Hothousing for Development: sorting out the mixed economy and state capitalism

In 1999, the then state-owned Servicio Postal Mexicano issued a postage stamp celebrating sixty-five years in Mexico of the development bank Nacional Financiera (Nafin). Set against a silver tint background, the anniversary stamp features a vertiginous architectural edifice that is seemingly zooming to the heavens in hues of cyan and indigo blue. Suspended above the skyscraper is the faint watermark symbol of Nafin that has unmistakably appeared across various publications since its founding in 1934. In 1989, the state-owned Correos Chile issued a set of four postage stamps to celebrate the fiftieth anniversary of the development bank Corporación de Fomento de la Producción (Corfo) in Chile, founded in 1939. The quartet all display different commodities on the frontier of Chile’s economic development, covering: maritime transportation and fishing; logging and manufacturing; telecommunications and electrification; and carbon mining and energy. Beyond the interest of philatelists, Eric Hobsbawm has conveyed that postage stamps are the ‘most universal form of public imagery other than money’. Celebrating Nafin and Corfo, these commemorative stamps highlight the significance of development banks within everyday state capitalism. The postage stamps thus assist in marking and identifying the significance of development banks in the construction of state capitalism, or what is also called “mixed economy” hybrids of public and private forms of development, in Mexico and Chile.

Our joint article in Environment and Planning A: Economy and Space seeks to refocus attention on Nafin and Corfo as development banks and their role in mid-century state capitalism in Latin America during Import Substitution Industrialisation (ISI). It does so by engaging with the very latest contributions to mid-century developmental statecraft, political economy and state formation in the Americas. In Sorting Out the Mixed Economy, Amy Offner argues that mid-century developmentalism in the Americas was marked by a “mixed economy” or hybrid developmental state conjoining the role of state and capital to embed public and private organisations in the forging of state-led development. Such rethinking and “sorting out” of the mixed economy holds that the developmental state was a contradictory formation constituted by contending visions of public policy-making and private capital investment, marking processes of land reform, housing, university economics education, business management, and corporate business. As reviewed on Progress in Political Economy (PPE), rather than focus on ‘direct, on-the-nose forms of connection and exchange’, Offner’s sorting out of the mixed economy traces ‘forms of indirect connection’ through linked networks of corporate executives, managers, urban planners, intellectuals, and economists in creating the developmental state.

Elsewhere, debates on the “new” state capitalism led by Ilias Alami and Adam Dixon in The Spectre of State Capitalism have argued that development banks are positioned as crucial fixes within mixed economy public-private ownership forms that are called ‘state-capital hybrids’. Development banks, it is argued, ‘have returned to fashion’ with more than 900 worldwide, controlling assets worth $49 trillion, used to maintain financial stability, funding infrastructure, and providing capital for development projects. Yet, despite claiming to provide a theory of the emergence of development banks within processes of capital accumulation, such an undertaking is omitted in preference for a focus on developments since the early 2000s that only offers a strictly presentist lens. This means that the claims about the contemporary rise and mutation of development banks can only ever furnish a partial perspective on their constitution. There remains the challenge of historicising the origins (and mutations) of development banks and to be more precise about the hybridity constituting both mixed economy and state capitalist analysis.

Our EPA article seeks to sort out mixed economy and state capitalist arguments by starting with a straightforward point made by Maurice Dobb in Studies in the Development of Capitalism that ‘every economic system is in some degree a “mixed system”’. Additionally, a dash of Dobb from his Papers on Capitalism, Development and Planning assists us in revealing how dominant treatments of economic history deliver a focus on the dynamic impetus of capitalism that is reflective of ‘the half-illuminating, half-distorting, mirror of ideology’. The mirror of ideology refers to common accounts that draw attention to autonomous entrepreneurs, or firms, motivated by considerations of individual profit in relation to capital accumulation. Economic development in these hands is treated as a self-perpetuating process as long as state interference is not regarded as an obstacle to curbing the agency of decision-making innovative entrepreneurs. Our argument is that a focus on the mixed economy is caught within this mirror of ideology because it accepts the given impulses of the state and market. In contrast, from Marx, we link the expansion of U.S. economic development in the twentieth-century to the hothousing for development that is defined in relation to the concentration and centralisation of capital in conditions of primitive accumulation and how these processes are ongoing, modified, and persistent in the present. The result is an intensification, acceleration, and quickening of capital accumulation to mature and force the growth of development, as if in a hothouse.

Our claim is that returning a focus back to development banks such as Nafin and Corfo, as direct on-the-nose agencies shaping mid-century state capitalism in Latin America, better assists in understanding what we define as the hothousing for development. Sorting out the mixed economy truly entails, then, rejecting the artificial separations of public and private, or state and market, that stand as reflections in the mirror of liberal ideology. At best, analysis of the mixed economy can only ever be half-illuminating due to its reliance on the dichotomies of liberal ideology. At worst, such analysis is half-distorting because of a reliance on artificial separations that obscure the role of the state and class forces within the economy. Instead, we advance a subtle argument about how planning through development banks ensured the concentration and centralisation of capital that entailed the internalisation of class interests by fractions of capital within state capitalist forms, such as Mexico and Chile. The nuance of our approach to analysing the internalisation of class interests within state capitalist forms also enables us to contribute to state capitalism debates, for example led by Nathan Sperber, by furthering a class-relational analysis.

There are two main sections in our article to advance the focus on the hothousing of development in Mexico and Chile. In these sections we deliver empirical detail to move beyond the half-illuminating noisy sphere of surface appearances, guarded as Marx forewarned in Capital by the threshold sign that says “No admittance except on business”. The first section addresses the role of Nafin in Mexico as the state development bank entrusted with the long-term debt financing of the economy as well as involvement in fixed capital formation in the drive for surplus value in the form of infrastructure investment. Novelty is added here to debates on the mixed economy and state capitalism by revealing how the expansion of capitalism through ISI proceeded on the basis of the internalisation of dominant class interests through the state, thereby addressing a blind spot in competing accounts. The second main section delivers similar detail to advance a focus on Corfo as a fundamental state developmental agent also connected to the internalising of class interests in relation to foreign capital. For example, during the early phases of ISI, Corfo developed short investment plans—called “Planes de Acción Inmediata”—for mining, agriculture, industry (manufacturing), energy (electricity, oil and coal), and transport and commerce. We thus reveal the entwining of national and foreign capital in the construction of ISI, challenging the simple diffusionist narrative of the outward spread of capital from core to periphery. Finally, this section also shows how Corfo assisted in concentrating and centralising capital to intensify, accelerate, and quicken the hothousing of development to shape state capitalism in Chile.

Our findings raise question marks about the obscuring explanatory contribution of mixed economy arguments. Our advance is that greater explanatory potential can be sought through a focus on the concentration and centralisation of capital accumulation and the internalisation of class relations within state capitalist nodal agents in shaping mid-century developmentalism. After all, as Christy Thornton has highlighted in Revolution in Development, at the hub of the governance of the global economy at mid-twentieth century, was ‘a Mexican vision for capitalist progress’ alongside ‘the organised power of capital’. With the potential to progress economic geography and geographical political economy in this vein, we argue that the internalisation of class relations within state capitalist nodal agents such as Nafin and Corfo strives towards realising how mid-century developmentalism proceeded through the hothousing concentration and centralisation capital.

Rather than getting mixed-up in mixed economy arguments, we build on the emerging analysis of state capitalism to advance a class-relational account of development banks in the mid-twentieth century hothousing for development. The pertinency of class will also still matter in the relational struggle to sort out the entrepreneurs of state capitalism and developmentalism in and beyond Latin America in the twenty-first century.