What is it about?
The Peruvian economy depends for its growth on the export of its mineral resources. This dependency is derived from the country’s role in the international division of labour and is expressed in its export structure, economic structure and business structure. Peru’s dependency on its mineral resources, an economic structure that is principally made up of non-tradable sectors and a business structure dominated by micro businesses, make lasting economic progress very difficult. We argue that although the Peruvian economy is divided into an advanced economy and a capitalist subsistence economy, the country is not a dual economy where two sub-economies are economically and socially separated from each other and have structurally different modes of operation. The capitalist subsistence economy is characterized by low productivity levels and is expressed in remuneration rates at or near the minimum wage level. This structural feature of the Peruvian economy impedes the successful implementation of a process that would make the country less dependent on its natural resources and would set it on a development course of increased value-added production.
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Why is it important?
The dependency of the country on its mineral resources, an economic structure that is principally made up of non-tradable sectors and a business structure dominated by micro businesses make lasting economic progress very difficult. Various authors have explained that extractive development models do not guarantee lasting and structural progress. Peruvian economists such as Jiménez (2010), Dancourt (2016) and Gonzales de Olarte (2007) consider industrialization, the diversification of the country’s productive apparatus, the return of the role of the state in the economy (augmenting public investments, redistributing income, etc.) and the development of the internal market, among others, to be crucial for progressive economic development. In the short run it is very hard to structurally transform the Peruvian economy. We believe that the rise of a capitalist subsistence economy (CSE) in Peru impedes the successful implementation of a process that would make the country less dependent on its natural resources and would set it on a development course of increased value-added production.
Perspectives
Lasting economic progress in Peru is only possible when the country’s role in the globalized capitalist world has been changed. As it is not possible to change this role in the short-run, Peruvian policy makers should implement, at least, long lasting structural policies that point to changing the country’s role in the international division of labour. The former government of Pedro Pablo Kuczynski (July 2016 - March 2018), however, did not seem very interested in changing this role. Not only was the National Plan of Productive Diversification implemented by the administration of Ollanta Humala (2011-2016) deactivated as the Kuczynski administration believed that this should be led by market forces, but further measures were taken to accelerate mining investments through the relaxation of environmental legislation and the improving of infrastructural conditions for mining operations and for the export of mining products. In June 2017, for instance, the country adopted more flexible air quality standards and in October 2017 an important number of mining exploration activities were exempted from the Environmental Impact Assessment System.
Dr Jan Lust
Beyers Naudé Secondary School
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This page is a summary of: The rise of a capitalist subsistence economy in Peru, Third World Quarterly, November 2018, Taylor & Francis,
DOI: 10.1080/01436597.2018.1529540.
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