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The Progressive Economics Forum

A Taxonomy of Linkages

As we discuss Dutch disease and the staples trap, it is good to be reminded that these discussions can benefit by being put in the context of Albert Hirschman’s linkages from commodity/resource/staple export. It so happens that a recent monograph begins with Hirschman and then elaborates on his linkages, and applies them in case studies. The study, titled “One Thing Leads to Another: Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa” is authored by Mike Morris and David Kaplan of the University of Cape Town and Raphael Kaplansky of the Open University UK and was published in 2012. http://tinyurl.com/CommoditiesBook (I am grateful to my UofT colleague, Gerry Helleiner, for drawing this study to my attention.)

Hirschman talked about Forward Linkage and Backward Linkage (production linkages), and Consumption Linkage (spending of incomes earned in the export sector) and Fiscal Linkage (the government capture of resource rents by royalties and by taxes on corporate profits. and the disposition of these revenues.) The authors of this study add Horizontal Linkage, which would include infrastructure built for the staple which then has powerful spread effects of its own. The point of this taxonomy is to show the complexity of spread or linkage effects, their breadth and their depth, and further dimensions are adumbrated in their case studies, like foreign or domestic ownership, effects on the culture of innovation, skills development, and so on.

As well as being able to specify what is and is not happening with respect to exports – oil, diamonds, timber, gold, copper – from Sub-Saharan Africa (Angola, Botwana, Gabon, Ghana, Nigera, South Africa, Tanzania and Zambia), the authors want to demonstrate that the enhancement of market-generated linkages by government policy is a valid and important development strategy.

For these authors, the Canadian case, which they refer to only in passing, demonstrates the success of the resource-for-export strategy. Given the relatively low income of the countries they are studying, that’s fair enough. But to live here is be conscious of the extent to which the fiscal linkage has been so neglected that the government of Alberta, sited on a swamp of bitumen, is presently pursuing austerity. The regional distribution of linkages within the country – not referred to it these case studies – can be of the first importance, feeding national disunity and constraining national policy. There can also be a maldistribution between different groupings, in our case, the persistent hurt done to aboriginal peoples. And, in the case of bitumen, even if there was no staples trap as our made-in-Canada resource curse, there’s now something much worse, which is the carbon trap and climate change and all that collateral damage.

I’ve digressed far from this study, though what I read it as saying is that there’s nothing inherently wrong with exporting resources. I agree. The issue is rather how responsible we are, what quality of stewardship we practice. That’s where we’re falling dramatically short

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: March 11, 2013, 11:47 am

You hit a key point for me Mel, there are ways policy makers can better manage such commodity growth- that can lead to a less paradoxical outcome than what we are witnessing. When Alberta announced an austerity budget, it further signifies to me that- managed tar sand development- is not part of the vernacular for these policy makers.

An example to add, and I hate to pile on here, look at poverty measures in Alberta in the last 10 years. Amidst all this oil wealth, poverty rates in the province have climbed from below 6% using a very conservative method called the Market Basket Measure maintained by HRSDC, to above 10% in 2010- which is approaching the national average. How is it in this land of plenty, that poverty has reached such heights?

In a word- mismanagement.

I think very much these days along the linkages that you make reference to- from raw material extraction all through the various value adding linkages of the globalized value chain. And when you breath that process in, and follow the profits, you begin to understand how important the political economy of a space truly does matter when considering the intersection of investment space. The Alberta political space played perfectly into such space. But it truly is economic insanity that keeps that political space coherent? How can any Albertan say it is okay for foreign based multinationals to come in and drain the swamp they live on, destroy the landscape and then not even help foot the bills to properly maintain a social contract?

(I am taking D. Harvey’s online Reading Volume II course, I took his reading vol I course twice now.) It truly is amazing seeing

Comment from mel watkins
Time: March 11, 2013, 12:53 pm

Most helpful Paul

Comment from Paul Tulloch
Time: March 11, 2013, 10:01 pm

http://www.social-europe.eu/wp-content/uploads/2013/01/eBook.pdf

Adding onto some thoughts in light of the single course of growth that our nation seems to be focused on- i.e. tar sand development- of course many of our heterodox friends in Europe are having a growing discussion about growth out of this great recession.

Reading through a few articles I especially focused on Wolfgang Streeck’s commentary- Economic Growth After Financial Capitalism.

It makes you wonder about the circuitry in a Marxian sense of capital flows. Assuming, as Wolfgang points out, that growth can be achieved under the current machination of capitalism- will it again be mostly fueled by another round of speculative, massively over-leveraged, too big to fail plunge back into the shark infested waters?

It does get one thinking about production processes, the balances between accumulation and wage growth and the never ending crisis of accumulation. As Streeck points out, growth since the 70’s has been on the decline. Since the post war boom, no amount of neo-con fix to the perceived profit squeeze put on by wage growth has restored any robust growth on a sustainable basis- the mid 90’s showed some brief flashes of hope- but then the gold rush fever set in and the dotcom bubble burst.

But the larger question remains, that I would like to ask these brave economic warriors in the SEJ, how much can the distributional aspects of profitability in a micro aspect, be restored to bring back investment, in a sustainable and robust manner.

Are we at this point maybe(?), where we have to conclude that the post war rebuilding was not some golden age of capitalism, but rather a Marshall plan, massive post war rebuilding exercise that would have cured any economy for 30 years.

Demand management has become victimized for 30 years of a profit centered focus to growth. When will it finally start entering the discourse, that something other than profit must enter the debate in the realm of social investment.

The answer is in your pants!

Marx talked a lot about socially necessary labour- I do wonder how that all has worked out in the end. For profit always we are told, produces the superior allocation of societies resources. Take a walk with the wool and fabric and the production process that is currently implemented to produce the pants that you wear. It is a real journey, that takes cheap energy for granted, and cheap labour for granted all to extract the maximum profit across a global value village of extreme poverty and exploitation.

Do I need to pull out my Polanyi to really get inside that point. What is the alternative to a profit motive, and given the political realm of the rise of the right, is it even worth while writing that something other than profit may be needed to build a new economy.

How about this- we use information, and not profit to to build a future that has a space for habitation for more than the 1%. Yes, I said planning- but a new form of planning, one backed by the onset of the information and knowledge economy.

I am not saying full bore, but how about a mix of both to guide the rudder, profit and planning.

We are almost there by default, as capital will not come out of its hiding. So how about we all say lets get on with it and Capitalism as it existed is dead, and move on.

If only it was that easy! In fact, I am feeling pretty secure that things looked this dire in the great depression, and yet not enough demand management was afforded the process until the world was mostly obliterated.

So I am fickle these days, someday feel things will change and we will get financial reform to prevent the same old speculative filled bubble low growth profit led ideology blaze the trail. And then other days, I see nothing but darkness and vapours from the sun’s heat as all that is solid melts into air.

I hope this makes sense, and I apologize if I have personalized too much.

Anyway, Big Data is on the pulpit right now for the profit maximizers- so I will have a look into that new magic bullet and see what is baking.

Comment from Mark Friesen
Time: March 13, 2013, 11:22 pm

Just would like to add, linkages spawned through resource extraction can be great as mentioned, however…
There’s also the notion that these developments undermine other types of linkages that might arise from the growth of different, less lucrative, sectors. Northern BC is a stark example. There’s a huge labour shortage; should folks up there be employed and trained towards resource extraction? or more long term, diverse, economic activity? Utilizing the limited labour for resource extraction diverts it away from other, possibly less volatile, uses.

Comment from Purple Library Guy
Time: March 16, 2013, 1:38 pm

Mr. Tulloch, I think information is a very important aspect, and modern technology can help us get planning done in more useful ways. But that can’t be a matter of technocrats harvesting everybody’s facts so they can make decisions. An argument that has struck me ever since I read it was in Hilary Wainwright’s “Arguments for a New Left”, that knowledge is a social product.
The employment of newly usable information and communications to get around needs for profit motive has to be horizontal, not top-down. The kind of approach you see in Venezuela’s Communal Councils, or the kind of thing suggested by the Parecon folks. And I do think that one key property of the new internet-ish technologies is an ability to scale horizontal communication and information-spreading much more broadly than ever before.

Comment from Paul Tulloch
Time: March 18, 2013, 6:15 pm

I am writing a piece on something like that right now. Their is this mass that I believe is caught up in the cannons of the world on future directions- a bit of a blend of new ideas – which some see as repackaged old ideas- going by the name of “Big Data”.

It is kind of a mix of many new and old ideas, enabled by what I think many originally thought when the internet broke through the mass culture day to day and into the out stretched arms of the masses. I like to refer to this as informating – Zuboff I believe was the first to coin such- the smarter machine is another term. Ultimately what I would define it as is new more ubiquitous data being generated by almost anything and everything- more than the internet, more than the production process, more than news, more than stock markets and measures of value, more than health and social well being. It is this massive juggernaut of data building daily by the exobyte. Combine that with a concurrent expanding field of data science- backed by new efficient data processing and collection machinery, with an expanding field of machine learning and smarter algorithms, and the cloud’s ability to centralize massive affordable computational power connected to billions of clients – and you get this thing called big data.

An example- Google’s new self driving car. I just finished an advanced course in this subject and spent the last 15 years working in the field at Statcan, and here is my take- we are actually finally building a beach-head in developing the smarter machine and it will deliver a newly defined information massively informed real space.

The question is, how exactly will it be designed- will it be in the form where the human is brought into the process and the relationship between the machine, the information and the human is allowed to be nutured and expanded to full potential. Or will be get the traditional, taylorist- managerial approach where deskilling and the black box of a com-modified profit first design.

It is difficult to say right now- for example- a lot of the tools that have been built to enable this next wave of computational prime moving have been developed in the universities under open source models.

Does it have the potential to plan an economy? Phrack can a profit maximizing monkey blind to the destructive aspects and misguided 1000 brands of lip stick and 4000 sports cars- while the world starves and is polluted- well yes is my answer! Will it be technocratic- no- I think anything technocratic will soon become deboned, filleted and eaten- vertically and horizontally.

It was actually hilarious the other day watching Tony Clement pretend he is actually on top of this stuff with an initiative called Google Hanging- whereby he was marketing the open government data initiative his closed minded technocrats have going at the Open Govt website. I went through some lot of that data- do you know it is basically old Cansim data being heralded as the back bone to Clements open government data initiative- truly pathetic and closed minded.

The question I have is- one needs some kind of primer mover to push this- but the bureaucratic private sector of large oligopoly industrial organization most likely will not be that beast. At least that is what Zuboff felt in 2006 as she pretty much abandoned the whole thought of the age of the smart machine.

It to me is the question- will the business and govt leaders find a way-or will it be the educational sector and the open source crowds pushing at the fences. Space is a huge concept here.

Risk will keep the old profiteers out for a while, but some of the newly minted gods such as Google, Facebook, and others will experiment and find some best practices that hopefully lead the way forward.

There are many examples but we still are just in the beginning of this new era of the smarter machine that will influence the rest of eternity.

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