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Rentiers, Strategic Public Goods and Financialization in the Periphery

Author

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  • Gabriel Porcile
  • Gilberto Tadeu Lima
Abstract
This paper revisits a traditional theme in the literature on the political economy of development, namely how to redistribute rents from traditional exporters of natural resources towards capitalists in technology-intensive sectors that have a higher potential for innovation and the creation of higher-productivity jobs. We argue that this conflict has been reshaped in the past three decades by two major transformations in the international economy. The first is the acceleration of technical change and the key role governments play in supporting international competitiveness. This role takes the form of the provision of strategic public goods to foster innovation and the diffusion of technology (what Christopher Freeman called “technological infrastructure†). The second is the impact of financial globalization in limiting the ability of governments in the periphery to tax and/or issue debt to finance those public goods. Capital mobility allows exporters of natural resources to send their foreign exchange abroad to arbitrate between domestic and foreign assets, and to avoid taxation. Using a macroeconomic model for a small open economy, we argue that in this more complex international context the external constraint on output growth assumes different forms. We focus on two polar cases: the “pure financialization†case, in which legal and illegal capital flights prevent the government from financing the provision of strategic public goods; and the “trade deficit†case, in which private firms in the more technology-intensive sector cannot import the capital goods they need to expand industrial production.

Suggested Citation

  • Gabriel Porcile & Gilberto Tadeu Lima, 2023. "Rentiers, Strategic Public Goods and Financialization in the Periphery," Working Papers, Department of Economics 2023_03, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2023wpecon3
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    References listed on IDEAS

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    More about this item

    Keywords

    Rentiers; public goods; financial globalization; technological infrastructure; center and periphery;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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