The failure of the Washington Consensus and of macroeconomic policies based onhigh interest rates and non-competitive exchange rates to generate economic growthprompted Latin America to formulate national development strategies. Newdevelopmentalism is an alternative strategy not only to conventional orthodoxy but also toold-style Latin American national developmentalism. While old national developmentalismwas based on the tendency of the terms of trade to deteriorate and, adopting a microeconomicapproach, proposed economic planning and industrialization, the new nationaldevelopmentalismassumes that industrialization has been achieved, although in differentdegrees by each country, and argues that, in order to assure fast growth rates and catching up,the tendency that must be neutralized is that of the exchange rate to overvaluation. Contraryto the claims of conventional economics, a capable state remains the key instrument to ensureeconomic development, and industrial policy continues to be necessary; but whatdistinguishes the new approach is principally growth with domestic savings instead of withforeign savings, a macroeconomic policy based on moderate interest rates and a competitiveexchange rate instead of the high interest rates and the overvalued currencies prescribed byconventional orthodoxy.
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