Developing Countries in Global Capitalism

This chapter makes another step towards a more complete analysis: the effectiveness of an active state-driven economic policy is severely limited when the national economy is no longer considered in isolation but in its embedment in the global context. International trade and financial flows cause exchange rate fluctuations, external debt, capital flight, and currency crises, thus penalizing developing countries if their governments want to intervene in markets and pursue ambitious development strategies. At this point, it thus seems that governments hardly have any policy options to steer growth and reduce poverty.