The political economy of financial subordination: from Prebisch to Neo-Dependentists

FLORENCIA SEMBER; ROBERTO LAMPA

Belo Horizonte

Workshop; The Political Economy of Uncertainty; 2024

Universidad Federal de Minas Gerais

The transformation of developing economies, particularly South American, triggered by the post-2008 reversal of international capital flows and the subsequent expansion of their financial sectors has implied a resurgence in the popularity of a neo-dependentist approach, focusing on the concept of financial subordination. While convincing on the theoretical and analytical planes, the political economy dimension of such an approach has revealed some controversial implications. By emphasising the role of external constraints on developing economies, the pivotal role of financial subordination implicitly limits, at minimum, if not directly eliminates, the space for possible reforms to be implemented at regional, subregional, and national levels. In other words, if the developing countries’ economic problems depend on the action of international institutions or advanced economies, the political-economic failures of regional governments take a back seat or become implicitly justified. Drawing from the history of economic thought, however, it is possible to maintain that such problems characterised also the Structuralist economists, most notably Raul Prebisch. A careful reappraisal of Prebisch’s (self-critical) last published can still provide a consistent solution to the current problems.