Philipp Fink, Conclusion: Myth or Mirage? in:

Philipp Fink

Late Development in Hungary and Ireland, page 242 - 252

From Rags to Riches?

1. Edition 2009, ISBN print: 978-3-8329-4173-4, ISBN online: 978-3-8452-1720-8

Series: Nomos Universitätsschriften - Politik, vol. 168

Bibliographic information
242 Conclusion: Myth or Mirage? The portrayal of the Irish and Hungarian FDI-led development strategies questions the viability of the current international development agenda, which focuses so heavily on harnessing TNCs as prime developers. In contrast to the official line on the developmental role of FDI, the Hungarian and Irish examples show that a development strategy relying solely on the attraction of export-oriented FDI resembles neither a silver bullet for development nor a yellow brick road from the economic periphery to the developed core. Instead, when the Hungarian and Irish development records are analysed in a historical perspective, economic peripherality persists. Obviously, Hungary and Ireland are a far cry from the agrarian economies and societies they once resembled after having gained their statehood. A transformation of the production structure, economic growth and a substantial increase in per capita incomes has undoubtedly taken place. Hence, growth is not a myth, but echoing Kirby (2004: 219), development nevertheless resembles a “mirage”. Despite the increase in per capita incomes and the high levels of high technology FDI inflows, the FDI-led development regime has not enabled Hungary and Ireland to overcome their economic peripherality Hungarian and Irish economic peripherality surfaced as a result of their respective imperial incorporation as agricultural hinterlands. In both cases, non-capitalist structures were affirmed by the insertion of Hungary and Ireland within an imperial division of labour. Both countries specialised in labour-extensive agricultural exports (Hungary: Grain; Ireland: Live cattle) and in return received consumption and industrial goods from the respective imperial centre. This division of labour seriously impeded further industrial development, as it led to a detrimental developmental lock-in defined by a dependency on labour-extensive agricultural exports to markets in the respective imperial core. Consequently, two sectors evolved distinguished by large productivity and profit differences. Reinvested agricultural export earnings resulted in increased unemployment and marginalisation, as, owing to the underdeveloped nature of the remaining economy, displaced farm labour was left unabsorbed, leading to rural unemployment. In Ireland emigration ensued and Hungary developed a marginalised agricultural class. Both results constrained the growth of wages, demand and markets, essentially inhibiting sufficient profit possibilities for entrepreneurial investment. The economic structures had decisive effects on the respective social and political fabric. In both countries, conservative agrarian interests were complemented by the economic structure. The imperial division of labour ensured the socioeconomic predominance of anti-capitalist and anti-democratic noble elites in Hungary. In Ireland, middleclass farming interests dominated the political sphere. Society and the state in Hungary and Ireland were directly or indirectly moulded by the dominant classes to affirm the status quo due to the lack of sufficient opposition. In Hungary, 243 this was guarantied by the acceptance of Austrian hegemony and the suppression of opposing interests of either ethnical or social nature. In Ireland, emigration relieved the political system from the pressure to act. Consequently, the formation of the subsequent development regimes was heavily influenced by the aforementioned socioeconomic factors. In both cases, they guaranteed the state a high degree of internal autonomy. In authoritarian Hungary, internal autonomy was upheld by the suppression of dissent. Conversely, in democratic Ireland internal autonomy was attained by the localism and competitive nature of the de facto two-party political system as well as ongoing emigration, which effectively exported dissent. In both cases, agricultural export dependency led to a low level of external autonomy. Hungarian external autonomy was additionally constrained through the repeated influence of greater regional powers. In contrast, both countries’ experiences diverge considerably from each other in terms of state capacity. Initially, both states followed a laissez-faire development policy built upon the export of agricultural goods; hence state capacity was low. However, in the case of Hungary the state reacted to the demise of the developmental agent by repeatedly following a “backward exit strategy” (Berend 2000: 50). This policy entailed a reduction in external economic influences. The developmental agent was relieved from market price pressures through increased protectionism. State interventionism and voluntary subjugation to greater regional powers allowed the dominant socioeconomic elites to preserve their income base in form of agricultural exports. Although Ireland reverted to protectionism in the 1930s in an attempt to create an industrial base and reduce its dependency on British export markets, state capacity, however, remained restrained and low. The Irish state refrained from market interventions to support indigenous industrialisation. Consequently, Irish dependency on UK markets persisted. Hungary and Ireland show differences on the issue of popular consent to the development regime. Consent waned with the failure of the respective developmental agent to produce the envisaged results. Economic collapse of the developmental agent reduced state capacity to steer the development process. As a result, rising dissent eventually eroded the state’s internal autonomy, leading to the replacement of the development regime. In the case of Hungary, this process only took place in pure form with the end of the socialist development regime. The previous development regime based on agricultural exports was briefly discontinued following the country’s defeat in WWI. Dissent was oppressed and the regime was subsequently realigned to cater for increased industrial development. Although the emphasis on agricultural exports remained, it was finally replaced by socialist development regime after WWII. In contrast, popular dissent towards the Irish development regimes arose only after the “Exit” safety valve of emigration ceased to work. Hence, emigration was one of the factors of stability, as it guaranteed the Irish state’s high level of autonomy. Nevertheless, despite the different historic experiences, both countries installed the current development regime of FDI-led export-orientation after the previous development regimes had failed to overcome economic peripherality. 244 Turning towards the results of the current FDI-led development regimes, admittedly, the performance of the aggregate economic figures illustrates that both countries have benefited from the primary effects of FDI inflows. However, the development of foreign-dominated export enclaves illustrates that the perceived secondary effects of FDI are mooted at best. Developmental inputs have not widely diffused into the remaining sectors of the Hungarian and Irish economies. Consequently, economic growth in both cases is dislocated from national structures of consumption and production by its dependency on their main export markets in the EU. Indigenous contributions to economic growth in both Hungary and Ireland are overshadowed by the vastly superior performance of export-oriented TNCs in terms of GVA, exports, output and profits. Furthermore, the high levels of FDI inflows, the technological superiority of investing TNCs and their orientation towards export markets contributed to rising social inequality. Social dichotomy is further exacerbated by compensation policies, which follow political efficacy and therefore are biased towards middle and higher income groups. The persistence of peripheral modes of economic growth is linked to two issues, which question the sustainability of the growth strategy. The first is related to the unsuitability of TNCs to act as transfer agents for the diffusion of modern technology into the productive structures of the host economies. On the one hand, their cutting-edge technologies and superior knowledge assets constitute firm-specific advantages, which render them a quasi-oligopolistic, or monopolistic position vis-àvis, their main competitors. Hence, the majority of TNCs are not inclined to recede these competitive advantages in order to protect their competitive positions and the base of their profits. On the other hand, the absorptive capabilities of indigenous firms to possibly utilise TNC technologies and know-how are insufficient to guarantee the indigenous internalisation of possible TNC spillovers. In both cases, the economy was prematurely integrated into the EU, leading to an increased demand for capital inflows. Trade liberalisation detrimentally affected indigenous enterprise via displacement effects and created macroeconomic imbalances due to the import dependency of internal demand. Although, Irish indigenous firms have made some headway, they have developed their own technologies, thereby creating specialised niches for production and exports. However, they constitute only a minority of firms. Furthermore, these tentative cases of success have evolved more than four decades after the Irish state installed the FDI-led development regime. Nevertheless, the level of substantial linkages between TNCs and Irish-owned firms remains low. Hence, a truncated development process has ensued, as illustrated by the existence of socioeconomic disparities in both Ireland and Hungary. Put into a wider regional perspective, Ireland and Hungary can serve as examples for the “bi-polar nature of EU-integration” (Kottaridi 2005: 91). Bi-polar integration is characterised by a distinct division of labour between the core and the peripheral members of the EU. 245 High value-added activities and innovation are increasingly concentrated in the core. In contrast, intermediary and final production (i.e. low value added activities) takes place in the periphery (Kottaridi 2005: 92). More importantly, the low diffusion of developmental inputs through the monopolisation of technology and knowledge by TNCs impedes the development of technological and innovatory capabilities. Consequently, the economic periphery is locked-in on the lower staves of the technological ladder. Thus, the duality of peripheral growth is mirrored by regional duality on a European level. This division of labour, therefore, echoes Hymer’s (1975) notion of uneven development. The transnational penetration of the periphery and its resulting domination by FDI leads to an unintended extrapolation of the corporate division of labour on the relationship between countries of the economic core, where the parent firm is located, and the periphery, where the affiliates are situated (Hymer 1975: 50; Buckley 2006: 144). Hence, FDI-led development, as pursued by Hungary and Ireland, leads to a situation, where the hierarchical division of labour within the international TNC production networks defines the economic relations between the core and the periphery. Beyond the technical sphere of integrating the developmental inputs of TNCs into the host economies, a second constraint belies the development strategy in form of its cost and spending-sensitivity. Both economies have been experiencing rising macroeconomic imbalances. In the case of Hungary, Twin-Deficits have surfaced, while Ireland has seen a deterioration of its balance of payments and current account as well as a drastic increase in private indebtedness. The macroeconomic imbalances are partly the consequence of compensation policies, which follow the lines of political efficacy and are aimed to uphold and increase popular consent to the development strategy. Furthermore, macroeconomic instability displays the perils of FDIled development. Peripheral growth in both cases is crisis-ridden and contradictory in nature. In the case of Ireland, the downturn in the growth of the international economy in 2001 revealed the imbalanced and dependent nature of the Irish growth process. Based on rapidly rising property prices and cheap loans, private demand increasingly replaced exports as the main determinant of economic growth (?ech 2006: 3- 4). As a result, the current account has deteriorated with import increases overtaking export growth and leading to a negative balance of payments (IMF 2006: 4). These macroeconomic imbalances have ironically arisen due to the success of the development strategy in form of per capita income increases, growing by 85% between 1995 and 2005 (McQuinn/O’Reilly 2006: 129). Ireland entered the European Monetary Union in 2001 at the height of its economic boom with its nationally set interest rates converging to the lower European Central Bank rates. The lower interest rates acted as a further accelerator for private demand, as consumers and homebuyers were able to access cheep capital (EEAG 2007: 61). The expansionary macroeconomic atmosphere was additionally fuelled by pro-cyclical government budgets and favourable taxation policies for property development (EEAG 2007: 63; Barry 2005: 50). 246 Consequently, a drastic construction boom was unleashed culminating in a rapid increase in housing prices. In total, house prices grew by 260% between 1995 and 2005 (McQuinn/O’Reilly 2006: 129). Mortgages have fuelled private indebtedness with the ration of household debt to disposable income reaching 130% in 2005; the highest in Europe (IMF 2006: 4). As a result, the GDP share of the construction sector reached 20% in 2005 employed over 10% of the workforce (EEAG 2007: 62). The rise in labour-intensive construction has prompted a deterioration of aggregate productivity. Furthermore, rising house prices have fuelled wage increases, which together with the recent appreciation of the Euro have increased Irish unit labour costs (IMF 2006: 4). Hence, Ireland is losing its wage-related competitive edge for manufacturing exports. Consequently, labour-intensive production sites have moved on to cheaper locations and cost-related global sourcing has increased. As a result, the channels for increased indigenous and foreign-owned cooperation in these branches have become fewer (Paus 2005: 80). Thus, the question is not if a slowdown in economic growth will arise, rather the issue is when and how. Amid fears of rising interest rates in the Euro-zone and in the UK (Guardian 06/06/2007), a bursting of the speculative house price bubble will negatively affect the construction sector and cause a drop in private demand and increase unemployment. The IMF as well as the European Commission has repeatedly called upon the Irish government to cater for a “soft landing” by increasing fiscal measures in order to slow the growth of construction and property prices (IMF 2006: 13). However, this poses a dilemma for the state, as it is heavily dependent on revenues stemming from property development. The highly unsocial construction-related administrative charges (“stamp duties”) contributed to almost of 35% of revenues and equalled the sum of collected corporation taxes in 2005 (?ech 2006: 4). Furthermore, the state refuses to reintroduce a property tax. This demonstrates the traditional close ties between the majority party in the government coalition, Fianna Fáil, and the indigenous construction sector (Breathnach 2005: 11). Moreover, it also illustrates the importance of the middle class as the government’s key voters, as they are the beneficiaries of the property development subsidies. Nevertheless, in order to stay within the dictates of the FDI-led export-oriented development strategy, the Irish state has no other option than to roll back private demand by penalising consumption through increased indirect taxation, reducing public investment in infrastructure and ensuring wage moderation either by increasing income taxes or freezing public pay. This would, however, jeopardise the already fragile social partnership process (Fink 2008). The current Hungarian government has the choice between a rock and a hard place. The resumption of economic growth after austerity in 1995 coupled with the attraction of export-oriented FDI enabled fiscal restructuring (CEC 2006). However, the gradual recovery of real wages together with the location of import dependent TNCs returned the pressure on the trade balance. The increase in imports aptly illustrated Stephan’s (1999: 192-193) notion of premature integration and underlined the sensitivity of the development strategy towards consumption and spending. 247 Furthermore, the extreme level of politicisation and polarisation of the political system is also responsible for the current Hungarian calamity. The highly competitive and intense nature of the de facto two-party system has created an expansionary political business cycle (OECD 2007). In the wake of the downturn in growth of the international economy in 2001, the then incumbent FIDÉSZ government and the following Socialist-led coalition governments resorted to increased public spending via investment, tax exemptions, public pay and minimum wage increases in order to win essential votes in extremely close elections (CEC 2006). As a result of these compensational policies, a fiscal deficit ensued, which together with the balance of payments deficit culminated into Twin-Deficits. Speculative currency devaluations further aggravated the balance of payments and prompted rising inflation due to the import dependency of the economy. However, the central government in Hungary has no other option than to implement drastic austerity. The Acquis communautaire binds Hungary to adopt the Euro and, therefore, to fulfil the Maastricht criteria (CEC 2006). Furthermore, the extreme politicisation of the political landscape impedes necessary reforms to the country’s governance structure as well as restructuring expenditure. Lacking any form of consensual politics, the current government does not preside over the necessary parliamentary majority to implement the required constitutional reforms and (Ehrke 2006: 3). The governance structure has been repeatedly identified as being responsible for public fiscal indiscipline and its restructuring is also a prerequisite for dispensing the ESF transfers from Brussels (OECD 2007; BAFA 2007). Violent protests in Autumn 2006 followed the Socialist-led coalition’s announcement of the austerity package as well as Prime Minister Gyurcsány’s confession of having lied to the electorate over the true state of public debt in the election campaign (Ehrke 2006: 3-4). The riots in Budapest illustrate not only the poisoned nature of Hungarian politics, but also emphasise a further weakness of the Hungarian development regime regarding the state’s high level of internal autonomy. In similarity with other post-socialist countries, Hungary presides over a weak civil society and social partnership process. Non-party and interests beyond the government are effectively excluded from the spheres of decision-making. Consequently, dissent is silenced to the ballot box. However, public protests were channelled by the nationalist opposition party, FIDÉSZ, in combination with radical-right wing groups on to the streets of Budapest in an attempt to topple the democratically elected government (Ehrke 2006: 4). Hence, dissent erupted in violence. Conversely, economic growth in Hungary continues unabated. Industrial production remained strong in 2006 (GKI 2007) and Hungary has regained its position as a regional outlier in terms of FDI inflows (BAFA 2006). The main factors responsible for the resilience of economic growth in Hungary despite political turmoil are exports to the EU (GKI 2007). The case of Hungary illustrates the truncated and contradictory nature of its growth process. The persistence of peripheral modes of growth in both cases is linked to the calibration of autonomy and capacity. On the hand, in both cases the level of external autonomy is low resulting from the adherence to free trade and the attraction instru- 248 ments, which cater for the free flow of capital. Consequently, both economies are extensively vulnerable to external economic occurrences. On the other hand, the respective state’s internal autonomy is high. In the case of Hungary, due to the aforementioned socioeconomic factors in form of an extremely polarised nature of the political system and a weak system of extra-parliamentary interest representation decision-making is heavily centralised within the executive. As a consequence of the extreme politicisation, every post-socialist government has ensured and increased its policy-making autonomy and continued with costly policies of compensation directed towards middle and high-income groups. Due to the institutional weakness of the Dáil, the extreme localism of Irish politics and the de facto ineffectual nature of social partnership, the central Irish state is the only relevant actor. In contrast to Hungary, the polity of development has been successively depoliticised and professionalized through the transferral of decisionmaking and implementation power to specialised para-state agencies. Consequently, the state in Ireland presides over a wide range of internal autonomy. However, in difference to Hungary, Irish state autonomy is embedded into a web of different communication channels through which the state interacts with relevant actors. Nevertheless, embeddedness is biased towards business and scientific interests, as labour interests are comparatively underrepresented. As has been extensively shown, the low level of embeddedness of TNCs and its consequences are related to the low level of capacity of the Irish and Hungarian states in the respective development process. It is evident that the instruments and policies at hand to steer the development process are neither sufficient to successfully counteract the distortions emanating from the foreign-owned export enclaves nor to augment indigenous absorptive and industrial capabilities nor to address the issue of social inequality. For both countries the priority of macroeconomic stabilisation as well as the spending and cost-sensitivity of the development strategy are seen to justify low state capacity. Adherence to both constraints implies the penalisation of income growth and therefore a short-term improvement in living standards. Nevertheless, it would be foolhardy to simply call for an increase in state capacity. The portrayal of historic Hungarian development regimes aptly displays that a mere increase in state intervention and the reduction of external influences is not a recipe for success. Rather, the solution lies in varying degrees of state autonomy and capacity in the development process. The insufficient size, technological incapability, lack of capital constitutes barriers-to-entry for indigenous firms to either operate as TNC suppliers or to access international markets. The monopolisation of technology and knowledge by TNCs strongly displays that market forces alone cannot guarantee a sufficient diffusion of technology and knowledge into the remaining economy. Quasi TNC monopoly power constitutes market imperfections, which require state intervention (Paus 2005: 30). This view is shared by an increasing number of observers,175 who criticise the blind faith in market forces alone to guar- 175 See for instance Ocampo (2002), Wood et al. (2003), Lall/Naurla (2004) and Dunning (2006). See also the 2004 special edition of the European Journal of Development Research 16 (3). 249 antee the embeddedness of TNCs in the host economy as well as to improve indigenous absorptive capacities. Alternatively, they argue for “re-evaluating existing governance so that peripheral countries can improve their domestic characteristics” (Kottaridi 2005: 93). For instance, the examples of certain East Asian Tigers (Ruane/U?ur 2006; Wade 2004; Herkenrath 2003; Thurborn/Weis 2006) show that a different approach is possible. FDI was seen to be complementary and not supplementary to existing indigenous productive structures and as a source for modern technology to propel indigenous development (Chang 2004: 707). By citing these examples, critics of the current development agenda, hold that a long-term successful associative development strategy entails not only the attraction of foreign capital, but also the mobilisation of sufficient amounts of indigenous capabilities (Lall/Narula 2004: 458; Wade 2003: 635; Lall 2002: 64). Conversely, indigenous capability is the result not of export demand being the sole source of economic growth. Rather, economic growth should also be based on a robust internal demand (Elsenhans 2002: 71). The proposed development regime is characterised by a coalition between the state and primarily local capital and to a lesser degree on FDI. It is built on a strong consensual base with state autonomy nevertheless strong, but immersed into communicative networks with relevant societal actors. In difference to the Hungarian and Irish FDI-led development strategies, wages are not seen as cost factors, which are harmful to the competitive trade position of the country. By focusing instead on policies directed at employment creation, wages and more importantly rising incomes based on relative labour scarcity are important sources for growth and innovation. Wage increases in line with productivity growth force local entrepreneurs to innovate in order to increase their productivity and profits (Elsenhans 1983: 17). This leads to increased technological capability and can, therefore, result in the transformation of the country’s comparative advantages. Hence, this strategy encompasses the notion of evolving comparative advantages, which, contrary to the static conception, does not lead to a lock-in situation with the catching-up economy remaining specialised on lower levels of technology (Elsenhans 2002: 72). The central role of wage increases in determining the expansion of the internal market implies increased social cohesiveness. Hence, this development strategy also calls for a redistributive state, which is anxious to spread wealth more evenly in order to ensure a maximum level of social inclusion. Furthermore, the development of a welfare state via tripartite bargaining would reduce the pressure of income increases to rise above productivity levels (Elsenhans 2004: 107). The strategy also presupposes a state with the capacity to steer the development process in order to increase indigenous technological capabilities and in view of participating gainfully in the international economy. Historically, infant industry protection in some forms “has always been the bedrock of industrial development” (Lall/Narula 2004: 459). Undoubtedly, as shown, development regimes based on import-substitution certainly failed to deliver the required results and were responsible for resource waste and the evolution of parasitic rent-seekers. 250 Nevertheless, those states faired best and eventually ascended from peripherality that not only used strategic industrial policies aimed at TNCs (i.e. performance requirements) as well as local firms. They also were flexible enough to switch policies according to the transformation of their respective economic structures and external conditions (Chang 2004: 707; Lall/Narula 2004: 460). In terms of external autonomy, in similarity with Katzenstein’s (1985: 36-37) account of the success of small European nations, this implies adaptation to the woes and whims of the international economy and not disciplinary reaction to uphold the status quo. Within this context, labour scarcity and the eventual introduction of initially protected firms to competition via trade and new actors are critical factors in explaining developmental success (Elsenhans 2004: 107). However, the implementation of such an alternative strategy requires not only a reform of the international development agenda, but also substantial internal reforms in both countries. As already shown, in both countries the focus of industrial policy needs to be placed upon indigenous enterprise. In the case of Hungary, the most pressing issues are those related to the extreme politicisation of the country, which severely constrains any possibility for a wideranging change in policy (Ehrke 2006). Turning to Ireland, the portrayed connection between inequality and economic growth calls for the establishment of a redistributional agenda. This aims at increased social participation in economic growth (Kirby 2006). This implies ending the tradition of policies following the “possessor’s principle” (Lee 1989). In terms of changing the international developmental policy constraints, it seems paramount to replace the current one-size-fits-all approach in order to allow peripheral countries to follow their own development strategies in accordance with their own needs (Lall/Narula 2004: 460; Chang 2004: 708). More precisely, within the context of Hungary and Ireland, the main responsibility for setting the developmental agenda lies with the EU and more importantly with its member states (Dauderstädt 2007: 29). Critical observers assert that the current policy guidelines are wholly insufficient to cater for either the developmental needs of the poorer EU periphery or to generate sufficient employment and growth in core member states (Dauderstädt 2007: 26; Bullmann/Kunz 2007: 90). Despite its population size and affluence, the EU economy has remained a laggard in terms of economic growth and employment regardless of the ongoing process of deregulation and liberalisation in the member states. Indeed the overemphasis of EU policies on market liberalisation is seen as responsible for the continued economic underperformance of the EU. This trajectory continues unchallenged, as initiatives such as the Lisbon Agenda call for further liberalisation and deregulation to increase the international price competitiveness of the EU in the presumed struggle to access international markets in the face of international competitors from Asia and the US (Dauderstädt 2007: 29; Bullmann/Kunz 2007: 90). However, member states are increasingly finding it difficult to undertake the necessary investments prescribed by the strategy due to the Maastricht criteria increas- 251 ingly acting as a straitjacket for expenditure (Bullmann/Kunz 2007: 96). As a result, a downward spiral in terms of labour regulations and social standards could ensue. This could unleash a process of competitive deflation between the member states, as individual devaluations are no longer possible with a common currency and a system of fixed exchange rates for Euro candidate countries. Hence, short-term international competitiveness is attained via fiscal policy and social systems in order to lower unit labour costs (Dauderstädt 2007: 37).176 In the case of the EU periphery and for the CEEC members in particular, the current policy nexus is potentially harmful. Having to converge to Maastricht criteria before adopting the Euro, their convergence process is unnecessarily prolonged. The resulting constraints on public expenditure, high interest rates and wage constraints limits the speed with which their catch-up processes can proceed. Suppressed incomes, unemployment and the stagnation of local productive structures are the consequences. Hence, “the waiting room for the Euro-zone could potentially become a poverty trap” (Dauderstädt 2007: 43). The “post-accession crisis” (Ehrke 2006: 1) expressing itself in rising public dissatisfaction towards the arisen socioeconomic disparities is possibly a sign for future social dissent towards the course of EU integration (Ehrke 2006: 4). An alternative lies within a process of deepened European integration, which aims to combine economic and social integration in order to spread the gains and the hardships of integration more evenly (Dauderstädt 2007: 42). However, a change in this direction depends in the long-term on the acceptance of a common European vision by the member states. To conclude, the examples of the Irish and Hungarian development should be taken as a warning on the further propagation of the FDI-led development strategy under the present international development agenda. Large-scale attraction of FDI cannot alone lead to the abolition of peripheral growth. Instead, peripherality is perpetuated in a contradictory and crisis-ridden growth process. Economic growth induced by large-scale export-oriented FDI inflows produces the simultaneous existence of poverty and wealth as well as development and underdevelopment. The presented alternative could turn the displayed mirage of development into developmental reality by offering an exit from peripheral modes of growth. 176 A prominent example of this process is the current export-led economic recovery in Germany, which is based on the previous 40% cut in unit labour costs (Dauderstädt 2007: 43).

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Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.