic retraction and the geo-economic reconfiguration of the value chains. In short, although the scale of effects has been completely different depending on the country’s financial and organizational capacity, we can see a deficiency in how governmental leadership has organized and defined lockdowns. The current decoupling between the social, economic, and environmental spheres is a deficit way of thinking of states and markets as opposite actors. Even nowadays, a large list of countries has serious difficulties defining and wisely deploying their resources. Perhaps the root of this problem was the lack of importance given to state capabilities.

These binary elections −many times strengthen by some political discourses of free-market policies− have minimized what the state knew how to do historically. Without seeking to elaborate on a pro-state vision, it is relevant to recognize the importance that the state has had on great historic events, and how, in this interconnected world, public-private alliances have been key to achieving economic and social results.

 A Historical Revision

Source: Kicking Away the Ladder (2002) book cover. (1)

From the Industrial Revolution to other prominent socio-economic policies in the United States, France, Germany, South Korea, Japan, and China, public-private alliances have always been critical to success. Inside free-market and private entrepreneurial spheres, the more open the markets are, the more successful a public policy or economic performance. However, history is more complex than this binary rhetoric. The above countries, whose economic development has been of relevancy, are examples of deep public-private alliances. In these cases, the state has been thought of as a socio-political organization with rational autonomy that rests on thinking, analyzing, and executing public policies together with the private sector.

According to Kicking Away the Ladder (2002), a famous economic book written by Han Joon Chang, a Korean expert on economic development, we can observe how most of today’s industrialized countries have mobilized resources from the public sector, together with the private sector. Paradoxically, Chang’s book title alludes to the fact that today, given the technological-productive frontier that industrialized countries have reached, those who have the socio-economic status they venerate as the optimum to follow, are the same ones that have systemically denied developing countries − with pretensions to scale economically− the recipes that led them to their current success. The worldwide influence of Great Britain (1760-1840) and then the United States (1945-2000) are clarifying examples of how the state, via tariff and non-tariff measures, and investment in science and technology, has been an important contributor to economic growth.

Innovation, Rationality, and Assumptions of Risk: The Image of the Entrepreneurial State

In light of Mariana Mazzucato’s book Mission Economy: A Moonshot Guide to Changing Capitalism (2021), we can observe how the United States has developed a robust public-private partnership since the Apolo 11 mission that has had very positive effects in terms of “productive, scientific, and organizational synergies and interlinkages” (2021; 87). From Black and Decker, Motorola, and General Motors to derived technologies such as the internet, solar panels, cellphone cameras, implantable cardioverter defibrillators, and water purification technology, medical and magnetic resonance imaging, “the Apollo 11 program and its association with private companies spawned many important innovations” (2021; 89). Without the state’s participation and positioning, the economic and social synergies between NASA, DARPA, and the extensive productive, scientific and academic network wouldn’t have been possible.

It is important to consider previous macroeconomic and socio-political tensions in each country. The U.S has had important economic and financial resources and assumed several risks, but the most valuable contribution according to Mazzacuto is the importance of thinking in intergenerational state capacities and their interdepartmental communication infrastructures −between the private sector, universities, technological scientists, etc.

In a schematic way, the Interpreturial State might be understood as an organizational and technical corpus whose most prominent features are technical, organizational, and management competencies with a proactive attitude to have leadership, vision, innovation, and flexibility. In most industrialized countries, the Entrepreneurial State has understood that “the principal role of the economy is the direction and not to speed” (Mazzucato, 2021). Nowadays, in a world full of uncertainty, geo-economic readjustments, and techno-social advances, with implications in endless spheres, it is important to understand that the role of the State must be to develop a clear, pragmatic, and programmatic vision to complement the private sector. However, these features are results of tangible and intangible capital. The Apollo 11 mission is an illuminating summary of hundreds of these valuable features. From billions of dollars in innovation and the assumption of risks to expensive technological rockets or devices; as well as the restructuration of organizations such as NASA and DARPA to its connections with prominent universities. Being aware of the material and immaterial asymmetries that countries have, it is important to keep in mind these policies to implement in the Global South.

Scope and Limitations in the Global South: A Possible Roadmap for Argentina

Given the importance of leading a set of green public policies whose approach is holistic, gradual, participatory, realistic but pragmatic, Argentina has relevant capacities to position itself as a country of reference in the region, though it lacks a solid-state capacity to improve its results.

In the short term, the “mission approach” is a possible economic exit to select and improve certain spheres. Argentina has several outstanding industries with a strong future ahead such as lithium, nuclear energy, and renewable energies. According to several official studies, even ECLAC has shown the potential of eolic, solar, and lithium capacity to be one of the most promising productive-green poles in the region (2018). Nowadays, only having natural resources is not enough. These critical industries need to have a political, strategic, and systemic approach. The explanation of each industry exceeds the aim of this work, but it is critical to understand how this “mission approach” could work in the country.

Eolic and solar potential in Latin America (2).
Source: CEPAL “Exploring new spaces for cooperation between Latin America and the Caribbean and China” (2018)

Worldwide, we can observe tangible and intangible capital in industries of the future. Therefore, Argentina must improve “its organizational dynamic” and horizontal decision-making architecture, to build gradual, pragmatic, and participatory public policies. Historically, the country has had dismal macroeconomic results; in addition to a misuse of public funds that did not allow financing policies in the long term. The ideological and political fractures between parties have not allowed defining a horizon on where and how we want to go.

Doing politics means defining priorities. Perhaps it is time to think about Argentina strategically in a context where, despite the opportunities it has, it urgently needs to solidify its mesolevel between companies, universities, and the public sector.

  • What lessons can we learn from the Apollo 11 mission? From which socio-economic sector can we create public-private infrastructures in order to establish more inclusive, complex, and sustainable roadmaps?
  • Is it useful to think dichotomously or taxonomically in this type of debate? What role does history play in revealing, clarifying and even problematizing certain maxims established in endless fields?
  • Is Latin America prone to being able to think of these strategic alliances or will we continue uncritically reproducing the pugnacity of both spheres and actors of the international system?

Notes

(1) This book tries to unravel, in the light of the metaphor of “kicking the ladder” how those fully industrialized countries with a high level of economic development and human development, deny the possibility to developing countries of knowing the trajectories historical that have allowed them to consolidate themselves as powerful state actors within the international system. A common point in the trajectories of those countries was not only the protectionism of their key industries but also the monitoring, the assumption of risk and the organizational and creative capacity of the State with the private sector.

(2)The development of renewable energies and the necessary components for their deployment and implementation undoubtedly require a complex public-private articulation that seeks not only the consolidation of a sustainable pattern of extraction of global public goods (natural resources) but also a look that contemplates how a path of sustainable, inclusive and federal economic development can be delineated


Suggested Readings

Mariana Mazzucato, Mission Economy: A Moonshot Guide to Changing Capitalism

Esteban Actis and Nicolas Creus, The Global Power Struggle

Reviews by Adam Tooze

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The False Dilemma Between…

by Joaquin Gomez Amato time to read: 7 min
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