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Immiserizing GrowthWhen Growth Fails the Poor$

Paul Shaffer, Ravi Kanbur, and Richard Sandbrook

Print publication date: 2019

Print ISBN-13: 9780198832317

Published to Oxford Scholarship Online: March 2019

DOI: 10.1093/oso/9780198832317.001.0001

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Exploring the Causes of Immiserizing Growth: A Comparison of Pathways

Exploring the Causes of Immiserizing Growth: A Comparison of Pathways

(p.106) 5 Exploring the Causes of Immiserizing Growth: A Comparison of Pathways
Immiserizing Growth

Benjamin Liu

Siyuan Yeo

John A. Donaldson

Oxford University Press

Abstract and Keywords

Why do some countries experience long bouts of immiserizing growth? This chapter identifies and examines a handful of countries that over at least a five-year period experienced positive GDP growth rates of at least 2 per cent per year while simultaneously experiencing declines in the income of the bottom 20 per cent. Process tracing reveals that the diverse cases traversed three distinct causal pathways: structural reforms (Dominican Republic, 1984–9), structural transformation (Singapore 1978–83), and the systematic exclusion of indigenous populations from the benefits of growth (Bolivia 1991–7). The conclusions have implications for our understanding of the political causes of immiserizing growth, the role of the international system in causing such incidents, and how cases that otherwise might be perceived as successful included the systematic exclusion of vulnerable portions of the population.

Keywords:   immiserizing growth, poverty reduction, structural adjustment, structural reform, ethnicity


During the late 1980s, the Dominican Republic’s economy expanded impressively, due in part to an International Monetary Fund (IMF) loan that was conditioned on the implementation of an austerity programme and policies designed to liberalize and open the country’s economy.1 Tourist resorts boomed. Exports from the country’s export processing zones (EPZs)2 skyrocketed—an ‘unqualified success’, according to one UN official (Willmore 1995). Even detractors acknowledge that the EPZs by themselves were responsible for generating nearly 80,000 jobs in just a few short years, and that the economy grew, albeit fitfully. The results were impressive on their own, but especially in comparison to the rest of the region—the Dominican Republic was one of only a handful of Latin American countries to see growth of any kind, let alone sustained robust growth (Tamayo 2000). However, these positive results did little to benefit the poorest in the country. In fact, their conditions actually worsened.

Most economists maintain that economic growth is often good for the poor; however, they also recognize that in many cases the benefits of growth fall unevenly on the poor (e.g., Dollar and Kraay 2002; Ravallion 2001; Kanbur 2001). In the more extreme cases, such as this one in the Dominican Republic, growth may fail outright to help the poor, or may even worsen their plight—a phenomenon that this volume calls ‘immiserizing growth’. In this chapter, we examine a number of pathways that give rise to bouts of immiserizing growth. While the term in contemporary literature (e.g. Bhagwati 1958) sometimes refers to terms of trade shifts that result in an overall decrease in GDP, we are (as in this volume generally) referring to a distinctly different phenomenon. (p.107) The term has its precedents in Malthus and Marx (Shaffer 2016; Chapter 2 of this volume). We use it here to refer specifically to significantly lengthy periods of economic growth that actually cause the incomes of the poorest to decline.

Why do some countries experience long bouts of immiserizing growth—periods in which the economy expands, but the income of the poorest declines? Dependency theorists such as Samir Amin (1976) argued that linkages with the Global North caused immiseration in poor countries as economic integration undermined traditional producers. Eastwood and Lipton (2001) linked immiseration with four possible causes: (a) growth shifts demand away from products produced by the poor; (b) labour-saving technologies, such as tractors or driverless cars, are introduced; (c) industries in which the immobile poor are active are slow to improve technologically; and (d) growth causes increases in the prices of products used by the poor.

Which of these hypothesized factors generate actual examples of immiserizing growth? To answer this question, we explore cases generated based on analysing one of the most comprehensive, comparable databases assembled (Dollar and Kraay 2002; Dollar et al. 2016). For these aforementioned papers and related works, this team of economists’ databases include comparable data from three respected sources. They derive the income of the poor either from nationally representative income household surveys or by extrapolating from Gini coefficients. They report in their database whether the welfare measure is based on income or consumption, and whether it is gross or net of taxes. Their sample includes data from a wide range of countries of all populated continents and from every decade since the 1950s. These scholars test the proposition that economic growth is shared one-for-one with the poor—which they define as the bottom 20 per cent of each population.

While these scholars use their data to show that economic growth is correlated with poverty reduction, the data are repurposed here to identify cases of immiserizing growth. In this chapter, we select countries that experienced at least five years of sustained economic growth, as measured by an increase in GDP per capita of at least 2 per cent per annum, while the income growth of the poor (the bottom 20 per cent, as defined by these economists) was on average negative. From this process, more than 10 per cent of Dollar and Kraay’s sample (seventy-one cases out of 602 in total) emerged as experiencing immiserizing growth as measured here. In fact, of the 145 cases in Dollar and Kraay’s two databases which saw negative income growth for the poor spanning at least a five-year period, nearly half were in the context of robust, sustained economic growth, as defined above. Thus, while it might be true that these scholars use their data to conclude forcefully that growth is good for the poor, the data also show that spells of immiserizing growth are not rare.

(p.108) However, while these cases show the juxtaposition of increases in economic growth and declines in income for the poor, in order to demonstrate that the growth is immiserizing, we must ask whether these two events are causally related, and if so how? Did these bouts of immiserizing growth result from decisions under human control? This chapter answers these questions by analysing causal connections using process tracing—an examination of the intervening steps between the purported cause and effect, as predicted by a specific hypothesized theoretical relationship (George and Bennett 2005: 207). Whereas quantitative methods can establish the generalized relationship between two variables, process tracing enables analysts to demonstrate the causal connection between the two. No single case study can establish or disprove a hypothesis, but via process tracing, a case study can demonstrate that some type of causal relationship exists—a pathway between two variables or sets of variables that demonstrate the process through which one causes another.

In this chapter, we apply process tracing to identify pathways that specific cases traversed to create conditions necessary for significant periods of immiserizing growth. In each case, domestic and international political and social forces combined to spark not just economic growth, but a type of growth that reduced the income or consumption of the poor. In each of the cases, some observers noticed that the poor were being hurt by policy changes—even those changes that grew the economy. Also, in each case, many experts missed this and rather applauded the cases for being positive examples of economic growth in action.

Space limitations preclude the full treatment that each of these cases deserves. Indeed, our analysis builds on the painstaking research of area experts and other informed observers. The three pathways that emerged through this process—there are doubtless many more—reveal that the causes of immiserizing growth, which are commonly thought to be economic in nature, are more intimately related to politics as defined by Harold D. Lasswell (1936): Who Gets What, When, How. To understand the distribution of growth—more accurately the maldistribution of growth—that actually increases the misery of the poor, we need to identify actual actors (who?) making decisions in a specific context (when?) in such a way (how?) as to hurt the prospects of the poor.

Pathway 1: Structural Reform

Under the first pathway, structural reforms cause bouts of immiserizing growth. Under such reforms, the state reduces regulation and other forms of interference in the economy, lowers or eliminates tariff and non-tariff barriers (p.109) to trade, and reduces spending to help stabilize its financial situation. The goal is to generate rapid, sustainable economic growth (Ocampo 2004). This growth, it was imagined, would generate new economic opportunities that could be broadly undertaken by both rich and poor.

Such periods of reform would often involve the intervention of international organizations, chiefly the IMF, which would demand structural reforms as conditions for loans designed to help countries resolve insurmountable fiscal crises. The IMF’s involvement in low-income countries across Latin America and Africa increased substantially in the 1980s as macroeconomic crises spread across both regions. Through reforms that centred on sustained conditional lending, the IMF moved beyond mere crisis management, to take on the longer-term objectives of structural adjustment and reorienting development strategies in developing countries (Collier and Gunning 1999). Many other structural reforms were not initiated by the IMF, but rather stemmed from the orthodoxy of the 1980s as represented by America’s President Ronald Reagan and British Prime Minister Margaret Thatcher, whose ideas served as the political foundation for a number of orthodox economists who rose to high ranks in a range of international organizations. This set of neoliberal ideas that took hold during this period, including the idea of structural reform as a means to generate rapid and lasting economic growth, also appealed to the leaders of many other countries.

Irrespective of whether the process of structural reform was encouraged, cajoled, or coerced by the IMF, or initiated by individual governments with no IMF involvement, the risks were the same. Adjustment policies were not based on well-founded theoretical bases (e.g. Bird 2004). Such reforms had multiple profound effects on the economic and social conditions of affected countries. Scholars have debated the extent to which this is true, with defenders of the IMF programmes typically pointing to areas other than the programmes’ effects on growth and poverty. For instance, one commonly cited defence demonstrates the positive effect IMF programmes had on improving the recipient country’s current account balance and overall balance of payments (Haque and Khan 1998), although the defenders’ conclusions on growth are more tentative. In fact, one critic concluded on the basis of his review of numerous studies that adjustment programmes ‘apparently have little significant impact on inflation and seem to have a negative impact on investment and economic growth’ (Bird 2004: 628).

If the effects of structural reform on the economy as a whole were dubious, so too were the effects on the incomes of the most vulnerable in society (e.g. Bird 2004; Zettelmeyer 2006). For example, Collier and Gunning (1999: 634) document that ‘avoidable hardship’ for the poor, linked to inadequate attention to distribution and sequencing of policy, plagued most adjustment programmes supported by the IMF, most notably with regard to financial (p.110) liberalization. In what has been termed the ‘empty box syndrome’ (e.g. Fajnzylber 1990; Korzeniewicz and Smith 2000), poorly designed programmes sometimes undermined the income of the poor through several mechanisms. First, under IMF reforms, foreign aid beyond a specified level could typically only be used to repay debt—a policy that addressed short-term financial instability but hindered long-term development. Governments were constrained from using aid freely to fund policies that would have helped promote both growth and poverty reduction. Second, budgetary austerity often required the slashing of vital social services, including health, education, and other forms of welfare. Third, the liberalization of the economy sometimes brought economic forces to bear that undermined industries or agricultural practices on which the poor depended. These and other forces led one UN under-secretary-general to argue that the benefits of IMF-supported reform were ‘overstated and their risks largely overlooked’ (Ocampo 2004: 84).

In sum, even the most vehement proponent of structural reform programmes would acknowledge that under some conditions they would sometimes reduce the income of the poor, at least for a time. Similarly, most critics would acknowledge that structural adjustment programmes sometimes spark increases in economic growth. The confluence of these events would amount to immiserizing growth. What are the conditions under which this happens? In this regard, the Dominican Republic serves as a useful example.

Dominican Republic (1984–9)

Annual GDP growth per capita: +2.38 per cent.

Annual income growth for the bottom quintile: −6.45 per cent.3

After the horrors of the Trujillo dictatorship (1930–60), the Dominican Republic’s economy industrialized rapidly via a strategy of import substitution. In the initial years, such industrialization did not compete with, but grew in parallel with, the country’s traditional agricultural crops, which diversified from the sugar plantations to include coffee, tobacco, and other products (e.g. Schrank 2000: 17, 47). However, by the 1970s the inefficiencies of the country’s industries underscored the unsustainability of this strategy (Kaplinsky 1993: 1851). A combination of declines in the prices of traditional exports, the second international oil crisis of 1979, the global recession of the early 1980s, and high interest rates saw Dominican Republic debt more than double from $1.4 billion to $2.9 billion between 1979 and 1983. In that period, debt as a proportion of GDP rose from 31.5 per cent to 55.2 per cent, while debt service as a proportion of export earnings increased from 20.9 per cent to 42.2 per cent. By the end of 1982, the newly elected administration led by President Salvador Jorge Blanco entered office with foreign currency (p.111) reserves almost exhausted and facing a pressing need for financial adjustment (Coutts et al. 1986).

In many ways, the Dominican Republic’s debt crisis was part of a regional phenomenon that extended to most Latin American countries. Conservative economists explain the Latin American debt crisis as a function of irresponsible fiscal expansion and the overvaluation of exchange rates, whereas more left-wing economists cite external factors such as changing terms of trade. Either way, most countries were compelled to accept IMF conditions in exchange for bailout loans, hurting many population groups—the poor and the middle class—while often sparing the wealthiest (e.g. Pastor 1989). What makes the Dominican Republic unusual in this regard is that it was one of the six Latin American and Caribbean economies (out of twenty-four in total) that did not experience negative economic growth during the 1980–8 period (UNECLAC 1990; Zettelmeyer 2006). The Dominican Republic’s experience with immiserizing growth was unusual, though not unprecedented, among Latin American countries during the debt crisis, not because of the pain experienced by the poor but because of that fact that the country’s overall economy grew.

The Blanco administration (1982–6) responded to the crisis by embracing a plan with three major planks. First, market liberalization and government incentives combined to spur the country’s moribund EPZs to rapid growth. These had been established in the 1960s, but only flourished in the mid-1980s, growing from seventy-six companies with 18,000 workers in 1980 to 4,000 companies boasting 100,000 workers in 1989 (Kaplinsky 1993; Schrank 2000). By then, the Dominican Republic’s EPZs became the world’s fifth largest such zone by employment and supplanted the country’s agricultural sector and traditional industries as the main employer. Second, tourism resorts were established during this period, drawing in international tourists and much-needed foreign exchange (e.g. Seyler 1991; Christie 2006). Third, and undergirding the gains from manufacturing and tourism, was the IMF bailout package, which was signed by the newly elected Blanco administration in January of 1983 (Espinal 1995: 66). In the first wave of reforms the state imposed austerity measures, freezing wages, increasing taxes, and slashing government services. This was followed by an agreement in 1984 that reduced government subsidies and price controls, devalued the Dominican peso, eased import restrictions, and established incentives for exports (Raynolds 1998: 151).

When it comes to evaluating the IMF intervention and the Dominican Republic’s subsequent economic performance, proponents argue that the country’s currency was overvalued and represented an implicit tax, rendering the zones uncompetitive. When the currency was successfully devalued in 1985 as part of the IMF adjustment programme, the zones were free to (p.112) grow, and grow rapidly—increasing employment greatly (e.g. Willmore 1995). Similarly, liberalization helped to spark tourism and non-traditional agricultural sectors, both of which contributed to growing the country’s troubled economy.

Detractors, though they sometimes acknowledge the growth that the devaluation brought to these industrial sectors, counter that for the average Dominican these adjustments were catastrophic. The pain came from two different sources. First, austerity brought rapid declines in public spending, especially for fundamental investments in public health and education. Government spending on education between 1987 and 1990 on a per capita basis was 40 per cent of what previous levels had been, after inflation was taken into account. Similarly, per capita government expenditures on health declined by 7.5 per cent. Second, under IMF-imposed currency devaluation, the price of basic consumption goods in the Dominican Republic increased by more than 400 per cent between 1980 and 1990. A 29 per cent increase in the minimum wage over that decade translated to a wage reduction of 42 per cent when adjusted for inflation. This is true for those who were employed; the country’s unemployment rate exceeded 27 per cent in 1985. Overall, average per capita caloric intake declined 7 per cent (Pan American Health Organization 1998: 228).

While the middle class’s economic position was undermined by the cancellation of government subsidies and the currency liberalization, the twin moves proved more than the urban poor could endure. Prices for basic goods such as food and gasoline skyrocketed. By April 1984, urban protests spilled over into violence, and indeed were regarded as the worst of the so-called ‘IMF riots’ of the 1980s. The riots left sixty dead (Espinal 1995; Pastor 1989; Schrank 2000: 77; Walton and Seddon 1994: 1595). The country’s minister of economic planning countered critics by noting: ‘It is not that we are unwilling to put our own house in order. It is that we want to keep our house and not let it go up in flames’ (New York Times, ‘Verbatim Rebuffing the IMF’, cited in Pastor 1989: 105).

International tourism in the Dominican Republic expanded impressively in the 1980s, replacing sugar as the country’s leading foreign exchange earner in 1984 and exceeding one million tourists a year in 1987, making it the fifth largest earner of tourism dollars in the Caribbean (Seyler 1991). The government had, since the early 1970s, extended subsidies such as virtual tax-free status that were not afforded to domestic tourist operators (Freitag 1994; World Bank 1995). Yet it was the structural adjustment policies that allowed the resorts to flourish. However, while tourism could drive economic growth, it could not ‘be the engine that…pull[ed] most Dominicans out of poverty’ (World Bank 1995: ii). The tourist industry operated with the characteristics of ‘typical enclaves’ (e.g. Mowforth and Munt 2003), employing (p.113) limited numbers of unskilled workers and closing the resort to those who might sell handicrafts or fruits to tourists. Not only were locals largely excluded from employment in the resorts, they were also unable to sell agricultural produce or other supplies, as these resorts were dependent on imports of such supplies. In addition, many locals were hurt as tourism sparked land speculation in areas surrounding the resorts, driving up prices. The resorts also put additional strains on local supplies of water and other resources. Some resorts were placed along traditional fishing areas, blocking access to those who depended on fishing for their livelihoods. Thus, in addition to excluding all but a small number of the local community from participating, resort and enclave tourism also contributed to undermining their survival strategies (e.g. Freitag 1996).

Finally, the Dominican Republic’s EPZs became one of the main drivers of the economy. As previously mentioned, while the EPZs were actually established in the 1960s, they grew tremendously during the 1980s (Schrank 2000: 14). Qualifying firms associated with the zones received a number of incentives, including duty-free imports of inputs, freedom from foreign exchange restrictions, income tax exemption for foreigners, 15–20 years of tax holiday, and unrestricted repatriation of profits. Most of the industries were in apparel or shoes, and most of the workers in those two industries (70 per cent) were female. Overall, the number of jobs in the EPZ tripled from 36,000 in 1985 to 105,000 in 1989 (Kaplinsky 1993: 1856).

The degree to which the EPZ generated jobs in which the poorest could partake becomes the key to unlocking the extent to which they reduced poverty. Since the poor, nearly by definition, lack formal education and appropriate skills, one relevant question is the extent to which these positions required formal qualifications or skills. This question is under debate. Many scholars (e.g. Willmore 1995), even those who dismiss the impact of EPZs on poverty (e.g. Kaplinsky 1993), routinely assert or assume that the jobs generated within the zone were unskilled—not surprising given that they were focused on basic manufacturing. There is substantial evidence for this. One scholar interviewed a large number of EPZ firms and concluded that only 40 per cent of all firms had formal education as a job requirement for the lowest level of worker (Mathews 1994).

Despite these conclusions, there is countering evidence that many of these jobs were out of reach to the poorest unskilled workers. Although most of the processing in EPZs was basic manufacturing and most workers there operated relatively simple machinery, many required training or experience working in other similar firms (Schrank 2000: 6). Unlike their counterparts in the traditional manufacturing sector, the EPZs competed based not on reducing costs, but on increasing productivity. Thus, most of the workers benefitting from the newly formed jobs tended to be better-educated new entrants to the formal (p.114) labour force. Newly created jobs did not draw workers from either the traditional manufacturing areas or the agricultural plantations, where poorly educated workers had found employment (Schrank 2000: 6). Similarly, a majority of the women working in these zones were relatively well-educated urban residents (Raynolds 1998). Moreover, these firms’ demands for skilled labour seemed unquenchable—one survey revealed that 80 per cent of EPZ sector managers surveyed ranked the lack of skilled labour as the most important factor affecting their productivity (Schrank 2000: 98). If so, many of these jobs would probably be out of reach for most of the Dominican Republic’s poor. Even the construction of the zone itself provided few jobs to low-income workers as the country’s corrupt leaders ensured that such jobs were distributed to supporters—probably not among the poorest—based on patronage (Schrank 2000: 84).

Even if, as Mathews (1994) concludes, formal education was not required by the majority of the zones’ manufacturers, 40 per cent is still not an insubstantial number. Moreover, according to the study, prior experience was the single most important criteria for hiring. Either way, neither the formally educated (due to costs of tuition and privilege of being educated) nor those with experience (due to past steady wages) are likely to be among the bottom 20 per cent. Moreover, the currency devaluation meant that even the moderately higher wages enjoyed by workers in the zone declined over time. Even for this workforce, currency devaluation and tight wage controls conspired to push down wages relative to the US dollar (Kaplinsky 1993). Over the course of the 1980s, Dominican workers shifted from being among the best-paid workers to among the worst-paid workers (Raynolds 1998: 154). Does it matter that the wages declined in US dollar terms but not in local currency (for this debate see Kaplinky 1993, 1995; Willmore 1995)? Although some (e.g. Wilmore 1995) point out that most workers purchase necessities locally, most urban workers relied on imported food, medicine, and other basic necessities. Thus, their wages’ relationship to the US dollar was important—a point that the IMF riots underscored.

Thus, most workers in the EPZs were not among the poorest. Moreover, wages in the zone declined. Could these zones nonetheless have helped reduce poverty? It would still be possible for economic activity in the zone to stimulate the rest of the economy by providing backward linkages with the agriculture sector or traditional manufacturing outside the zone. Alas, these were completely lacking. Irrespective of whether this was caused by US import policy (Kaplinsky 1993: 1854), the policies of the Dominican Republic’s government (Willmore 1995), or circumstances related to traditional manufacturing (Schrank 2000: 144), the EPZ’s admirers and detractors alike recognize the notable absence of backward linkages (Fleury 1991; Kaplinski 1993, 1995). Even workers involved in the traditional ports exporting agricultural products (p.115) in La Romona and San Pedro received no boon from the EPZ benefit, as new ports were built outside of the capital Santo Domingo to serve the zones (Schrank 2000). In fact, a World Bank investigation at the time failed to find a single case of backward linkages (Rhee et al. 1990). This was in part by design, as USAID saw the Dominican Republic’s domestic economy as ‘a cesspool of corruption and rent-seeking’ (Fox 1989, cited in Schrank 2000: 79), and therefore believed such linkages would only serve to enrich the powerful and perhaps compromise this new programme of export-oriented industrialization (Schrank 2000: 78). While observers debate the reasons, the clear consensus is that the growth in the EPZ provided no benefits to traditional industry.

Thus, while the EPZs helped to drive the Dominican Republic’s economic growth during this period, the main beneficiaries were the managers and owners of the factories and relatively well-educated workers. As one observer summarized:

While the country has moved from an overwhelmingly agricultural economy to one based on manufacturing and services, these changes have not brought prosperity to anyone other than a small elite of entrepreneurs and technocrats. In thirty years, the near-slavery of the sugar plantation has given way to the low-wage economy of the export processing zone.

(Ferguson 1992: 74)

The Dominican Republic’s manufacturing sector also became the world’s third-most dependent on such zones, which accounted for 56 per cent of all manufacturing. However, this led to what one scholar called ‘immiserizing employment’ (Kaplinsky 1993: 1856). The World Bank (1995) agreed, concluding that ‘a relatively small group of rural poor have benefitted from the employment generation of the [EPZs] and even tourism’ (World Bank 1995: 25). If the Dominican Republic’s traditional manufacturers and agriculture simply had not benefitted from the EPZs, this would be a case of exclusion. However, the development of the EPZs undermined the rest of the economy by diverting many of the country’s resources (Kaplinsky 1993). EPZ development also came at a cost for traditional agriculture (Raynolds 1994: 2). In a further blow to the poor, agriculture shed tens of thousands of jobs during the 1980s (Murphy 1989, cited in Raynolds 1998: 155). Due to poor titling under the post-Trujillo land reforms, farmers and tenants were especially vulnerable to land grabs. The opening of the market brought opportunities for non-traditional crops, but also forced additional competition (Seyler 1991). The losses to traditional agriculture compounded people’s dependence on food imports—especially for the urban poor and middle class—and hence also compounded their vulnerability to currency depreciation (Pomoroy and Jacobs 2004).

The decisions made at the time were based on a coalition of political elites and northern elites drawn from the Dominican Republic’s secondary cities, (p.116) who had owned and managed the country’s traditional crops (other than sugar) (Schrank 2000: 90–1). This came at the expense of the country’s long-standing southern economic elites, who had benefitted from the country’s investments in import-substituting industries (Schrank 2000: 20–2). To be sure, the IMF and USAID used the crisis as a way to open the country’s economy and resources to foreign investment. USAID officials explicitly justified foreign assistance as necessary to helping ‘replace the country’s import substitution orientation by promoting exports and export-oriented investment’ (USAID 1985: 23, cited in Schrank 2000: 78).

For his part, President Balaguer was more than willing to support the EPZs as a way of fuelling his patronage machine (Schrank 2000: 84). The attendant construction boom also provided more jobs that could be allocated to political supporters. Thus, international organizations (both the IMF and World Bank) collaborated with local industrialists and top leaders to drive new forms of industrialization. The winners included relatively well-educated workers. The losers were industrialists involved in the old industries, and especially poorly educated workers and poor rural residents (Espinal 1995: 67).

Steep declines in the standard of living among ordinary Dominicans, combined with government mismanagement, was enough to turn Blanco out at the polls in 1986, in favour of Joaquín Balaguer. The latter responded by implementing an aggressive policy of state-led development, driven by construction and funded by the printing of money. Balaguer gave the IMF the cold shoulder for the rest of the 1980s, until the government ran out of the foreign currency needed for oil imports (Espinal 1995). The stage was set for a brief period not characterized by immiserizing growth, but by a recession of a common sort—one that hurts both rich and poor. By 1992 the economy had recovered, when the country went on a ‘growth spurt’ that outpaced most Latin American countries and, at a decade in duration, was unusually long-lived (Zettelmeyer 2006). As for the 1980s, the poor were not among the winners with either Blanco’s structural reforms or Balaguer’s state-led, construction-fuelled development.

In sum, both admirers and sceptics of the structural reforms during this period in the Dominican Republic’s history are taking positions based on fact. The IMF programmes brought recovery and new opportunity; they also brought pain and undermined the survival strategies of the most vulnerable. New sectors in export processing and tourism brought benefits and development from which the poor were excluded. More than that, the resources and government programmes required to develop these were diverted away from traditional industry and agriculture, even as government spending on basic human services collapsed. These forces conspired to create immiserizing growth: a modest but sustained economic expansion juxtaposed with real declines in the income of the poorest.

(p.117) Pathway 2: Structural Transformation

Whereas a country undergoing structural reform liberalizes its economy and reduces government spending, a country with an economy undergoing structural transformation shifts its underlying economic structure. That is, as these countries shift away from agriculture to manufacturing, or from basic manufacturing to more advanced, capital-intensive industrialization, or from manufacturing to advanced services, periods of immiserizing growth may emerge. As this transition occurs, countries move from more labour-intensive industries to more capital-intensive ones. Countries so doing move up the value chain in order to spur economic growth and maintain economic competitiveness in the global economy (Herrendorf et al. 2013).

Policies required to transform an economic structure successfully are typically distinct from those that are needed for structural reform. For instance, whereas structural reform policies generally involve reducing the involvement of the state and encouraging more market activity, structural transformation often will not occur through market forces alone but require direct involvement from the government. Economist Tsakok (2011) identifies five key components critical to a successful, welfare-increasing structural transformation in an agriculture-driven economy: macroeconomic and political stability; effective technological diffusion; ability to access markets; effective ownership and reward systems; and employment creation by non-traditional sectors. Underlying these five conditions is ‘sustained government investment in and delivery of public goods and services’ (Tsakok 2011: xxi–xxii). Building upon this baseline, Timmer (2015) suggests three factors that could explain the failure of countries in sub-Saharan Africa and Asia to make poverty-reducing structural transformations: a poor base of resources (explaining a country’s suitability for rapid growth in agricultural productivity); weak institutions (leading to inactive governance or poor policy choices); and ‘being a latecomer’ to increasingly competitive global markets (blocking entry to saturated markets, while entrenching dependence on agricultural sectors). According to these scholars, such variables explain why some countries, e.g. Japan, South Korea, and the Republic of China (Taiwan), leveraged their agricultural bases to effect industrialization, while other countries (e.g. India and a number of sub-Saharan African countries) have not (see also Briones and Felipe 2013).

However, even successful structural transformation can cause immiserizing growth, such as when such transformation undermines employment and other economic activities on which the poor depend, even as it generates new opportunities in which the poor can largely not participate. Oftentimes, when countries move up the production chain, workers with modest amounts (p.118) of formal education have difficulty in following, even when the country focuses on retraining.

Singapore (1978–83)

Annual GDP growth per capita: +5.83 per cent

Annual income growth for the bottom quintile: −1.28 per cent4

That Singapore experienced a significant bout of immiserizing growth is in many ways surprising, given the rapid reduction of poverty that came in the wake of independence in 1965. Basic manufacturing increased greatly as multinational corporations, responding to Singapore’s preferential policies and well-disciplined workforce, invested greatly in the country. Yet, in the face of the changing global economy in the late 1970s, the Singapore government became aware of the dangers of being overreliant on labour-intensive industries, and the subsequent need to shift the economy towards capital-intensive sectors (Rodan 1985). Gains in value-added per worker in basic manufacturing had been slowing throughout the decade. While foreign capital still saw Singapore as a basic manufacturing hub up to 1976, it subsequently accelerated its investments in higher-end manufacturing from that date, and especially after 1978. While some argued that market forces would naturally shift Singapore’s economy from basic to advanced manufacturing, by the late 1970s the government grew impatient with the pace of restructuring and embarked on aggressive measures to expedite the transition (Rodan 1985).

This initiative, dubbed the ‘second industrial revolution’, was multifaceted. One primary instrument was using state influence over wages to drive wages up, and to force less productive industries to either close down or upgrade (Rodan 1985; Low et al. 1991; Lee 2001a). Second, a number of incentives and funds were introduced to encourage new investments in higher-end manufacturing. The government’s targets included computers and related equipment, chemicals and pharmaceuticals, precision engineering products, and advanced control systems. While manufacturing remained the backbone of Singapore’s economy, the government also encouraged advanced services, including software development and financial services. Third, the state withdrew incentives and preferential policies that had encouraged lower-end manufacturing, starting with local vehicle manufacturers, which immediately led to the closure of all foreign-owned auto assembly plants, as well as the nation’s sole tyre manufacturer. These were replaced by value-added, high-tech auto components. Similarly, the government reduced or eliminated protections for traditional industries, including tariffs on imports of sugar, biscuits, and a variety of consumer goods (Rodan 1985: 147–8). Finally, the government (p.119) invested in supportive infrastructure of many kinds—land, buildings, transportation, and energy. The ten-year plan (1980–90) included a science park, a base for the aeronautics and aviation industries, and even applied reclamation practices to unite several of the Singaporean archipelago islands together to create one larger island for use as an international petrochemical manufacturing base. As one political scientist summarized it, the strategy ‘boiled down to actively discouraging low-skill labour-intensive production on the one hand, while providing the necessary preconditions and inducements for higher value-added production on the other’ (Rodan 1985: 149).

The effects of the wage hike were significant: by 1981, jobs were being replaced by capital investment at a high rate, with a 71 per cent rise in fixed investment and a 28 per cent growth in value-added per worker across the economy (Rodan 1985). Such increases were coupled with a 37 per cent drop in new jobs created in the first quarter of the year. As a result of these efforts, Singapore’s economy underwent significant reforms during this period, with the automation of processes previously done by non-skilled or semi-skilled physical labour being fundamental to these shifts (Chow et al. 1988: 178; Peebles and Wilson 1996: 37). Investment increased markedly, from $6.3 billion in 1979 to $11.1 billion in 1983 (Rodan 1985: 175). Moreover, targeted industries—electronics, petroleum and petrochemicals, capital, computers, and sophisticated machinery—grew apace.

While Singapore’s government initially hoped that spurring capital-intensive manufacturing would not involve a trade-off with more basic manufacturing, it soon became apparent that this was not to be: growth in the former came at the expense of the latter. During this and subsequent periods, the government targeted increasing investment in such industries as computing and printed circuit boards. Industries that declined during this period included low-tech manufacturing such as concrete products, cement, and rubber processing (Lee 2001a: 212). Textiles, apparel, and precision equipment saw the bulk of the declines, as did agricultural processing, including timber and wood products. Compounding these losses was the virtual end of agriculture in the country—including the loss of 6,000 agriculture jobs, or about one-third of the total (Ministry of Labour, various years).

From a national standpoint, shifting to higher-end manufacturing represented a national goal, one that served as a basis for Singapore’s continued development. From the perspective of low-income and poorly educated workers, these were real job losses. While on the whole Singapore gained jobs—and especially jobs in manufacturing—most workers in the lower end of manufacturing could not qualify for these jobs.

Making matters worse, low-skilled workers had to compete with foreign counterparts from poorer countries. At least some of the success of the second (p.120) industrial revolution has been credited to the presence of foreign workers (Rodan 1985: 178). The goal of attracting unskilled foreign workers, which started in the late 1960s, was less about filling job vacancies and spurring growth and more about putting downward pressure on wages (Rodan 1985: 138). As Singapore shifted away from basic manufacturing, such factories looked for alternative areas in which to invest. Even though China was at the time just opening up to foreign direct investment, foreign companies found no lack of suitable places in which to manufacture low-end items that they had previously made in Singapore. Thus, in addition to foreign workers living in Singapore, Singaporean workers were compelled to compete with foreign workers abroad, including workers in other ASEAN (Association of Southeast Asian Nations) countries, as well as Bangladesh and Sri Lanka.

The government implemented a number of programmes to encourage the retraining of its current workers in order to help them shift up the value chain, either in government-sponsored classes or in industry-provided training sessions (Low et al. 1991: 56). Using the analogy of a pair of scissors, then Minister for Trade and Industry, Goh Chok Tong, noted that if increasing the relative price of labour vis-à-vis capital represented one blade of the scissors, ‘the other blade is the skill of our workers’ (quoted in Rodan 1985: 148). The government signalled this fact by establishing a new Council for Professional and Technical Education, which coordinated among ministries and educational institutions in an effort to provide sufficient and well-trained manpower to these growing industries (Low et al. 1991: 59). Moreover, the government established the Skills Development Fund in 1979 to encourage employers to support workers in upgrading their skills.

In spite of these rhetorical and concrete signs of commitment, the government placed the greatest emphasis on university and polytechnic education, particularly in engineering, which would help place younger graduates into higher-end positions. Very little of this sort occurred in the retraining of older workers until later. According to the economic surveys published at the time by the Ministry of Labour (various years), long-standing training programmes for adult workers, run by the Institutions of the Vocational Training Board, actually shrank in number between 1978 and 1983, from 11,220 students to 10,320. The number enrolled in workers’ training via a second training platform, run by Singapore’s Economic Development Board, hovered between 1,000 and 1,200. It increased rapidly in 1983 to 1,950 workers. The government also launched basic English and maths courses, setting as their goal an ambitious target of 322,000 students. However, this was only piloted in 1983, with a class of less than 25,000 across both subjects. Meanwhile, the slots for science and engineering in Singapore’s universities and polytechnics, predominated by traditional high-school and college-age students, increased from 11,010 to 14,360. The retraining programmes would have to scale (p.121) up greatly to make a dent in retraining the 365,000 workers classified as ‘production and related workers’ in 1978, about half of whom were above thirty years of age. Meanwhile, the bulk of the population remained unprepared and unqualified to take on the roles expected of it. As late as 1984, only 5 per cent of Singaporeans had completed tertiary education, while more than one-half of the workforce had a primary education level or less, a rate that rises to 88.2 per cent if only the poor are included (Lee 2001b: 61).

Meanwhile, Singapore’s public anti-poverty programmes compounded the high level of unskilled unemployment. At the time, Singapore’s social welfare system was firmly based on the most miserly version of the ‘productivist’ welfare system (Holliday 2000; Kwon 2005)—one that featured programmes that were linked to and designed to encourage productive work. Singapore’s welfare system had three major components. Singapore’s retirement system, the backbone of which is the Central Provident Fund, is a pay-as-you-go pension scheme. The public housing scheme administered by the Housing Development Board provides subsidized housing to Singaporeans; accessing these benefits also requires remunerative work. Singapore’s Public Assistance Program was provided only to truly needy Singaporeans, such as the severely physically or mentally disabled who could not work and had no family or other means of support (Lee 2001b). Through this, the government encouraged families to see employment as their primary strategy for avoiding poverty. With employment opportunities in basic manufacturing decreasing, Singapore’s miserly, inadequate, and often inaccessible public programmes proved insufficient to meet the needs of the poor, the elderly, and the less educated (Lee 2001b).

Because those able-bodied workers without independent financial means must work or starve, such workers were compelled to accept nearly any job. Thus, the difficulties of the poor in Singapore turned up not in unemployment rates, but in underemployment and low wage rates. As workers were forced to shift out of jobs that, while menial, were sufficient to support a family, they were compelled to accept often lower-paying employment, often in the lower ends of the service sectors. As one scholar concluded, ‘in the 1970s and 1980s poor households have relatively poor education attainment levels and high incidence of unemployment and irregular employment patterns. Unskilled and semi-skilled workers, because of their poor education, cannot adapt with an economy in transition and thus they were often found employed, at least, in low paying menial jobs’ (Lee 2001b: 60).

The aggressive moves to shift to high-end, capital-intensive manufacturing were spurred by a number of factors. First, Singapore was responding to foreign pressure, at least to some extent. Both the United States and many European governments had expressed displeasure at being expected to accept low-end Singaporean goods. Under pressure from their own domestic manufacturers, (p.122) the European Economic Community imposed duties on selected goods starting in 1976 and 1977. Finance Minister Hon Sui Sen cited this issue specifically in his 1978 budget speech as a reason to shift to higher-end manufacturing (Rodan 1985: 137). Second, national security also served as a major justification for the upgrading of technology, which would serve a double purpose of both modernizing Singapore’s manufacturing base and allowing it to excel in the manufacture of advanced weaponry. This logic was explicitly stated, though years later, by the then Minister of Trade and Industry, George Yeo. He noted that Singapore must ‘be good in missile technology, in mechanical systems, and command and control systems. If we are not at the forefront of manufacturing technology, how can we maintain a defence force?’ (Lee 2001a: 217). Third, the attempt to shift from basic to higher-end manufacturing reflected a deep commitment among top government leaders that such moves were necessary for Singapore’s economic survival. Remaining in low-end manufacturing was not palatable, and in any case was perceived to be unsustainable. Since a shift was inevitable, the government provided as much support as possible to ensure the process went both smoothly and efficiently.

Although these factors in combination would probably have been sufficient motivations for the government to encourage structural transformation, one additional factor might have been involved—electoral politics. The 1980 general elections, while by international standards apparently a complete domination of the ruling party, betrayed signs of the slipping popularity of the People’s Action Party (PAP). Singapore’s main two troublesome electoral districts held higher proportions of relatively well-educated young people, who not only did not appreciate the PAP’s accomplishments as much as older generations had, but also saw fewer opportunities in the broader economy. As a result, the party altered the election rules, increased their control over the media, and generally tightened their grip on the economy. The shift to higher-end manufacturing, and with it additional positions in managerial and leadership, were part of the party’s effort to win the support of better-educated youth, and thus retain its political indomitability (Rodan 1985).

By 1983, Singapore was well on its way to achieving, as one architect explained it, ‘a modern industrial economy based on science, technology, skills and knowledge’ (Rodin 1985: 147). Thus, while economic growth remained moderately strong as productivity increased, those with insufficient human capital—the poor, disproportionately—to meet new demands from the service sector inevitably suffered job losses and lower incomes (Chow et al. 1988; Lee 2001b), and ultimately lack of support in finding their feet in a transitioning economy. Singapore’s relatively broad-based public housing and education programmes were intended in part to moderate poverty; however, in the years between 1978 and 1983, they appeared to have only done this (p.123) very selectively and insufficiently, with the least skilled in society being excluded from the employment opportunities of the economic transition, as well as suffering from public assistance programmes ill-designed to address their needs.

Pathway 3: Ethnic-based Exclusion and Discrimination

Indigenous peoples in most countries throughout the world experience discrimination and alienation and are often excluded from participating in the broader economy. Hall and Patrinos’s conclusions (2012) are consistent with earlier studies (e.g. Psacharopoulos and Patrinos 1994), revealing that between 1994 and 2004, income levels of indigenous peoples throughout the world have been consistently lower than that of the rest of the population. What is more, human development indicators such as education, healthcare, and access to public assistance programmes followed similar trends (Ullah 2017). Facing discrimination and social exclusion, indigenous people face the choice of assimilating to the extent that they can or remaining trapped in a cycle of poverty.

When economic change, even improvement, occurs, it too often undermines indigenous people or ethnic minorities whose survival strategies are undermined. Some of this reflects struggles that poorly educated people face with modernization—just as when structural reform or transformation occurs. However, when rights are not evenly distributed, development can be particularly costly to indigenous people, resulting in the loss of traditional land or the disenfranchisement from forestland used for hunting and gathering. Often excluded from education or other opportunities that might help them to participate in the economy, the situation of impoverished indigenous peoples often deteriorates even more than that of other poor people.

Bolivia (1991–7)

Annual GDP growth per capita: +4.24 per cent

Annual income growth for the bottom quintile: −13.07 per cent5

Like the Dominican Republic, hyperinflation, slowing economic growth, and political volatility compelled Bolivia to undertake a series of deep structural reforms in the mid-1980s (Jemio et al. 2009). Led by the IMF and economist Jeffrey Sachs, the state mandated sweeping fiscal reforms, trade liberalization, decontrol of prices, and privatization of public enterprises, including mining and other key industries. This was followed by a second wave of reforms in the 1990s, when Bolivia was led by President de Lozada, who as planning minister (p.124) had been a main designer of the 1985 reform. Subsequently, as president, Lozada was compelled to rule in coalition with a small party representing indigenous concerns. As a result, further liberalization came with a set of progressive polices, including decentralization, and education and land reforms (Gigler 2009: 23–4).

The initial reforms helped indigenous and other poor Bolivians. To be sure, the elimination of hyperinflation alone helped both rich and poor, but because the poor had fewer ways to protect their income, the degree to which they benefitted from stabilizing prices was greater (Thiele 2003). The reforms implemented in the 1990s, by contrast, sparked a round of immiserizing growth (Flexner 2000; Jemio et al. 2009). Such policies aimed to improve the efficiency of various sectors of the economy, and thus the overall functioning of the economy. In this regard, reforms did succeed in stabilizing the country’s macro economy, strengthening crucial political and economic institutions, and attracting significant inflows of foreign direct investment (Flexner 2000; Jemio et al. 2009).

Yet this growth not only excluded a majority the country’s poor but also undermined their survival strategies and worsened their standards of living. Despite the economy’s overall expansion, poverty persisted, as this economic stability and growth did little to improve the income, education, and health indicators of the poor. Poverty rates—those earning up to $1.90 a day—increased from 8.6 per cent of the population in 1990 to 19.3 per cent in 1997. In contrast to other immiserizing growth spells that emerged from structural reform, the worsening conditions of the poor resulted largely from undermining the survival strategies of Bolivia’s indigenous population (e.g. Kohl and Farthing 2006; Gigler 2015). While the poor among the non-indigenous population also suffered, several factors ensured that the impoverished among Bolivia’s indigenous groups were particularly affected.

First, privatization, especially the closing of Bolivia’s state-owned mines, hit the Aymara and Quechua communities especially hard (Gigler 2009). State mines were shuttered, but production was more than made up for by private mining. Here, job losses led to widespread unemployment and underemployment. In the 1980s, workers in the state-owned mines represented 3 per cent—an impressively large proportion—of the labour force. By 1999 they had shrunk to less than 1 per cent (Gigler 2009; Thiele 2003). The dismantling of the state mines was more than just an attempt to boost productivity and exports; it had the additional effect of breaking the power of miners and their unions (Sanabria 1999: 543).

Second, liberalization undermined the market position held by traditional and subsistence agriculture by flooding the market with cheaper, subsidized food imports (Arze and Kruse 2004). Not only do the indigenous in Bolivia comprise the greater share of the rural economy, but they depend on (p.125) producing traditional agricultural products. Stagnant yields precluded their ability to participate in the export market (Gigler 2009). Their situations were worsened by land grabs from the timber industry and cattle ranchers. As non-traditional agriculture grew, it came at the expense of traditional subsistence agriculture. As the World Bank concluded, Bolivia’s ‘rural economy is increasingly polarized between the small peasant sector producing foodstuffs, on the one hand, and the agro-enterprises sector producing cash crops for exports, on the other hand’ (World Bank 2005: 30).

Third, both the liberalization of foreign direct investment and the structural reforms contributed to widening the gap between formal and informal workers, who were ‘the last to benefit from the economic boom, but first to suffer from the economic downturn’ (Spatz 2006: 104–5). In addition, informal workers were also affected as the 500,000 formal jobs that the privatization of key industries was supposed to produce did not materialize. To be sure, the privation of industries increased both investment and productivity in these sectors, but the net effect on jobs was negative (Kohl 2002: 459, cited in Gigler 2009: 26). While the employment in these formal sectors were predominantly held by Spanish-speaking, non-poor workers, job losses in the formal sector forced many into the informal sector. This in turn increased competition for positions held predominantly by indigenous urbanites who faced declining wages as a result (Thiele 2003: 317, cited in Gigler 2009: 26). The privatization of the public utilities brought extra pain, as the costs of energy and water increased. The price of liquid natural gas, the cooking fuel of the urban poor, increased 25 per cent in the late 1990s, with electricity and water prices increasing 50 per cent between 1995 and 1997 alone (Kohl 2002: 460, cited in Gigler 2009: 26).

In Bolivia, most poor are indigenous and most indigenous people are poor (Albo 1994; Strobele-Gregor 1994, cited in Grootaert and Narayan 2004). Thus, it is not surprising that economic changes undermining the position of the poor should affect the indigenous population disproportionately. Although the available data do not consistently disaggregate poverty rates by ethnic group, scholars point to three indicators that poverty increases during this period hit the indigenous population harder than others. First, changes in poverty varied greatly by region. This is not surprising—Bolivia’s reforms successfully opened its economy to foreign direct investments, and these were largely channelled into the eastern lowlands areas (Jemio et al. 2009). The average growth rate in the eastern lowlands between 1990 and 2006 was double that of the western highlands that largely lacked such investment. Poverty remained high in the western highlands, with its heavy concentration of indigenous people (Gigler 2015; Jemio et al. 2009).

A second indicator is the large and growing difference in the incidence of poverty between urban and rural areas. Based on Bolivia’s official measure of (p.126) extreme poverty, rural poverty increased from nearly 50 per cent to 57 per cent between 1989 and 1994. By contrast, poverty in urban areas (excluding departmental capitals, where poverty rates are even lower) declined from 43 per cent to 33 per cent over the same period (Spatz 2006: 27, 49). Economic growth during this period betrayed an urban bias. Bolivia’s rural areas are approximately 90 per cent indigenous, primarily Aymara and Quechua, who have traditionally lived in the valley of the high Andes as well as the Altiplano (Albo 1994; Strobele-Gregor 1994, cited in Grootaert and Narayan 2004: 1180). What rural development there was, occurred in the more modern non-traditional agricultural sector, which as we have seen largely excluded poor indigenous people. What is more, growth in Bolivia’s urban areas did not spread to rural areas, which were also affected by Bolivia’s difficult ecological and climatic conditions for agricultural production, exacerbated by the adverse impact of the El Niño/La Niña weather phenomenon.

Third, what data are available—these are from 1998, which is after our time period—on the situation of Bolivia’s ethnic minorities vis-à-vis the rest of the population show the lag experienced by Bolivia’s indigenous peoples. While the under-five mortality rates for Bolivia in 1998 as a whole stood at a moribund ninety-nine per 1,000, among the Aymara and Quechua the rate was 163 and 165 respectively (worse than Afghanistan in 2017, which was ranked last among all countries) (Hall and Patrinos 2012: 53). Stunting rates in the country stood at 9.4 per cent—for the Aymara and Quechua, the rates were 12.3 per cent and 19.1 per cent, respectively. The rates of water deprivation for the country stood at 9.4 per cent, but 12.3 and 19.1 per cent for the two ethnic groups (Bolivia DHS 2003, cited by Macdonald 2012: 53). Data indicate that the difference between the poverty incidence of indigenous and non-indigenous populations are consistently around twenty percentage points (Hall and Patrinos 2012: 354).

Thus, Bolivia during this period, like Mexico during a similar period, experienced immiserizing growth primarily by excluding certain ethnic groups. As analysed in more depth in Chapter 3 of this volume, Mexico also experienced rapid economic growth throughout much of the 1990s due to trade liberalization and openness (e.g. Kehoe and Ruhl 2010). The adjustment hit agriculture and traditional industries hard, but primarily undermined the survival strategies of Mexico’s indigenous farmers, who were forced further to the south (e.g. Lustig 1998; Chapter 3 in this volume).

As in Mexico, the worsening situation of the indigenous population in Bolivia was the result of political decisions. Some of these had to do with class—like in much of the world, the structural reforms promoted by the IMF were also supported by much of the powerful business community. While the reforms of the mid-1980s benefitted the poor, the position of the indigenous population was eroded, as mentioned earlier, by land grabs. In 1990, hundreds (p.127) of indigenous farmers participated in a 750-kilometre march from the Bolivian lowlands to La Paz, the capital. The coalition government of Lozada that took power in 1993 passed impressive progressive legislation related to popular participation, education, and agricultural reform between 1994 and 1996. These however were hamstrung by ineffective and inconsistent implementation. In some cases, the laws actually backfired, for instance by formally recognizing the rights of colonizers to keep land in indigenous territories (Healy 2004; Gigler 2009).

Since the election of Bolivia’s first indigenous president in 2005, Evo Morales, Bolivia has experienced improved reductions in poverty (Pineo 2016: 435). Morales’s distinctly anti-globalist and anti-neoliberal rhetoric has not resulted in a deep transformation of the economy. Instead of producing the promised hybrid economy that balances domestic and foreign sectors, Bolivia continues to depend on the export of primary products (Wanderley 2009: 264–5). By contrast, what proved important was the state’s willingness to aggressively requisition and redistribute resources, including taxes from hydrocarbon extraction (Pineo 2016: 439) and land from large private landowners and ranchers. Recent research concludes that the Morales administration has not only succeeded in expanding the economy, but economic growth was especially pro-poor. What is more, indigenous Bolivians benefitted disproportionately, closing about 25 per cent of the income gap they had held vis-à-vis Spanish-speaking households. Moreover, these benefits were spread evenly among all indigenous ethnic groups (Hicks et al. 2016).


The cases described here have focused on three primary pathways: structural reforms, structural transformation, and the systematic exclusion of indigenous populations from the benefits of growth. While none of these pathways are novel—all are discussed in the development literature as problems to healthy and sustainable development—our research inductively verifies that these are part of specific pathways towards immiserizing growth.

Which overarching theory of immiserizing growth do these patterns support? Amin’s suggestion that linkages with the international system cause immiserizing growth is valid, at least to an extent. To be sure, the patterns seen in each of the examples described here had extensive interaction with the international system, and these interactions were indeed linked to their bouts of immiserizing growth. The Dominican Republic’s austerity plan was proposed as a condition of an IMF bailout plan and shaped by American laws regarding imports from Latin America. Singapore’s growth was caused by its links with multinational corporations and international trade, and its loss of (p.128) jobs in the labour-intensive sector was predicated on the globalization of capital and manufacturing’s ability to quickly shift production around the world—as well as pressure caused by rising tariffs in the west. Bolivia’s adjustments and the need for these adjustments were similarly sparked by the international system. The declines in traditional manufacturing and agriculture were caused, in part, by increasing competition and overseas investment in non-traditional agriculture and other industries. Countries integrating into the international system have had a diversity of experiences, including some in which the incomes of the poor increased tremendously. However, the poor in the cases detailed here were harmed by crude attempts to embrace globalization. To be sure, these cases do not follow the specific pattern that Amin describes in his broader theory, but they do reflect his hypothesis related to the power imbalances between the core and periphery, and the impact of these on the poor.

While Amin’s hypothesis is at least partially consistent with the evidence, he downplays domestic factors by dismissing domestic politics as being linked to and to some extent controlled by global capitalists. In some of these cases, we saw that countries had a far greater ability to resist international pressure than Amin might otherwise expect. For instance, Singapore’s government defended its institutions by shaping and managing its response to international pressure in ways that allowed it to manage its own course. The leaders of the Dominican Republic also used international forces in ways that allowed them to deepen their system of patronage and strengthen their hand politically. Bolivian leaders were also willing instruments, working with the IMF to reform the economy in ways that perpetuated the traditional exclusion of indigenous people.

The effects of the international system—both positive and negative—on both economic growth and the plight of the poor vary greatly not just in the three cases described here, but throughout the developing world. Thus, a more specific question becomes: under what conditions do links with developed countries help or hurt the poor? Here, the predictions of Eastwood and Lipton (2001) detail several possible mechanisms through which economic growth could undermine the livelihoods of the poor—by increasing their costs, replacing their labour with capital, or undermining the competitiveness of—or demand for the products of—traditional industries. We have seen many of these mechanisms on display here. Structural adjustments and structural transformations may do each of these, as reflected in the cases of the Dominican Republic and Singapore. Bolivia’s experience with these problems were worsened by the systematic exclusion of indigenous groups.

The story of immiserizing growth in each of these cases is a story of exclusion. In two cases, such exclusion was class-based—the poor typically lacked the formal education and other attributes needed to participate directly in (p.129) more advanced jobs. In one case, the excluded were the vast swath of citizens. In Bolivia’s, such exclusion was ethnic in nature, as minorities were systematically excluded from participation based on long-standing discrimination, both formal and informal. Yet, the stories go well beyond excluding the poor from economic opportunities, new and old. For the Dominican Republic and Singapore, the modernization of manufacturing came at the expense of traditional, more labour-intensive industries and agriculture—the mainstay of employment for poorly educated workers. The opening of the economy to globalization also exposed these traditional industries to more efficient overseas competitors. While these countries’ economies benefitted overall from restructuring and reforms, the poor suffered. The poor were left unsupported by newly frayed (Dominican Republic, Bolivia) or miserly-by-design (Singapore) social safety nets and government programmes.

Several additional points emerge from this analysis. First, for most of these cases the time periods in question are relatively long. In each case, five years is a long time for positive economic growth on average to be matched with five years of negative growth in the incomes of the poor. What happened after each period? In each case, they were followed by recessions—recessions in which the incomes of the poor and non-poor alike were negatively affected. In 1990, the Dominican Republic saw massive inflation and the largest percentage drop in real output since its 1965 civil war, paving the way for another, albeit more successful, round of IMF intervention (Kaplinsky 1993; Young and Cardoso 2001; Sánchez-Fung 2005). Similarly, in 1985, Singapore’s GDP shrank for the first time in its history as a nation state—a development that spooked local officials into reversing a number of the policies that it had been pursued during Singapore’s industrial transformation (Rigg 1988; Singapore Department of Statistics 2018). Bolivia experienced a longer period in the economic doldrums, seeing its GDP fall in 1999, 2001, and 2002, after two straight decades of consistent growth (World Bank 2018). Whether this is anything more than a coincidence or not awaits further review. In every case we examine here, the same forces that helped to grow the economy while undermining the survival strategies and thus the incomes of the poor seemed to give way to periods of even broader pain.

Second, these periods of immiserizing growth were no accidents, but were the direct effects of decisions made by powerful domestic and international actors. In each case, domestic actors worked with international ones to shape economic development. Intentionally or not this steered economic opportunities away from the poorest, and in the process also undermined their survival strategies. In some cases, the losers could be defined by region, or ethnic group, or levels of education. But they were invariably defined by class—which also implied the lack of political power. As argued in Chapters 1 and 2, the cases of immiserizing growth are intimately related to politics.

(p.130) Third, the fact that economic growth in many of these cases also came with increased misery for the poor often went unnoticed in many circles. In fact, some of these cases have been promoted as success stories. The IMF held the Dominican Republic’s case as a success, emphasizing the gains to its overall economy, but not mentioning or even analysing the impact liberalization had on the poor (IMF 1999). Singapore is a quintessential example of rapid economic growth that coincided with poverty reduction—thus it is surprising to find a five-year period of immiserizing growth. Even this period has been largely unrecognized. After all, Singapore’s reforms during the late 1970s and early 1980s shifted he economy successfully from one founded on basic manufacturing to high-tech industries and higher-end services. These have been widely praised as being part of the East Asian economic miracle. By contrast, our approach examines the experience of the ‘least of these’ before judging the performance of any economic or reform policy, thus pointing out the negative impact this period had on the lives of Singapore’s poorest residents.

Overall, this study did demonstrate that there are several pathways that can create immiserizing growth. The fact that many of these pathways stemmed from either structural reforms or structural transformation is sobering, and underscores that these programmes can exacerbate poverty. This chapter emphasizes the importance of understanding the survival strategies of the poor before undertaking any reform on the economy. Any reform should not undercut these strategies, but rather should strive to augment these strategies or provide alternatives. While this study does not undermine conclusions that economic growth generally reduces poverty (e.g. Dollar and Kraay 2002; Dollar et al. 2016), it does underscore that exceptions—and not a small number of them—persist. Thus, it is not enough to conclude that growth is good for the poor. Instead, it is more appropriate to ask under which conditions can growth be made better for the poor.

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(1.) The authors thank the participants at the Immiserising Growth workshop, and especially the organizers, Ravi Kanbur, Richard Sandbrook, and Paul Shaffer. In addition, the authors thank Jennifer Milewski for her help in preparing this chapter.

(2.) Sources appear to use the term interchangeably with free trade zones. See for example Mathews (1994: 30).

(3.) Data cited here are from the databases used in Dollar and Kraay (2002) and Dollar et al. (2016). For more details on how they derived these data, see the original sources.

(4.) See note 3.

(5.) See note 3.