In Growth Without Development, Rubén Berríos develops the thesis that Peru has missed its opportunity for development. Using comparisons with other countries (most centrally Chile and South Korea) that have made the transition to high economic performance, Berríos argues that Peru has made a critical mistake in focusing too exclusively on extractivist industries without worrying about other aspects of development that promote the general welfare. As a result of this strategy, plus poor governance and corruption, Peru has fallen behind. An important utility of the book is that it goes beyond the conclusions specific to Peru by trying to explain why some countries have been able to transform themselves. As such, the book should be of interest not only to Peruvianists or Latin Americanists but to all students interested in the political economy of development.
The book has five chapters plus a conclusion. In chapter 1, Berríos provides a useful overview of the literature focusing on the political economy of development. There, he sets up the question of why some countries have been much more successful in building strong economies than others. He engages the literature by discussing definitions and some standard explanations, such as resource endowments and good governance. He points out the role of technology and the challenges of the informal sector, but the overall goal is to discuss the interaction of the state, the market, and civil society in building an economy. He argues that while Peru has engaged in important and productive economic debates, previous economic failures have been the result of poor policy choices, as well as reliance on commodities that cycle between boom and bust. “Appropriate government policy,” therefore, is difficult to design, given the reliance on fickle international markets.
In chapter 2, Berríos digs into Peru’s economic model and political history to explain its limited success. Borrowing a 150-year-old jab that likens Peru to a “beggar sitting on a golden bench,” Berríos explains that in spite of great natural resources and experiments with both a state-led model and neoliberalism, Peru has failed to develop (though he does note some periods when the country has experienced high growth rates). Berríos argues that the problem has been the focus on extractivist industries, but he cites Dani Rodrick in arguing that “to move resources from low-productivity areas to modern industries such as manufacturing… requires state interventionist polices, which goes against the current neoliberal model” (30). Successful policy, he notes, includes attention to social policy.
An important discussion in this chapter revolves around trade openness, but surprisingly, China is not a central part of the analysis. Berríos does note that Peru’s “rosy performance” from 2003 to 2013 is due in part to China’s purchase of Peruvian minerals. He also raises the concern that reliance on China’s purchase of these raw materials has made Peru vulnerable to volatile prices and a dependence on foreign investment. This is an important theme that merits further discussion, since many countries in Latin America and other parts of the world have hitched their economies to the China train.
Chapters 3 and 4 develop the comparisons with Chile and South Korea, respectively. For the former, Peru has an advantage in terms of resources, but it has performed much more poorly. Berríos does not point at a singular explanation, but he does focus on governance and long-term planning. He argues that while there is a solid “partnership between the state and the national private sector” in Chile, in Peru the “lack of political unity [hampers] such a partnership.” He also points to factors such as political stability, continuity, accountability, and education.
Given that Berríos is an economist, this emphasis on political variables is particularly noteworthy. Berríos provides an overview of the political histories of the two countries, and, while not ignoring the 1973–90 dictatorship in Chile, he cites that country’s stronger democracy as a reason for its economic advantage. This, he says, helps countries reach compromises and accommodation. At the same time, he does credit the Chilean military government for combining market-friendly policies while also supporting the state development corporation (CORFO). With weak political parties, meanwhile, Peru has failed to represent interests very well. In the 1990s, it did implement neoliberal reforms—under a president who undertook a self-coup and closed Congress—but Berríos explains that those reforms were so intent on reducing the size of the state that they ignored the important role of planning.
This discussion, while useful, generates an unresolved tension over whether a democracy can provide the needed policies. Berríos is careful to note the horrendous atrocities committed by the Pinochet regime, but he gives the military great credit for the economic model that Peru and others should copy, while at the same time noting that Chile’s stronger political parties and democratic institutions promote further development. The many examples of dictatorships—in Peru and other parts of the world—that have failed to implement successful economic policies should be enough evidence to dispel the idea that dictatorships are a sufficient explanation for development. Democracies, too, come in many flavors, and Berríos’s study serves to remind us that some are not very tasty. The unresolved question, then, is how to develop the type of democracy that can represent interests and implement successful development policies.
For South Korea, Berríos develops the difference between a “productive economy and an extractive economy.” Even with limited natural resources, South Korea has been successful, owing to policies that have emphasized productive growth and outward orientation. The country has also created opportunities for investment and has invested an amazing “one-third of [its] GDP to achieve high rates of growth” (87). It has successfully implemented policies to protect its infant industries. Berríos gives some credit to US assistance to South Korea, arguing that “post-war relief … laid the foundation for nation building.” While this is not fully articulated, Berríos implies that it also helped to support the land reform and new industrial policies. It is noted that the United States has also given aid to Peru, but apparently that aid has not had such a positive impact.
Chapter 5 turns to the specific topic of human capital and technology. Here Berríos argues that Peru lags behind in terms of developing its human capital, owing to a poor education system relative to Chile and South Korea. Peru is improving its education levels, as literacy has risen to over 90 percent and primary school enrollment is nearly universal. Quality, however, is poor (and uneven), and spending per student is less than one-third of that in Chile. Berríos then links these problems with issues of innovation and technology development. In an interesting section titled “Can Peru Still Compete?” Berríos argues that Peru has a comparative advantage in some areas and does have technological capability. However, some of the areas in which the country competes for the export market, including agricultural products and textiles, are too “low end” to support further development. This leads Berríos to explain that Peru should follow the example of East Asia to diversify the economy, in order to avoid vulnerability and develop an explicit policy related to innovation. In a telling table, he shows that Korea spends 40 times what Peru does (0.1 percent of GDP versus 4.2 percent) on research and development.
In the conclusion, Berríos reviews the many challenges facing developing countries and the lessons from the book’s comparisons. He also reminds us that studies of development cannot focus solely on international economics or domestic politics and policy, but must consider the multidimensional problem and broader context.
In sum, the book uses the case of Peru to explain that development, a concept that encompasses much more than economic growth, requires an activist state with a carefully designed relationship with the industrial sectors. A development model, furthermore, must consider domestic political institutions as well as markets. By distilling complex economic and political issues into short discussions, Berríos provides a readable account of the complex factors that have limited Peru’s development. Furthermore, the book’s comparative context and detail about Chile and Korea creates an interesting puzzle about why some countries have had more success in development. In contrasting Peru with these more successful cases, Berríos does a nice job of confirming his conclusions about the necessary role of the state in promoting development.
