Latin America’s Economic Development: Confronting Crisis [2 ed.] 9781685857899

Table of contents :
Contents
Illustrations
Preface
Part I An Overview and Introduction
1 A Brief Economic History
Part II Economic Growth, Development, and Equity
Introduction
2 The Reality of Power and the Poverty of Economic Doctrine
3 From Growth to Basic Needs
4 Equity and Development
5 The Magnitude of Poverty in Latin America
Part III Institutional and Structuralist Perspectives
Introduction
6 Economic Development: An Institutionalist Perspective
7 Raúl Prebisch and the Origins of the Doctrine of Unequal Exchange
8 Terms of Trade and Center-Periphery Relations
Part IV The Development Strategy: Import Substitution Industrialization or Export-Oriented?
Introduction
9 The Import Substitution Strategy of Economic Development
10 Import Substitution in Latin America in Retrospect
11 Challenges and Opportunities Posed by Asia's Superexporters: Implications for Manufactured Exports from Latin America
12 Overcoming Underdevelopment: What Has Been Learned from the East Asian and Latin American Experiences?
Part V The Role of Transnational Corporations
Introduction
13 Transnational Corporations, Dependent Development and State Policy in the Semiperiphery: A Comparison of Brazil and Mexico
14 How to Divest in Latin America and Why
Part VI Inflation and the Imperative of Macroeconomic Balance
Introduction
15 Price Trends in Latin America, 1961-1990
16 The Macroeconomics of Populism
17 Macroeconomic Equilibria and Development
Part VII Employment and the Gender Divide
18 The Latin American Labor Market 1950-1990
19 Unequal Participation by Women in the Work Force
Part VIII Neoliberal Policies and the Neostructuralist Response
20 From Inward-Looking Development to Development from Within
Acronyms
The Contributors
Index
About the Book

Citation preview

Latin America's Economic Development

LATIN AMERICA'S ECONOMIC DEVELOPMENT Confronting Crisis • • • second edition edited by

James L. Dietz

LYNNE RIENNER PUBLISHERS

B O U L D E R L O N D O N

Published in the United States of America in 1995 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London W C 2 E 8 L U © 1995 by Lynne Rienner Publishers, Inc. All rights reserved Library of C o n g r e s s Cataloging-in-Publication Data Latin A m e r i c a ' s e c o n o m i c d e v e l o p m e n t : c o n f r o n t i n g crisis / edited by J a m e s L. Dietz. — 2nd ed. p. cm. Includes index. ISBN 1 - 5 5 5 8 7 - 6 0 0 - 5 (alk. paper) 1. Latin A m e r i c a — E c o n o m i c policy. 2. Latin A m e r i c a — E c o n o m i c conditions—1982I. Dietz, James L., 1 9 4 7 . H C 1 2 5 . L 3 5 3 6 1995 338.98—dc20 95-9032 CIP British C a t a l o g u i n g in Publication Data A Cataloguing in Publication record for this book is available from the British Library.

Printed and bound in the United States of America

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T h e paper used in this publication meets the requirements of the American National Standard for P e r m a n e n c e of Paper for Printed Library Materials Z 3 9 . 4 8 - 1 9 8 4 . 5 4 3 2 1

Contents vii XI

List of Illustrations Preface

• 1

• 2 3 4 5

• 6 7

8

• 9

Part I

An Overview and Introduction

A Brief Economic History James L. Dietz

Part II

3

Economic Growth, Development, and Equity

The Reality of Power and the Poverty of Economic Doctrine James H. Street From Growth to Basic Needs Paul Streeten Equity and Development Nora Lustig The Magnitude of Poverty in Latin America Juan Carlos Feres and Arturo León

Part III

1

Institutional and Structuralist Perspectives

Economic Development: An Institutionalist Perspective C. E. Ayres Raúl Prebisch and the Origins of the Doctrine of Unequal Exchange Joseph L. Love Terms of Trade and Center-Periphery Relations José Antonio Ocampo

Part IV The Development Strategy: Import Substitution Industrialization or Export-Oriented? The Import Substitution Strategy of Economic Development Robert J. Alexander

V

21 27 45 55 69

83 89

99 121

143 149

contents

vi 10 11

12

• 13

14

Import Substitution in Latin America in Retrospect Robert J. Alexander Challenges and Opportunities Posed by Asia's Superexporters: Implications for Manufactured Exports from Latin America Gustav Ranis Overcoming Underdevelopment: What Has Been Learned from the East Asian and Latin American Experiences? James L. Dietz

Part V

The Role of Transnational Corporations

Transnational Corporations, Dependent Development, and State Policy in the Semiperiphery: A Comparison of Brazil and Mexico Gary Gerejfi and Peter Evans How to Divest in Latin America and Why Albert O. Hirschman

•

Part VI Inflation and the Imperative of Macroeconomic Balance

15

Price Trends in Latin America, 1961-1990 Felipe Pazos The Macroeconomics of Populism Rudiger Dornbusch and Sebastian Edwards Macroeconomic Equilibria and Development Joseph Ramos

16 17

• 18 19

• 20

Part VII

Employment and the Gender Divide

The Latin American Labor Market, 1950-1990 Ricardo Infante and Emilio Klein Unequal Participation by Women in the Work Force Irma Arriagada

Part VIII Neoliberal Policies and the Neostructuralist Response

159

167

191

199

203 237

245 253 271 279

311 315 333

351

From Inward-Looking Development to Development from Within Osvaldo Sunkel

355

List of Acronyms List of Contributors Index About the Book

383 385 389 401

Illustrations •

Map

Latin America

•

ii

Tables

II.1 4.1 5.1 5.2 5.3 5.4 5.5 8.1 8.2 8.3 8.4 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11A.1

HDI Rankings, Latin America and the Caribbean, 1992 Income Distribution in S o m e Latin A m e r i c a n Countries in the 1970s Poverty and Indigence Lines: Per Capita Monthly Budgets in National Currency and U.S. Dollars Households Living in Poverty or Indigence Latin America and the Caribbean: Estimates of Poverty and Indigence, 1980 and 1986 Magnitude of Poverty and Indigence A r o u n d 1970, 1980, and 1986 Latin A m e r i c a and the Caribbean: M a g n i t u d e of Poverty in 1989 Estimates of Trade in the Real Prices of R a w Materials Real Prices of Raw Materials Estimates of the Terms of Trade of D e v e l o p i n g Countries, by Type of Product Terms of Trade of Latin American Countries Primary Import Substitution Effective Protection, Circa 1967 Indexes of M a j o r Cereal C r o p Yields Real Monthly Wages in Construction The Growth and Composition of Industrial Exports Exports of Manufacturing, Total and C o n s u m e r Nondurables Manufactured E x p o r t s — M a r k e t Shares Country Statistical Indicators, East Asian S I C s — South Korea

vii

24 59 70 72 76 77 79 129 132 134 136 172 174 177 177 178 179 182 186

viü IIA.2 11A.3 IIA.4 13.1 13.2

13.3

13.4 13.5 13.6

15.1 15.2 15.3 15.4 15.5 15.6 15.7 17.1 17.2 18.1 18.2 18.3 18.4 18.5 19.1 19.2 19.3 19.4

illustrations Country Statistical Indicators, East Asian S I C s — T a i w a n Country Statistical Indicators, Latin American S I C s — Brazil Country Statistical Indicators, Latin American S I C s — Mexico U.S. Direct Investment in Brazil, Mexico, and Latin America, 1 9 2 9 - 1 9 7 8 Percentage of Assets of Largest 300 M a n u f a c t u r i n g Firms in Brazil and Mexico Held by U.S. and Other Foreign T N C s : Selected Industries, 1972 Acquisition as a M o d e of Entry into M e x i c o and Brazil: Percent of N e w U.S. M a n u f a c t u r i n g Affiliates Established by Acquisition N u m b e r and Size of Locally O w n e d Firms Acquired in M e x i c o and Brazil T N C Joint Ventures in Mexico and Brazil Exports in Comparison to Sales for U.S. T N C s in Brazil and Mexico, M a n u f a c t u r i n g Only, 1960, 1966, and 1972 Retail Prices, 1 9 6 1 - 1 9 8 9 Inflation by Region, 1 9 5 1 - 1 9 8 9 Evolution of Basic Product Prices, 1 9 6 1 - 1 9 8 0 Net Financial Transfers, 1 9 6 1 - 1 9 8 7 Net Foreign Exchange Acquisitions, 1 9 6 1 - 1 9 8 7 Chile and Peru: Effects of Deliberate D e m a n d Expansion Chile: E x c h a n g e Rate and Retail Price Increases, 1970-1976 Latin A m e r i c a : Inflation, External Imbalance, and Growth, 1950-1988 The M a c r o e c o n o m i c Burden of the Transfer of Resources Abroad, 1 9 8 2 - 1 9 8 8 Structure of Economically Active Population, by Sector, 1950-1990 Trends in Structure of Employment, 1 9 5 0 - 1 9 8 9 Labor Market Growth Rates and Trends, 1 9 8 5 - 1 9 8 9 Trends in the Urban E m p l o y m e n t Structure, 1 9 8 0 - 1 9 8 9 Evolution of Average Real Wages and Incomes, 1980-1989 Participation by Gender, 1960 and 1985 Female Participation by Marital Status and Education, 1980 Percentage Distribution of the Working Female Population, by Sector, 1980 Feminization of Occupations, 1980

187 188 189 208

213

217 218 219

223 254 256 260 260 260 263 264 281 285 316 318 321 323 327 334 335 337 338

illustrations 19.5 19.6 19.7 19.8 20.1 20.2 20.3 20.4

• I.1 5.1 8.1 8.2 8.3 8.4

II.1 20.1

U n e m p l o y m e n t Rates by A g e and Gender, 1985 Female E m p l o y m e n t and U n e m p l o y m e n t Rates, 1982 and 1985 Average Income Indicators A m o n g Working Population by Gender and Level of Schooling, 1985 Average Income Indicators of Working Population by Gender and Occupation, 1985 Latin America: Military Expenditures and A r m s Imports Latin America: Net Capital Inflow and Transfer of Resources Latin America: Effect of Debt Burden on Investment, Wages, and Product Long-Term Trends in the International E c o n o m y B e f o r e and A f t e r the 1970s

ix 343 343 345 345 361 364 366 370

Figures Stages of Latin A m e r i c a ' s D e v e l o p m e n t , 1 5 0 0 - 1 9 4 5 Latin America (Ten Countries): Relationship B e t w e e n Magnitude of Poverty and Level of Income, 1980 Real Prices of Raw Materials Real Prices of Raw Materials Other than Oil Real Prices of Raw Materials and M a n u f a c t u r e s Exported by Developing Countries Terms of Trade of Latin American Countries: Large Countries and Total, and M e d i u m - S i z e d and Central American Countries Transition Phases Latin America: Net Capital Inflow and Net Transfer of Resources

11 75 130 131 135

137 170 365

Preface Since the first edition of Latin America's Economic Development (1987), Latin America has yet to return to a path of rapid and sustained economic growth, despite efforts to stabilize and adjust the region's economies to the dislocations of the debt crisis of the early 1980s. There has been growth in some countries and for some periods, but as the collapse of the Mexican peso in early 1995 exemplified, the difficulties associated with continuing dependency on external sources of financing have not been satisfactorily resolved by any of the adjustment programs put in place. Given the large external debt of many countries, the reliance on inflows of financial capital, and the increasing openness of the economies, the question of whether vigorous, long-term growth is possible without igniting inflation or a balance-of-payments crisis remains very real. The readings here analyze some of the major issues facing the Latin American economies: the nature of the development model; inwardvs. outward-oriented growth; the lessons of the East Asian miracle economies; inflation; balance-of-payments disequilibria; the role of the state; the macroeconomics of growth; foreign investment; employment and unemployment; the informal sector; the nature and evolution of poverty; the role of women workers; and other issues. There remain topics not covered in the volume—particularly on agriculture and agrarian reform and development and the environment—not because they are considered unimportant, but primarily because of space limitations. So much has been written on the debt problem, and since virtually all of the contemporary discussions on Latin America's future must confront, implicitly or explicitly, the impact of debt accumulation, the specifics of the debt accumulation issue also have been set aside to be read about elsewhere. The first edition of this book was organized around understanding the debate between structuralist (and institutionalist) economists and monetarist economists as to the nature of Latin America's economic problems. In this edition, there is a greater focus on key problem areas, such as inflation, macroeconomic disequilibria, and poverty; but the underlying controversy on how to develop is never far below the surface. By the 1990s, however, a neostructuralist analysis was emerging from Latin America and elsewhere that was more robust and acknowledged more keenly the

xi

x¡¡

preface

importance of respecting f u n d a m e n t a l e c o n o m i c constraints (like the balance of p a y m e n t s and the central g o v e r n m e n t d e f i c i t s ) than might have been the case in the past. Then, too, some of the stridency of early neoliberal r e c o m m e n d a t i o n s f o r stabilization and a d j u s t m e n t have been s o m e what muted, with the decidedly mixed results that such policies have had in practice. Perhaps there is a learning curve, w h e r e heterodox and orthodox economists are able to learn from one another, with the result being better policy that will be growth-augmenting, more equitable, and sustainable. T h e debate over how to d e v e l o p is not a settled issue. T h e r e is much to be learned f r o m u n d e r s t a n d i n g the m i s t a k e s that s o m e Latin American countries have made, just as there are lessons f r o m the successes of Japan and other East Asian nations in recent decades. No one theory and no one country has a monopoly on knowledge about the proper path of development that can be universally valid. Understanding and progress is the end result of a process of inquiry and openness to ideas. This book is presented as a contribution to that end. T h e first edition of Latin America's Economic Development was edited with James H. Street of Rutgers University, an important contributor to institutionalist writings on Latin America and to the dissemination of structuralist thinking in the United States. P r o f e s s o r Street died in 1988, and his guidance in the editing of this edition was sorely missed. J. L. D.

Latin America's Economic Development

• part I an overview and introduction

The first chapter of this book provides a brief history of Latin America's economic development from the conquest to the present. The region's current development problems have their roots in the past, particularly in the international division of labor inherited from the colonial period, when Latin America first became an exporter of primary products and an importer of manufactured goods. However, to suggest that history is important to understanding the present is not to imply that the past has determined in some mechanistic fashion the present level and type of economic and social development in the region. All nations face both external and internal obstacles to their development. External barriers can include international competition from other nations, differentials in economic size and political power among nations, wars, global financial crises, and the like. Internal obstacles to progress—in Latin America, an extremely unequal income distribution, incomplete markets for important factors of production, an undeveloped financial sector, the lack of an adequate science and technology infrastructure, and weak political institutions—also can thwart progress. What characterizes successful paths of development seems to be the ability of nations, via active and appropriate state policy, to make strategic decisions that can overcome or compensate for these barriers, internal or external. At times in Latin America's past, external forces undoubtedly have created conditions that, ceteris paribus, have had an adverse impact on the region's future development prospects. In the 1970s, the rising price of oil, and then in the 1980s, the managed global recession radiating from the United States and the United Kingdom are two examples of external

1

2

overview & introduction

barriers, outside the control of Latin America, that negatively impinged on the region. How such external events are managed, though, is determined by factors internal to the country, and this is why, to a great degree, it is legitimate to suggest that progress toward development is conditioned primarily by the flexibility of internal factors to the requisite changes that a fluctuating world economy demands. Though Latin America is a less-developed region, it is relatively better off than Africa or parts of Asia. However, the slowdown in progress in the region since the 1970s, the debt crisis of the 1980s that has spilled over into the 1990s, and the relatively rapid ascent of nations such as South Korea and Taiwan from less-developed status to the threshold of development raise questions about what is holding Latin America back. The readings in this volume make a case that it is often inappropriate policy response by central governments to internal and external events that is fundamental to answering this question. But to understand why the Latin American state is relatively weak and has made what seem to be bad policy decisions far too frequently, it is necessary to look at the root structure of economic, political, and social power in the region that has sustained such governments. And to understand the constraining obstacles to further progress returns us to those internal barriers to development peculiar to Latin America mentioned above and that are examined in the readings that follow.

•

1

A Brief Economic History James L. Dietz

Latin America, including the Caribbean, is a region diverse in culture, language, and geography. Spanish is the most c o m m o n l y spoken vernacular, but more than a third of Latin A m e r i c a n s — B r a z i l i a n s — s p e a k Portuguese; in the Caribbean region, besides Spanish spoken in Puerto Rico, the D o minican Republic, and Cuba, English, French, Dutch, Papamento, and Creole are official languages. In Peru, Bolivia, G u a t e m a l a , and M e x i c o , indigenous populations continue to be sizable, and Indian languages are the daily means of c o m m u n i c a t i o n f o r this often neglected and s o m e t i m e s still abused segment of the population. Of the thirty-nine economies that the region c o m p r i s e s , population size ranges f r o m the smallest island nations like Antigua and Barbuda, Aruba, St. Kitts and Nevis, and Dominica in the Caribbean, each with populations of 80,000 or less, to the continental giants of Mexico, with more than 86 million persons, and Brazil, with a population approaching 160 million in the mid-1990s. South A m e r i c a alone is about the size of the continental United States and Canada and contains s o m e of the w o r l d ' s most diverse and essential resources: bauxite, gold, nickel, tin, copper, petroleum and, of course, a b u n d a n t and richly fertile land. Yet, despite its great potential wealth, Latin America remains part of the less-developed world. For the region as a whole, average per capita income in 1992 was $ 2 , 6 9 0 . ' By the World B a n k ' s classification, four e c o n o m i e s ( G u y a n a , Haiti, H o n d u r a s , and N i c a r a g u a ) are " l o w - i n c o m e " ( 1 9 9 2 i n c o m e per capita of $ 6 7 5 or less), s e v e n t e e n are " l o w e r m i d d l e - i n c o m e " ( $ 6 7 6 $2,695), seventeen are " u p p e r m i d d l e - i n c o m e " ( $ 2 , 6 9 6 - $ 8 , 3 5 5 ) and one, the U.S. Virgin Islands, is classified as " h i g h - i n c o m e . " In 1992, according to World Bank f i g u r e s , per capita G N P ranged f r o m a low of $ 3 4 0 in Nicaragua (and probably lower in Haiti) to $ 9 8 0 in Guatemala, $ 1 , 9 6 0 in Costa Rica, $ 2 , 7 3 0 in Chile, $ 2 , 7 7 0 in Brazil, $ 3 , 4 7 0 in M e x i c o , and $6,590 in Puerto Rico (World Bank 1994: 2 5 1 - 2 5 2 , 1 6 2 - 1 6 3 ) . 2 Taking Latin America and the Caribbean as a whole, per capita inc o m e declined f r o m 1980 into the early 1990s (World B a n k 1994: 163).

T h i s is a r e v i s e d v e r s i o n of the first chapter, written with the late J a m e s H. Street, for the first e d i t i o n o f this v o l u m e .

3

4

overview & introduction

This fall in income was the result of a complex of factors related to excessive external debt accumulation in the 1970s to finance severe balance-ofpayment problems; high and destabilizing inflation rates; bloated and inefficient public sectors that resulted in unsustainable central g o v e r n m e n t fiscal deficits; adverse m o v e m e n t s of the prices of some key c o m m o d i t y exports; a stalled and stagnant d e v e l o p m e n t model; structural a d j u s t m e n t strategies for coping with these distortions; and, in some countries, near or actual civil war. The impact of these various factors, and their interaction, comprise the major content of this v o l u m e . Despite being relatively well-off as a region c o m p a r e d to A f r i c a or Asia, Latin A m e r i c a and the C a r i b b e a n c o n t i n u e s to s u f f e r f r o m high rates of poverty, and income distribution in many countries is a m o n g the worst in the world. For example, while the top 20 percent of income earners in Brazil received 67.5 percent of the e c o n o m y ' s total income, the poorest 60 percent shared but 15.9 percent of total income in 1989, a worsening of the relative distribution since 1972 as a c o n s e q u e n c e of the impact of the debt crisis. I n c o m e distribution was little better in most other countries; in Mexico, the top 20 percent received 55.9 percent of total inc o m e in 1984, while the poorest 60 percent shared 24.2 p e r c e n t — a n imp r o v e m e n t c o m p a r e d to 1977, but with lower average incomes. In Chile, which has been represented by many neoliberal economists as a true success story of the 1980s and early 1990s, the richest 20 percent of individual income earners captured 62.9 percent of all income in 1989 (compared to 51.4 percent in 1968), while the poorest 60 percent of individuals received 20.3 percent of all income generated (compared to 27.2 percent in 1968; World Bank 1986: Table 24, 2 2 6 - 2 2 7 ; World Bank 1994: Table 30, 2 2 0 - 2 2 1 ) . Poverty, far f r o m being eliminated in the region, has actually increased as a consequence of the efforts to resolve the problems related to e x c e s s i v e debt a c c u m u l a t i o n and an increasingly ineffective e c o n o m i c growth strategy (see Chapters 4 and 5).

• Understanding Latin America's Development Problems Why is Latin America poor relative to the United States, Western Europe, and Japan? This is the obvious question that must be c o n f r o n t e d and answered. To do so adequately, it is necessary to consider the region's historical development. After the Spanish conquest of the Americas in the sixteenth century, Spain treated its colonies as little more than lucrative treasure chests to be raided and plundered (Stein and Stein 1970 are excellent in describing this period). At first gold, and later, in much more significant quantities, silver were mined and appropriated, using indigenous slave labor. These

Brief E c o n o m i c History

5

precious metals were then shipped to Spain to finance the s u m p t u o u s lifestyle of royalty and the small merchant class. Spaniards, Portuguese, and other foreigners w h o emigrated to the " N e w World" did not go to work in the mines or the fields. T h e y came to enrich themselves as quickly as possible so as to return h o m e as "gentlem e n . " T h o s e not involved directly in the mining operations often f o u n d e d haciendas b a s e d on royal land grants, grants which o f t e n included the labor of resident Indians to work the property. These semifeudal haciendas prospered by p r o d u c i n g f o o d and other products f o r the w o r k e r s in the mines, and soon small stores, c a n t i n a s (saloons), stables, brothels, and other related establishments appeared in small settlements that flourished around the mining regions, which acted as growth poles for such c o m p l e mentary production (see Furtado 1976). T h e privileged class of pureblood Spanish i m m i g r a n t s imported m a n u f a c t u r e d and other luxury g o o d s directly f r o m Spain and the rest of E u r o p e f o r their personal c o n s u m p t i o n , while s a v i n g f o r their eventual return to the C o n t i n e n t to retire on the wealth earned on the backs of exploited Indian and other forced labor. Ironically, the large f l o w of precious metals extracted f r o m the New World after the conquest of the Americas did not contribute to the sustained development of Spain. In fact, easy access to such liquid wealth by elite groups severely retarded Spanish e c o n o m i c progress by m a k i n g expanded production unnecessary for the attainment of high levels of consumption. It w a s enough to profit by position or by c o m m e r c e . T h e bulk (perhaps two-thirds) of the gold and silver from the Americas simply passed through Spain on its way to other parts of Europe, particularly England, which p r o d u c e d most of the m a n u f a c t u r e d goods c o n s u m e d in Spain or transshipped to the colonies. Consumption goods thus flowed f r o m Europe to Spain; precious metals f l o w e d in the other direction. Spain f u n c t i o n e d as little more than an intermediary for all this trafficking, as its d o m e s t i c manufacturing industry crumbled f r o m the competition f r o m Europe, abetted by the severe inflation in Spain that the influx of gold and silver fueled. S p a i n ' s easy wealth, plundered f r o m its colonies, delayed the arrival in Spain of the industrial revolution that was sweeping the rest of Europe, a revolution ironically propelled by the colonial wealth that but passed through Spanish hands. Spain r e m a i n e d a p r e d o m i n a t e l y f e u d a l economy held back by its adherence to mercantilist e c o n o m i c policies; at the same time the rest of Europe was in the throes of the transition to capitalism, with its vastly expanded production possibilities. This delay in entering the modern economic, incipiently capitalist world was reproduced in the colonies under Spanish rule, which also failed to be t r a n s f o r m e d significantly in either institutions or modes of production. Spanish e c o n o m i c b a c k w a r d n e s s produced anachronistic colonial policy. P u r e - b l o o d e d Spanish immigrants (peninsulares) were accorded privileges in c o m m e r c e and colonial administration not open to criollos

6

overview & introduction

(children born in Latin America to pure-blooded Spanish parents), a f o r m of f a v o r i t i s m that created m o u n t i n g tensions as the criollo class g r e w in size and s e l f - c o n s c i o u s n e s s . T h i s division b e c a m e increasingly apparent after the silver mines had been depleted (roughly, after 1650). For now it w a s agricultural exports f r o m plantation e n c l a v e s in Brazil and the Caribbean and haciendas elsewhere that constituted the f u n d a m e n t a l productive base for rapid wealth accumulation in the Americas. Criollos found their emerging economic and political ambitions—limited by colonial edict to small land ownership, petty trade, and the lower administrative posts in each c o l o n y — b l o c k e d by a corrupt and self-serving foreign colonial administration bent on trying to preserve its unique position at all costs. T h e frustration of the economic and nationalist aspirations of the maturing, domestic criollo elite class erupted in 1 8 0 9 - 1 8 1 0 in Argentina and Mexico into the Wars of Independence that then spread throughout the empire. Spain, locked in the Napoleonic wars on the Continent at the time, was unable either to d e f e n d militarily its back door in the colonies or to muster the political foresight at h o m e to grant the criollos the greater autonomy they sought within the colonial structure—a m o v e that might have won criollo allegiance. Spain paid the price; by the mid-1820s, all of the f o r m e r colonies in Latin A m e r i c a , e x c e p t i n g C u b a and Puerto Rico, had won their political f r e e d o m . Breaking the colonial bonds, however, did not lead to a full rupture with the past that might have permitted the Creole elite to create solid e c o n o m i c f o u n d a t i o n s for f u t u r e growth and development. Factions within the Creole elite fought a m o n g themselves for political control for another half century, and they split into independent nations that mirrored the fragmented colonial vice royalties that had kept the colonies divided from each other for so long under Spanish rule. Moreover, the Creole elite seemed not to be interested in, or were not capable of t r a n s f o r m i n g their newly independent countries along the lines that had been followed in Europe and the United States—that is, f o l l o w i n g a path of capitalist and industrial revolution. Rather, the goals of the new elites w e r e relatively limited: T h e y wished only to gain the class privileges Spanish (and Portuguese) colonial policy had denied them and reserved exclusively for peninsulares. Such a backward-looking elite could only perpetuate the unprogressive productive and political structures it inherited f r o m Spain. This elite appeared quite content to continue the pattern of e x p o r t i n g p r i m a r y c o m m o d i t i e s , both mineral and agricultural, begun under Spanish rule, as the principal motor of e c o n o m i c expansion. As chance w o u l d have it, world demand, and hence the prices, for Latin A m e r i c a ' s minerals and agricultural products were high in the seco n d half of the nineteenth century, b e c a u s e of rapidly rising world inc o m e s , so this export-oriented strategy a p p e a r e d to be validated. Trade with the a d v a n c e d center countries permitted the elites to import the

Brief E c o n o m i c History

7

manufactured luxury goods to which they aspired as displays of their class position. With easy access to vast reaches of land (often taken by expropriation from holdings of the Catholic church and native Indians), the creole elite could prosper by continuing to produce in the traditional, lowproductivity ways, bringing more land under cultivation (extensive production methods) rather than being forced to utilize the latest technological advances in an effort to increase the yield on each unit of land (intensive production methods). Delays in developing Latin America's essential infrastructure—particularly banks and other financial institutions, communication systems, and roads—further reinforced this lag in modernization, by making new methods and techniques of production more expensive for any landowners who might have wished to become more technologically adaptive. It was in this period, after the 1870s or so, then, that Latin America's pattern of relatively limited export product diversity, focused on primary commodities, was consolidated, in some countries manifesting itself as classic monocultural production, with all the attendant dangers of such a limited array of exports. Of course, the prevailing e c o n o m i c ideology at the t i m e — f r e e trade liberalism, espoused particularly by British economists and policymakers—exerted a p o w e r f u l influence on a creole elite anxious to consume not only foreign goods, but foreign ideas as well. The vaunted benefits of shaping production according to a nation's comparative advantage in a milieu of free trade among nations (see Chapter 7) kept the newly independent governments f r o m taking steps to foment their own m a n u f a c turing industries through selective trade limitations and tariff protection to replace similar imports from Europe or the United States. Not surprisingly, the free trade doctrine coincided perfectly with the needs of English importers of tropical primary products and of exporters of manufactures, w h o supplied some two-thirds of the world market in the last half of the nineteenth century. Thus from the beginning of independence, the newly established Latin American republics suffered from internecine warfare that cost their economies at least fifty years of progress. Further, the weak central governments that finally emerged were captives of a foreign ideology that served best the g r o w i n g power of English manufacturers and merchants and but poorly the future productive structures of their own economies. Instead, the limited range and pattern of crops and minerals for export originating in the colonial period was reinforced by the narrow goals of the Creole elites and the prevailing economic orthodoxy. The international division of labor that resulted, in which manufactured goods for export were produced in the center countries and primary products in the periphery, was to become one of the principal components of the original structuralist criticism of the organization of the world economy (see Chapters 7 and 8). It is important to recognize, however, that the trajectory of Latin America's

8

overview & introduction

productive structure was ultimately the c o n s e q u e n c e of internal class conflict, weak states, and poor policy choices, though these were no doubt intensified and reinforced by external factors, especially the rapidly expanding role of British and U.S. world trade. By the end of the nineteenth century, then, most Latin American and C a r i b b e a n countries had firmly established o u t w a r d - o r i e n t e d economic structures. T h e pace of domestic income growth and of wealth acc u m u l a t i o n d e p e n d e d on external factors, such as f a v o r a b l e d e m a n d and prices for Latin A m e r i c a ' s primary exports. While the world e c o n o m y was growing, as it did f r o m about 1880 to 1910, the Latin American economies likewise tended to grow; but when exports lagged, or their prices declined, as happened beginning even b e f o r e the onset of World War I in 1914, dom e s t i c e c o n o m i c growth, income, and a c c u m u l a t i o n w e r e a f f e c t e d adversely, and the peripheral economies experienced declines. T h e center countries, like the United States and E n g l a n d , meanwhile, had e c o n o m i e s and p r o d u c t i v e structures that w e r e significantly more i n w a r d - o r i e n t e d . T h e d y n a m i c industrialization, e c o n o m i c growth, and income creation of the center countries depended upon the application of new technologies to locally owned enterprises and upon the consequent and multiplied growth in domestic c o n s u m p t i o n that f o l l o w e d any initial i n c o m e e x p a n s i o n . This did not mean that the center e c o n o m i e s were wholly s e l f - s u f f i c i e n t or that external f a c t o r s had no impact, but it did mean that these economies exercised substantially more control over their own patterns of development than did the technologically dependent, outward-oriented economies of Latin America and the Caribbean. By contrast, the peripheral e c o n o m i e s were a f f e c t e d p r o f o u n d l y by, but did not substantially influence, the center countries that were their m a j o r trade partners and their e c o n o m i c engines of growth (Glade 1989: 7, 2 2 - 2 3 , 3 9 - 4 0 ) .

• The Crisis of Outward-Oriented Dependence Latin A m e r i c a ' s o u t w a r d - o r i e n t e d e c o n o m i c model provided the agricultural and commercial elites in Latin A m e r i c a with substantial success prior to World War I. Economic growth was rapid, and in some countries, such as Argentina, the elite standard of living rivaled that of many Western European countries and the United States. However, this success proved to be transitory, based as it was on primary product export growth which began to reach its limits even b e f o r e the period of world crises that began in 1914. E n g e l ' s Law is a statistical relationship demonstrating that the d e m a n d for primary, particularly agricultural, products tends to have a low r e s p o n s e to increases in i n c o m e (technically, this m e a n s that the inc o m e elasticity f o r these products is less than 1). As a c o n s e q u e n c e , the g r o w t h of Latin A m e r i c a ' s export d e m a n d b e g a n to slow e v e n as world

Brief E c o n o m i c History

9

i n c o m e s c o n t i n u e d to grow, thereby p r o v o k i n g d o m e s t i c i m b a l a n c e s . 3 Then, successive shocks, beginning with World War I, f o l l o w e d soon after by the Great Depression of 1 9 2 9 - 1 9 3 3 , and then by World War II, wreaked h a v o c on the Latin A m e r i c a n e c o n o m i e s and ushered in an era of severe and prolonged e c o n o m i c crisis. T h e international e c o n o m i c collapse of the Great Depression was especially significant, and its effect was magnified in Latin A m e r i c a by the region's extreme d e p e n d e n c e for its internal e c o n o m i c d y n a m i c on export markets. Unable to sell sufficient exports and hence to earn the income required to purchase the f o r m e r level of imports, the Latin A m e r i c a n countries suffered f r o m a succession of b a l a n c e - o f - p a y m e n t s crises. As a consequence, a rethinking of the conventional e c o n o m i c belief in the benefits of f r e e trade w a s thrust upon the Latin A m e r i c a n nations, and c i r c u m stances f o r c e d the adoption of a new g r o w t h strategy in the region (see Chapters 9, 10, and 13). For the larger countries with s o m e preexisting industry prior to 1914, the new model of development w a s based on the expansion and f u r ther promotion of a particular type of industrialization, called import substitution industrialization or, more simply, ISI ( C a r d o s o and P é r e z 1979 are especially g o o d on this transition). During the 1930s, the emphasis was on easy, or horizontal, ISI—that is, on the domestic production of simple, nondurable, m a n u f a c t u r e d consumer g o o d s — f u r n i t u r e , textiles, glassware, b e v e r a g e s and so o n — t o replace those b e i n g imported. In e s s e n c e , the Great Depression acted in the same way that infant industry tariff protection does, by providing the shield f r o m more efficient external competition s o m e t i m e s required to initiate industrial production in diverse sectors. In Latin America, then, industrialization via import substitution was accelerated f o l l o w i n g the isolation from the world markets resulting f r o m world war and international e c o n o m i c depression, an isolation that permitted industry to grow without the fear of international competition destroying the nascent industrialization process. This structural shift toward industry had a far-reaching impact on Latin A m e r i c a ' s productive, institutional, and power structures. ISI diversified the domestic productive structure, created a trend in the direction of more i n w a r d - o r i e n t e d growth, and generally strengthened the position of the incipient industrial capitalist class relative to the landed oligarchy, as the agricultural sector was neglected as a result of the industrial thrust. Nevertheless, the transfer of power was not complete in any of the countries. Further, in all cases of ISI, state initiative was f u n d a m e n t a l in setting in motion and redirecting the new process of domestic production and acc u m u l a t i o n , particularly through the erecting of tariff barriers to i m p e d e the free flow of imports. The expanded participation of the Latin American states in their e c o n o m i e s thus can be dated f r o m the 1930s. T h e r e is little doubt that the shift t o w a r d ISI and the enlarged role of the state in the

overview & introduction

10

e c o n o m y m a d e the larger Latin A m e r i c a n countries structurally less dependent on the world market than they had been prior to 1914, at least for a time, and the ISI strategy helped to strengthen the small but growing, industrial capitalist class. T h e t r a n s f o r m a t i o n s in Latin A m e r i c a ' s d e v e l o p m e n t pattern to the end of World War II are s u m m a r i z e d in Figure 1.1 ( C h a p t e r 11 provides a schema for understanding the transformations since then).

•

The Crisis of ISI

Easy or horizontal ISI nevertheless suffered f r o m internal contradictions and inherent limitations. In particular, the size of the market for c o n s u m e r g o o d s produced in each c o u n t r y w a s limited by relatively low average i n c o m e s , their unequal distribution, the high prices of d o m e s t i c manufactured goods, and the neglect of agriculture (see Chapter 9). In the second stage of Latin A m e r i c a ' s industrialization (by the 1960s), the larger c o u n t r i e s — M e x i c o , Brazil, Chile, a n d A r g e n t i n a — t u r n e d to vertical ISI, as they began to produce m o r e of their o w n intermediate and capital goods, the imports of which had grown to some 80 percent or more of all imports under the previous horizontal ISI strategy. In fact, the g r o w i n g need for intermediate and capital goods imports had reinforced, rather than relieved, Latin A m e r i c a ' s d e p e n d e n c e on primary c o m m o d i t y exports to earn foreign e x c h a n g e . Only now, rather than luxury c o n s u m e r good imports, the success of the horizontal ISI strategy required the purchase of an expanding quantity of imported inputs—especially capital goods and technology—essential to the new industries. Vertical ISI, although more c o m plex b e c a u s e of the relatively s o p h i s t i c a t e d technology and capital required, was Latin A m e r i c a ' s next stage of industrial transformation, one it was believed could help to ease the secondary import d e p e n d e n c e and the series of b a l a n c e - o f - p a y m e n t s crises that periodically afflicted the economies of the region (and continue to do so to this day). 4 Vertical ISI brought with it other problems, however. Intermediate and capital goods production w a s characterized by the use of more capital intensive techniques of production that exacerbated an emerging e m p l o y ment problem that kept formal sector e m p l o y m e n t growth below the rate of growth of the labor force (see Chapter 18). Further, the capital and technology required for such sophisticated production very often could be attained only through increased transnational corporate investment. Direct foreign investment (DFI, the control of productive facilities), especially f r o m the United States, had been g r o w i n g in Latin A m e r i c a since the 1870s (see Cardoso and Pérez: 115; and Hunter and Foley 1974: 2 1 5 - 2 1 7 , for details), but it accelerated with particular rapidity in the 1960s. In

Brief Economic History

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on w i d e n i n g i n c o m e g a p s b e t w e e n d e v e l o p e d a n d d e v e l o p i n g c o u n t r i e s is also well k n o w n (see, f o r e x a m p l e , B a i r o c h 1 9 8 1 ) a n d m u s t h a v e p l a y e d a role in the l o n g - t e r m price d e t e r i o r a t i o n of t h o s e c o m m o d i t i e s that are prim a r i l y p r o d u c e d in d e v e l o p i n g c o u n t r i e s . A s is o b v i o u s , this i n c o m e g a p c a n n o t e x p l a i n p r i c e t r e n d s f o r t e m p e r a t e a g r i c u l t u r a l g o o d s . In the latter case, the high rate of t e c h n i c a l c h a n g e in relation to that of industrial production in d e v e l o p e d c o u n t r i e s is part of the e x p l a n a t i o n ( E v a n s 1987). T h i s e v i d e n c e aside, it is unclear what e f f e c t technical c h a n g e has had o n r a w material prices. S c a n d i z z o and D i a k o s a w a s ( 1 9 8 7 ) f o u n d very little e v i d e n c e of an i n v e r s e relation b e t w e e n real p r i c e s a n d p r o d u c t i v i t y by h e c t a r e f o r t r o p i c a l b e v e r a g e s ( c o f f e e , tea, a n d c o c o a ) a n d sugar, alt h o u g h they did f i n d s u c h c o r r e l a t i o n for s o m e g r a i n s ( m a i z e and w h e a t ) . T h e results of this study i n d i c a t e , on the other h a n d , that real i n c o m e b y unit of land has r e m a i n e d a p p r o x i m a t e l y c o n s t a n t o v e r the l o n g term f o r grains and increased at a rate of 0.5 percent per year for sugar and 1 percent per year for tropical b e v e r a g e s . It s h o u l d be p o i n t e d out, h o w e v e r , that the latter rates are b e l o w s t a n d a r d - o f - l i v i n g i m p r o v e m e n t s in d e v e l o p e d c o u n tries t h r o u g h o u t the t w e n t i e t h century (2 p e r c e n t per year), a n d are barely equal to the a v e r a g e increase of per capita i n c o m e in the periphery ( f o r estimates of long-term s t a n d a r d - o f - l i v i n g i m p r o v e m e n t s , s e e Bairoch 1981). T h e c a u s e s u n d e r l y i n g the m a r k e d d e t e r i o r a t i o n e x p e r i e n c e d by the real c o m m o d i t y p r i c e s in m o r e recent d e c a d e s are clearer, a n d i n v o l v e both long- a n d s h o r t - t e r m f a c t o r s (see, f o r e x a m p l e , W o r l d B a n k a n d I M F 1 9 8 7 ; M a i z e l s 1 9 8 7 ; H e l l e i n e r 1 9 8 8 ) . A c c o r d i n g to e x i s t i n g s t u d i e s , the m o s t i m p o r t a n t u n d e r l y i n g f a c t o r has u n d o u b t e d l y b e e n the s e v e r e r e c e s sion e x p e r i e n c e d b y the e c o n o m i e s of d e v e l o p e d c o u n t r i e s in the e a r l y 1980s a n d the l a g g a r d s u b s e q u e n t r e c o v e r y in Western E u r o p e , w h i c h c o n c e n t r a t e s half of the w o r l d ' s raw m a t e r i a l i m p o r t s . S t r u c t u r a l c h a n g e s in the central e c o n o m i e s ( r e l a t i v e g r o w t h of the s e r v i c e sector, in p a r t i c u l a r ) h a v e a l s o h a d a m a j o r i m p a c t on recent trends, as well as the e f f e c t s of recent t e c h n o l o g i c a l i n n o v a t i o n s in m a n u f a c t u r i n g , w h i c h h a v e s i g n i f i c a n t l y r e d u c e d the r a w material intensity of p r o d u c t i o n p r o c e s s e s . O n the o t h e r h a n d , at the o n s e t of the 1 9 8 0 s , m o s t c o m m o d i t y producing sectors had accumulated substantial excess capacities, associated w i t h i n v e s t m e n t s m a d e in the 1970s under e x p e c t a t i o n s of w o r l d e c o n o m i c g r o w t h a n d i m p r o v e m e n t s in real raw material prices, w h i c h did not m a t e r i a l i z e . T h e a d j u s t m e n t p r o c e s s e s a d o p t e d by virtually all d e v e l o p i n g c o u n t r i e s in the 1980s a n d the p r e s s u r e by the multilateral credit a g e n c i e s on L D C s to e l i m i n a t e d i s t o r t i o n s l e a d i n g to low d o m e s t i c r e l a t i v e p r i c e s for traditional e x p o r t s h a v e e n c o u r a g e d the o v e r s u p p l y of r a w m a t e r i a l s in recent years a n d m a y r e i n f o r c e it in the near f u t u r e . O n the other h a n d , international c o m m o d i t y a g r e e m e n t s h a v e w e a k e n e d , as the p r o p o s a l s to d e sign f u n d s to r e g u l a t e raw m a t e r i a l prices have m a d e n o h e a d w a y . Finally, a g r i c u l t u r a l a n d t r a d e p o l i c i e s of d e v e l o p e d c o u n t r i e s h a v e c o n t i n u e d to

institutionalism & structuralism

134

distort world c o m m o d i t y rates f o r those g o o d s in w h i c h they play a significant role as producers (grains, sugar, meat, and dairy products). Given the importance attributed by . . . North-South literature to the characteristics of c o u n t r i e s rather than the g o o d s they p r o d u c e , it is important to have an accurate idea of trends in the prices of m a n u f a c t u r e s exported by d e v e l o p i n g countries. Unfortunately, existing e v i d e n c e on such trends is scanty. Table 8.3 s u m m a r i z e s available data, which c o v e r only a relatively short period and may thus not reflect long-term trends. T h e United Nations 1 9 6 0 - 1 9 8 0 series refers to the prices of m a n u f a c t u r e s exported by L D C s to d e v e l o p e d countries, d e f l a t e d by average export prices in the opposite direction. As can be appreciated, the price trend during this period w a s u p w a r d and more f a v o r a b l e than that for agricultural goods exported by the periphery.

Table 8.3

Estimates of the Terms of Trade of Developing Countries, by Type of Product

Source of Data

Product or Group of Products

United Nations

Foodstuffs

1960- - 1 9 8 0

0.31

Agricultural raw materials other than foodstuffs

1960- - 1 9 8 0

-1.05"

Fuels

1960- - 1 9 8 0

7.47a

Manufactures

1960- - 1 9 8 0

0.77a

Raw materials of d e v e l o p i n g countries

1957- - 1 9 8 7 1968- - 1 9 8 7

-0.783 -1.52"

Manufactures

1968-- 1 9 8 7

-0.88a

International Monetary Fund

Period

Trend (% per year)

Sources: United Nations (1975, 1981) and IMF (1988). Notes: United Nations series refer to the price of exports from developing countries to developed countries, deflated by the price of exports from developed countries. IMF series refer to raw materials exported by developing countries and to the unit value of exports from developing countries where the sale of manufactures in 1980 amounted to over 50% of the total exports, deflated in both cases by the unit value of exports from developed countries, a. Significantly different [from] zero with 99% confidence.

T h e most recent data shown in Table 8.3 and Figure 8.3 indicate that from the late 1960s through the 1980s, there has been a deterioration in the real price of m a n u f a c t u r e s exported by d e v e l o p i n g countries. Such trend has, nonetheless, been more favorable than that for raw materials exported

Trade & C e n t e r - P e r i p h e r y Relations

135

by L D C s . As Figure 8.3 shows, the collapse experienced by commodity prices since the mid-1980s has been shared by manufactures exported by the periphery. Thus, the hypothesis according to which international price trends follow c o m m o n patterns associated with the characteristics of the exporting countries cannot be rejected. Nonetheless, given the short period covered by the series on L D C s ' manufactures prices, it is impossible to know to what extent their evolution in 1 9 6 8 - 1 9 8 7 is merely a reflection of a short-term trend and impossible to evaluate their performance in relation to productivity. Finally, Table 8.4 and Figure 8.4 explore the evolution of the terms of trade of Latin American countries in the postwar period. Although the price trend for raw materials has been reflected in the evolution of the relative export prices of these countries, its impact has been less pronounced than often asserted. This fact seems to confirm the statistical results obtained by other authors (Grilli and Yang 1988; Dornbusch 1985), according to which the deterioration of the prices of raw materials is only partly reflected in the terms of trade of LDCs. This fact is associated with the favorable performance of the prices for some primary goods that play an important role in the exports of some countries (particularly oil, coffee, and tin), the growing importance of manufacturing exports, whose prices tend to evolve more favorably, and the importance of raw materials in the import structure of some countries in the region. As Table 8.4 shows, the deterioration in the terms of trade in the postwar period is only statistically significant for half of the countries

Figure 8.3

Real Prices of Raw Materials a n d Manufactures Exported by Developing Countries (1980 = 100)

Source: IMF (1988). Note: The characteristics of this series are shown in Table 8.3.

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Price Trends, 1961-1990

255

second half of the year, although it began rising constantly and rapidly for four consecutive years to reach an annual rate of 400,000 percent towards the end of July 1989. Then, it fell during several months, but again shot up to hyperinflationary levels by March 1990. A third fact to be observed from Table 15.1 is that, in spite of a clear tendency for inflation to rise, the tempo of price increases fell on occasion [disinflation], at times considerably. There are few examples of successful stabilization policies, but the table shows pronounced declines in inflation rates in Chile from 1974 to 1982, in Bolivia from 1985 to 1987, and in Mexico from 1987 to 1989, less spectacular declines in Argentina and Brazil from 1985 to 1986, and in Ecuador and Nicaragua between 1988 and 1989. In periods prior to those reported in the table or hidden in the 10-year averages, there were considerable reductions in inflation in Paraguay in 1953-1954; Bolivia, 1956-1958; Argentina, 1959-1960 and 1967-1969; Chile, 1960-1961; Brazil, 1964-1969; and Uruguay, 1 9 6 8 1970. Reducing inflation is a very difficult task, but it has been achieved on many occasions. For that reason, we should analyze how it was achieved in each case. A further finding, as important as those cited above, as becomes clear in the analysis of Table 15.2, is that in each of the last four decades inflation in Latin America has been considerably higher than that of other developing countries, and very much higher than in industrial countries. Equally serious is the fact that this greater inflationary intensity has become gradually more pronounced: in the 1950s, inflation rates were a little more than double those of other developing countries and nearly four times higher than in industrial nations. By the 1980s, however, Latin America's inflation rate was seven times higher than in the Middle East, 20 times higher than in Asia, and nearly 30 times higher than in the industrial countries.

•

The Persistence of Inflation

In order to analyze the problem of inflation in recent years, it must be asked why inflation has continued and accelerated. And, more importantly, in order to elaborate and implement an effective anti-inflationary policy, it is necessary to understand the mechanisms that sustains inflation. Economic theory clearly identifies the pressures which give rise to inflation, but not the factors or mechanisms that maintain it. The economic literature contains extensive and intensive analyses of the origins and nature of increases in aggregate demand beyond available supply, of cost increases, and of the partial supply deficiencies that distort the economy, all of which cause prices to rise; but the reasons for the persistence of inflation have not been studied in depth. Unfortunately, economists of

inflation & macroeconomic balance

256

Table 15.2 Inflation by Region, 1951-1989 (annual percentage increases) Region Industrial countries Asia Middle East Latin A m e r i c a World

1951-60

2.1 3.3 3.6 7.9 2.4

1961-70

1971-80

1981-89

21.2

8.7 9.1 19.6 39.4

4.4

11.0

4.9 7.4 19.0 149.0 12.7

3.3 5.8 3.8

Source: International Monetary Fund, Yearbook of International

Financial

Statistics

industrial countries have resigned themselves to a constant annual inflation rate of f r o m 3 percent to 4 percent. T h e y consider this to be a consequence of the p o w e r of labor organizations, of imperfect competition in the goods and services market, and of expectations. Latin A m e r i c a n s have accepted m u c h higher inflation with the s a m e passivity, as long as it did not surpass 4 0 percent or 50 percent annually. Inflation was considered to be the nearly inevitable result of the instability of foreign trade. This resignation has meant a tacit renunciation of in-depth investigation into the causes of the persistence of inflation. Current i m p e r f e c t i o n s in the m a r k e t s f o r labor, goods, and services are a necessary condition for the persistence of inflation, because the p o w e r of labor organizations, together with u n e m p l o y m e n t insurance, allow workers to obtain pay hikes even in times of u n e m p l o y m e n t . Nevertheless, these factors are not inflation's cause. This lies rather in the deterioration of real wages arising f r o m the use of annual or multi-year labor contracts, which freeze wages while general price levels rise. Monopolistic price-fixing among producers is also a necessary condition for the persistence of inflation, because it allows companies to reduce production, while c o n t i n u i n g to raise prices w h e n g o v e r n m e n t s apply restrictive fiscal and monetary policies; but this is not a cause of price increases either. T h e s e result f r o m the wage hikes that occur in the renewal of work contracts. Expectations tend to intensify short-term price increases, more so than long-term increases. In the short term, expectations exacerbate inflation and encourage hoarding, with the consequent decrease in the supply of goods, thus contributing to price increases. As long as they last, inflationary expectations lead to hoarding; nevertheless, hoarding cannot c o n tinue indefinitely due to limits on storage s p a c e and the costs involved. W h e n the process ends, inflationary e x p e c t a t i o n s take on a d e f l a t i o n a r y role.

257

Price Trends, 1961-1990

E x p e c t a t i o n s of inflation raise the costs of longer-term p r o j e c t s and affect labor and rent contract negotiations. Nevertheless, the main obj e c t i v e of w o r k e r s in contract renewals in Latin A m e r i c a has more to do with r e c o v e r i n g their real w a g e losses during past inflationary e p i s o d e s than with p r o t e c t i n g t h e m s e l v e s in a d v a n c e f r o m any inflation they m a y expect to o c c u r in the f u t u r e . A n d the s a m e can be said with respect to landlords and the rent they charge. In practice, contract a d j u s t m e n t s serve both to replace losses occasioned by past inflation and to cover losses expected f r o m f u t u r e inflation; but the first objective is the most important, since these w a g e and rent hikes would have to take place even if there existed absolute security that inflation would stop. Failure to m a k e such adj u s t m e n t s w o u l d undercut wages and rents in real terms.

Periodic Over-adjustment

of Wages and Prices

T h e i m p e r f e c t nature of c o m p e t i t i o n in the m a r k e t s f o r labor, goods, and services creates conditions for the persistence of inflation. Inflationary expectations help maintain it, but the f u n d a m e n t a l cause of inflationary persistence in Latin A m e r i c a is the temporary lag and periodic o v e r - a d j u s t m e n t of t h o s e prices subject to f i x e d - t e r m c o n t r a c t s , such as wages and rent, or of those prices subject to official regulation, such as exchange rates and public service charges. Work and rent contracts are usually signed f o r periods of o n e year, or, at times, for two years or more, which m e a n s that wages and rent are kept stable during those periods and gradually lose value with respect to general price levels if there is any inflation. T h e real incomes of w o r k ers and landlords lose b u y i n g p o w e r during that time. W h e n it is time to renew contracts, w o r k e r s and landlords d e m a n d increases that will restore their real i n c o m e s and, in the case of w o r k e r s , take into account the increased productivity arising f r o m technological progress and, in the case of landlords, changes in d e m a n d in the property market. Wage hikes periodically exceed the increases that occurred in the price index, pushing prices upward again. Wage increases are, t h e r e f o r e , over-adjustments to past inflation and not simply the reestablishment of an equilibrium w a g e . Wage increases surpass the goal of w o r k e r s to simply recover their real w a g e level, or of the e m p l o y e r s ' policy of m a i n t a i n i n g real w a g e s . T h e r e f o r e , it is necessary to investigate the c a u s e s of t h e s e over-adjustments in c i r c u m s t a n c e s in which the increases could be limited to the a m o u n t necessary to bring wages into e q u i l i b r i u m so that they w o u l d not put f u r t h e r u p w a r d pressure on prices. In order to c l a r i f y this problem, it will be convenient to divide the issue into t w o parts: (1) W h y are equilibrium w a g e s not reestablished in the first a d j u s t m e n t s that occur during the early phases of inflation? and (2) Once inflation is under way, why do over-adjustments occur?

258

inflation & macroeconomic balance

In the first r o u n d s of contract r e n e w a l that occur in the early phases of inflation, workers d e m a n d and obtain increases necessary to restore their w a g e s to pre-inflationary levels (abstracting f r o m small additional p e r c e n t a g e increases obtained as c o m p e n s a t i o n f o r productivity gains). However, the prior nominal level of w a g e s no longer can be considered a real equilibrium wage, because it has been reduced by inflation. T h e recovery of the prior real level of w a g e s involves an over-adjustment, partly in anticipation of f u t u r e inflation, that puts u p w a r d p r e s s u r e on prices. In subsequent contract renewals, e f f o r t s to recover real i n c o m e prior to f u r t h e r inflation, and to i n c o r p o r a t e e x p e c t e d productivity increases, will continue to raise wages above current, warranted equilibrium levels. Once inflation is under way, the m e c h a n i s m that maintains the inflationary m o m e n t u m is in place, i.e., the temporal lag and periodic overadjustment of wages and other prices subject to fixed-term contracts or o f ficial regulation. 2

Diversity in Rates of

Productivity

Another cause of the persistence of inflation lies in the fact that industries that increase productivity rapidly do not reduce the prices they charge consumers. Rather, they raise w a g e s to reflect greater w o r k e r efficiency, thus establishing the norm for w a g e levels in similar industries, including those with lower productivity increases. In those sectors of lower technological progress, w a g e increases that e x c e e d productivity f o r c e an increase in final output prices, with the consequent impact on the general cost of living index. T h e persistence of inflation due to w a g e cost inc r e a s e s in activities of lower productivity accounts, however, f o r only 1 percent or 2 percent of inflation annually. This is not important with annual inflation rates of 3 0 percent or 4 0 percent, but it is significant with annual inflation rates of 3 percent or 4 percent.

• Inflationary Acceleration T h e acceleration of price increases in Latin A m e r i c a in the last t w o decades was caused by a n u m b e r of factors, s o m e general in c h a r a c ter and others specific to certain countries. In the 1970s, the sharp rise in oil prices, the much lower, yet substantial, increases in the prices of other p r i m a r y products, and the c o n s i d e r a b l e rise in prices of exports f r o m industrial nations accelerated inflation, w h i c h , however, w a s m o d e r a t e in c o m p a r i s o n with that of the 1980s. In the 1980s, the surge in prices w a s caused mainly by: (a) the efforts of Latin A m e r i c a n governments to soften the domestic effects of the sharp decline in the ability to purchase imports resulting f r o m the reduction in loans after the debt crisis began and (b) the

Price Trends, 1961-1990

259

d e c r e a s e in p r i m a r y product prices of Latin A m e r i c a ' s e x p o r t s . To these factors, others must be added w h i c h a f f e c t e d only certain countries; (c) monetary e x p a n s i o n ; (d) the d e c r e a s e s in the e x c h a n g e rate resulting f r o m liberalization p r o g r a m s or arising f r o m e x p e c t a t i o n s of b a l a n c e - o f payments disequilibria; (e) guerrilla wars; and ( f ) the a u t o m a t i c acceleration of inflation w h e n the process surpasses certain levels. As we will see, factor (c), monetary expansion, has been the cause of inflationary acceleration at one time or another in nearly all the countries of in the region, but especially in Argentina, Bolivia, Brazil, Chile, Mexico, Peru, and U r u g u a y ; factor (d) has accelerated inflation in Chile, Mexico, and Venezuela; factor (e) in El Salvador and Nicaragua; and factor (f) in Argentina, Bolivia, Brazil, Nicaragua, and Peru. Two of the six factors mentioned, (a) and (b), are of foreign origin and are not, t h e r e f o r e , attributable exclusively to d o m e s t i c policies [that were permissive of inflationary pressures], although these could have been more effective. For their part, guerrilla wars constitute a serious n o n e c o n o m i c national problem. T h e other three factors are directly and i m m e d i ately related to d o m e s t i c e c o n o m i c and financial policy and, t h e r e f o r e , must be studied with care in order to avoid them in the future.

Increases in Import Prices Oil prices rose sharply in 1 9 7 3 - 1 9 7 4 and again in 1979 and 1980, with the result that a v e r a g e fuel prices in the 1970s w e r e eight times higher than in the 1960s (Table 15.3). Also in 1 9 7 3 - 1 9 7 4 , the prices of other primary products began an upward trend that continued until 1980, raising their average value to double that of the 1960s. A similar trend occurred in the prices of exports f r o m industrialized nations that s h o w e d up in the prices of i m p o r t e d m a n u f a c t u r e d g o o d s in Latin A m e r i c a . T h e increase in oil and other primary product prices led to considerable income and cost increases in producer countries, raising prices f r o m the d e m a n d side and p u s h i n g them up f r o m the cost side. Given the higher prices of imported m a n u f a c t u r e d goods, it is little w o n d e r that Latin A m e r i c a n inflation rose f r o m an average annual rate of 21 percent in the 1960s to 39 percent in the 1970s, and to around 5 0 percent by the end of that decade.

Compensating

Policies

As can be seen in Table 15.4, during the 1960s, net financial t r a n s f e r s (new loans and direct f o r e i g n investment m i n u s loan amortization, dividend, and interest p a y m e n t s ) left an average annual b a l a n c e of - $ 7 0 0 million [i.e., an o u t f l o w that averaged $ 7 0 0 million a b o v e inflows of financing]. Positive inflows of f i n a n c i n g equal to an annual average of $12.6 billion were achieved during 1 9 7 1 - 1 9 7 5 and of $23.4 billion over the period

inflation & macroeconomic balance

260

Table 15.3

Evolution of Basic Product Prices, 1 9 6 1 - 1 9 8 0 Index 1971-1980 ( 1 9 6 1 - 1 9 7 0 = 100)

P r i c e of oil P r i c e s of b a s i c p r o d u c t s P r i c e s of industrial c o u n t r y exports Industrial c o u n t r i e s , level of i n f l a t i o n 3 Latin A m e r i c a , level of i n f l a t i o n b

Increase from 1961 (percent)

828.5 212.1

728.5 112.1

211.6

111.6

185.7

85.7

263.0

163.0

Source: International Monetary Fund, Yearbook of International Financial Statistics, various years. Notes: a. 3.3 percent annual rate over the period 1961-1970 and 8.7 percent, 1971-1980. b. 21.2 percent annual rate over the period 1961-1970 and 39.1 percent, 1971-1980.

Table 15.4

Net Financial Transfers, 1961-1987 ( a n n u a l a v e r a g e s , in b i l l i o n s o f 1 9 8 6 d o l l a r s )

Direct i n v e s t m e n t Loans Interest a n d dividend payments Net f i n a n c i a l t r a n s f e r s A c q u i s i t i o n of capital

19611970

19711975

19761981

2.6 4.1

3.9 17.3

5.5 41.9

3.3 9.7

-7.4 -0.7

-8.6 12.6

-24.0 23.4

-35.0 -22.0

6.7

21.2

47.4

13.0

19821987

Source: International Monetary Fund, International Financial Statistics; World Bank, World Debt Tables; Economic Commission for Latin America and the Caribbean, Preliminary Overview of the Economy of Latin America and the Caribbean.

Table 15.5

Net Foreign E x c h a n g e Acquisition, 1961-1987 ( a n n u a l a v e r a g e s , in b i l l i o n s o f 1 9 8 6 d o l l a r s )

Exports Net f i n a n c i a l t r a n s f e r s Net f o r e i g n e x c h a n g e acquisition

19611970

19711975

19761981

19821987

28.8 -0.7

52.4 12.6

79.8 23.4

94.8 -22.0

28.1

65.0

103.2

72.8

Source: International Monetary Fund, International

Financial

Statistics.

Price Trends, 1961-1990

261

1 9 7 6 - 1 9 8 1 . D u r i n g the f o l l o w i n g six years, 1 9 8 2 - 1 9 8 7 , net f i n a n c i a l f l o w s b e c a m e negative [i.e., o u t w a r d ] again, with an average annual loss of - $ 2 2 billion, i.e., a decline of $45.4 billion in the annual average of net financial transfers c o m p a r e d to the previous period ( c o m p u t e d , as all the other figures, in constant 1986 dollars). Latin A m e r i c a n exports attained their m a x i m u m value of $ 1 0 8 . 2 billion in 1981, and fluctuated below that level during the f o l l o w i n g years, a v e r a g i n g $ 9 4 . 8 billion d u r i n g the 1 9 8 2 - 1 9 8 7 period. That a v e r a g e still was higher than that of the preceding five years, even if computed in terms of 1986 prices; however, as Table 15.5 shows, total acquisition of foreign e x c h a n g e (export income plus net financial transfers) fell f r o m an annual average of $103.2 billion in 1 9 7 6 - 1 9 8 1 to $72.8 billion during 1 9 8 2 - 1 9 8 7 , i.e., a deterioration of $30.4 billion. This figure is equivalent to 3.6 percent of regional GDP, 22.7 percent of exports, and 17.3 percent of central g o v ernment income. T h e decline in f o r e i g n e x c h a n g e receipts s h o w n in Tables 15.4 and 15.5 presented g o v e r n m e n t s with the d i l e m m a either of a l l o w i n g this shortfall to p r o v o k e a violent contraction of e c o n o m i c activity and e m p l o y m e n t , or of a p p l y i n g c o m p e n s a t o r y [i.e., p e r m i s s i v e ] policies w h i c h would, almost inevitably, accelerate inflation. G o v e r n m e n t s chose the seco n d alternative but, even so, they could not a v o i d G D P c o n t r a c t i o n s of - 1 . 4 percent in 1 9 8 2 and - 2 . 9 percent in 1983, with a very slow rate of growth in the f o l l o w i n g years. As a result of such compensatory policies, average Latin American inflation rates rose f r o m 57 percent in 1981 to 85 percent, 130 percent, 185 percent, and 274 percent in the f o l l o w i n g years (Table 15.1). Inflationary acceleration thus was caused by compensatory central government e c o n o m i c policy aimed at absorbing the sharp drop in the inflow of foreign exchange f r o m both exports, loans, and other sources. This outlines the situation which g a v e rise to the structuralist theory of inflation, first articulated by Juan F. Noyola and later reformulated in more syst e m a t i c f o r m by O s v a l d o S u n k e l , Anibal Pinto, a n d Raul P r e b i s c h . T h i s theory argued that Latin A m e r i c a n inflation w a s not due to lack of f o r e sight or extravagance, but to imperfections in the productive apparatus and instability in foreign trade. These factors forced governments to implement compensatory policies which generated inflationary trends. 3

•

Monetary Expansion

T h e direct and i m m e d i a t e cause of inflation is w a y s monetary e x p a n s i o n . A s explained above, such used to finance compensatory policies, or can originate monetary expansion does not raise prices in situations

obviously and ale x p a n s i o n can be f r o m the idea that of u n e m p l o y m e n t

262

inflation & macroeconomic balance

and unused productive capacity, or it can result f r o m irresponsible financial policies. T h e first cause has been analyzed in the previous section and the third cannot be justified, but the second is little understood and, therefore, merits explanation. T h e belief that, in situations of u n e m p l o y m e n t and u n u s e d productive capacity, monetary expansion does not generate inflation is based on an e r r o n e o u s application of K e y n e s i a n theory which f o r g e t s that this may be true in closed e c o n o m i e s , but is not the case f o r open e c o n o m i e s and in countries with low gold reserves and a lack of f o r e i g n e x c h a n g e . W h e n a country with an open e c o n o m y and u n u s e d p r o d u c t i v e capacity does possess s u f f i c i e n t international reserves, the e x p a n s i o n of d e m a n d can, for a time, increase production without p r o v o k i n g inflation, because a c c u m u l a t e d f o r e i g n e x c h a n g e reserves can be used to f i n a n c e the increased imports resulting f r o m greater domestic productive activity. H o w ever, w h e n these reserves are spent, inflation takes off, the e c o n o m y bec o m e s disjointed, production contracts, and u n e m p l o y m e n t increases. Expansion of d e m a n d as an instrument of development policy has been applied, at one time or another, in many of the Latin A m e r i c a n countries. To illustrate its e f f e c t s , it is s u f f i c i e n t to study the f i g u r e s (Table 15.6) f o r the main m a c r o e c o n o m i c variables of Chile in 1 9 7 0 - 1 9 7 3 and Peru in 1 9 8 5 - 1 9 8 8 , w h e n this policy w a s applied. In Chile, the deliberate expansion of d e m a n d was successful during the first two years, when real output rose and the inflation rate was stable, but d e m a n d expansion began to have negative e f f e c t s during the third year and b e c a m e critical d u r i n g the fourth year, in which inflation took o f f , e c o n o m i c activity contracted sharply, and real salaries plummeted. In Peru, the favorable e f f e c t s of demand expansion lasted three years, but the crisis that began in the fourth year was even more serious than that suffered by Chile. In spite of these arguments and the facts t h e m s e l v e s , e c o n o m i s t s have f r e q u e n t l y m a i n t a i n e d the illusion that, w h e n labor and i n f r a s t r u c ture are in slack supply, monetary expansion will increase production but not prices. On the basis of this illusion, c o u n t r i e s have had r e c o u r s e to monetary expansion, although it is difficult to discern w h e n this has been motivated by the hope of increasing production or w h e n it w a s merely irresponsibility. Be that as it may, inflationary acceleration, in many cases, has been the c o n s e q u e n c e of m o n e t a r y e x p a n s i o n that s h o u l d not have occurred.

Increases in the Exchange Rates D u r i n g 1 9 7 1 - 1 9 7 3 , w h i l e a policy involving the deliberate expansion of demand w a s being applied in Chile, inflation was partially contained through the overvaluation of the e x c h a n g e rate. Table 15.7 s h o w s that b e t w e e n 1969 and the third trimester of 1973, the e x c h a n g e rate

Price Trends, 1961-1990

263

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Labor Market, 1950-1990

319

modernization and is e n j o y i n g its benefits, above all in terms of greater inc o m e through increased productivity. Other g r o u p s , however, have rem a i n e d on the sidelines a n d have not m a n a g e d to o v e r c o m e the poverty barrier. In this process of differentiation, a very important role w a s played by the agrarian reform and colonization policies applied in various countries of the region, which f o r m e d part of the overall set of policies aimed at m o d e r n i z i n g agriculture. T h e s e m o d e r n i z a t i o n policies, w h i c h did not reach all sectors and excluded certain groups f o r various kinds of reasons, s u c c e e d e d in improving the levels of productivity and income of only the g r o u p s at which they w e r e directed, thus increasing the distance b e t w e e n them and other groups which were not incorporated into these programs. A similar p h e n o m e n o n is to be o b s e r v e d in the i n f o r m a l sector. Although initially belonging to the informal sector w a s closely identified with poverty, the process of internal differentiation has taken place in this sector as well. A l r e a d y in the 1970s, P R E A L C w a s i d e n t i f y i n g areas within the informal s e c t o r — f o r e x a m p l e , repair services, f o o d , f o o t w e a r , w o o d products, some sub-sectors of c o m m e r c e — w h i c h had growth potential, and it w a s drawing a distinction between them and others which were marginal, non-viable o c c u p a t i o n s to w h i c h it w a s not p o s s i b l e to apply policies aimed at increasing productivity ( P R E A L C 1975; P R E A L C 1976). A s e c o n d e l e m e n t of continuity as r e g a r d s the situation of labor is the share of w a g e earners in the gross d o m e s t i c product of most of the countries. Between 1960 and 1980, this ratio remained relatively constant at a r o u n d 35 percent. A l t h o u g h the proportion of w a g e - e a r n e r s increased f r o m 5 4 to 60 percent (Table 18.2), wages grew in direct proportion to productivity. 3 No precise information is available on the evolution of informal sector incomes, but estimates based on the hypothesis of a constant share of the urban informal sector in the gross domestic product and on the existence of a link between the growth of d e m a n d in the w a g e - e a r n i n g sector and the income of the urban informal sector suggest that there w a s an increase in the average real wages in the urban informal sector over the period 1 9 6 0 - 1 9 8 0 . T h e reduction in urban poverty is some further proof supporting this hypothesis. Finally, it may be noted that the level of open u n e m p l o y m e n t was low and also remained stable within the overall rate of labor under-utilization until 1980. Estimates by P R E A L C (1981) s h o w that the rate of u n e m p l o y m e n t remained at around 5 percent of the EAP, or about a quarter of the total under-utilization of the labor force.

•

Changes in the Labor Market in the 1980s

T h e b e g i n n i n g of the 1980s w a s m a r k e d in the industrialized countries by a significant slackening in their e c o n o m i c growth rates and a

320

employment & the gender divide

generalized process of structural adjustment. In the Latin American region, the crisis situation w a s even more severe, leading to a serious deterioration in output and e m p l o y m e n t , particularly with the debt crisis. 4 As a result of this adjustment process, the labor market in the region u n d e r w e n t c h a n g e s which decisively a f f e c t e d its f u n c t i o n i n g c o m pared with that of the previous thirty years: structural heterogeneity further increased, and there w a s a change in the trends regarding both the underutilization of labor, and a shift t o w a r d s m o r e p r e c a r i o u s f o r m s of w o r k (Table 18.3).

Changes in the Nature of the Employment

Problem

First, the share of the informal sector in urban e m p l o y m e n t increased f r o m 25 percent (its traditional level in the past) to 31 percent, while the share of the peasant sector in agricultural e m p l o y m e n t rose f r o m 5 8 percent in 1980 to 6 0 percent t o w a r d s the end of the d e c a d e (Table 18.2). This c h a n g e in the composition of e m p l o y m e n t , involving an increase in the share of activities of lower productivity, together with the fact that open unemployment (although it grew during the crisis) remained relatively constant between 1980 and 1989, meant that total under-utilization of the labor f o r c e ( u n d e r e m p l o y m e n t plus u n e m p l o y m e n t ) increased f r o m 40 percent to 42 percent during the decade. This represented a reversal of the historical d o w n w a r d trend registered by under-utilization of labor between 1950 and 1980. Furthermore, during the period of a d j u s t m e n t to the debt crisis there w a s a c h a n g e in the structure of the under-utilization of the labor f o r c e : the i m p o r t a n c e of u n d e r e m p l o y m e n t increased, but that of u n e m ployment remained relatively constant (Table 18.2). What is more, urban u n d e r e m p l o y m e n t and u n e m p l o y m e n t b e c a m e r e s p o n s i b l e for the m a j o r part (70 percent) of the overall e m p l o y m e n t problem of the region. 5 In addition to these trends, there was an intensification of the shift towards more precarious f o r m s of work in such respects as lower labor stability, r e p l a c e m e n t of f u l l - t i m e e m p l o y m e n t by part-time w o r k , and increasing use of subcontracting, which are the main features of the current f u n c t i o n i n g of the labor market (Wurgaft 1988).

Labor Supply Trends In the 1980s, the demographic e f f e c t s of the decline in the growth rate of the w o r k i n g - a g e population which had b e g u n in the 1970s began to m a k e t h e m s e l v e s felt in the labor market. T h e g r o w t h rate of the economically active population slackened significantly, despite the increase recorded in rates of participation; thus, on average the E A P grew by 2.7 percent per year, which is significantly less than the rate of 3.1 percent

321

Labor Market, 1950-1990

Table 18.3

Labor Market Growth Rates and Trends, 1985-1989 (percentages) Annual growth rate 1 9 8 5 - 1 9 8 9 Real w a g e s GDP

Argentina Bolivia Brazil Colombia Costa Rica Chile Jamaica Mexico Paraguay Peru Trinidad and Tobago Uruguay Venezuela

0.1 1.4 3.6 4.9 4.6 6.8 4.1 0.5 4.2 -1.0 -3.4 3.9 3.3

Industry -7.7

Minimum -11.8

—

—

2.4 1.0 -0.7 6.8

-4.9 0.3 -0.4 2.0

—

—

-0.3 —

-14.5 —

-8.3 8.2 -19.1 —

4.7 0.5

-4.4 -5.2

Rate of urban unemployment 1985

Percentage of informal e m p l o y m e n t in urban E A P a

1989

1985

1989

6.1 5.8 5.3 14.0 6.7 17.0 25.0 4.4 5.1 10.1

7.8 7.0 3.3 9.6 3.8 7.2 18.0 2.9 6.1 7.9

27.6 25.0 28.7 28.4 21.3 26.2 23.0 28.1 36.4 35.0

28.7 27.0 28.6 27.3 22.0 30.0 25.0 34.8 35.6 39.0

15.0 13.1 14.3

21.0 8.6 9.7

23.0 19.0 22.5

19.0 19.0 23.3

Sources: PREALC estimates, based on household surveys of the countries, and ECLAC (1991). For Jamaica and Trinidad and Tobago, the data come from Witter and Anderson (1991) and Pantin (1991). Note: a. Informal employment includes own-account workers, family helpers, and domestic service.

registered for the 1970s. Towards the end of the 1980s, the EAP consisted of 157 million persons ( C E L A D E 1990). One of the elements which determined the evolution of the labor supply in the 1980s was undoubtedly the increase in the participation of w o m e n in the labor market, which had begun in previous decades. T h e household surveys of a number of countries reveal a constant increase in rates of f e m a l e participation. Since the male participation rates did not show any appreciable change, there was also an increase in the proportion of w o m e n in the labor force. Thus, the rate of participation by women increased by almost one-fifth during the decade, from 32 percent to 38 percent, and consequently, the contribution by w o m e n to the increase in the economically active population over that period was 42 percent. Another factor which affected the evolution of the EAP during the period was due to the dynamics of younger workers. T h e participation rates of the 1 5 - 1 9 age g r o u p continued to fall, while those of the 2 0 - 2 4 age g r o u p continued to increase because of the higher participation by women, which made up for the decline in male participation rates.

employment & the gender divide

322

Finally, it is also necessary to take into account the relevant factors of the trends and location of the labor supply. The non-agricultural EAP continued to grow at a relatively high annual rate of 3.7 percent, while the agricultural EAP maintained its historical trend towards lower growth rates, with an increase of 0.7 percent per year in the decade (Table 18.2). These trends in the evolution of the labor force meant that at the end of the 1980s, 74 percent of the total EAP corresponded to non-agricultural activities and 26 percent to the agricultural sector. Restructuring

of Urban

Employment

Although in the 1980s the region was under less population pressure than in the previous decade, the sharp contraction in economic growth slowed down the creation of jobs in the modern sector, whose feeble expansion was markedly below the growth rate of the labor supply. Because of this, at the beginning of the crisis, unemployment rose to levels almost twice as high as the historical rate of open unemployment, and such jobs as were generated were almost entirely in the sectors of lower productivity, thus reversing the downward trend registered in the previous three decades in the under-utilization of the labor force. Although this type of adjustment was observed in most of the countries, the restructuring of employment was less marked in those which set about processes of structural change during the decade (Chile, Costa Rica, and Colombia). In these countries, the reduction in the proportion of the urban EAP engaged in modern employment was less than in the others, and there was also a less rapid increase in low-productivity employment (in small urban enterprises, for example). Loss of dynamism of modern urban employment. Within the general scheme of the adjustment policies, an important role was assigned to the labor market in the process of transferring labor from the sector producing goods not tradeable on the international market to the sectors producing tradeable and exportable goods. In this context, the modern labor market was called upon to play a central role by reallocating employment and lowering real wages in order to bring them into line with the new situation of openness to the exterior. The severe recession generated by the external debt crisis caused the level of economic activity of the non-agricultural sectors to drop by 1.4 percent per year during the period 1980-1983 (Table 18.4). The response of modern employment to this drop in the product was not uniform, however. On the one hand, employment in medium-sized and large private sector enterprises reacted very flexibly, decreasing by 2.1 percent per year between 1980 and 1983. This, combined with the deterioration in real wages, enabled this sector to largely offset higher financial costs resulting from increased interest rates that accompanied the debt crisis. In this period of

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VI

Women in the Work Force

339

work as restaurant waiters, hotel employees, etc., and a very small proportion of them w o r k in private h o m e s (and are paid considerably more than women). Another category in which s o m e feminization is also observed is that of p r o f e s s i o n a l s and t e c h n i c i a n s . By 1980, over half of t h e s e w e r e w o m e n (except in E c u a d o r ) , b e c a u s e most of the main activities in this group—education and health c a r e — a r e carried out by w o m e n . Another occupational sector with a high proportion of w o m e n is that of spinners, tailors and dressmakers, in which over half of those e m p l o y e d are w o m e n . In the period f r o m 1960 to 1980, f e m a l e participation by occupational groups did not experience m a j o r changes in terms of the proportion of w o m e n f o u n d in the various categories. In general, this proportion increased s o m e w h a t more a m o n g o f f i c e workers and salespersons, although by 1980 w o m e n w e r e still a minority in these categories. Generally speaking, the labor market continues to be very s e g m e n t e d . O c c u p a t i o n s traditionally defined as f e m a l e have not changed and no other occupations have o p e n e d up with significant n u m b e r s of w o m e n . Together with s e g m e n t a tion, the incorporation of w o m e n into production has been predominantly bipolar: m a n y w o m e n w o r k at the manual level, a l m o s t exclusively as maids, and another m a j o r i t y g r o u p is e n g a g e d in n o n - m a n u a l labor: professionals, o f f i c e workers, and s a l e s w o m e n . Lastly, occupational trends in the 20 years studied s h o w that most w o m e n have been incorporated into non-manual jobs: over half of the increases in e m p l o y m e n t that occurred in these jobs can be attributed to the hiring of w o m e n . Although this suggests a trend towards an improvement in w o m e n ' s occupational status, the history of some countries of the region indicates that increases in w o m e n ' s schooling and in their n u m b e r s within n o n - m a n u a l o c c u p a t i o n s have not raised their i n c o m e s , since their e m ployment continues to be s e g m e n t e d within occupations considered to be female, i.e., into those that are lower in prestige and pay.

•

Women's Domestic Work

U p to now, w e have been e x a m i n i n g o c c u p a t i o n s e n g a g e d in by w o m e n in the labor market. H o u s e w i v e s without paid e m p l o y m e n t in the region constitute b e t w e e n 30 percent and 50 percent of the f e m a l e p o p u lation over 15, d e p e n d i n g on the country. T h u s , a c c o r d i n g to data f r o m household surveys, in 1985, out of the total of w o m e n over age 15, housewives accounted f o r 32 percent in Bogotá, 44 percent in Caracas, 40 percent in Panama, 4 8 percent in San José, Costa Rica, and 55 percent in Sao Paulo. It is difficult to d e f i n e h o u s e w o r k . At a general theoretical level, it is the "series of m a i n t e n a n c e activities required to r e p r o d u c e the work

340

employment & the gender divide

force daily, which includes the transformation of goods into valuables for consumption use" (Beneria 1984: 25). In all societies, housework is distinguished from non-domestic work and is considered to be predominantly women's work. However, at a concrete level, the definition is very heterogeneous in terms of the forms which housework takes on. It varies depending on family cycle stage, social class, cultural, ecological and regional conditions, degree of development and modernization and, in a very definitive way, on the ideological conceptualization adhered to by society on the role of women as "mother-wife-housewife." Until recently, there were no quantitative studies measuring housework done by women in Latin America. 1 This lack of concern results from the fact that unpaid housework done by women is not considered to be 'work' as such, because it is not transacted on the market and, therefore, is not recorded in national accounts. However, early in the 1970s, ideological changes regarding women's role in society and the conception of their work began to emphasize the importance of unpaid housework in the reproduction of the population. This situation was reinforced by the 1980s debt crisis when the importance of housework became more apparent, particularly among the poor. Here, the decrease in basic goods and services had to be supplemented by female housework (De Barbieri and de Oliviera 1985). Thus, the importance of housework helps to explain the relatively low rates of participation by married women, in particular among the lower strata of the population. A pioneer study by the International Labor Organization (ILO 1984) shows that among women in Latin America, time dedicated to housework is often equal to or greater than that dedicated to paid work in the market, so that a high proportion of housewives are over-employed. In a study on Chile, it was calculated that housewives worked an average total of 56.3 hours a week, out of which 37.9 hours were devoted to housework, not counting activities outside the home (e.g., shopping for food). Thus, housewives had the equivalent of an eight hour workday every day without Sunday rest, while for women who were also employed outside the home, the total time worked was 12 hours a day (Pardo 1983). In terms of value-added, these measurements suggest that housework could be equivalent to between one-third and one-half of a family's monetary income. In the case of poor households, housework is more important since it constitutes an essential element in survival strategies. In the same study on Chile, it was estimated that the contribution by women's housework to gross output was 30 percent, and that it was exceeded only by the manufacturing sector. Likewise, studies done by the ILO (1984) on Argentina, Bolivia, Chile, Mexico, Peru, Venezuela, and Uruguay have confirmed some important hypotheses:

341

Women in the Work Force

(a) T h e incorporation of w o m e n into the labor market d o e s not mean a correlative reduction of w o r k in the home, i.e., w o m e n w h o w o r k actually p e r f o r m t w o w o r k s h i f t s a day [one at h o m e , another at paid employment]. (b) T h e increase in family income f r o m w o m e n ' s work outside the h o m e has not meant less h o u s e w o r k for the w o m a n ; what has c h a n g e d is its composition, as a result of which the most unpleasant chores have b e e n delegated to third parties. (c) H o u s e w i v e s w h o rely on technical equipment within the h o m e devote almost as much time to h o u s e w o r k as do those w h o live in h o u s e s without such e q u i p m e n t . T h e important d i f f e r e n c e lies in the intensity of personal effort involved. (d) With regard to t h e e c o n o m i c crisis of the 1980s, a l t h o u g h housework has increased, men have not increased their contribution to it. Thus, although the role of men as main providers has declined, this did not mean correlative increases in h o u s e w o r k for men.

•

The Crisis and Women's Work

F r o m the 1950s o n w a r d , and for three d e c a d e s a f t e r w a r d s , the Latin A m e r i c a n countries e x p e r i e n c e d sustained g r o w t h in their e c o n o mies, with s o m e variations. But f r o m 1980 onwards, there began a drastic decline in this g r o w t h . T h e r e p e r c u s s i o n s of the crisis and of the a d j u s t ment policies i m p l e m e n t e d b e c a m e evident in the labor market in three main w a y s (Tokman 1986a and 1986b): (a) declines in employment growth rates; (b) m o d i f i c a t i o n of the type of e m p l o y m e n t g e n e r a t e d , with increases in the informal sector and tertiarization, and (c) reductions in real wages (see Chapter 18).

Unemployment

by Gender

U n e m p l o y m e n t w a s o n e of the results of the debt crisis. For the w o r k f o r c e as a whole, b e t w e e n 1980 and 1985, the n u m b e r of u n e m ployed persons in the region g r e w by 4 8 percent ( E C L A C 1988). T h e following is an examination of the w a y s in which the crisis affected the labor market in the cities of Bogotá; Caracas; Panama; San José, Costa Rica; and S a o P a u l o . T h e e f f e c t s of the crisis on men and w o m e n are a n a l y z e d f o r the years 1982 and 1985. In 1985, u n e m p l o y m e n t rates in these f i v e Latin American cities reached m a g n i t u d e s of b e t w e e n 5.2 percent (Sao Paulo) and 13.6 percent (Bogota). A comparison based on gender shows that the range for male une m p l o y m e n t rates is m u c h lower than f o r w o m e n : b e t w e e n 5 percent and

342

employment & the gender divide

10 percent for men and between 6 percent and 19 percent for women. Thus, with the exception of Caracas, women's unemployment rates are higher than for men, and the variations are greater between countries. The latter difference may be due to difficulties in measuring female unemployment, which in many cases remains hidden in the category of housework (Table 19.5). In order to explain higher female unemployment, we must bear in mind that the Latin American economies are not dynamic enough to absorb all the new entrants to the labor force. Further, there is an oversupply of female labor for the limited number of occupations available to women, due to the high degree of segmentation of the work force by gender. As well, it often is argued that, as women are not usually heads of households, they can "allow" themselves to be unemployed because they are not the main economic support of the family group. This is the classic argument used by employers for hiring fewer women or for paying them lower wages (Ribeiro and Barbieri 1978). However, this argument is contradicted by the growing number of female heads of household. In recent years, women have come to account for between a fifth—and, in the case of the Caribbean, a third—of total heads of households (ECLAC 1984; Massiah 1983). Between 1982 and 1985, female unemployment increased almost five-fold in Bogotá, and in Caracas it practically doubled. In Sao Paulo it increased somewhat, while it decreased in Panama and San José, Costa Rica. Unemployment rates were highest among youths between the ages of 15 and 19, reaching over 30 percent in Bogotá and Panama (Table 19.5 and Table 19.6). Between 1984 and 1987, unemployment in Mexico was greatest among the population aged 15 to 19, and among the unemployed the percentage of those looking for work for the first time was higher among the female population than among unemployed males (De Oliveira 1987). Though the rate of female unemployment increased in the majority of cities, the number of jobs held by women actually rose, as may be seen by examining employment rate performance (Table 19.6). This trend is observed in three of the five cities: Bogotá, Caracas, and Sao Paulo. A similar trend is also observed in Uruguay, a country where women poured into the labor market (Prates 1987). There has been an increase in female participation vis-à-vis decreases in family income. Thus, women's participation in the Latin American labor market during the crisis of the 1980s has had the opposite effect to that recorded during the crisis of the 1930s in the United States, a country where women withdrew from the labor market to allow greater employment opportunities to the male population. In Latin America, as a consequence of the decrease in family income during the recession, other household members, especially young women have joined the formal and

343

Women in the Work Force

Table 19.5

Unemployment Rates by Age and Gender, 1985 Population 15 years and older

City

Bogotá Men Women Caracas Men Women Panama Men Women San J o s é Men Women S a o Paulo Men Women Source:

Population aged 15 to 19

Population aged 2 0 to 2 4

33.9 32.3 35.6 21.5 23.8 16.7 32.3 30.6 34.7 19.8 18.5 21.8 13.7 13.4 14.2

22.3 17.8 27.2 15.6 16.1 14.8 22.7 19.9 27.7 13.1 11.7 15.3 7.2 7.2 7.2

13.6 10.1 18.6 9.8 10.5 8.6 10.4 9.4 12.2 7.3 6.8 8.2 5.2 5.0 5.6

ECLAC estimates.

Table 19.6

Female Employment and Unemployment Rates, 1982 and 1985 Employment rates

City

Bogotá 1982 1985 Caracas 1982 1985 Panama 1982 1985 San J o s é 1982 1985 Säo Paulo 1982 1985 Source:

Unemployment rates

All women

Women aged 15-24

All women

Women aged 15-24

35.8 39.9

29.5 33.0

4.2 18.6

8.7 30.0

35.3 37.2

26.9 27.5

4.8 8.6

8.3 15.3

33.6 33.8

24.4 21.4

14.2 12.2

29.3 30.3

37.7 32.4

34.1 29.4

9.2 8.2

18.5 17.5

35.4 42.5

49.5 51.1

4.7 5.6

7.5 10.5

ECLAC special tabulations based on home surveys.

344

employment & the gender divide

informal labor markets in search of paid work to compensate for this drop ( I C R W 1986). T h e reason for this d i f f e r e n c e in p e r f o r m a n c e is unclear. On the one hand, it may be said that appraisal of f e m a l e work has changed, so that now w o m e n place greater value on w o r k i n g outside the h o m e . H o w e v e r , it is probable that w o m e n in the middle and upper echelons b e h a v e in similar fashion to North A m e r i c a n w o m e n in the 1930s: within their logic of choice, as wages drop, they withdraw f r o m the labor market. For their part, w o m e n f r o m poorer f a m i l i e s , f o l l o w i n g the logic of d e t e r m i n a t i o n , have had to work outside the h o m e in all parts of the formal and, in particular, the informal labor markets.

Income Distribution by Gender Income distribution in Latin America has always been unequal, although variations d e p e n d on the degree of d e v e l o p m e n t of a country and the prevailing political and social m o d e l . National studies s h o w that inc o m e received by w o m e n is lower than that obtained by men, although this difference varies between countries. In the case of Chile, for example, between 1960 and 1985, average female income did not exceed 68 percent of male income, once the education level variable was controlled. This relation has not changed in the past quarter of a century (Leiva 1987). If average income differences are analyzed by gender and age, it is seen that a m o n g the y o u n g population these differences are less, but that they increase as age increases. This leads to the c o n c l u s i o n that w o m e n progress less than men, which deepens the income disparity between sexes of equal age (AES 1987). In 1985, a m o n g the five metropolises studied, the f e m a l e population received between 5 3 percent and 84 percent of average male income: Sao Paulo, 52.8 percent; Caracas, 60.8 percent; Bogotá, 66.3 percent; San José, Costa Rica, 79.9 percent; and P a n a m a , 83.5 percent. One might ask whether the difference in income between men and w o m e n results f r o m w o m e n ' s lack of skills. However, in the f i v e cities studied, the average income of employed men and w o m e n with equal levels of schooling, showed major differences, and in all cases, the higher the level of schooling, the greater the g a p in income, to the detriment of w o m e n . Thus, the d i f f e r e n c e in income by gender a m o n g illiterate persons is m u c h lower, and in San José, Costa Rica, a v e r a g e f e m a l e i n c o m e is slightly higher. At university levels (over 12 years of schooling), d i f f e r ences in income are markedly greater between the sexes. T h e extreme case is presented by Sao Paulo, where average male income is double the average f e m a l e income (Table 19.7). Average income indicators by male and f e m a l e occupation (Table 19.8), show that male i n c o m e is always higher for the same occupations. O n c e again, as w e pass f r o m manual to non-manual occupations, the gap

345

Women in the Work Force

Table 19.7

Average Income Indicators Among Working Population by Gender and Level of Schooling, 1985 Sâo Paulo 3

Bogota

Caracas

Panama

San José

Level of schooling

M

W

M

W

M

M

W

M

None Primary 0 - 6 years Secondary 7 - 1 2 years University 13 years+ Total

61

42

53

40

—

—

70

76

69

52

76

46

63

42

77

52

50 78 84

23 37 44

93

70

104

65

99

83

104

82

142

77

263 115

152 76

221 116

134 71

251 106

157 88

175 107

140 85

335 117

150 62

W

W

Source: ECLAC tabulations based on the home surveys. Notes: Measured as an index (= 100) of average income of the population as a whole, a. Levels of schooling in Sâo Paulo are: no schooling; 1 to 4 years; 5 to 8 years; 9 to 11 years; and 12 years and over.

Table 19.8

Average Income Indicators of Working Population by Gender and Occupation, 1985 Bogota

Occupation

M

Professionals 313 Technicians 197 Directors/ managers/ public admin. 540 Secretaries 105 Business employees 89 Self-employed 163 Skilled/ semi-skilled workers 75 Unskilled workers 61 Domestic employees 58 Total 116

Caracas

Panama

San José

Sâo Paulo

W

M

W

M

W

M

W

M

193 154

240 138

154 71

317 164

180 118

200 167

175 125

340 168

142 72

373 85

205 77

175 70

195 91

158 101

234 98

124 50

347 95

191 102

43 78

102 118

76 49

110 67

76 51

93 116

69 79

114 149

52 69

49

89

60

88

67

81

73

86

93

51

75

46

69

65

75

63

40

33

54 74

48 116

40

60 106

33

80 107

46

88

85

28 117

20 62

70

Source: ECLAC, based on the home surveys. Note: Average income for total population is taken as a basis for the index (= 100).

W

346

employment & the gender divide

between incomes widens, with the greatest differences being observed between average male and female incomes among professionals, managers, administrators, and directors. The greatest disparity between female and male incomes, both in the population as a whole and among heads of household, is observed in Sao Paulo. This city has recorded one of the most spectacular increases in female participation in recent years. However, this has been possible at the expense of women accepting much lower wages than men. In this case, as in Uruguay, female employment constitutes a "stagnated labor reserve" made up of active workers, but with irregular work whose pay levels are below normal working class levels (Prates 1987). Between 1982 and 1985, the relative average income of women declined in Bogotá and Caracas, remained constant in Panama and grew only in San José, Costa Rica, a country where there was a strong decrease in employment, i.e., the opposite of the Sao Paulo process. In relation to education levels, women who saw decreases in their average income again were those with intermediate levels of schooling, i.e., between 7 and 12 years. During the process, average incomes of women with the highest and lowest levels of schooling tended to draw closer, so that in 1985 the difference in income due to schooling was much lower (Table 19.7). Thus, a drop in average female wages occurred; in other words, the equalization was towards lower income levels. With regard to occupations, women who lost the most income during this period were office workers—which coincides with that recorded at the intermediate levels of schooling—and self-employed saleswomen. Only in Caracas did average professional incomes drop. In the other cities, they remained constant and even increased (Table 19.8). A comparison of the average income of the highest and lowest paid occupations, shows that in Bogotá income concentration by occupation increased, widening the gap between both extremes. In Caracas and San José, Costa Rica, on the other hand, the difference between these wages decreased, and in Panama they remained constant. An initial analysis of what occurred during the crisis shows an increase in income inequality among workers, both men and women. There has been a general decrease in wages among women, but particularly so at intermediate levels, which has given rise to lower concentrations of income, so that differences due to different levels of schooling and to different types of occupation have tended to decrease. In summary, the crisis has had a very severe impact on the labor market and on all workers, but has particularly affected women in a negative way. This situation has consequences for specific social policies affecting women in general, as well as for female heads of households and young women, who have been the hardest hit.

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It has also b e e n s h o w n that d u r i n g the crisis the n u m b e r of w o r k ers or w o r k i n g m e m b e r s per f a m i l y has increased, p a r t i c u l a r l y a m o n g p o o r f a m i l i e s w h e r e , in m a n y cases, y o u n g e r c h i l d r e n are i n c o r p o r a t e d into v a r ious i n f o r m a l and s e l f - e m p l o y e d activities. T h i s c h a n g e in f a m i l y s t r u c t u r e h a s m e a n t a greater w o r k l o a d f o r w o m e n , f r o m t w o p e r s p e c t i v e s : r e s o u r c e s f o r r e p r o d u c t i o n h a v e d e c l i n e d , and the n u m b e r of p e r s o n s to b e s u p p o r t e d has i n c r e a s e d . S o m e s t u d i e s h a v e p o i n t e d out that p r o l o n g e d u n e m p l o y m e n t g i v e s rise to v a r i o u s f a m i l y survival strategies that d i f f e r b e t w e e n m e n and w o m e n . M a l e strategies are b a s e d at first on the s e a r c h f o r w o r k related to their o w n o c c u p a t i o n s or to s o m e p r e v i o u s w o r k , t h r o u g h f r i e n d s a n d e x f e l l o w w o r k e r s . A t the s e c o n d s t a g e , the s e a r c h e x t e n d s t o any k i n d of w o r k , w h i c h m e a n s s e l f - e m p l o y m e n t or, in o t h e r c a s e s , the u n d e r t a k i n g of s p o r a d i c a n d l o w - p a y i n g j o b s w h i c h g e n e r a l l y e n d u p s w e l l i n g the i n f o r m a l s e c t o r of the e c o n o m y . F r e q u e n t l y , f r u s t r a t i o n o v e r p r o l o n g e d p e r i o d s of u n e m p l o y m e n t l e a d s to e x c e s s i v e a l c o h o l c o n s u m p t i o n , w h i c h c a u s e s f a m i l y p r o b l e m s , strife, a n d f a m i l y v i o l e n c e . F o r w o m e n , the s t r a t e g i e s are v a r i e d in n a t u r e . L i k e m e n , they begin the search for income by doing part-time, irregular, unstable, and very l o w - p a y i n g w o r k , w h i c h to a large extent is an e x t e n s i o n of their d o m e s t i c role: s e w i n g , l a u n d r y , d o m e s t i c s e r v i c e o n a w a g e b a s i s or by t h e h o u r , s a l e of f o o d , e t c . A n o t h e r d i f f e r e n t a l t e r n a t i v e is to p a r t i c i p a t e in g r o u p s of w o m e n w h o j o i n f o r c e s to f a c e the s a m e t y p e s of survival p r o b l e m s t o g e t h e r , w h e t h e r by g e n e r a t i n g i n c o m e or f o r o b t a i n i n g t h e g o o d s n e c e s s a r y f o r s u r v i v a l of the f a m i l y unit. W h a t is n e w a b o u t this t y p e of f e m a l e r e s p o n s e is that w o m e n f a c e the p r o b l e m of s u r v i v a l c o l l e c t i v e l y a n d not as i n d i v i d u a l s . At the s a m e t i m e as it p r o v i d e s a m o r e " s o c i a l " v i e w of the p r o b l e m , t h e r e is an i n c r e a s e in o p p o r t u n i t i e s f o r f e m a l e part i c i p a t i o n a n d s e l f - v a l u a t i o n , s i n c e w h a t w a s n o r m a l l y an e x e r c i s e of d o m e s t i c c h o r e s b e c o m e s w o r k that is c o n s i d e r e d w o r k . T h e r e are v a r i o u s stages w h i c h f a m i l i e s g o t h r o u g h in crisis situations that h a v e a direct i m p a c t o n the i n c r e a s e in w o m e n ' s w o r k l o a d . T h e first t h i n g that h a p p e n s is that bills are left u n p a i d , i.e., m o r t g a g e p a y m e n t s if they exist, gas and electricity, a n d lastly, w a t e r bills. W o m e n h a v e to use f i r e w o o d to c o o k , w h i c h in m a n y c a s e s i n v o l v e s g o i n g out to c o l l e c t it. T h e y m u s t a l s o f e t c h w a t e r f r o m p u b l i c s t a n d p i p e s that are a l o n g w a y f r o m the h o u s e , e t c . Later, p e r s o n a l p r o p e r t y is s o l d : the r e f r i g e r a t o r , d i s h e s , c l o t h i n g , h o u s e h o l d repair m a t e r i a l s , etc. All t h e s e sales i m p o s e an a d d i t i o n a l b u r d e n on w o m e n , s i n c e they are d e p r i v e d of the essential tools f o r c a r r y i n g out h o u s e h o l d c h o r e s . Lastly, articles such as c l o t h i n g , s h o e s , a n d h o u s e h o l d f u r n i s h i n g s w h i c h b r e a k d o w n or w e a r out are not r e p l a c e d . F a m i l i e s lack the m o n e y n e c e s s a r y f o r t r a n s p o r t a t i o n to g o out a n d l o o k f o r w o r k , s i n c e all the m o n e y that they m a n a g e to s c r a p e t o g e t h e r is s p e n t

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on food. "Immediacy and the solution of permanent small crises becomes the lifestyle of the poor" (Jelin and Gogna 1987: 9).

•

Conclusions

One may conclude from the statistical and qualitative data provided that the repercussions of the crisis have had a different effect on workers of both sexes. With drastic reductions in household income, women, unlike men, have increased the rate at which they are incorporated into the formal and informal labor markets. The segmentation of the labor market by gender has not experienced major variations attributable to the 1980s crisis. The informal sector, however, has grown. With regard to income distribution by gender, inequality has been heightened by the crisis, to the point where average female income in some cases is only half of the average male income. This discrepancy becomes greater in the case of heads of household. Data by degree of schooling and type of occupation show that average income declined the most for women with non-manual, low-level occupations, i.e., self-employed saleswomen, office workers and others, corresponding to groups with intermediate levels of 7 to 12 years of education. Likewise, the process of maintenance and reproduction of the work force, particularly among the poor, became increasingly difficult. Poorer women must extend and intensify their working day to compensate for the decrease in goods and services caused by the crisis.

•

Note

1. For an exhaustive discussion on w a y s to measure housework, see Goldschmidt-Clermont ( 1 9 8 7 ) . This article examines values attributed to housework by substitute workers, wages for equivalent function in the market, opportunity costs, and the average or minimum wage in the market.

•

References

A E S (Agrupación de Economistas Socialistas/Grupo de Economía Feminista). 1987. "El trabajo tiene sexo," Santiago, Chile, mimeo. Benería, Lourdes. 1984. Reproducción, producción y división sexual del trabajo. Santo Domingo: CIPAF, Colección Teoría. De Barbieri, Teresita and Orlandina de Oliveira. 1985. Presencia de las mujeres de América Latina en una década de crisis. Santo D o m i n g o : CIPAF, C o l e c c i ó n Teoría. De Oliveira, Orlandina. 1987. "Empleo femenino en M é x i c o en tiempos de expansión y recesión económica: tendencias recientes," M é x i c o City: El C o l e g i o de México.

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E C L A C (Economic Commission for Latin America and the Caribbean). Women, Work and Crisis. Santiago, Chile: UN (August). . 1989a. Statistical Yearbook for Latin America and the Caribbean. Santiago, Chile: UN. - . 1989b. Transformación ocupacional y crisis social en América Latina. Santiago, Chile: UN. . 1984. La mujer en el sector popular urbano. América Latina y el Caribe. Santiago, Chile: UN. Goldschmidt-Clermont, Luisella. 1987. Economic Evaluations of Unpaid Household Work: Africa, Asia, Latin America and Oceania. Geneva: International Labour Office. ICRW (International Centre for Research on Women). 1986. "Weathering Economic Crises: Women's Responses to the Recession in Latin America and the Caribbean," proposal presented at the Ford Foundation, Washington, D.C., mimeo. ILO (International Labour Organisation). 1984. Mujeres en sus casas: Estudios sobre el trabajo no remunerado en el hogar. Lima: Regional Office for Latin America and the Caribbean. Jelin, Elizabeth and Mónica Gogna. 1987. "Los pobres: familia y vida cotidiana," document prepared for the XIV General Assembly of the Latin American Council for the Social Sciences, held in Recife, Brazil, November 1987, mimeo. Leiva, Alicia. 1987. "Las desigualdades en el trabajo de hombres y mujeres," Conyuntura económica 14 (April). Massiah, Joycelin. 1983. Women as Heads of Households in the Caribbean: Family Structure and Feminine Status. Paris: UNESCO. Pardo, Lucía. 1983. "La dueña de casa y su aporte al PGB," Revista de economía 15 (August). Prates, Suzana. 1987. Participación laboral femenina en un proceso de crisis. Montevideo: Information and Research Center. Ribeiro, Lucía and Teresita de Barbieri. 1978. "La mujer obrera chilena: una aproximación a su estudio," in Paz Covarrubias and Rolando Franco (eds.), Chile: muyer y sociedad. Santiago, Chile: UNICEF. Tokman, Victor. 1986a. "Crisis, ajuste económico y costo social," El trimestre económico 53 (January). . 1986b. "Ajuste y empleo en América Latina: los desafíos del presente," Revista internacional del trabajo 105, 3.

— • part VIII neoliberal policies and the neostructuralist response

With the onset of the debt crisis in the early 1980s, there w a s little doubt that Latin A m e r i c a desperately needed a different model of development. Too long dependent on external sources of f i n a n c e and technology, too inefficient in production, and too exclusive in sharing the fruits of increased g r o w t h , the entire e c o n o m i c , political, and social structure of the region w a s ripe f o r c h a n g e . Much of the b l a m e f o r Latin A m e r i c a ' s p r o b l e m s of inflation, debt, and slow growth was centered on the role of the state. A n d there can be little a r g u m e n t that the central g o v e r n m e n t in most Latin A m e r i c a n nations w a s a bloated, inefficient institution that d i s p e n s e d largesse to f a v o r e d sectors, be they w o r k e r s in the public sector or o w n e r s of overprotected ISI industries earning e c o n o m i c rents. T h e neoliberal response to the crisis in Latin A m e r i c a , be it f r o m the International Monetary Fund, the World Bank, or contract economists, w a s to call f o r the radical d i s m a n t l i n g of State action in the e c o n o m i c sphere. T h r o u g h liberalization, or o p e n i n g , of the p r o d u c t i v e , f i n a n c i a l , and external sectors of the economy, international and internal f o r c e s of c o m p e t i t i o n w o u l d b e unleashed that w o u l d b r i n g the Latin A m e r i c a n economies up to world class standards and income levels. T h i s v i e w should s o u n d familiar. It is little more than the traditional Smithian market, laissez-faire approach to e c o n o m i c d e v e l o p m e n t , with a dash of Ricardian comparative advantage added in. A key issue that neostructuralist and other heterodox critics of the neoliberal laissez-faire model as applied to Latin A m e r i c a must c o n f r o n t is how to design alternative strategies that respect the market f o r c e s without b e c o m i n g their hostage. That is the theme .of Osvaldo S u n k e l ' s provocative chapter.

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S u n k e l , long an i n t e r n a t i o n a l l y r e s p e c t e d e c o n o m i s t with E C L A C c o n n e c t i o n s , s u g g e s t s that the d i c h o t o m y b e t w e e n an " o u t w a r d " and an " i n w a r d " d e v e l o p m e n t m o d e l is unsatisfactory. W h a t Latin A m e r i c a needs is d e v e l o p m e n t from

within,

that is, r e g a r d l e s s o f w h e t h e r p r o d u c t i o n is

sold at h o m e or in the international m a r k e t , what is essential is the e s t a b l i s h m e n t o f an internally p r o p e l l e d d e v e l o p m e n t p r o c e s s based on t e c h n o l o g i c a l adaptation and human capital a c c u m u l a t i o n that can build upon the e x i s t i n g b a s e inherited f r o m the I S I stage. B o t h e x p o r t and d o m e s t i c m a r kets a r e i m p o r t a n t , but n e i t h e r s h o u l d n e c e s s a r i l y h a v e priority o v e r t h e other. R a t h e r , the d y n a m i c o f e c o n o m i c d e v e l o p m e n t must c o m e f r o m the internal m a t u r a t i o n o f d o m e s t i c f a c t o r s o f p r o d u c t i o n that p r o g r e s s i v e l y a p p r o a c h i n t e r n a t i o n a l s t a n d a r d s o f p r o d u c t i v i t y and c r e a t i v i t y and then c o m p e t e w h e r e v e r the s o c i a l returns are the largest. T h e s e are t h e m e s with e c h o e s f r o m e a r l i e r readings on t h e i m p o r t a n c e o f t e c h n o l o g y , the role o f e d u c a t i o n , the proper s e q u e n c i n g o f the d e v e l o p m e n t path, and the proper r o l e o f the state in g u i d i n g the d e v e l o p m e n t p r o c e s s o n t o a n o n d i s t o r tionary and s u s t a i n a b l e path that c o n t r i b u t e s to human d e v e l o p m e n t in the broadest sense. S u n k e l is s e a r c h i n g f o r a strategy o f d e v e l o p m e n t that m a k e s b e s t use o f the m a r k e t and the p u b l i c s e c t o r and that can c r e a t e s u s t a i n a b l e and e q u i t a b l e g r o w t h . T h e r e is not o n l y the e x t e r n a l d e b t , a f i n a n c i a l o b l i g a tion, that Latin A m e r i c a n e c o n o m i e s must f a c t o r into their d e c i s i o n s . T h e r e also is a s o c i a l debt, w h i c h is c o n c e r n e d with a l l e v i a t i n g poverty, p r e s e r v ing the b a l a n c e o f the e c o s y s t e m , and r e s p e c t i n g culture and other a s p e c t s o f c i v i l s o c i e t y , i n c l u d i n g the s t r e n g t h e n i n g o f d e m o c r a t i c

institutions,

s t r u c t u r e s , and b e h a v i o r . S u n k e l r e c o m m e n d s s o m e c o n c r e t e m e a n s that m i g h t h e l p to r e c o n c e i v e n e e d e d a d j u s t m e n t s t r a t e g i e s , including the c r e ation o f a National Fund f o r E c o n o m i c R e s t r u c t u r i n g and S o c i a l D e v e l o p m e n t , to i n s t i t u t i o n a l i z e and d e m o c r a t i z e the t r a n s f o r m a t i o n o f the L a t i n American economies. A study o f S u n k e l ' s C h a p t e r 2 0 and a rereading o f C h a p t e r 1 7 by R a m o s s h o u l d q u i c k l y dispel a n y n o t i o n that t h e r e a r e no a l t e r n a t i v e s to the n e o l i b e r a l a d j u s t m e n t p o l i c i e s . P o l i c i e s that c a n p r o m o t e a d j u s t m e n t with e c o n o m i c growth and equity and c r e a t e l o n g - t e r m d e v e l o p m e n t that is s u s t a i n a b l e are b e i n g o f f e r e d a n d f o r m u l a t e d in w a y s that c o n f o r m w i t h and r e s p e c t the m a c r o e c o n o m i c b a l a n c e s , both internal and e x t e r n a l , that o f t e n d e r a i l e d populist s t r a t e g i e s o f the past. W i t h a bit o f p r e s s u r e f r o m the international lending a g e n c i e s , like the I M F and the World B a n k , g o v e r n m e n t s i m p l e m e n t i n g n e o l i b e r a l p o l i c i e s that h a v e f a i l e d to p r o m o t e g r o w t h or equity under the c l o u d o f the debt c r i s i s m i g h t b e persuaded to undertake s o m e o f the neostructuralist strategies that, with an e a s i n g o f e x ternal debt r e p a y m e n t o b l i g a t i o n s , m i g h t p a v e the w a y f o r the d y n a m i c reinsertion o f the Latin A m e r i c a n e c o n o m i e s into the international m a r k e t .

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If the c o u n t r i e s of the region f o l l o w S u n k e l ' s strategy of d e v e l o p m e n t f r o m w i t h i n , they will, a f t e r all, have learned o n e of the very i m p o r t a n t lessons of the East Asian economies, and much of what Sunkel suggests as n e c e s s a r y f o r progress can be f o u n d i m b e d d e d as policy a d v i c e in the World B a n k ' s recent study ( 1 9 9 3 ) , The East Asian Miracle, a b o o k that c o n f i r m s m u c h of the thrust of this v o l u m e ' s institutional and n e o s t r u c turalist perspective.

• 20 From Inward-Looking Development to Development from Within Osvaldo Sunkel

Three fundamental concerns appear to focus socioeconomic and political attention in Latin America at present. One involves the hopes and fears aroused by democracy: its establishment, its recovery, its consolidation, its deepening, its difficulties, its precariousness, its eventual failure. Closely linked to these fears are those generated by the economic and social crisis, which to a greater or lesser extent affects virtually all the region. One of its most visible and dramatic manifestations is the problem of the external debt and adjustment policies that have devastated [the region] for a whole decade, with disastrous financial and social consequences. But . . . this is merely one particularly acute aspect of a more serious underlying development crisis that has carried over from the 1960s. The third concern emerges from the search for answers to the other two and involves a renewed interest in development. This concern was an essential task and major effort during the postwar decades when intellectual and political initiatives in the region sought to design and implement a modernizing industrialization strategy that would respond to socioeconomic backwardness, and to the excessive external vulnerability evidenced by the Great Depression of the 1930s and the two world wars. H o w e v e r , t o w a r d the late 1960s, a certain d i s i l l u s i o n m e n t set in with regard to the o u t c o m e s of the d e v e l o p m e n t policies b e i n g f o l l o w e d . Subsequently, the 1970s brought along more or less revolutionary experiments for in-depth sociopolitical change; then came the oil crisis and after that an extraordinary b o o m in international private f i n a n c e , and with it a p o w e r f u l u p s u r g e in an ultraconservative version of neoliberal e c o n o m i c policies. This w a s followed by the still-ongoing external debt crisis and the collapse of real socialism in Eastern Europe and the f o r m e r Soviet Union. C o n s e q u e n t l y , f o r nearly two d e c a d e s c o n c e r n f o r long term socioecon o m i c d e v e l o p m e n t w a n e d in the f a c e of d r a m a t i c political and social events and p r o f o u n d changes in e c o n o m i c doctrines. . . .

Reprinted with permission in abridged form from Osvaldo Sunkel (ed.), Development from Within: Toward a Neostructuralist Approach to Latin America (Boulder, CO: Lynne Rienner, 1993).

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This chapter attempts, first of all, to explain the b e g i n n i n g s and evolution of distinctive Latin A m e r i c a n thinking on d e v e l o p m e n t that arose out of the inward-looking structuralist strategy of growth and industrialization. T h i s strategy replaced the outward-looking phase of growth that prevailed u p until the Great D e p r e s s i o n of the 1930s and w a s the major instrument for recovery f r o m that crisis and f o r subsequent postwar development. Second, it highlights certain aspects of t o d a y ' s critical relation between the prospects for democracy and s o m e of the salient features of the 1980s economic crisis. Lastly, it outlines some basic guidelines for a new d e v e l o p m e n t approach from within, contributing s o m e elements of this new s t r a t e g y — a n d policy proposals consistent with the o b j e c t i v e of o v e r c o m i n g the crisis and strengthening democracy-—as an expression of the recovery and renewal of structuralist thinking. . . .

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Challenges to Latin America's Development Model

In the early 1970s, as a result of historical realities and serious doctrinal divergences, thinking about d e v e l o p m e n t took three d i f f e r e n t lines: a radical criticism f r o m the left and f r o m the right and a revised structuralist position that f a v o r e d some changes in the prevailing developmental a p p r o a c h . In reply to the e v o l v i n g d e v e l o p m e n t crisis, three corr e s p o n d i n g attempts w e r e m a d e in practice to m o d i f y the [ d e v e l o p m e n t ] strategy. T h e leftist option involved greater socialization, an even more active, interventionist, and definitely wider role of the state. T h i s w a s the case of experiences such as the Unidad Popular in Chile, the Velasco Alv a r a d o g o v e r n m e n t in Peru, and brief similar e x p e r i e n c e s in Bolivia and Argentina, all of which w e r e rather short-lived, mainly for political but also f o r e c o n o m i c reasons. T h e r i g h t - w i n g o p t i o n — n e o l i b e r a l and m o n e t a r i s t — r e p l a c e d these socialist or socializing experiments and had great influence in Latin America, reaching its most extreme expression in Uruguay, Argentina, and Chile. T h e s e experiences, which developed primarily during the latter half of the 1970s and up until the crisis of the 1980s, had generally quite negative effects: stagnation of the basic productive sectors and particularly of the industrial sector, siphoning off of savings and investment to speculative activities and capital flight, w o r s e n i n g social p r o b l e m s a n d u n e m p l o y m e n t , heavy concentration of i n c o m e and wealth, colossal external and domestic indebtedness, and extreme external dependence. The third option, structuralist developmentalism, continued to be applied with substantial corrections, particularly in the external sector, in Brazil, Mexico, and Venezuela. This allowed these countries to continue

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g r o w i n g , d e s p i t e the a l r e a d y d e s c r i b e d p r o b l e m s of d e p e n d e n c e a n d social p o l a r i z a t i o n , w h i c h h a d arisen t o w a r d t h e e n d of the 1960s. At p r e s e n t , a n d w i t h the clarity of h i n d s i g h t f r o m h a v i n g l i v e d t h r o u g h t h e s e e x p e r i e n c e s , t h e r e w o u l d s e e m to b e a g r e e m e n t that t h e structuralist d e v e l o p m e n t strategy w a s very b i a s e d t o w a r d industrialization via i m p o r t s u b s t i t u t i o n . H o w e v e r , d e s p i t e the f a c t that t h i s c r i t i c a l j u d g m e n t a p p e a r s to b e basically correct, it d r a w s attention a w a y f r o m the essential to the ancillary. W h a t s e e m s m o r e i m p o r t a n t is that the p a s t i n d u s t r i a l i z a t i o n a n d d e v e l o p m e n t s t r a t e g y f o c u s e d m o s t l y on e x p l o i t i n g the d o m e s t i c m a r k e t a n d p r o m o t i n g d o m e s t i c p r o d u c t i o n of p r e v i o u s l y i m ported industrial c o n s u m e r g o o d s . T h i s p r e f e r e n c e for c o n s u m p t i o n a n d the existing domestic m a r k e t — m i d d l e and upper sector d e m a n d s — i s what p e r m e a t e d a n d b i a s e d the i n d u s t r i a l i z a t i o n s t r a t e g y a n d r e s u l t e d in a f o r eign trade policy c h a r a c t e r i z e d by e x c e s s i v e protectionism, a c o n s u m p t i o n p r o m o t i n g p o l i c y t h r o u g h s u b s i d i e s , c o n t r o l l e d prices a n d c o n s u m e r c r e d its, a n d an i n v e s t m e n t p o l i c y p r e f e r e n t i a l l y a i m e d at e x p a n d i n g t h e imitative c o n s u m e r d u r a b l e s m a r k e t , to the d e t r i m e n t of, f o r e x a m p l e , agricultural or m a n u f a c t u r i n g p r o d u c t i o n f o r p o p u l a r c o n s u m p t i o n a n d e x p o r t , and of an i n c r e a s e d s a v i n g s and i n v e s t m e n t e f f o r t . T h e r e f o r e , it is not so m u c h a matter of criticizing such partial a n d i n s t r u m e n t a l a s p e c t s of e c o n o m i c p o l i c y as tariffs, e x c h a n g e rates, or p r i c e c o n t r o l s . T h e p r o b l e m is m u c h m o r e f u n d a m e n t a l . It has to d o with a g e n eralized national s y n d r o m e arising f r o m a p o p u l i s t - c o n s u m e r i s t - i n d u s t r i a l ist national s t r a t e g y that e m e r g e d in r e s p o n s e to the p r e s s u r e of past e x p e riences and unfavorable contemporary external circumstances—not f r o m the e x p r e s s will of e c o n o m i c a u t h o r i t i e s — a n d w h i c h s u b s e q u e n t l y p e r s i s t e d b e c a u s e it y i e l d e d g o o d d i v i d e n d s f o r q u i t e s o m e t i m e . P r o m i n e n t a m o n g t h e s e p a s t e x p e r i e n c e s are the . . . w e l l - k n o w n d e v a s t a t i n g e f f e c t s of the G r e a t D e p r e s s i o n of the 1 9 3 0 s a n d the s e r i o u s e c o n o m i c d i f f i c u l t i e s b r o u g h t a b o u t by W o r l d War II. . . . Critics of the import substitution process also o v e r l o o k the a d v e r s e external c o n d i t i o n s that p r e v a i l e d at least until the e n d of the 1950s. First of all, inflation a n d the d e v a l u a t i o n s that t o o k p l a c e in i n d u s t r i a l i z e d c o u n t r i e s a b r u p t l y d e v a l u e d the a b u n d a n t international r e s e r v e s that Latin A m e r i c a n c o u n t r i e s had a c c u m u l a t e d d u r i n g World War II. In a d d i t i o n , in the p o s t w a r p e r i o d the U n i t e d States o p p o s e d the i n d u s t r i a l i z a t i o n of Latin A m e r i c a a n d c h a n n e l e d its r e s o u r c e s into the r e c o n s t r u c t i o n of E u r o p e a n d the c o n t a i n m e n t of the S o v i e t U n i o n . I n t e r n a t i o n a l p r i v a t e f i n a n c i a l m a r kets and direct [ f o r e i g n ] i n v e s t m e n t h a d all but d i s a p p e a r e d s i n c e their collapse d u r i n g the Great D e p r e s s i o n . International p u b l i c f i n a n c i n g w a s very limited a n d c o n d i t i o n e d . E u r o p e a n e c o n o m i e s w e r e b e g i n n i n g their r e c o n s t r u c t i o n w i t h strict i m p o r t l i m i t a t i o n s a n d s e v e r e e x c h a n g e c o n t r o l s y s t e m s , d u e to the p r e v a i l i n g " d o l l a r s h o r t a g e . " Last but c e r t a i n l y not least,

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the United States and the European countries c o n t i n u e d to carry on their own i m p o r t substitution policies through the s t i l l - o n g o i n g m a s s i v e agricultural support programs started in the 1930s. Moreover, the foreign trade b o o m that b e g a n in the late 1950s w a s essentially attributable to the r e e s t a b l i s h m e n t of trade b e t w e e n the U n i t e d States and the E u r o p e a n e c o n o m i e s and b e t w e e n the latter and their f o r m e r c o l o n i e s , within the f r a m e w o r k of the reconstitution of the A t l a n t i c and colonial e c o n o m i e s , while discriminating against Latin American exports. In the late 1960s these adverse external conditions changed, and the import substitution industrialization strategy b e g a n to s h o w signs of e x h a u s t i o n . H o w e v e r , it w a s d i f f i c u l t to reorient it b e c a u s e , m o r e than a simple liberalization of markets, it w a s necessary to undertake an in-depth r e f o r m u l a t i o n : n o t h i n g short of a global s h i f t in d e v e l o p m e n t strategy based on the o p e n i n g up to world markets, with all the c o m p l e x implications this m e a n t for [the region]. At a d o m e s t i c level, this involved c o n siderable d e m a n d s in terms of creating competitiveness, innovation capacity, and technological adaptation; reallocating i n v e s t m e n t ; c h a n n e l i n g credit f r o m the promotion of internal consumption to the promotion of exports; and, with very serious c o n s e q u e n c e s r e g a r d i n g intersectoral linkages, channeling productivity, competitiveness, and patterns of production, c o n s u m p t i o n , and e m p l o y m e n t , aside f r o m the m o r e o b v i o u s policy aspects related to e x c h a n g e rates, tariffs, and other i n s t r u m e n t s . M a n y of these r e c o m m e n d a t i o n s for o v e r c o m i n g the s h o r t c o m i n g s of import substitution i n d u s t r i a l i z a t i o n are present in the s t r u c t u r a l i s t literature f r o m the 1960s, and point to d o m e s t i c and external m a r k e t s as v i t a l i z i n g sources of g r o w t h . T h e y suggest distributive r e f o r m s as m e c h a n i s m s f o r domestic market expansion (see Lustig 1981 and 1988) and e m p h a s i z e the critical i m p o r t a n c e of growth and diversification of exports for the very survival of a d y n a m i c d e v e l o p m e n t strategy ( S u n k e l 1969) [also see Chapter 11]. Subsequently, the international f i n a n c i a l p e r m i s s i v e n e s s that began to prevail in the late 1960s and increased in the 1970s made it possible to evade most of the e m e r g i n g problems. D u r i n g those years—characterized by easy access to abundant external f i n a n c i n g — c o n c e r n for dev e l o p m e n t theory, strategies, and m e d i u m - and long-term concerns and policies waned; everything seemed solvable through external financing. As growth seemed assured—economies had grown and continued to grow during the 1 9 7 0 s — f u n d a m e n t a l concerns thus centered on stability and e f f i ciency. Short-term neoclassical views b e c a m e o v e r w h e l m i n g and any notion of the need for a long-term strategy that w o u l d allow f o r the rational planning of the unexpectedly abundant external savings simply evaporated. Thus, despite the early warnings afforded by the first oil crisis of 1973, Latin American economies continued to e x p a n d quite vigorously in the years that followed, even though most of them w e r e net oil importers.

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I n s t e a d of i m m e d i a t e l y a d o p t i n g a d j u s t m e n t a n d r e s t r u c t u r i n g p o l i c i e s req u i r e d by t h e e n e r g y c r i s i s , t h e e x t r e m e l y s e r i o u s r e c e s s i o n that w a s a f f e c t i n g the w o r l d e c o n o m y , a n d the l o o m i n g d e v e l o p m e n t p r o b l e m s , L a t i n A m e r i c a n c o u n t r i e s p e r s i s t e d in their e x p a n s i o n i s t p o l i c i e s . O n l y B r a z i l b e g a n a s e r i o u s e c o n o m i c r e s t r u c t u r i n g p r o g r a m , e m p h a s i z i n g the e x p o r t of m a n u f a c t u r e s and a l t e r n a t i v e s o u r c e s of energy. O t h e r w i s e , it w a s e v e n c l a i m e d that c o n t i n u e d g r o w t h d e m o n s t r a t e d t h e s e e c o n o m i e s ' d e g r e e of d e v e l o p m e n t , the v i g o r of t h e i r a c c u m u l a t i o n c a p a c i t y , a n d the s t r e n g t h of their p r o d u c t i v e f o r c e s a n d industrial d e v e l o p m e n t . H o w e v e r , w h a t w a s really o c c u r r i n g w a s that h e a v y e x t e r n a l ind e b t e d n e s s m a d e it p o s s i b l e to c o m p e n s a t e this n e w e x t e r n a l i m b a l a n c e . It is f o r this r e a s o n that I h a v e b e e n a r g u i n g f o r a l o n g t i m e that the real " l o s t d e c a d e " f o r Latin A m e r i c a w a s the 1970s. I n s t e a d of u s i n g easily a v a i l a b l e e x t e r n a l f i n a n c i n g to c o r r e c t the structural p r o b l e m s g e n e r a t e d p r e v i o u s l y a n d to a d j u s t in s o m e d e g r e e to t h e n e w international e c o n o m i c c o n d i t i o n s a n d to the n e w energy prices, m o s t c o u n t r i e s c o n t i n u e d to e x p a n d in an absurdly i r r e s p o n s i b l e m a n n e r , c o n f i d e n t that they c o u l d c o n t i n u e to i n c r e a s e their i n d e b t e d n e s s i n d e f i n i t e l y . T h i s is a tragic, practical d e m o n s t r a t i o n of the d e g r e e to w h i c h n e o l i b e r a l c o n c e p t i o n s led to l o s i n g sight of the n e e d f o r a l o n g - t e r m g r o w t h strategy, r e p l a c i n g it w i t h the m i s t a k e n s i g n a l s of the s h o r t - t e r m f i n a n c i a l m a r k e t with its n e g a t i v e real interest rates that inv i t e d e x c e s s i v e i n d e b t e d n e s s a n d t h e e v e n t u a l u n l e a s h i n g of a m a j o r f i nancial c r i s i s as s o o n as c o n d i t i o n s c h a n g e d . ( S e e S u n k e l 1 9 8 4 ; G r i f f i t h J o n e s a n d S u n k e l 1986.) T h i s is precisely w h a t o c c u r r e d b e t w e e n 1 9 7 9 a n d 1 9 8 2 w h e n the s e c o n d oil s h o c k and c h a n g e s in the e c o n o m i c p o l i c y of the U n i t e d S t a t e s led to a n o t h e r w o r l d r e c e s s i o n , s k y r o c k e t i n g interest rates, the c o n t r a c t i o n of i n t e r n a t i o n a l trade, the s h a r p d e t e r i o r a t i o n of Latin A m e r i c a n t e r m s of t r a d e , a n d the o u t b r e a k of t h e e x t e r n a l d e b t c r i s i s a n d its d r a m a t i c a f t e r m a t h in the latter part of 1 9 8 2 .

• Democracy and the Development Crisis of the 1980s N o t w i t h s t a n d i n g the diversity of national s i t u a t i o n s that prevail in Latin A m e r i c a , t w o g e n e r a l i z e d sets of t r e n d s c a n b e c l e a r l y d i s c e r n e d , c o r r e s p o n d i n g to t w o p r o f o u n d a n d l o n g - t e r m p r o c e s s e s that are u n f o r t u nately c o n t r a d i c t o r y a n d o n a c o l l i s i o n c o u r s e . O n the o n e h a n d , t h e r e is the d e m a n d for d e m o c r a t i z a t i o n a n d citizen p a r t i c i p a t i o n that has b e e n ine x o r a b l y m o u n t i n g , b a s e d o n the p r o f o u n d s o c i o e c o n o m i c a n d c u l t u r a l c h a n g e s — b o t h d o m e s t i c a n d e x t e r n a l — t h a t h a v e t a k e n p l a c e in r e c e n t d e c a d e s . O n the other h a n d , t h e r e is a d e v e l o p m e n t crisis of m a j o r p r o p o r t i o n s a n d a l r e a d y l e n g t h y d u r a t i o n as a result of the e x t e r n a l d e b t c r i s i s

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and the adjustment and restructuring policies that have been implemented since then. W h i l e the first process leads to d e m a n d s and hopes that involve the need for allocating greater financial and e c o n o m i c resources to everwider popular sectors, the second works in the other direction, restricting, denying, and even severely cutting back resources. This results in serious concern regarding the prospects for democracy both in recently established democracies and in those of longer standing. T h e challenge f a c i n g the institutionality, parties, corporate actors, and other political elements of each c o u n t r y ' s political regime is dramatic: How should the intense and growing conflict b e t w e e n c o n t a i n e d social aspirations, w h i c h are e x p r e s s e d with greater f r e e d o m and insistence within the new democratic f r a m e w o r k , be processed and politically directed vis-à-vis the restrictions, sacrifices, and p o s t p o n e m e n t s preemptorily d e m a n d e d by the e c o n o m i c crisis? T h e political and technical capacity of each country in o v e r c o m i n g this crisis without exceeding the tolerable limits of democratic operation and the economic process will be crucial for the prospects of consolidating democracy and development. . . . A m o n g the most recent and p r o m i n e n t f a c t o r s with the greatest impact is the collapse of the dictatorships that predominated in many Latin American countries in the mid-1970s. From 1978 on, military dictatorships have been forced to a b a n d o n g o v e r n m e n t in virtually all Latin A m e r i c a n c o u n t r i e s with the sole e x c e p t i o n of C u b a and recently Haiti, and civil g o v e r n m e n t s and d e m o c r a t i c r e g i m e s have been established or reestablished. 1 Although the extent of this change in terms of real political power and effective social participation remains to be seen, and has been very diverse in the various countries, it was e v e r y w h e r e a p o w e r f u l boost to setting f r e e democratic d e m a n d s that had been incubating, . . . but which had remained relatively contained by military regimes. A n o t h e r relatively recent d o m e s t i c f a c t o r of great i m p o r t a n c e in several countries is the process of maturation, moderation, renovation, and unification of the m a j o r l e f t - w i n g political s t r e a m s , m o v e m e n t s , parties, and trends, inspired by a new sense of realism and p r a g m a t i s m , f o r m i n g more or less unified c o n g l o m e r a t e s that value the d e m o c r a t i c g a m e . This was undoubtedly affected by the defeat of previous left-wing governments, the difficulties of surviving under military regimes, the hard experience of life in exile, and the experiences of European social democratic and socialist parties. They were also limited in their political and policy options by the e c o n o m i c crisis and the rapidly growing degree of internationalization of their economies and societies. However, all these domestic and international social and political trends that f a v o r the implanting and consolidation of d e m o c r a t i c r e g i m e s in Latin Apierica come up against major obstacles. One of these is the persistence of antidemocratic cultures characterized by intolerance, paternalism,

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patronage, authoritarianism, and extremism. In addition, the persistence or r e s u r g e n c e of guerilla activity, as well as the d r a m a t i c and increasingly deep-rooted p r o b l e m of drug t r a f f i c k i n g — w h i c h has already e x t e n d e d in one way or another to many countries, gaining undertones of an out-andout w a r — a l l lead to a counterpoint of multipolar violence and militarization characterizing the countries in which these p r o b l e m s occur in a particularly virulent manner. Such o b s t a c l e s r e i n f o r c e n e g a t i v e trends that lead to the f o r m a t i o n of d e m o c r a t i c r e g i m e s that are restricted in scope, elitist, oligarchic, exclusionary, and increasingly supported and infiltrated by the a r m e d forces. Table 20.1 s h o w s some figures on d e f e n s e e x p e n d i tures a n d a r m s strength that indicate the i m p o r t a n c e of the military in Latin A m e r i c a . A w o r r i s o m e c o n t r i b u t i n g element is the g e n e r a l i z e d c o n t e m p o rary p h e n o m e n o n of the internationalization and transnationalization of the r e g i o n ' s e c o n o m i e s and societies. T h e r e is an ever closer link b e t w e e n m i d d l e - and upper-class s e g m e n t s of the local b o u r g e o i s i e and t e c h n o c racies with transnational economic, financial, military, technological, and mass media p o w e r structures, which c o n f o r m a highly h o m o g e n e o u s and integrated nucleus sharing a similar life-style and strong political, social, and cultural affinities. This process implies a dangerous tendency toward the disintegration and exclusion of a large part of the remainder of society, c o n f i n i n g it to a national c o m p l e m e n t of activities, r e g i o n s , and social

Table 20.1

Latin America: Military Expenditures and Arms Imports Military

Military Expenditures

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Armed

Arms

Expenditures/

Military

Imports

Gross

Expenditures/

Arms Armed

Imports/

(1984

Forces

(1984

Domestic

Fiscal

Forces/

Total

billion US$)

(thous)

billion U S $ )

Product

Expenditures

1,000 inhab

Imports

8.6 9.8 10.5 10.2 10.1 10.8

1,297 1,328 1,438 1,478 1,491 1,361 1,617 1,687 1,746 1,798 1,814

11.0

13.7 12.3 12.7 12.5

— —

2.287 2.967 2.884 2.445 4.022 4.011 3.451 4.145 3.348

1.6 1.7 1.8 1.7 1.6 1.6 1.6 2.1 1.9 1.9 1.8

7.3 8.0 8.0 7.4 7.2 6.9 6.1 7.0 6.5 7.0 7.5

4.1 4.1 4.3 4.3 4.2 4.3 4.4 4.5 4.5 4.6 4.5

—

2.5 3.1 2.6 1.8 3.1 4.0 4.6 5.6 4.7

Source: Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, Washington, D.C., May 1985. Reproduced with amendments in "Militares y Armas en América Latina," Augusto Varas (1988), pages 99, 101.

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g r o u p s that are s u b o r d i n a t e , marginal, b a c k w a r d , and isolated (Sunkel 1973, 1979). This increases the resistance to making the e c o n o m i c and political concessions needed for a fairer distribution of the dire consequences of the economic crisis and of the adjustment and restructuring policies. In many countries the debt crisis and the ensuing a d j u s t m e n t and restructuring policies have brought to light this violent contradiction in a particularly acute manner. The ruling classes have let the adjustment burden fall, to a large extent, upon the [poor] and s e g m e n t s of the m i d d l e class, preserving at any price the privileges and interests of transnationalized sectors, the upper middle class, and international business. . . . 2 During the p o s t w a r d e c a d e s , a model of e c o n o m i c g r o w t h and partial m o d e r n i z a t i o n w a s articulated in m a n y of our countries that w a s very d y n a m i c and p r o f o u n d l y changed our societies, giving rise to the demands for democratization. To a greater or lesser extent, depending on the case, that m o d e l ' s sociopolitical and e c o n o m i c axis was the developmental state, which b e c a m e m o r e e x t e n d e d and took on new and various f u n c tions, such as e m p l o y m e n t generation, capital a c c u m u l a t i o n , creation of public enterprises, provision of social services (health care, housing, education, social w e l f a r e ) , and support f o r the private sector through subsidies, protection, and f i n a n c i n g . In this way populist social and political pluralistic class coalitions were articulated in which e n t r e p r e n e u r s , middle classes, and organized working classes participated, and in which some support was even given to the informal urban sectors. This w a s initially feasible, thanks to the tapping by the state of the surplus generated in the traditional specialized agricultural and mining export sectors, which w a s then channeled toward the multiple uses and sectors indicated ( E C L A 1956). 3 But over time this major source of public inc o m e b e c a m e relatively less important. T h e contribution of f o r e i g n f i n a n c i n g and investment w a s very m o d e s t during the 1950s and 1960s, and there was strong resistance to the creation, expansion, and modernization of an efficient taxation system. As a consequence, inflationary financing of the fiscal g a p b e c a m e increasingly prevalent. T h u s , b a s e d on all these elements and others indicated in the relevant literature, the structural c o n d i t i o n i n g f a c t o r s of the inflationary p h e n o m e n o n w e r e activated through cumulative propagating m e c h a n i s m s leading to spiraling inflation [see Chapter 15]. Later, in the mid-1970s, when the increasing scarcity of f o r e i g n e x c h a n g e , the oil crisis, r u n a w a y inflation, and the previously mentioned development problems called for urgent adjustments of the development strategy, the extraordinary b o o m in the international private financial market provided an abundance of easy credits under very favorable initial terms. In these circumstances, most countries preferred to evade the necessary, inevitable, and long o v e r d u e restructuring and a d j u s t m e n t of their economies. Instead, most embarked on a path of heavy and increasing external indebtedness until the early 1980s.

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In s p i t e of t h i s s t r u c t u r a l l y f l a w e d s i t u a t i o n , it w a s . . . p o s s i b l e to m a i n t a i n an e x p a n d i n g e c o n o m y a n d c o n t i n u e to d i s t r i b u t e an a p p a r ently e v e r - g r e a t e r s u r p l u s t h r o u g h the s t a t e a p p a r a t u s . In t h i s w a y , alt h o u g h in d i f f e r e n t a n d u n f a i r p r o p o r t i o n s , m a j o r social s e c t o r s m a n a g e d to i m p r o v e their l i v i n g s t a n d a r d s d u r i n g t h e w h o l e p o s t w a r p e r i o d until the 1980s. T h i s last s u p p o r t i n g b a s i s that h a d a l l o w e d the state to c o n t i n u e to p e r f o r m s i m u l t a n e o u s l y its a c c u m u l a t i o n a n d redistribution f u n c t i o n s coll a p s e d s u d d e n l y a n d u n e x p e c t e d l y in 1 9 8 2 . T h e e x t e r n a l d e b t c r i s i s not o n l y e l i m i n a t e d . . . e x t e r n a l f i n a n c i n g , but in f a c t r e v e r s e d it, f o r c i n g an e n o r m o u s drain of s u r p l u s to the exterior ( s e e Table 2 0 . 2 a n d F i g u r e 20.1). In the f a c e of t h e n e e d to turn a r o u n d an e x t e r n a l s i t u a t i o n that until 1 9 8 2 h a d b e e n c h a r a c t e r i z e d b y a l a r g e e x c e s s of i m p o r t s o v e r e x ports a n d of e x t e r n a l f i n a n c i n g o v e r f o r e i g n r e m i t t a n c e s , it b e c a m e i m p e r ative to drastically r e d u c e i m p o r t s a n d to i n c r e a s e c o n s i d e r a b l y the f i n a n cial p a y m e n t s a b r o a d . T h i s r e o r i e n t a t i o n in the f l o w of t r a d e a n d f i n a n c e d e m a n d e d , as a logical d o m e s t i c c o u n t e r p a r t , a c o n s i d e r a b l e s u r p l u s in domestic savings. To b r i n g a b o u t t h i s m a m m o t h n a t i o n a l s a v i n g e f f o r t w i t h i n the c a n o n s set by i n t e r n a t i o n a l f i n a n c i a l a g e n c i e s a n d f o r e i g n b a n k s a n d g o v e r n m e n t s , a series of e c o n o m i c a d j u s t m e n t a n d r e s t r u c t u r i n g p o l i c i e s w e r e i m p l e m e n t e d . O n the o n e h a n d , the p r i v a t e sector w a s f o r c e d to r e d u c e its c o n s u m p t i o n a n d i n v e s t m e n t t h r o u g h a m a j o r c u t b a c k in p r i v a t e i n c o m e s . O n the o t h e r h a n d , a strict c o n d i t i o n a l i t y w a s i m p o s e d on p u b l i c s e c t o r m a n a g e m e n t , w h i c h , as it w a s f o r c e d to g u a r a n t e e external c o m m i t m e n t s , h a d to s h o u l d e r t h e g r e a t c o s t of the a d j u s t m e n t . T h u s the a t t e m p t w a s m a d e to s t y m i e t h e s t a t e in its m u l t i p l e r o l e s b y r e d u c i n g the n u m b e r of p u b l i c o f f i c i a l s a n d their w a g e s , c u t t i n g b a c k o n s p e n d i n g in s o c i a l services, eliminating subsidies, reducing public investment, privatizing state activities and e n t e r p r i s e s , a n d by a t t e m p t i n g to quickly raise r e v e n u e s t h r o u g h tax r e f o r m s that a s s i g n e d g r e a t e r p r i o r i t y to i n d i r e c t o v e r d i r e c t taxation. In b o t h p r i v a t e a n d p u b l i c f r o n t s , a c t i o n s w e r e u n d e r t a k e n w i t h the o b j e c t i v e of r e d u c i n g e x p e n d i t u r e s a n d g e n e r a t i n g the d o m e s t i c s a v i n g s u r p l u s n e e d e d to c o m p e n s a t e p a y m e n t s a b r o a d . B u t the r e c e s s i v e n a t u r e of all t h e s e m e a s u r e s m a d e it very d i f f i c u l t to a c h i e v e an i n c r e a s e in savings, a n d c o n s e q u e n t l y , the g r e a t e r part of the a d j u s t m e n t r e s u l t e d in a red u c t i o n in i n v e s t m e n t , j e o p a r d i z i n g f u t u r e g r o w t h ( s e e T a b l e 2 0 . 3 ) . It is a l s o e v i d e n t that this set of p o l i c i e s w a s i m p l e m e n t e d w i t h a s e v e r e l y reg r e s s i v e bias, p l a c i n g a l m o s t all the b u r d e n of a d j u s t m e n t a n d r e s t r u c t u r ing on the m i d d l e s e c t o r s a n d p o o r e r c l a s s e s , w h o h a v e w i t n e s s e d an inc r e a s e in u n e m p l o y m e n t a n d u n d e r e m p l o y m e n t ( a n d t h e r e f o r e of the i n f o r m a l s e c t o r ) ; a r e d u c t i o n in their i n c o m e s a n d w a g e s ; an i n c r e a s e in their tax b u r d e n ; c u t b a c k s , i m p o v e r i s h m e n t , a n d a rise in the cost of e d u c a t i o n , health c a r e , h o u s i n g , a n d social w e l f a r e s e r v i c e s ; a n d g e n e r a l l y a

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Table 20.2

Year

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990a

Latin America: Net Capital Inflow and Transfer of Resources (billions of dollars and percentages)

1. 2. Net Net Payments Capital of Profit Inflow and Interest

7.9 11.4 14.3 17.9 17.2 26.2 29.1 32.0 39.8 20.1 2.9 10.4 3.0 9.9 15.1 5.5 10.1 17.9

4.2 5.0 5.6 6.8 8.2 10.2 13.6 18.9 28.5 38.8 34.5 37.3 35.3 32.7 31.4 34.3 37.4 36.8

3. Transfer of Resources (1-2)

3.7 6.4 8.7 11.1 9.0 16.0 15.5 13.1 11.3 -18.7 -31.6 -26.9 -32.3 -22.8 -16.3 -28.8 -27.3 -18.9

5. 4. Transfer of Resources/ G o o d s and G o o d s and Services Services Exports Exports (3/4)

(%)

28.9 43.6 41.1 47.3 55.9 61.3 82.0 104.9 113.2 103.0 102.4 113.8 109.0 94.7 108.1 122.8 136.4 147.1

12.8 14.7 21.2 23.5 16.1 26.1 18.9 12.5 10.0 -18.2 -30.9 -23.6 -29.6 -24.9 -15.1 -23.5 -20.0 -12.8

Sources: 1973-1988: ECLAC based on data provided by IMF. 1990: ECLAC based on official figures. Note: a. Preliminary estimations subject to review.

lessening of opportunities and the f r u s t r a t i o n of the hopes f o r e c o n o m i c and social i m p r o v e m e n t that had been kindled by a return to d e m o c r a c y (see Chapter 5). In these conditions, the prospects for c o n s o l i d a t i n g existing and newly established d e m o c r a t i c r e g i m e s are evidently not good in many countries. It is not merely a matter of o v e r c o m i n g the external debt problem. What is at stake is an in-depth reorganization of the state and its relations with civil society in order to rearticulate a d y n a m i c sociopolitical and e c o n o m i c model of capital a c c u m u l a t i o n , g r o w t h , and d e v e l o p m e n t and to replace the one that had c o m e into being in the postwar period, was eroding in the late 1960s, and collapsed in 1982. T h e only proposal currently available for f a c i n g the economic crisis—strongly encouraged by international agencies responsible for implementing a d j u s t m e n t and restructuring policies, by the g o v e r n m e n t s of industrialized countries, by transnational banks, and by the transnationalized

365

D e v e l o p m e n t from Within

Figure 20.1

Latin A m e r i c a : Net C a p i t a l Inflow a n d Net Transfer of Resources (billions of dollars)

40

20

0

S

n

iii R 'i » ¡ i ; ' ¡

n n

lililí llÚW

-20

y1

n

¡.[J. i

i

1•

-40 r'i'si-invor— o o D N O ' - ' t N c i - a - m ^ o t ' - o o o s r ^ r - r - r — r - r ^ t ^ - o o o o o o o o o o a o o o o o o o o o

Q I

Net Capital Inflow I Net Payment of Profits and Investment Net Transfer of Resources

Source: ECLAC based on data provided by IMF.

sectors of Latin American society—is the neoliberal program with its wellknown social and dynamic limitations [see Chapter 17]. T h e surprising economic policy reversals in recent years by such presidential candidates as Carlos Andres Pérez, Fernando Collor de Melo, Alberto Fujimori, and Carlos Saúl Menem after populist electoral campaigns, as well as the relative continuity of the economic policies of the new Chilean democratic government, are based on these new historical realities rather than on profound ideological conversions. Some of the elements included in the neoliberal program are unquestionably necessary in any renewed development process: new dynamic forms of export growth; the raising of productivity, efficiency, and competitiveness; the increase in savings and investment; the reduction, rationalization, flexibilization, and greater efficiency of the

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Table 20.3

Latin America Argentina Brazil Chile Colombia Costa Rica Ecuador Mexico Peru Uruguay Venezuela

Latin America: Effect of Debt Burden on Investment, Wages, and Product (percentages)

Debt/GDP

Investment/GDP

Accumulated Variation in Real Wages

1982-87 (70-81)

1982-87 (70-81)

1982-87 (70-81)

56 73 45 90 25 110 61 65 61 88 58

(38) (40) (32) (60) (20) (82) (35) (35) (42) (41) (40)

16.6 12.7 16.3 12.0 18.3 18.2 17.8 17.8 21.2 9.7 19.0

(22.6) (20.8) (23.3) (16.7) (18.4) (22.5) (24.2) (23.2) (23.4) (12.3) (25.9)

—

16 3 -13 18 -2

(-7) (56)

(-3) (-1) (32)

—

—

-30 3 -8

(15) (-14) (-35)

—

—

Accumulated Variation in Per Capita Product 1982-87 (70-81) -3.3 -14.5 3.9 -5.7 9.0 -9.7 -10.5 -14.4 -5.7 -9.7 -13.1

(32.9) (9.5) (81.5) (12.9) (36.7) (29.2) (87.3) (49.2) (13.5) (35.8) (5.7)

Source: ECLAC (1988a: 13). Notes: Debt = Total external debt disbursements; Investment = Gross domestic investment. Data in parentheses refers to the precrisis period and other data to the crisis period. Since the crisis did not begin simultaneously in all countries, accumulated changes for the most suitable periods were included for each country in order to reflect the effect of adjustment over real wages. Therefore, figures for the last two columns refer to changes registered between 1981 and 1987 in Argentina, Brazil, Costa Rica, and Ecuador, and between 1982 and 1987 for the remaining countries.

state apparatus; the achievement and maintenance of a reasonable degree of macroeconomic balances; and expansion in the role of the market and private economic agents. This latter emphasis, and the attempt to reduce the debt burden through debt-for-equity swaps, has led to a massive and indiscriminate wave of privatization. In this, as in other policies, it would be wise to differentiate between those processes inspired in an authentic rationalizing and modernizing project, and others marked by ideological dogmatism and for whom liberalization, deregulation, and privatization are ends in themselves. The former involves the pursuit of a more competitive and dynamic economy that contributes a long-term solution to the chronic fiscal and external deficit, imposing the need to adjust an oversized state when in fact there is a more appropriate private alternative. The latter primarily pursues an ideological end of reducing the role of the state to a minimum or easing short-term financial pressures on the public sector without taking into account the ultimate spinoffs on overall economic and social efficiency. 4 Even while accepting the general relevance of conventional recommendations, with the reservation just expressed, democratization processes

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f a c e the e n o r m o u s c h a l l e n g e o f : r e c o n c i l i n g t h e s e r e f o r m s w i t h an i m p r o v e d s t a n d a r d of living in at least t h o s e s e c t o r s most d e p r i v e d in recent d e c a d e s a n d m o s t n e g a t i v e l y a f f e c t e d by r e c e n t p o l i c i e s ; r e a f f i r m i n g t h e critical role of the s t a t e in g u i d i n g l o n g t e r m e c o n o m i c a n d s o c i a l d e v e l o p m e n t ; e n s u r i n g that the s e a r c h f o r i n t e r n a t i o n a l c o m p e t i t i v e n e s s b e a c h i e v e d by i n c r e a s i n g p r o d u c t i v i t y a n d not by r e d u c i n g w a g e s ; a n d g u a r a n t e e i n g that the d e c e n t r a l i z a t i o n a n d p r i v a t i z a t i o n of a c t i v i t i e s a n d p u b lic e n t e r p r i s e s will s t r e n g t h e n civil s o c i e t y , i n c r e a s e s o c i a l a n d p o l i t i c a l participation, and strengthen medium, small, and cooperative private ent e r p r i s e s , a n d will not s i m p l y s e r v e as a p r e t e x t to a b a n d o n b a s i c p u b l i c f u n c t i o n s or l e a v e t h e m to the m a r k e t a n d t h u s a l l o w u n c o n t r o l l a b l e n a tional a n d f o r e i g n p r i v a t e m o n o p o l i e s in p u b l i c s e r v i c e s and b u s i n e s s . In short, the p o l i c y restrictions i m p o s e d by the e c o n o m y d e m a n d c r e a t i v e political a n d e c o n o m i c a n s w e r s in t e r m s of the e x t e r n a l debt, state r e f o r m , social policies, international r e i n s e r t i o n , p r o d u c t i v e r e s t r u c t u r i n g , c a p i t a l a c c u m u l a t i o n , a n d t e c h n i c a l p r o g r e s s in o r d e r to s u s t a i n t h e d e m o c r a t i z a t i o n p r o c e s s , w h i c h a p p e a r s so t h r e a t e n e d . Both d o m e s t i c and e x t e r n a l e c o n o m i c c o n d i t i o n s c o n s t i t u t e a l i m i t i n g f r a m e w o r k , but the b r e a d t h or n a r r o w n e s s of this f r a m e w o r k d e p e n d s on the e f f i c a c y , c r e a t i v ity, and responsibility of political, intellectual, a n d technical actors l e a d i n g the political p r o c e s s . T h e c h a l l e n g e is e n o r m o u s , but so are the o p p o r t u n i ties f o r r e o r g a n i z i n g our e c o n o m i e s a n d societies in order to a c h i e v e a new s t a g e of stable a n d c o n s o l i d a t e d d e m o c r a t i c d e v e l o p m e n t .

• Toward Development from Within: Bases for a Proposal It is well k n o w n that it has b e c o m e c u s t o m a r y in the literature on Latin A m e r i c a n d e v e l o p m e n t to d i s t i n g u i s h b e t w e e n the o u t w a r d - l o o k i n g d e v e l o p m e n t p r i o r to the 1 9 3 0 s a n d the i n w a r d - l o o k i n g d e v e l o p m e n t t h r o u g h i m p o r t s u b s t i t u t i o n i n d u s t r i a l i z a t i o n f r o m the 1 9 3 0 s o n w a r d s . H o w e v e r , . . . the actual c o u r s e f o l l o w e d by past d e v e l o p m e n t r e s p o n d e d m o r e to p r e s s u r e s f r o m a d v e r s e e x t e r n a l c i r c u m s t a n c e s than to a p r e c o n ceived purpose on the part of e c o n o m i c or intellectual authorities at the time. T h e f o l l o w i n g q u o t a t i o n f r o m o n e of the p i o n e e r i n g w o r k s of Raul P r e b i s c h p r o v i d e s a f a i t h f u l a c c o u n t of the t r u e m e a n i n g that t h e E C L A school of t h o u g h t g a v e the industrialization p r o c e s s in its o r i g i n s . T h e e c o n o m i c d e v e l o p m e n t of the peripheral countries is o n e m o r e s t a g e in the w o r l d - w i d e spread o f the n e w f o r m s o f p r o d u c t i v e t e c h n i q u e . . . . A f e w early s i g n s o f this n e w s t a g e had already appeared in the primary producer c o u n t r i e s b e f o r e the First World War. But it w a s the war, w i t h the c o n s e q u e n t d i f f i c u l t i e s o f m a i n t a i n i n g imports, w h i c h r e v e a l e d the industrial p o s s i b i l i t i e s o f t h o s e c o u n t r i e s , w h i l e the great e c o n o m i c depression of the 1 9 3 0 s strengthened the c o n v i c t i o n that t h o s e p o s s i b i l i t i e s had

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to be used in order to offset, by means of internal development, the manifest failure of the external incentive which until then had stimulated Latin American economy; this conviction was confirmed during the Second World War, when Latin American industry, with all its improvisations and difficulties, nevertheless became a source of employment and of consumption for a large and increasing part of the population (ECLA

1950). It is thus clear that Prebisch's original proposal distinguished both stages in terms of compensating the dynamic stimulus of the propagation of modern techniques that came from without, and which had become insufficient, by developing stimulus from within. T h e change of wording suggests a f u n d a m e n t a l distinction. Prebisch was thinking of a domestic industrialization process capable of creating an endogenous mechanism of capital accumulation and generation of technical progress and improvements in productivity, as constituted in the central countries since the Industrial Revolution. Thus, Prebisch describes Japan's incorporation into the "universal propagation of technical progress," pointing out that incorporation occurred when Japan "set out to rapidly assimilate Western production modes." T h e latter expression is particularly revealing, since it refers to assimilating and not transferring, copying, or reproducing technical progress, and places express emphasis on production modes, in other words, on the supply side of the economy. In contrast, inward-looking development places the emphasis on demand, on the expansion of the domestic market, and on replacing previously imported goods with locally produced goods, instead of placing the emphasis on accumulation, technical progress, and productivity. This led to a strategy based on the expansion of domestic consumption and the local reproduction of consumption, industrial production, and technological patterns of central countries, primarily through import substitution guided by a narrow and biased domestic demand shaped by a very unequal pattern of domestic income distribution [see Chapters 9 and 10]. The strategy of industrial development from within has very different implications. In short, in the words of Fajnzylber (1983), it involves a "creative domestic effort to shape a productive structure that is f u n c tional to the specific national deficiencies and potentials." Responding to this logic, one begins by establishing those industries considered to be the essential pillars for creating what we would call today a basic endogenous nucleus for industrialization, accumulation, the generation and diffusion of technical progress, and the increase of productivity. This initial creative impulse gives rise to industries such as iron and steel, electrical machinery and engineering, and basic chemistry and petrochemicals and to the infrastructure for energy, transportation, and communications, based on the use

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of hitherto idle natural resources and f r o m the articulation and integration of the national territory and market. According to Fajnzylber, once this foundational stage has passed, the reinforcement of domestic creativity d e m a n d s greater participation and closer interrelation b e t w e e n different agents and motivations: large industrial plants tied to m e d i u m and small business, scientific, and technological i n f r a s t r u c t u r e ( t e c h n o l o g i c a l and basic sciences research institutions and the like); the training of skilled human resources; mass c o m m u n i c a tions media; and public agencies defining strategy, policies, and standards. Once the c o m m u n i c a t i o n , interaction, and fluidity of the articulation between these actors, a g e n c i e s , and levels of d e c i s i o n m a k i n g are c o n s o l i dated as a national practice, an " e n d o g e n o u s nucleus of technological dyn a m i s m " will have been f o r m e d . Only then will it be possible to generate articulated systems capable of reaching international levels of excellence in every link of the productive specialization chain. Such a strategy is not directed, a priori, toward meeting the final c o n s u m p t i o n d e m a n d s of m e d i u m - and u p p e r - i n c o m e sectors, nor d o e s it start out p r e j u d g i n g in favor of an import substitution process that w o u l d eventually lead d o w n a blind alley. It leaves open the options to orient this industrialization f r o m within toward strategic d o m e s t i c , regional, and world markets, based on activities in which our countries possess or can acquire relative levels of e x c e l l e n c e that g u a r a n t e e them a solid a n d dynamic insertion into the world economy. D y n a m i c linkages do not occur, as in import substitution industrialization, f r o m final d e m a n d b a c k w a r d s toward inputs and capital goods and technology, but rather f r o m the latter e l e m e n t s t o w a r d the selective tapping of d o m e s t i c and external d e m a n d s c o n s i d e r e d to be essential f o r a long term strategy. A veritable and solid national and regional development will have to be based primarily on the transformation of the natural resources Latin America possesses in relative a b u n d a n c e ; the extensive and efficient utilization of the c o n s i d e r a b l e acc u m u l a t e d p r o d u c t i v e i n f r a s t r u c t u r e of the region; a d e t e r m i n e d s a v i n g s and investment effort; the effective contribution of the entire p o p u l a t i o n — in particular those that have remained in the informal sector; and the adoption of life and consumption styles and productive techniques and organizational f o r m s that are in line with the e n o r m o u s tasks ahead. T h e traumatic experiences of the recent past are c o m p o u n d e d by the somber international prospects for the near future. Table 20.4 compares the rather positive trends of the 1 9 5 0 - 1 9 7 0 period with the much less favorable contemporary situation. In these conditions the main issues affecting Latin A m e r i c a in the current critical historic m o m e n t are debt, crisis, the appalling social cost of a d j u s t m e n t and restructuring, and the need to o v e r c o m e them as soon as possible. Transition strategies and policies are required that will reestablish and a f f i r m d e m o c r a c y and be s u s t a i n a b l e

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Table 20.4 Long-Term Trends in the International Economy Before and After the 1970s

World e c o n o m y International trade Terms o f trade Public international financing Direct f o r e i g n investment Private f i n a n c i n g

Interest rates Protectionism International cooperation External c o n d i t i o n a l i t y in e c o n o m i c p o l i c y matters

B e t w e e n 1 9 5 0 and 1 9 7 0

After 1 9 8 0

E x c e p t i o n a l l y rapid and sustained g r o w t h Great e x p a n s i o n R e l a t i v e l y l o w and stable (in relation to early 1 9 5 0 s ) Rapid and sustained increase Rapid and sustained expansion Exceptional expansion since m i d - 1 9 6 0 s

S l o w and unstable g r o w t h

Very l o w Decreasing Very favorable attitude Short term I M F

S l o w g r o w t h , instability S e v e r e deterioration (in relation to 1 9 8 0 ) Limited e x p a n s i o n Very s c a r c e Scarce, d e c r e a s i n g , and substantial n e g a t i v e net f l o w (debt s e r v i c i n g ) Very high Strong increase Very n e g a t i v e attitude Short term: IMF, international banks, U.S. government L o n g term: World Bank, U.S. government

Source: Osvaldo Sunkel (1987) "El futuro del desarrollo latinoamericano: algunos temas de reflexión," in Neoliberalismo y políticas económicas alternativas, Quito, Ecuador: Cordes.

over the medium and long terms. T h e success of this transition obviously involves o v e r c o m i n g both the past i n w a r d - l o o k i n g stage of d e v e l o p m e n t and the present, rather one-sided experiences of renewed outward-looking growth. T h e alternative is to e m b a r k upon a d e v e l o p m e n t and industrialization strategy f r o m within, which brings with it d y n a m i c accumulation, innovation, and increased productivity. Given the current scenario of depressed investment, one should particularly stress that the efficient allocation of r e s o u r c e s — a n d , consequently, increased p r o d u c t i v i t y — i s a necessary but insufficient condition for achieving the objective of growth with greater equity. An additional challenge is the increased internal and external financing required to implement the new strategy, particularly at a time when Latin America is experiencing severe fiscal problems and chronic scarcity of foreign exchange due to the heavy burden of servicing the foreign debt. An immediate alternative is imperative and at hand: at least a partial suspension of transfers of domestic savings abroad in order to recover investment levels. As Ramos points out in Chapter [17], an adjustment program

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will b e e f f i c i e n t only if it helps to correct the p e r m a n e n t i m b a l a n c e s in the external accounts, not only the transitory i m b a l a n c e s . On the basic p r e m i s e , o p t i m u m conditionality s h o u l d e n s u r e external f i n a n c i n g as a c o u n t e r p a r t to an e q u i v a l e n t p e r m a n e n t d o m e s t i c a d j u s t m e n t e f f o r t . It s h o u l d b e e m p h a sized again that what is involved is a suspension of transfers a b r o a d , but not s u s p e n s i o n of the c o r r e s p o n d i n g d o m e s t i c s a v i n g s e f f o r t . T h i s m e a s u r e , w h i c h s h o u l d be n e g o t i a t e d a n d a g r e e d u p o n w i t h the c r e d i t o r s , w o u l d m a k e a v a i l a b l e a c o n s i d e r a b l e v o l u m e of f o r e i g n e x c h a n g e . T h e e x a c t a m o u n t w o u l d d e p e n d on the d e b t s e r v i c i n g b u r d e n of e a c h c o u n t r y , on the p r o p o r t i o n of the p a y m e n t it is a g r e e d to s u s p e n d , a n d , as h a s b e e n s t r e s s e d , o n the p r e m i s e that t h e i n c r e a s e d f o r e i g n e x c h a n g e a v a i l a b i l i t y is not u s e d to f i n a n c e an e x p a n s i o n a r y p r o c e s s b a s e d on i n c r e a s e s in c o n s u m p t i o n . If it w e r e p o s s i b l e to e n s u r e that by m e a n s of t h e s e a c t i o n s o n e c o u l d e f f e c t i v e l y d i s p o s e of a s i g n i f i c a n t p o r t i o n of this potential v o l u m e of f o r e i g n e x c h a n g e , a g o o d part of the s t r a t e g y ' s initial f i n a n c i n g n e e d s w o u l d b e e n s u r e d w i t h i n an e n c o u r a g i n g c o n t e x t of e c o n o m i c r e c o v e r y that w o u l d f a c i l i t a t e its c o n s o l i d a t i o n at h i g h e r l e v e l s of domestic investment and saving. A d o m e s t i c e f f o r t of s u c h m a g n i t u d e a n d e c o n o m i c a n d social ser i o u s n e s s s h o u l d elicit the c o o p e r a t i o n of the i n t e r n a t i o n a l c o m m u n i t y not directly a f f e c t e d b y the partial s u s p e n s i o n of debt s e r v i c i n g , w h i c h w o u l d be the large m a j o r i t y , a n d w h i c h c o u l d e x e r t p o s i t i v e i n f l u e n c e o n i n d u s trialized c o u n t r i e s a n d i n t e r n a t i o n a l a g e n c i e s . In s o m e i n d u s t r i a l i z e d c o u n tries, the U n i t e d States in particular, there are i m p o r t a n t v o i c e s a n d s e c t o r s that h a v e e x p r e s s e d d i s s a t i s f a c t i o n w i t h o f f i c i a l p o l i c y . L a t i n A m e r i c a s h o u l d s u p p o r t and s t r e n g t h e n t h o s e sectors with c o n c r e t e a n d s o u n d technical a n d political a r g u m e n t s . T h i s d e b a t e a n d the e n s u i n g internal political p r e s s u r e s in i n d u s t r i a l i z e d c o u n t r i e s are c r i t i c a l in c h a n g i n g o f f i c i a l p o s i t i o n s . T h e w o r l d e c o n o m y is in a n e g a t i v e - s u m - g a m e s i t u a t i o n in w h i c h all, or virtually all, lose or at least d o not w i n . D e b t o r c o u n t r i e s are the m o s t a f f e c t e d , p a r t i c u l a r l y their p o o r e r c l a s s e s , but c r e d i t o r c o u n t r i e s a l s o l o s e or d o not w i n . T h e l o w e r l e v e l s of e c o n o m i c activity, e m p l o y ment, trade, investments, and international financial flows constitute a r e c e s s i v e i n f l u e n c e on the w o r l d e c o n o m y a n d a f a c t o r of instability a n d uncertainty. H o w e v e r , any s u c c e s s a c h i e v e d in s u s p e n d i n g e x t e r n a l d e b t serv i c i n g s h o u l d in n o w a y m e a n a s u s p e n s i o n of the c o r r e s p o n d i n g d o m e s tic s a v i n g e f f o r t . T h i s is t h e m a i n d i f f e r e n c e w i t h p o p u l i s t p r o p o s a l s f o r s u s p e n d i n g e x t e r n a l d e b t s e r v i c i n g . R a t h e r , this e f f o r t s h o u l d b e f o r m a l ized b y m e a n s of an institutional f r a m e w o r k , s u c h as a N a t i o n a l F u n d f o r E c o n o m i c R e s t r u c t u r i n g a n d S o c i a l D e v e l o p m e n t . M o r e o v e r , as a m e a n s of s i m u l t a n e o u s l y p r o m o t i n g s o c i a l a n d p o l i t i c a l c o n s e n s u s a n d s u p p o r t , all s o c i a l s e c t o r s s h o u l d b e d e m o c r a t i c a l l y r e p r e s e n t e d in t h i s f u n d . Initially, at least, p r i o r i t y s h o u l d b e g i v e n to a p p l y i n g its r e s o u r c e s to the

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most p r e s s i n g social p r o b l e m s and to raising the efficient p r o d u c t i o n of tradables (Sunkel 1989). In order to deal more generally with the f u n d a m e n t a l problem of linking the short term with the long term and linking the structural factors with those of the current f u n c t i o n i n g of the economy, as well as with the social, cultural, and political aspects of a r e n e w e d d e v e l o p m e n t strategy f r o m within, it is imperative to o v e r c o m e the prevailing conventional econ o m i c a p p r o a c h e s . O n e way to attempt this c o m p l e x articulation task, at least conceptually, is to distinguish clearly b e t w e e n annual short term f l o w s , w h i c h are what c o n v e n t i o n a l e c o n o m i c s deals with almost exclusively, and the national wealth, assets, or stocks acquired and accumulated over the long term, w h i c h are usually n e g l e c t e d . T h e nature and c h a r a c teristics of annual f l o w s condition and s h a p e national assets in the long term; these assets in turn constitute the structural factors that largely condition short term f l o w s . T h r e e kinds of stock may be d i s t i n g u i s h e d : social and cultural assets (population and its d e m o g r a p h i c characteristics, traditions, values, educational levels, s c i e n t i f i c and technological capacity, institutional organization, ideologies and political systems, and regimes); natural e n d o w ments (the territory, its ecosystemic characteristics, and the current and potential availability of r e n e w a b l e and nonrenewable natural resources); and f i x e d capital assets ( p r o d u c t i v e capacity a n d installed and a c c u m u l a t e d infrastructure, or the built environment). T h e s e are obviously merely ext e n d e d political e c o n o m y versions of the three classical p r o d u c t i v e resources: labor, land, and capital. Although it is basically an e c o n o m i c approach, it has the a d v a n t a g e of suggesting linkages b e t w e e n the social, cultural, and political aspects of development and the spatial and environmental aspects, as well as with accumulated productive capacity—in other words, the relationship of the assets a m o n g t h e m s e l v e s and with the system of f l o w s , and, t h e r e f o r e , the relationship b e t w e e n the m e d i u m and long term trends and the annual flows. These refer essentially to short term m a c r o e c o n o m i c balances and f o c u s on fiscal, monetary, external, e m p l o y ment, and income balances and their implications and sociopolitical conditioning factors. Thus, for example, the serious negative external imbalance in inc o m e f l o w s and foreign exchange outlays severely curtails imports, causing considerable underutilization of the accumulated sociocultural, human, natural, and productive potential. This m e a n s that a considerable a m o u n t of r e s o u r c e s (cultural, organizational, and material) could be m o b i l i z e d with a modest availability of imported inputs. This reveals in turn the structurally dependent nature of the former development pattern, and with it the critical link b e t w e e n the d o m e s t i c and the external, both at the m a c r o e c o n o m i c policy level of short term f l o w s and in view of the longer

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term d e v e l o p m e n t s t r a t e g y a n d p o l i c i e s r e g a r d i n g the utilization of the e n d o w m e n t of p r o d u c t i v e a s s e t s . T h i s c o n c e p t u a l i z a t i o n a l s o h e l p s to s h e d light on the issue of the p a s s a g e f r o m a c o n v e n t i o n a l r e c e s s i v e a d j u s t m e n t to an e x p a n s i o n a r y a d j u s t m e n t , a n d to the transition t o w a r d d e v e l o p m e n t f r o m w i t h i n . R e c e s s i v e a d j u s t m e n t essentially c o n s i s t s of m a n i p u l a t i n g short term e c o n o m i c policy i n s t r u m e n t s a i m e d at l i m i t i n g g l o b a l d e m a n d , c u t t i n g b a c k o n p u b l i c expenditure, reducing investment, lowering income, curbing monetary e x p a n s i o n , a n d d e v a l u a t i n g t h e c u r r e n c y , all of this f o r t h e p u r p o s e of r e d u c i n g i m p o r t s a n d a c h i e v i n g e x t e r n a l b a l a n c e , but with s e r i o u s e f f e c t s on capital a c c u m u l a t i o n , p r o d u c t i o n , w a g e s , a n d e m p l o y m e n t . E x p a n s i v e a d j u s t m e n t , rather than p l a c i n g the a c c e n t unilaterally on, or g i v i n g priority to, c u r b i n g d e m a n d a n d i m p o r t s , w o u l d c o m b i n e a p o l i c y of s e l e c t i v e restriction of d e m a n d w i t h a p o l i c y of s e l e c t i v e e x p a n s i o n of s u p p l y . T h e aim w o u l d be to c h a n g e the c o m p o s i t i o n of b o t h to a c h i e v e their r e c i p r o cal a d j u s t m e n t a n d b a l a n c e . A s i m u l t a n e o u s e f f o r t w o u l d a l s o b e u n d e r t a k e n to u t i l i z e the idle a n d a v a i l a b l e s o c i o c u l t u r a l , n a t u r a l , a n d c a p i t a l p r o d u c t i v e potentials in the short t e r m , w h i l e s h a p i n g an i n v e s t m e n t policy a n d i n s t i t u t i o n a l a n d s o c i o c u l t u r a l c h a n g e s a i m e d at m o d i f y i n g in the l o n g e r t e r m the d e p e n d e n t , h e t e r o g e n e o u s , d i s c o n n e c t e d , a n d p o l a r i z e d s t r u c t u r e of t h o s e s o c i o c u l t u r a l , natural, a n d capital assets. W h i l e the u l t i m a t e g o a l of t h e r e c e s s i v e r o u t e is p a y m e n t of t h e external debt, the s e l e c t i v e r e c o v e r y a l t e r n a t i v e has as a r u l i n g h o r i z o n the p a y m e n t of the " s o c i a l d e b t . " 5 In the latter a p p r o a c h , p r i m a r y i m p o r t a n c e is g i v e n b o t h to s h o r t - t e r m a c t i o n s , a i m e d at r e d u c i n g the e x t e n t a n d deg r e e of p o v e r t y , a n d to l o n g - t e r m p o l i c i e s that s e e k to o v e r c o m e e x t r e m e p o v e r t y levels t h r o u g h n e c e s s a r y d i s t r i b u t i v e c h a n g e s in o r d e r to reach a socially a c c e p t a b l e e q u i t y level. M o r e o v e r , r e c e s s i v e d e m a n d p o l i c y relies on the m a r k e t to i m p o s e its s e l e c t i v e n e s s , with w e l l - k n o w n r e g r e s s i v e e f f e c t s g i v e n the i n c o m e a n d p o w e r c o n c e n t r a t i o n and the h e t e r o g e n e i t y of the p r o d u c t i v e structure, w h e r e a s a c o m b i n e d policy of selective restriction of d e m a n d and s e l e c t i v e e x p a n s i o n of s u p p l y w o u l d h a v e to m a k e intellig e n t use of the m o b i l i z i n g , g u i d i n g , a n d c o o r d i n a t i n g c a p a c i t y of the state. In the light of t h e s e c o n s i d e r a t i o n s a n d a p p e a l i n g to the w e a l t h of s o c i o c u l t u r a l a n d political e x p e r i e n c e of the last d e c a d e , it is a d v i s a b l e to r e e x a m i n e the role of e a c h social a g e n t in t h e political and e c o n o m i c tasks of a t r a n s i t i o n t o w a r d s e l f - s u s t a i n e d a n d e q u i t a b l e d e v e l o p m e n t . B e a r i n g this in m i n d , the m u c h - m a l i g n e d u s e of s t a t e i n t e r v e n t i o n s h o u l d be a n a l y z e d u s i n g a m o r e p r a g m a t i c c r i t e r i o n , r e c o g n i z i n g the vital r o l e of the s t a t e in m a k i n g u p f o r m a r k e t f a i l u r e s a n d f o r n e g a t i v e t r e n d s in the d i s tribution of the b e n e f i t s of g r o w t h , as well as its role in g u i d i n g l o n g term d e v e l o p m e n t a n d its u n a v o i d a b l e c o m m i t m e n t as g u a r a n t o r of d e m o c r a t i c institutionality.

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For their part, the private sector, workers, and entrepreneurs have the legitimate right to demand respect for the rules of the g a m e and for individual f r e e d o m and creativity. However, they should also assume the responsibility of responding with their utmost productive potential to the d e m a n d s of efficient economic development and to moderate their socioeconomic demands as an effective way of contributing to political stability. A s Rosenthal (1989) suggests, the legitimacy of the state should not be e s t a b l i s h e d at the e x p e n s e of the private sector, but at the s a m e time, the legitimacy of the private sector cannot be f o u n d e d at the expense of the state and, in particular, of the most vulnerable strata of society. Both agents should be important actors in the e c o n o m i c d o m a i n and only through their reciprocal support, by m e a n s of c o n s e n s u s - b u i l d i n g processes, will a s p a c e of d e m o c r a t i c political c o n v e r g e n c e be achieved in which an e f f i c i e n t and m o d e r n state can f u n c t i o n without restricting the initiative and f r e e d o m of private agents. With regard to the p r e c e d i n g c o n s i d e r a t i o n s , it is important to point out that in Latin American countries there is a wealth of macroeconomic and sociopolitical experience, in addition to more detailed sectoral, regional, and specific practical k n o w l e d g e of grass-roots social organizations. This should also serve as a basis to attempt the formulation of concrete proposals for development actions aimed at mutually supporting and adequately h a n d l i n g a c c u m u l a t e d assets. P r o p o s a l s should f o c u s both at the m i c r o e c o n o m i c and local as well as the m e z z o e c o n o m i c , regional, and m a c r o e c o n o m i c policy levels. All of these d i m e n s i o n s are important and complementary given the structurally heterogeneous nature of the poverty conditions in which a large part of the Latin American population remains. (See [Chapter 5] f o r b a c k g r o u n d i n f o r m a t i o n on the r e g i o n ' s serious poverty p r o b l e m . ) E f f o r t s at e f f i c i e n t social assistance will have greater impact and lower costs in the short term, and in turn, a correct macroecon o m i c d e p l o y m e n t could contribute to e l i m i n a t i n g the structural conditioning factors of extreme poverty ( P R E A L C - I L O 1988b). Assistance or direct policies can focus their redistributive efforts in three areas: social expenditure policies, contingency employment programs, and policies directed at the informal sector and small and medium business. First, social expenditure should f o c u s on the neediest groups in urban and rural areas, f a v o r i n g their access to social p r o g r a m s involving nutrition, health care, education, housing, and social security. It would be advisable to insist on specific measures aimed at improving nutritional programs directed at the child and maternal sector, without detriment to continuing this assistance to the rest of the population; introducing legislative reforms on health care to include the u n e m p l o y e d and reduce the contributions of lower income taxpayers; universalizing basic general education; overcoming the e n o r m o u s housing deficit; and increasing retirement pensions and the coverage of the poorest groups in the social security system.

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In t e r m s of the s e c o n d set of p o l i c i e s , w e c a n p o i n t to m a s s i v e l a b o r e m p l o y m e n t p r o g r a m s f o r c o n s t r u c t i o n a n d r e c o n s t r u c t i o n of h o u s ing, sanitation w o r k s , i n f r a s t r u c t u r e , and c o m m u n i t y i m p r o v e m e n t s in p o p ular s e t t l e m e n t s ; c o n s t r u c t i o n , r e c o n s t r u c t i o n , a n d m a i n t e n a n c e of r o a d inf r a s t r u c t u r e , p u b l i c w o r k s , a n d h u m a n s e t t l e m e n t s in g e n e r a l ; p r o t e c t i o n against f l o o d s a n d o t h e r d i s a s t e r s c a u s e d by natural f o r c e s ; f o r e s t a t i o n a n d terrace f o r m a t i o n in e r o s i o n - p r o n e areas; c l e a n - u p a n d p r o t e c t i o n of r i v e r s a n d c a n a l s , d r a i n a g e w o r k s , a n d irrigation; i n c o r p o r a t i o n of n e w lands; repair a n d m a i n t e n a n c e of p u b l i c b u i l d i n g s , m a c h i n e r y , a n d e q u i p m e n t ; a n d other s u c h labor i n t e n s i v e p r o d u c t i v e activities. . . . In m a n y c a s e s and c o u n t r i e s , there are also a m p l e p o s s i b i l i t i e s f o r t a k i n g a d v a n t a g e of a c c u m u l a t e d r e s o u r c e potential t h r o u g h social r e f o r m s a n d s t r u c t u r a l , l e g a l , i n s t i t u t i o n a l , a n d t e c h n o l o g i c a l i n n o v a t i o n s that f a cilitate a c c e s s b y vast social s e c t o r s to u n d e r u t i l i z e d or n e g l e c t e d natural r e s o u r c e s , a n d that i m p r o v e their m a n a g e m e n t . It is i m p e r a t i v e to i n c l u d e in the a g e n d a s t r u c t u r a l a n d i n s t i t u t i o n a l r e f o r m s a n d s o c i a l o r g a n i z a t i o n i n n o v a t i o n s at all l e v e l s . M a n y of t h e s e r e f o r m s can b e s e e n as b e i n g the n e c e s s a r y s u p p o r t that small a n d m e d i u m - s i z e d b u s i n e s s a n d the i n f o r m a l s e c t o r s s h o u l d r e c e i v e , to cut the n o o s e that is c h o k i n g f u l l e x p r e s s i o n of their p r o d u c t i v e potential. A large part of the i n c o m e of the m o s t i m p o v e r i s h e d social g r o u p s c o m e s f r o m the labor m a r k e t , f o r w h i c h r e a s o n the array of selective m e a sures a n d p r o g r a m s e v a l u a t e d at the m a c r o level s h o u l d u n d e r s c o r e the increase in i n v e s t m e n t and its r e o r i e n t a t i o n t o w a r d a c t i v i t i e s that m a x i m i z e the g e n e r a t i o n of p r o d u c t i v e e m p l o y m e n t . E n s u r i n g the p e r m a n e n c e of this s a l u t a r y e f f e c t r e q u i r e s that i n v e s t m e n t be a l l o c a t e d to t r a d a b l e s e c t o r s , particularly e x p o r t a b l e s a n d b a s i c c o n s u m p t i o n , w i t h the greatest e m p l o y ment linkage. R e m u n e r a t i o n p o l i c y that p u r s u e s the p r e c e d i n g o b j e c t i v e m u s t f o c u s o n the r e c o v e r y of d e p r e s s e d real w a g e l e v e l s a n d o n s c h e d u l i n g rates of [ w a g e ] i n c r e a s e a c c o r d i n g to p r o d u c t i v e p e r f o r m a n c e . T a r g e t i n g . . . the p o o r e s t strata also r e q u i r e s an active m i n i m u m w a g e p o l i c y a i m e d at i m p r o v i n g the r e m u n e r a t i o n l e v e l s of t h e s e w o r k e r s . T o p r e v e n t i n f l a t i o n a r y b r e a k o u t s a n d p r o v i d e w o r k e r s i n c e n t i v e s , part of the real w a g e p a i d o v e r a n d a b o v e p r o d u c t i v i t y c o u l d t a k e t h e f o r m of an i n v e s t m e n t w a g e , i n c r e a s i n g w o r k e r p a r t i c i p a t i o n in c o m p a n y e q u i t y and b e c o m i n g an a d e q u a t e m e c h a n i s m f o r p e r m a n e n t l y altering the d i s t r i b u t i v e s t r u c t u r e . N e v e r t h e l e s s , it m u s t b e r e c o g n i z e d that the d e b t c r i s i s h a s i m p o s e d a t e m p o r a r y structural i m p e d i m e n t to the c h a l l e n g e of s u b s t a n t i a l l y r e v e r s i n g r e g r e s s i v e i n c o m e d i s t r i b u t i o n in the short t e r m . T h e i m m e d i a t e need to g e n e r a t e [an] external [trade] s u r p l u s d e m a n d s the m a i n t e n a n c e of a high real e x c h a n g e rate, a n d , c o n s e q u e n t l y , this d e m a n d s m o d e r a t i o n in w a g e c l a i m s . O n l y o v e r the m e d i u m a n d l o n g t e r m , a n d to the extent that productivity is increased, can greater and fairer w a g e aspirations be a d d r e s s e d

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in o r d e r to render them c o m p a t i b l e with the necessary incentives to the tradable sector. At another overall d e v e l o p m e n t strategy level, it is necessary to r e c o g n i z e the need f o r c o o r d i n a t e d natural r e s o u r c e and e n v i r o n m e n t a l m a n a g e m e n t that allows f o r the sustainable e x p l o i t a t i o n of the i m m e n s e potential available and the generation and d e v e l o p m e n t of " n e w " productive resources (Sunkel 1980, 1987). T h e rational transformation of the natural environment through scientific and technological research permits the utilization of opportunities and implies appropriate m a n a g e m e n t of the env i r o n m e n t a l supply. Natural resources are not a static g e o g r a p h i c datum, but are created by society to the extent that society decides and knows how to seek them and utilize them. Biased by its dependent and imitative development, the region has been unimaginative both in terms of avoiding w a s t e and in optimizing the utilization of its resources. S c i e n t i f i c and technological research has not been aimed primarily at protecting environmental resources or promoting their a d e q u a t e m a n a g e m e n t . Our countries have not devoted e f f o r t s to i d e n t i f y i n g u n r e c o g n i z e d or neglected resources, i m p r o v i n g technical e f f i c i e n c y in the use of raw materials and energy, nor i m p r o v i n g energy c o n s e r v a t i o n , m u c h less the utilization of w a s t e a n d residues. C o n s e quently, this e n o r m o u s latent potential could eventually b e t r a n s f o r m e d through a d e q u a t e science and t e c h n o l o g y policy into a concrete and important contribution to future development. In addition, it is possible to i m p r o v e the utilization of a c c u m u lated productive assets by seeking a more systematic, interconnected, and c o m p r e h e n s i v e utilization of the external e c o n o m i e s created by capital invested in a given sector for its utilization in other sectors. This situation arises f r e q u e n t l y in the case of large projects, for e x a m p l e , hydroelectric d a m s , roads, ports and harbors, urban infrastructure, and social services. T h e p r e v a l e n c e of the sectoral a p p r o a c h , the c u s t o m a r y classification of the e c o n o m y into s e c t o r s — i n d u s t r y , agriculture, m i n i n g , energy, transportation, construction, housing, health, e d u c a t i o n — p e r v a d e s e c o n o m i c policy and planning, public administration, and p r o f e s s i o n a l disciplines and credit institutions. This gives rise to the duplication of activities and the waste of obvious opportunities for mutual support and c o m p l e m e n t a tion in the utilization of the multiple positive external economies that arise when a sectoral approach is replaced by a spatial-regional one. A d e q u a t e regional or spatial m a n a g e m e n t also allows a series of positive interconnected benefits to be obtained. T h u s , f o r example, w h e n the need is pointed out for protection of upper river basin forests, not only is the s u p p l y of timber and f i r e w o o d and the p r e s e r v a t i o n of wild flora and fauna ensured, but soil loss and river and dam silting is also prevented, the useful life of d a m s and irrigation s c h e m e s is lengthened, the risk of f l o o d i n g is reduced, and the d e v e l o p m e n t of a q u a c u l t u r e and tourism is

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supported. W h e n explicit consideration of the regional environment is put f o r w a r d at the project preparation stage of m a j o r infrastructure works, the p u r p o s e is not only to protect the e c o s y s t e m i c base of those very w o r k s and therefore their long-term durability and profitability, but also to bring out the d e v e l o p m e n t potential and rational utilization of a series of res o u r c e s a n d external e c o n o m i e s that are g e n e r a t e d by those w o r k s , a n d which could have a highly positive impact on the quality of life of regional and local c o m m u n i t i e s . T h e s a m e applies to national d e v e l o p m e n t programs, plans, and policies. On the other hand, the wealth of local d e v e l o p m e n t a l t e r n a t i v e s proposed and experimented with over the last d e c a d e s — s u c h as integrated productive systems, c o m b i n e d technologies, and e c o d e v e l o p m e n t — s h o u l d be considered. They are directly aimed at production to meet basic needs through the utilization of local knowledge, labor, natural resources, wastes, and residues. C o m b i n e d with appropriate technical, credit, m a n a g e m e n t , and marketing support, they could m a k e a considerable contribution at the c o m m u n i t y level. They have been resorted to in the current e c o n o m i c crisis situation but should be upgraded to help o v e r c o m e the structural heterogeneity that characterizes our economies and societies. They revalue the work process aimed at meeting essential needs and at organizing labor and underutilized skills and other potentialities, m a k i n g less use of scarce factors, such as capital and foreign exchange, and taking advantage of specific geographic contexts, daily experience, local knowledge, and cultural traditions. . . . A main characteristic of these activities and projects is their local g e o g r a p h i c specificity in concrete locations and sites. Therefore, they involve an area of public activity that lends itself particularly to decentralization and c o m m u n i t y participation, issues of special interest and priority in the search for d e m o c r a t i c p l a n n i n g and d e c i s i o n m a k i n g s y s t e m s . Although the circumstances of the crisis have served as a catalyst to start m o v e m e n t s of this type, the fact that they involve basic needs that are systematically unmet, even in an e x p a n d i n g e c o n o m y , s u g g e s t s the need to create permanent programs and activities that are adequately institutionalized and financed. M o v i n g to the other extreme of the income structure, given the severe scarcity of resources and the enormous savings and investment efforts r e q u i r e d — n o t to mention considerations of equity and sociopolitical viability—it will be imperative to limit consumption in general and conspicuous consumption in particular, especially consumption that directly or indirectly implies a high import c o m p o n e n t . We must encourage, on the one hand, efficient replacement with goods and services, technologies and designs that are based on the use of national and local material and human r e s o u r c e s and, on the other hand, e n c o u r a g e an extraordinary e f f o r t to increase exports of goods and services.

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A development strategy f r o m within, based on national effort and the exploitation of our own resources, d e m a n d s that w e c o m e down f r o m exaggerated levels of abstraction to the concrete consideration of the specific availability of human resources and technology, the characteristics of size and location of each country, the relation between population and natural resources, the environmental and energy situation, and the degree and characteristics of urbanization. This means that development policies will have to differ for countries exhibiting marked differences in these aspects; it also means that policies, applied to each country in particular, will have to give priority to consideration of differentiated regional and spatial aspects (including the urban-rural issue). All of this is in contrast to the homogenizing trends that have tried to be imposed in many different areas: e c o n o m i c policies, c o n s u m p t i o n patterns, technology, architectural designs, environmental standards, and the like. The international crisis has once again brought to the fore the importance of Latin American regional integration and cooperation. This integration process, which w a s initially conceived as a regional extension of the domestic market to favor import substitution, must now be rethought in terms of its contribution to the launching of a strong export drive and an efficient import substitution strategy. Likewise, the utilization of the extensive shared potential resources of Latin A m e r i c a should be a very important a v e n u e f o r r e v i v i n g regional c o o p e r a t i o n . Joint and c o o r d i n a t e d sustainable utilization of areas such as the River Plate basin, the A m a z o n basin, the Caribbean, Pacific, and Atlantic m a r i n e and coastal areas, and Patagonia constitutes an e n o r m o u s potential in agriculture, forestry, energy, mining, and river and sea transportation for the region. An additional c o m m e n t has to do with the distinction b e t w e e n short and long-term policies. This is of great i m p o r t a n c e w h e n d e a l i n g with both the recession and the structural crisis. Long term policies—such as those that have an impact on natural resource conservation, population, education, science and technology, international relations, regional cooperation, and social o r g a n i z a t i o n — w o u l d seem not to have any bearing on short-term p r o b l e m s . But . . . they p r o v i d e a m p l e opportunities to c o n tribute to resolving s o m e of them, such as e m p l o y m e n t g e n e r a t i o n , the meeting of basic needs, and the development of new exports and opportunities for import substitution. Conversely, short term e c o n o m i c policies, particularly special e m p l o y m e n t programs, f o r m u l a t e d in reaction to the recession could be designed so as to contribute to preserving and improving the existing social infrastructure, productive capital, natural resources, and the environment. Therefore, the close collaboration between those responsible f o r short-term m a c r o e c o n o m i c b a l a n c e s (ministries of f i n a n c e , central banks) and those c o n c e r n e d with d e v e l o p m e n t over the m e d i u m and longer term ( p l a n n i n g o f f i c e s , sectoral ministries, regional agencies,

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p u b l i c e n t e r p r i s e s ) could m a k e a positive and f r u i t f u l contribution to the objective of achieving sustainable development. In the final analysis, all the p r e c e d i n g t h o u g h t s lead to the conclusion that an enormous and complex task is implicit in the renewed challenge of a c h i e v i n g democratically a n d e n v i r o n m e n t a l l y sustainable and sustained s o c i o e c o n o m i c development f r o m within. In e c o n o m i c terms, it requires an a d e q u a t e level of capital a c c u m u l a t i o n , c o m p e t i t i v e n e s s , and creativity to p e n e t r a t e and satisfy critical markets, w h e t h e r these be domestic or f o r e i g n . In the social sphere, it urgently requires the alleviation of poverty and the achievement of a reasonable level of social justice, as well as s u f f i c i e n t labor and e d u c a t i o n a l o p p o r t u n i t i e s and substantially wider access to a decent standard of living. At the international level, it requires a d o m e s t i c p e r f o r m a n c e that allows our countries to participate individually and collectively as respected actors in the c o m m u n i t y of nations with mutually balanced and satisfactory international relations. In the cultural field, it requires the attainment of a sufficient level of national identity to represent in a pluralistic w a y the best v a l u e s a n d traditions that shape and distinguish our nations, while incorporating selectively and with creativity what world culture has to offer. In the political arena, it requires the a c h i e v e m e n t and m a i n t e n a n c e of an acceptable d e g r e e of legitimacy, representation, efficiency, responsibility, and renovation of authorities, and ample participation by the people in national, regional, and local government institutions. R e g a r d i n g h u m a n rights, a f u n d a m e n t a l c o m p o n e n t of d e m o c r a c y , the necessary respect must be e n s u r e d f o r the f u n d a m e n t a l rights of the individual, the family, a n d basic social o r g a n i z a t i o n s . Last, but certainly not least, actions must be taken in the environmental sphere to e n s u r e that the natural e n d o w m e n t inherited f r o m the past be passed down to f u t u r e generations in the best possible conditions to ensure an improved material base for their f u t u r e well-being.

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Notes

The author w i s h e s to thank Gustavo Zuleta for his collaboration in preparing this chapter. 1. The democratizing w a v e in Latin America began with the fall of dictator S o m o z a in Nicaragua ( 1 9 7 8 ) and continued in Ecuador (1979), Peru (1980), Honduras and Bolivia (1982), Argentina (1983), El Salvador (1984), Uruguay and Brazil (1985), Guatemala (1986), Paraguay (1989), and Chile (1990). 2. The enormous public financial transfers to private national and foreign banks f o l l o w i n g the debt crisis are clear evidence of the privilege granted these sectors and the unfair conditionality that the transnationalized sector imposes on our economies: benefits are privatized but losses are socialized. 3. Herrera and Vignolo ( 1 9 8 1 ) present a documented review of the series of m e c h a n i s m s used by the Chilean state in tapping surplus from the large-scale

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copper mining sector. They point to the progressive increases in direct and indirect taxation on that sector, the imposition of an overvalued peso exchange rate on export proceeds, the subsequent "Chileanization" of the large copper enterprises, which meant majority participation by the state, and finally their nationalization in 1971. Similar itineraries were followed by most of the region's countries although obviously with variations, particularly in the case of countries with nationally owned agricultural export sectors. 4. Marcel (1989) in particular evaluates the recent and radical privatization process in Chile, drawing two important conclusions. One establishes that whenever privatized enterprises were economically viable prior to their sale, the effect on public finance will most probably be negative over the long term. The other indicates that, compared to alternative sources of fiscal financing, privatizations will have a greater crowding out effect on private investment, given that they attract resources that could have been destined for new investment. In the light of this research, the greater efficiency argument with which the privatizing zeal tends to be justified is questionable. 5. The concept of "social debt" refers to a domestic commitment to recover the deterioration in the standard of living of the most vulnerable sectors of the population, which is in fact the other side of the recessive adjustment policies adopted to meet the external debt commitment (PREALC-ILO 1988a).

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References

ECLA (1950) Economic Survey of Latin America, 1949, New York: United Nations. — (1956) "Some Aspects of the Inflationary Process in Chile" in Economic Bulletin for Latin America 1 (January): 4 5 - 5 3 . ECLAC (1988) Economic Panorama of Latin America 1988 (September). Fajnzylber, F. (1983) La Industrialización Trunca de América Latina, Mexico: Editorial Nueva Imagen. Griffith-Jones, S. and O. Sunkel (1986) Debt and Development Crises in Latin America: The End of an Illusion, Oxford: Oxford University Press. Herrera, J. and C. Vignolo (1981) El Desarrollo de la Industria del Cobre y las Empresas Transnacionales: la Experiencia de Chile (April), mimeo, ECLA. Lustig, N. (1981) Distribución del ingreso y crecimiento en México. Un análisis de las ideas estructuralistas. Mexico: El Colegio de Mexico. (1988) "Del estructuralismo al neostructuralismo: La busqueda de un paradyma heterodoxo" in Colección Estudios CIEPLAN 23, Special issue (March): 3 5 - 5 0 . Marcel, M. (1989) "La Privatización de Empresas Públicas en Chile 1 9 8 5 - 1 9 8 8 " in Notas Técnicas de CIEPLAN, No. 125 (January). PREALC-ILO (1988a) Meeting the Social Debt, Santiago. (1988b) Uruguay: Los Desafíos del Crecimiento Equitativo, Documento de Trabajo (November), Montevideo, Uruguay. Rosenthal, G. (1989) Modernization of the State. Statement presented to the Special Day of Collective Reflections on Latin America and the Caribbean, 23 March 1989, Paris. Sunkel, O. (1969) "National Development Policy and External Dependence in Latin America" in Journal of Development Studies 6 (October): 23-48. (1973) "Transnational Capitalism and National Disintegration in Latin America" in Social and Economic Studies 22 (March): 132-176, Jamaica, University of West Indies.

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(1979) "Transnationalization and Its National C o n s e q u e n c e s " in J. J. Villamil (ed.) Transnational Capitalism and National Development: New Perspectives on Dependence, Hemel Hempstead: Harvester Press. (1980) "The Interaction Between Styles of Development and the Environment in Latin A m e r i c a " in CEPAL Review 12 (December): 1 5 - 4 9 . (1984) "Past, Present and Future of the International E c o n o m i c Crisis" in CEPAL Review 22 (April): 8 1 - 1 0 5 . ( 1 9 8 7 ) " B e y o n d the World C o n s e r v a t i o n Strategy: Integrating D e v e l o p ment and the E n v i r o n m e n t in Latin A m e r i c a " in P. J a c o b s and D. A. M u n r o (eds.) Conservation with Equity; Strategies for Sustainable Development, Cambridge, U.K.: International Union for the Conservation of Nature.

Acronyms A AAUP ABDIB

amortization of debt American Association of University Professors Associagäo Brasileira pelo Desenvolvimento de Industria de Base

BEFIEX

Export Fiscal Benefits

CAPES

CIMMYT CN CONACYT

C o o r d i n a d o do Aperfeigoamento de Pessoal de Nivel Superior Corporación de Investigaciones Económicas para América Latina Centro Internacional para el Mejoramiento de Maíz y Trigo consumer nondurables National Council of Scientific and Technological Research

DC DFI

developed country direct foreign investment

ECLA

United Nations Economic Commission for Latin America (CEPAL in Spanish) United Nations Economic Commission for Latin America and the Caribbean

CIEPLAN

ECLAC

FLACSO FY

Latin American Faculty of the Social Sciences foreign income outflow

GDP GNP

gross domestic product gross national product

HDI HPAEs

human development index high performance Asian economies

IMF IMIT

International Monetary Fund Instituto Mexicano de Investigaciones Tecnológicas

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acronyms

384 IPADE ISI

Instituto Panamericano de Alta Dirección de Empresa import substitution industrialization

LDC LIBOR

less developed countries London Inter-Bank Offered Rate

MTB

merchandise trade balance

NFS NIC

balance of nonfactor services newly industrialized country

OECD OPEC

Organization for Economic Cooperation and Development Organization of Petroleum Exporting Countries

PES PIS PREALC

primary export substitution primary import substitution Regional Employment P r o g r a m m e for Latin America and the Caribbean

SAM SIC SUDENE

Mexican Alimentation System semi-industrialized country Superintendency of Development of the Northeast

TNC

transnational corporation

UNAM UNESCO

Universidad Autónoma de México United Nations Educational, Scientific, and Cultural Organization

The Contributors Robert J. Alexander is professor of economics at Rutgers University, New Brunswick, New Jersey. He has published many articles and more than twenty books on Latin American development and politics, including Agrarian Reform in Latin America; Juan Domingo Perón; Labor Relations in Argentina, Brazil and Chile; Latin American Politics and Government, A New Development Strategy; and The Struggle for Democracy in Latin America. Irma Arriagada is a senior research assistant in the Social Development Division of the Economic Commission for Latin America and the Caribbean. C. E. Ayres was professor of economics at the University of Texas, Austin from 1930 to 1961. He was one of the leading contributors to the American institutionalist economic tradition. His books include The Theory of Economic Progress; The Industrial Economy; and Towards a Reasonable Society. Professor Ayres died in 1972. James L. Dietz is professor of economics at California State University, Fullerton. His many publications include Economic History of Puerto Rico; Progress Toward Development in Latin America: From Prebisch to Technological Autonomy (coedited with Dilmus James); and The Process of Economic Development (with James Cypher). Rudiger Dornbusch is Ford International Professor of Economics at the Massachusetts Institute of Technology, Cambridge. He has published extensively in the area of macroeconomics and international economics, making many distinguished contributions. His books on Latin America include Alternative Solutions to Developing-Country Debt Problems; The Chilean Economy: Policy Lessons and Challenges; The Political Economy of Argentina, 1964-1983; and Reform, Recovery, and Growth: Latin America and the Middle East (with Sebastian Edwards). Sebastian Edwards is the Henry Ford II Professor of International Business Economics at the University of California, Los Angeles and chief

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economist for Latin America and the Caribbean at the World Bank. His many articles and books include Monetarism and Liberalism: The Chilean Experiment; The Macroeconomics of Populism in Latin America (with Rudiger Dornbusch); On the Sequencing of Structural Reforms; and Debt, Adjustment, and Recovery: Latin America's Prospects for Growth and Development. Peter Evans is professor of sociology at the University of California, Berkeley. His Dependent Development: The Alliance of Multinational, State and Local Capital in Brazil has become one of the more influential books on Brazil and on state and economic relations published in recent years. Evans's most recent book is Embedded Autonomy: States and Industrial Transformation. Juan Carlos Feres is a staff member in the Statistics and Projections Division at the United Nations Economic Commission for Latin America and the Caribbean. Gary Gereffi is professor of sociology at Duke University. He has written widely on Mexico, the Asian and Latin American models of development, and, most recently, on commodity chains. A profile author of articles and book chapters, Professor Gereffi's books include Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia; The Pharmaceutical Industry and Dependency in the Third World; and Commodity Chains and Global Capitalism. Albert O. Hirschman is professor emeritus at the Institute for Advanced Studies at Princeton University. Not only is Professor Hirschman one of the early pioneers in economic development studies, with many articles and books, he also is one of the most respected economists working on Latin America. His many books on development i n c l u d e d Bias for Hope; The Strategy for Economic Development; and Rival Views of Market Society. Ricardo Infante is an economist in the Regional Employment Programme for Latin America and the Caribbean (PREALC). Emilio Klein is a sociologist in the Regional Employment Programme for Latin America and the Caribbean (PREALC). Arturo Leon is a consultant to the United Nations Economic Commission for Latin America and the Caribbean. Joseph L. Love is professor of history at the University of Illinois, UrbanaChampaign. He is the author of Rio Grande do Sul and Brazilian Regionalism and Sao Paulo in the Brazilian Federation, 1889—1937.

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Nora Lustig is a professor at the Centro de Estudios Económicos del Colegio de México and is a visiting fellow at the Brookings Institution in Washington, D.C. Her publications include many articles and Distribución del ingreso y crecimiento en México. José Antonio Ocampo is an adviser to the Colombian Foreign Trade Board. He has been an adviser to the Colombian government in several capacities and has taught at the Universidad de Los Andes. Felipe Pazos is an economic adviser to the Central Bank of Venezuela. He also founded and served as the president of the Central Bank of Cuba. Among his many publications is Chronic Inflation in Latin America, a classic on the subject. Joseph Ramos is director of the Industry and Technology Division of the United Nations Economic Commission for Latin America and the Caribbean. Besides many articles concerned with employment, income distribution, and adjustment issues, his book, Neoconservative Economics in the Southern Cone of Latin America: 1973-1983, has made an important contribution to the debate on stabilization and adjustment. Gustav Ranis is Frank Altschul Professor of International Economics at Yale University. He is a distinguished contributor to both the theory of economic development and to historico-empirical studies of particular countries. His recent work on the East Asian economies has been particularly insightful and often cited. He has published countless articles and books, including The Political Economy of Development Policy; Science, Technology, and Economic Development; and The Taiwan Success Story: Rapid Growth with Improved Distribution in the Republic of China, 1952—1979. James H. Street was professor of economics at Rutgers University, Brunswick, New Jersey. Among his many contributions are Urban ning and Development Centers in Latin America and Technological ress in Latin America: The Prospects for Overcoming Dependency. fessor Street was a coeditor of the first edition of this volume.

New PlanProgPro-

Paul Streeten is professor of economics at Boston University. He formerly worked as a special adviser to the Policy Planning and Review Department of the World Bank. He has written widely on development issues and development strategies, including Foreign Investment, Transnationals, and Developing Countries; Beyond Adjustment: The Asian Experience; and First Things First: Meeting Basic Human Needs in Developing Countries. Osvaldo Sunkel is special adviser to the executive secretary of the United Nations Economic Commission for Latin America and the Caribbean in

388

contributors

Santiago, Chile, and president of the Corporación de Investigaciones para el Desarrollo. His scholarly work in economics has greatly influenced two generations of students and colleagues. Sunkel's books include El subdesarrollo latinoamericano y la teoría del desarrollo; América Latina y la crisis económica internacional: Ocho tesis y una propuesta; and Debt and Development Crises in Latin America.

Index AAUP. See American Association of University Professors ABDIB. See Associaçâo Brasileira pelo Desenvolvimento de Industria de Base Academic freedom, 21, 27, 40-41 Adjustment programs, 4, 25, 26, 61, 63, 64, 140, 250, 280, 352, 373; current account deficits, 279, 280, 281(table), 289, 290, 371-372; demand reduction, 291, 292, 373; expansive, 373; expenditure reduction, 287, 288, 289, 291-292, 293, 306(n4); investment, 289, 290, 292, 293; and recession, 280, 287, 288, 289, 291, 292, 293, 306(n5), 373; social effects, 61, 62, 362, 363-364, 366, 373, 380(n5); and tradable/nontradable production, 286, 287, 288, 290, 291, 292-293, 306(n5); wages, 288, 328-330. See also Inflation; Stabilization programs; Transfer of resources; individual countries Agrarian reform, 59, 141, 153, 154, 155, 157, 158, 162 Agriculture, 6, 7, 155, 337(table); Asian, 169, 170(fig), 171, 173, 176, 183; employment, 153, 154, 155, 316, 317, 318(table), 320, 322, 326-327; export, 104, 134, 328, 362; food production, 175-176, 183-184; industrialization, 144, 153-154, 157, 169, 170(fig), 174(table), 183; investment in, 153, 154-155, 162, 208(table), 319; subsistence, 126, 127, 139, 153; wages and income, 327(table), 329; women in, 337(table). See also Foodstuffs; Peasant sector; Primary commodities; individual countries Alemán, Miguel, 210 Alexander, Robert, 143 Allende Gossens, Salvador, 33, 34, 60, 274, 276 Alliance for Progress, 99, 242 Altimir, O., 58

American Association of University Professors (AAUP), 27, 36 Amin, Samir, 99, 112, 113; Accumulation on a Worldscale, 113 Amsden, Alice H., 196 Andean Pact bloc, 162, 163, 176 Antigua and Barbuda, 3 Aramburu, Eugenio, 30 Argentina, 6, 8, 163, 168, 356; central bank, 101, 103, 104, 105, 106, 116(nl9); Depression, 102, 103-104, 117(n24); economic populism, 272; education, 334, 335(table); employment, 321(table), 330(n2), 333, 334(table), 335(table), 337-338(tables); export, 101, 105, 182(table); hyperinflation, 308(nl7); imports, 104, 105, 172(table); income, 59(table), 73; industrial production, 10, 104, 105, 107, 115(nl2), 157, 159, 164, 168, 172(table); inflation and adjustment, 38-39, 43(n24), 106, 253, 254(table), 255, 259, 265, 285(table), 294, 306(n8), 366(table); political repression, 29-33, 38; poverty, 70(table), 71, 72(table), 73, 75(fig), 77, 78(table), 80(n4); trade, 102-103, 104, 106, 107, 115(nl2), 116(nn 18, 19), 117(n35), 136(table), 138; unemployment, 73; wages, 288, 366(table); women, 330(nl), 333, 335(table), 337-338(tables), 340 Argentine National Council of Scientific and Technological Research (CONACYT), 32 Arrigada, Irma, 313 Asia: export performance, 15, 167-187. See also individual countries Associagäo Brasileira pelo Desenvolvimento de Industria de Base (ABDIB), 220 Austerity programs, 14, 22, 38, 249. See also Adjustment programs Austral Plan (Argentina), 265, 294, 307(nl3) Automobile industry, 221-222, 224

389

390 Ayres, C. E., 14, 83, 84; Theory of Economic Progress, The, 83 Bacha, E., 57 Balance of payments, 9, 12, 13, 215; case studies, 106, 107, 214, 224; external/internal imbalance, 248-249, 279-280, 281, 282, 286, 287; permanent/temporary imbalance, 289, 290, 291. See also Debt crisis Baltra Cortés, Alberto, 109 Barbados, 313, 334(table) Basic needs, 22, 23, 45-46, 48, 49-53, 377; human development index (HD1), 23, 24(table), 25. See also Human capital BEFIEX. See Export Fiscal Benefits program Bennett, Douglas, 219 Bergsten, Fred, 225 Beverages. See Tropical beverages; individual beverages Bitar, S., 275 Boenninger, Edgardo, 34 Bolivia, 163, 356; employment, 321(table), 330(n2), 334(table); hyperinflation and control, 253, 254(table), 255, 259, 266, 287, 294, 303, 307(nn 11, 14, 15); social expenditure, 65(n21); trade, 136(table), 138; women, 330(nl), 340 Branco, Humberto Castello, 213 Brazil, 3, 6, 174, 177(table), 203-206, 356; agriculture, 184, 288; auto industry, 221-222, 224; economic populism, 272; employment, 305(n3), 321(table), 333, 334(table), 335(table), 337-338(tables); exports, 182, 184, 206-207, 214-216, 222, 225, 231(nl3), 305(n3), 359; GDP, 203, 224, 229(nl); income, 4, 49, 58, 59(table), 74, 203, 229(nl), 344, 345(tables), 346; industrialization, 10, 145, 157, 158, 161, 164, 166, 168, 172(table), 181, 199, 207, 210, 211-213, 220, 221, 230(nl0); inflation and adjustment, 207, 226-227, 254(table), 255, 259, 265, 285(table), 287, 294, 306(n5), 308(nl7); investment, 204, 206, 207, 210, 212, 213, 214, 215, 224, 230(nllj; local interests, 220, 221; mining, 204, 218, 228; nationalism, 211, 212-213, 215, 220, 226; oil, 204, 207, 228, 230(n9); poverty, 70(table), 71, 72(table), 74, 75, 76, 78(table); state economic involvement, 207, 210, 220; TNCs, 12, 211-212, 213(table), 216-217, 218-219, 220, 221-225, 231(nl8); trade, 115(n2), 136(table), 138,

index 214, 222, 224-225, 232(n20), 305(n3); unemployment, 61, 321(table), 341, 342, 343(tables); wages, 74, 224, 321(table), 366(table); women, 333, 335(table), 337-338(tables) Bretton Woods Conference (1944), 112 Bruera, Ricardo, 31, 32 CACM. See Central American Common Market Cagan, Philip, 253 Cámpora, Héctor J., 31 Canada, investment, 210 Capital: in Asia, 147; domestic, 196, 199, 207, 212, 230(nl0); equipment, 95-96; export, 61; flight, 212-213, 276; foreign, 180, 183, 195; inflation control, 290; inflows, 180, 183, 195, 260(table), 280, 281, 290, 365(fig), 372. See also Capital accumulation; Capital goods Capital accumulation, 56-57, 125, 138, 147; in center-periphery hypothesis, 114, 115; in development model, 126 Capital goods, 10, 95-96, 165, 173, 174, 211 Cárdenas, Lázaro, 210 Caribbean, 6. See also individual countries Caribbean Common Market, 162, 163 Caribbean Free Trade Area, 163 Catholic University (Chile), 34, 160 Catholic University (Paraguay), Colegio Cristo Rey, 35 Center-periphery hypothesis, 6-8, 84-87, 99-100, 119(n68), 121-122; development of, 105, 106, 108-109, 110, 111, 113-114, 138, 367-368; semiperiphery in, 199. See also Dependent development; Import substitution industrialization; Prebisch, Raúl; Trade Central American Common Market (CACM), 99, 162, 163 CEPAL. See United Nations Economic Commission for Latin America Ceremonialism, 16, 83, 90, 91 Chapman, William Leslie, 30 Chicago School (of economic thought), 22, 36-37, 160 Chile, 3, 36, 163, 356; copper industry, 18(n6), 379(n3); democracy, 276-277, 365; economic populism, 272, 274, 275, 276; education, 334-335; employment, 321 (table), 322, 333, 334(table), 335(table), 337-338(tables); exports, 181, 182(table); income and wages, 4, 58, 59(table), 60,

index 344, 345(tables), 346, 366(table); industrialization and aftermath, 10, 105, 157, 158, 159, 160, 161-162, 164, 172(table); inflation and adjustment, 36, 38, 39, 160, 254(table), 255, 259, 262, 263(table), 264, 265, 266, 285(table), 306(n8), 307(nl2), 366(table); political repression, 29, 33-35, 38; privatization, 380(n4); trade, 136(table), 138; women, 333, 335(table), 337-338(tables), 340, 344, 345(tables), 346 Christian Democratic Party (Chile), 60 CIEPLAN. See Corporación de Investigaciones Económicas para América Latina Class, 6-7, 9, 39, 83, 195 Classical trade policy, 108, 122. See also Neoclassical trade policy Cocoa, 130, 133 Coffee, 130, 133, 135, 206, 207, 210, 214 Collor de Melo, Fernando, 365 Colombia, 163, 168; employment, 321(table), 322, 330(n2), 334(table); exports, 176, 181, 182(table); income, 25, 58, 59(table), 74, 344, 345(tables), 346; industrialization, 164, 165, 172(table), 305(n3); inflation and adjustment, 254(table), 285(table), 366(table); poverty, 70(table), 71, 72(table), 75, 76, 78(table); trade, 136(table), 138, 305(n3); unemployment, 74, 341, 342, 343(tables); wages, 61, 366(table); women, 330(nl), 344, 345(tables), 346 Common markets, 144, 162-163 Comparative advantage, 86, 101, 108, 110, 114, 159-160, 161, 173, 176, 180, 183 Computer industry, 220, 221 Conditionality, 37, 291-294, 370(table) CONACYT. See Argentine National Council of Scientific and Technological Research Conniff, M., 272 Construction, 327(table), 329, 337(table) Consumer goods, 56-57, 357, 377; Asian, 145, 173; durable, 60, 65(nl5), 145, 164, 174(table), 211; excess, 37; exports, 176, 178-179(tables); nondurable, 143, 174(table) Corporación de Investigaciones Económicas para América Latina (CIEPLAN), 38 Costa Rica, 3, 52, 163; employment, 321(table), 322, 330(n2); income, 58, 59(table), 74, 344, 345(tables), 346; inflation and stabilization, 254(table), 285(table), 294, 302-303, 306(n8),

391 307(nl4), 308(nl6), 366(table); poverty, 70(table), 71, 72(table), 73, 74, 75(fig), 77, 78(table); trade, 136(table), 138; unemployment, 341, 342, 343(tables); wages, 61, 366(table); women, 333, 337(table), 344, 345(tables), 346 Credit, 103, 107, 296, 302, 306(n8), 307(nl5); in center-periphery hypothesis, 106 Criollos, 5-6, 11 (fig) Cruzado Plan (Brazil), 265, 294, 307(nl3) Cuba, 18(n6), 164, 333, 334(table) Currency: devaluation, 249; overvaluation, 266 Debt accumulation, 4, 227-228, 247; case studies, 173, 207, 226-227, 230(n8) Debt crisis (1980s), 13-15, 60-61, 63, 73, 249, 284, 359-360, 362-363, 366(table). See also Adjustment programs; Balance of payments; Inflation; Stabilization programs Debt-for-equity swaps, 366 Debt servicing, 14, 15, 62, 63, 250, 304 Declaration of Cocoyoc, The (1974) (Dag Hammarskjöld Foundation), 45 Demand: in developmental model, 127; expansion, 262, 275 Democratization, 359, 360-361, 379(nl), 366-367 Denationalization, 12, 18(n6), 200, 216-217. See also Privatization De Pablo, Juan Carlos, 267 Dependent development, 199, 204, 205, 212, 214, 215-216, 225, 226, 227, 228, 229(n3). See also Center-periphery hypothesis Depression (1929-1933), 9, 102, 103-104, 150, 207 Desaparecidos, 32 DFI. See Direct foreign investment Diaz Alejandro, Carlos, 101, 115(nl2) Direct foreign investment (DFI), 10, 12-13, 18(n5), 21, 196, 200, 201(nl), 204-205, 226, 229(n4), 259, 260(table), 370(table); denationalization, 12, 18(n6), 200; future of, 228-229. See also Dependent development; Transnational corporations; individual countries Distributive conflict theory, 296, 306(n9) Dominica, 3 Dominican Republic, 103, 254(table), 294, 334(table) Dornbusch, Rudiger, 247, 267 Drug trafficking, 361

392 Duhau, Luis, 100 Durable goods. See Consumer goods EAP. See Economically active population Echeverría, Luis, 60, 215, 218, 223, 224, 227 ECLA. See United Nations Economic Commission for Latin America ECLAC. See United Nations Economic Commission for Latin America and the Caribbean Economically active population (EAP), 311, 313, 315, 316, 318(table), 320-321, 322, 323(table), 324, 325; sector employment, 316(table), 318(table) Economic development, 5-8, 9, ll(fig), 15, 22, 92-96, 183, 355-356, 357-358, 359; and authoritarianism, 37; Asian, 147, 193-194; dualism of, 46, 47, 65(nl0), 95; external funding, 195-196, 241-242; inward-looking, 9, ll(fig), 106, 356, 368; long/short term policy, 378-379; proposals for endogenous, 352, 367-369, 370-371, 372-373, 377-378, 369; regional, 376-377, 378; social aspects, 46, 352, 374; state role, 15, 16, 25, 147, 193-194, 195, 367; strategy switch-points, 194-195; and transnational society, 361; trends in international, 369-370; trickle-down, 25, 46, 47; vested interests, 192, 193. See also Center-periphery hypothesis; Dependent development; Economic growth; Economic populism; Trade; Trade policy Economic growth: 1950-1989, 280, 281(table), 321(table); state role, 191-192, 197(nn 1, 2, 3, 4, 5) Economic populism, 271-277, 362, 379(n3) Ecuador, 163; employment, 334(table), 335(table), 337-338(tables); industrial production, 164; inflation and adjustment, 254(table), 255, 285(table), 288, 294, 306(n8), 307(nn 14, 15); trade, 136(table), 138; wages, 366(table); women, 335(table), 337-338(tables) Education, 83, 84, 94, 96, 334, 335; expenditures, 62, 65(nl7); and income, 65(nl0), 313, 344, 345(table), 346 Edwards, Sebastian, 247 Eichner, Alfred S., 40 Elite, 6, 200, 211, 212 El Salvador, 136(tab]e), 163, 164, 254(table), 294, 334(table) Emmanuel, Arghiri, 99

index Employment, 47, 48, 60, 103, 181, 312, 333; contract, 312, 320, 325; in center-periphery hypothesis, 108; in development model, 126, 127; economic populism, 275; education, 334-335; endogenous development proposal, 375; enterprise, 322, 323(table), 324-325; industrial, 171, 316; inflation and adjustment, 322, 324-325, 330, 347-348; low-productivity, 311, 312, 317, 319, 320, 322, 325; part-time, 312-313, 320; sectoral, 312, 316-317, 318(table), 319, 320, 321, 322, 323(table), 324-325, 326-328; women, 333, 343(table); youth, 333, 347. See also Economically active population; Income; Underemployment; Wages Engel, Ernst: law of, 8, 86, 111 Environment, 376, 377 EP. See Export promotion Equity, 23, 24, 57, 63, 64, 176, 186-189(tables); social consensus, 60, 64, 65(n20). See also Economic populism; Income redistribution; Inequality Evans, Peter, 12, 199 Exchange rates. See Foreign exchange rates Export development: coefficient, 186-189(table), 283; evolution of, 168-185; phases of, 169, 170(fig), 171-176. See also Export promotion; Primary commodities Export Fiscal Benefits program (BEFIEX), 222, 224 Export promotion (EP), 146, 170(fig), 175, 184, 194, 214-216, 225, 292, 294 Exports, 6, ll(fig), 161, 162, 261, 364(table), 377; Asian, 168-185, 172, 182-183, 186-189(tables); nontraditional, 283-284, 292. See also Consumer goods; Export development; Export promotion; Export substitution; Manufacturing; Primary commodities; individual countries Export substitution, 161-162, 170(fig), 173, 283, 305(n3); Asian, 145-146 Extractive industries, 208(table), 228. See also Agriculture; Mining Factor service payments, 12 Fajnzylber, F., 368-369 FAO. See United Nations Food and Agriculture Organization Feres, Juan Carlos, 25 FLACSO. See Latin American Faculty of the Social Sciences

index Fodor, Jorge, 102 Foodstuffs: grains, 102, 104, 116(nl8), 129(table), 130, 133, 177(table); imports, 173, 176, 180; meat, 102, 104, 116(nl8); price, 129( table), 130, 132(table); protection, 174(table); sugar, 133; trade, 134(table). See also Agriculture; Primary commodities; Tropical beverages Foreign exchange rates: in center-periphery hypothesis, 108; controls, 102, 104; economic populism, 248, 273, 275, 277; endogenous development proposal, 371; inflation and adjustment, 13, 14, 15, 259, 260(tables), 261, 262, 263(table), 264, 265-266, 291, 292, 293 Frank, André Gunder, 99, 113 Free trade. See Trade Frei, Eduardo, 161 Friedman, Milton, 36, 39, 43(n26), 160 Friedman, Rose, 39 Frondizi, Arturo, 30 Frondizi, Risieri, 30 Fujimori, Alberto, 365 Furtado, C., 56, 115(n2), 119(n63) Galtung, Johan, 99 Garcia, A., 60, 274 GDP. See Gross domestic product Gereffi, Gary, 12, 199 Gini coefficient, 186-189(tables), 283 GNP. See Gross national product Gold, 103, 104, 106; standard, 102, 106 Gondra, Luis, 104, 115(n4) Gordon, Wendell, 95 Goulart, Joäo, 212, 226 Great Britain: in center-periphery hypothesis, 106, 108-109, 119(n68); trade, 87, 102-103, 116(nn 18, 19), 128, 129(table), 206 Gross domestic product (GDP), 12, 14-15, 22, 61, 165, 224, 261, 280, 281(table), 282, 284, 288, 306(n5), 323(table), 324, 326; defined, 287; hyperinflation, 303 Gross national product (GNP), 3, 12, 22, 24(table), 186-189(tables) Guatemala, 3, 163; employment, 334(table), 337(table); income, 73; inflation, 254(table), 294; poverty, 70(table), 71, 72(table), 73, 75(fig); trade, 136(table); unemployment, 73; women, 330(nl), 334, 337(table) Guerilla activity, 259, 361 Gurrieri, Adolfo, 37

393 Guyana, 3, 334(table) Haciendas, 5, 6, 11 (fig) Haiti, 3, 103, 254(table), 294, 313, 334(table) Harberger, Arnold C., 36, 39 HDI. See Human development index Health care: expenditures, 62, 65(nl7), 220 Heterodox trade policy, 18(n5), 282, 289, 293-294, 301, 307(nl3). See also Institutionalism; Neostructuralism; Structuralism Hirschman, Albert, 110, 112, 191, 200 Honduras, 3,136(table), 163, 254(table), 294, 330(nl) Hong Kong, 168, 169, 173 Houssay, Bernardo, 30 HPAEs (high performance Asian economies), 15. See also individual countries Hueyo, Alberto, 101 Human capital, 21, 94, 147, 172, 180, 183, 192, 289, 312, 369; institutionalist perspective, 83, 84. See also Basic needs development Human development index (HDI), 23, 24(table), 25. See also Basic needs development Human rights, 21, 32, 35 Hyperinflation, 287, 298, 303. See also Bolivia IDB. See Inter-American Development Bank Iglesias, E. V., 58 Illiteracy, 94 ILO. See International Labour Organization IMF. See International Monetary Fund Imports, 1, 6-7, 9, 258, 259; Asian, 176; coefficient, 283; food, 173, 176. See also Center-periphery hypothesis; Dependent development; Import substitution industrialization Import substitution industrialization (ISI), 9-10, 13, 18(n4), 125, 145, 146, 149-158, 292, 357-358; Asian, 145-147; as developmental phase, 157-158, 161-162; horizontal (easy, primary), 9, 10, ll(fig), 13, 143; imports for, 10, 13, 154, 169; market expansion, 143, 144, 151-152, 154, 156-157; market saturation, 13, 157-158, 162, 180-181, 194, 284, 358-359; products, 145, 164-166; reaction to, 159-162; trade, 110, 138-139, 143; vertical (difficult, secondary), 10, 13, 57, 199, 215. See also Center-periphery hypothesis;

index

394 Expdrt promotion; Primary import substitution (PIS); Secondary import substitution (SIS) Income, 327(table); Asian, 173, 186-187(tables); center-periphery hypothesis, 85, 111, 119(n62), 122; concentration, 56-57, 58, 83; industrialization, 156; inflation, 73, 74; informal sector, 312, 330; per capita, 3 - 4 , 17(nl), 22, 26, 74, 170-171, 186-189(tables); poverty, 45-46, 47, 69, 75(fig), 76-77, 80(nn 1, 2). See also Income distribution; Income elasticity; individual countries Income distribution, 1, 4, 22, 25, 38, 39, 55-60, 65(nn 10, 15), 176, 180, 181; Asian, 173; center-periphery hypothesis, 114; by gender, 344, 345(tables), 346; industrialization, 144. See also Equity; Income redistribution; Kuznets curve Income elasticity, 8, 86, 87, 111, 119(nn 59, 68), 122, 123, 124, 131, 133, 138; in center-periphery hypothesis, 121 Income redistribution, 58-60, 62-64, 65(n20), 271, 277; economic populism, 272-273, 274, 275 Indigence, 26, 69, 70(table), 71, 76(table), 77, 78(table), 79, 80(nl). See also Poverty Indigenous culture, extirpation of, 94 Indirect foreign investment, 206, 229(n4) Indonesia, 184, 185 Industrialization, 95, 97, 241, 176; Asian, 196; center-periphery hypothesis, 86, 87, 105, 121-122, 139; endogenous development proposal, 367, 368-369; rural, 176. See also Import substitution industrialization (ISI); Manufacturing Inequality, 49-50, 55, 65(nl0). See also Equity Infante, Ricardo, 311 Inflation, 152, 245-246, 282, 297, 304-305; acceleration, 258-259, 260(table), 261, 271, 272, 274, 275; in center-periphery hypothesis, 108; expectation of, 298, 300, 301, 302, 307(nl2); halt of, 265-268; 1950-1989, 253, 254(table), 255, 256(table), 260(table), 280, 281(table), 282, 294; occasional, 298, 302-303; persistent, 247, 255-258, 297, 298; populist government, 247-248; taxation, 299; theory, 296-298, 306(nn 7, 8, 9), 307(nl0). See also Adjustment programs; Debt crisis; Hyperinflation; Prices; Stabilization programs; individual countries

Informal sector, 48, 49, 61, 65(n24), 314(n2), 319, 369; employment, 312, 317, 318(table), 319, 320, 321(table), 323(table), 325, 330, 336 Infrastructure, 169, 191 Institutionalism, 16-17, 83-84, 92-96. See also Center-periphery hypothesis Inter-American Development Bank (IDB), 34, 314(n2) Interest rates, 227, 249, 259, 260(table), 370(table) International Bank for Reconstruction and Development, 112. See also World Bank International Labour Organization (ILO), 47, 340 International Monetary Fund (IMF), 14, 37, 112, 134, 223, 227, 250, 271, 273, 276, 287, 290, 291 International Trade Organization (ITO), 112 Inti Plan (Peru), 294, 307(nl3) Investment, 18(n5), 95, 169, 171, 186-189(tables); in Asia, 196; centerperiphery hypothesis, 84; endogenous development proposal, 375; inflation and adjustment, 289, 363; public, 65(nl0); transnational corporate, 10, 21, 200. See also Direct foreign investment; Indirect foreign investment; Transnational corporations; individual countries ISI. See Import substitution industrialization ITO. See International Trade Organization Jamaica, 313, 321(table), 334(table) Japan, 368 Johnson, H., 123 Kemmerer, Edwin, 115(n9) Keynes, John Maynard, 16, 28, 103, 123-124 Klein, Emilio, 311 Korea (South), 168, 169, 172, 173, 174, 176, 177(tables), 181, 182(table), 184, 186(table), 193, 196, 197(n5), 211, 284 Krueger, Anne, 191 Kubitschek, Juscelino, 158, 161, 211, 230(nll) Kuznets curve, 22, 25, 46, 55, 57, 65(nl0) Kyn, O., 57, 65(nl0) Labor, 5; Asian, 173, 186-187(tables); in center-periphery hypothesis, 85, 122; contract negotiations, 257, 301; in development model, 126, 128; inflation and adjustment, 288-289, 301, 322;

index international division of, 86, 112, 122, 123; organization, 119(n63), 329; subcontracting, 312, 320, 325. See also Employment; Labor force; Wages Labor force: gender, 313, 315, 321, 330(nl); industrialization, 152, 153; sectoral, 153-155, 171, 175, 186-189(tables), 311, 314(nl); surplus, 85, 122, 153, 169, 183, 312, 314; unskilled, 169, 172; utilization of, 48-49, 316, 320, 322; youth, 321 Labor-intensive industry, 181, 185 LAFTA. See Latin American Free Trade Area Lai, Deepak, 191 Landholding, 7, 83, 144, 153-155 Latin American Faculty of the Social Sciences (FLACSO), 34 Latin American Free Trade Area (LAFTA), 162, 163 Latin American Free Trade Association, 99 LDC. See Less developed countries León, Arturo, 25 Less developed countries (LDC), 122, 133, 139. See also Center-periphery thesis Letelier, Orlando, 38 Lewis, Sir Arthur, 47, 126, 139 Liberalism, 7. See also Neoliberalism; Orthodox trade policy Loans, 14, 206, 210, 223, 226-228, 230(n8), 249, 250, 258, 259, 260(table), 358-359 López Mateos, Adolfo, 212 López Portillo, José, 60, 215, 223 Love, Joseph, 84 Lustig, Nora, 23 Malaysia, 177(table), 184 Manufacturing: Asian, 145; in centerperiphery hypothesis, 86, 105; exports, 18(n3), 65(nl0), 107, 134, 135, 139, 144, 172, 178-179(tables), 181, 182(table), 186-189(tables), 222, 223(table); investment, 208(table), 212, 231(nl4); labor-intensive, 185; prices, 134, 135, 258, 259; technological development, 133; wages and income, 327(table); women, 337(table). See also Import substitution industrialization (ISI); Industrialization Maquiladora industry, 204, 231(nl6) Martial law. See Military government Marxism, 33-34, 109 Massera, José Luis, 35 Menem, Carlos Saúl, 365 "Mexicanization" law, 218, 219-220, 231(nl7)

395 Mexico, 3, 6, 168, 177(tables), 203-205, 356; agriculture, 158, 228; central bank, 107, 108; economic populism, 272; employment, 321(table), 334(table); exporte, 181, 182(table), 189(table), 206-207, 214-216, 222, 231(nl5); GDP, 203, 229(nl); income distribution, 4, 25, 49, 58, 59(table); industrialization, 10, 145, 157, 164, 172(table), 181, 199, 206, 207, 210, 211-213, 222, 228; inflation, 14, 223, 226-227, 253, 254(table), 255, 259, 264, 266, 285(table), 289, 294, 301, 306(n8), 366(table); investment, 204, 210, 212, 214, 215, 230(nll); investment and TNCs, 12, 207, 210, 216-217, 218-227, 230(n6), 231(nn 17, 18); local interests, 211-212, 216-217, 218, 220; nationalism, 212, 215; oil, 228; poverty, 70(table), 71, 72(table), 74, 75, 76, 77, 78(table); social expenditures, 62, 65(nl8); state economic involvement, 210, 220; trade, 136(table), 222; unemployment, 61, 223; wages, 65(nl9), 77, 176, 177(table), 203, 229(nl), 321(table), 366(table); women, 340 Micro-enterprises, 312, 325 Middle class, 26, 64, 150 Military expenditures, 361 Military government, 28-29, 35, 36, 37, 38, 42(nl8), 360. See also Political repression Mining, 4-5, ll(fig), 204, 206, 328, 337(table); investment, 208(table); nationalization, 362; protection, 174(table). Misetich, Antonio, 32 Monetarism, 21-22, 37, 38, 39 Monetary expansion, 108, 247, 259, 261-262, 267-268, 296, 299 Money supply, 108, 246, 307(nl4) Multinational enterprises. See Transnational corporations Myrdal, Gunnar, 48, 191 National Atomic Energy Commission (Argentina), 32 National Bureau of Economic Research, 95 National Fund for Economic Restructuring and Social Development, 352, 371 National Institute for Industrial Technology (Argentina), 32 Nationalism, 211, 212-213, 226 Nationalization, 59, 160, 207, 362 National Physics and Technology Institute (Argentina), 32

396 National Research Institute for Agriculture and Cattle Breeding (Argentina), 32 National University of Asuncion, 28, 35 Natural resources, 3, 125, 169, 172, 174-175, 180, 181, 183, 194-195; Asian, 184; endogenous development proposal, 369, 375, 376, 377 Neoclassical trade policy, 15, 17, 18(n5), 39, 112, 124-126, 138 Neoliberalism, 15, 21, 191, 193, 197, 253, 351, 356, 359, 365-366 Neostructuralism, 16, 17, 283, 305, 352 Net financial transfers, 259, 260(tables), 261 Neto, Delfim, 220, 225, 227 Nicaragua, 3, 136(table), 163, 330(nl), 334(table); economic populism, 272; inflation, 254(table), 255, 259, 294 Niemeyer, Sir Otto, 101, 115(n9) North-South trade models, 123-128. See also Center-periphery hypothesis Noyola, Juan F., 261 Nuclear power, 33 Ocampo, José, 87 O'Connell, Arturo A., 102 OECD. See Organization for Economic Cooperation and Development Oil, 1, 13, 87, 129-130, 131, 132(table), 135, 165, 208(table), 259, 260(table), 358; imports, 247. See also individual countries Oliveira-Tanzi effect, 267 Ongania, Juan Carlos, 31 Organization for Economic Cooperation and Development (OECD), 304 Orthodox trade policy, 84, 87, 245-246, 282, 283. See also Classical trade policy; Liberalism; Neoclassical trade policy; Neoliberalism Panama: education, 334-335; employment, 330(n2), 333, 334(table), 335(table), 336, 337-338(tables); income, 74, 344, 345(tables), 346; inflation, 254(table), 294; poverty, 70(table), 71, 72(table), 74, 75(fig); unemployment, 74, 341, 342, 343(tables); women, 330(nl), 333, 335(table), 336, 337-338(tables) Papanek, G., 57, 65(nl0) Paraguay, 36, 42(n20), 136(table), 163; employment, 61, 321(table), 334(table), 337(table); inflation, 254(table), 255; political repression in, 28, 35; women, 334, 337(table)

index Pazos, Felipe, 240, 243(n2), 246 Peasant sector, 153, 154,155, 312, 314, 317, 318(table), 319, 320, 327. See also Agriculture Peninsulares, 5 - 6 Pérez, Carlos Andres, 365 Perón, Juan Domingo, 30 Peru, 163, 356; economic populism, 272, 273-274; employment, 321 (table), 330(n2), 334(table), 336, 337(table); income and wages, 73, 366(table); industrialization, 157, 164; inflation and adjustment, 254(table), 259, 262, 263(table), 285(table), 288, 289, 294; poverty, 70(table), 71, 72(table), 73, 75, 77, 78(table); trade, 136(table), 138; unemployment, 73; women, 334, 336, 337(table), 340 Petrodollars, 13, 14 Petrochemicals, 218, 220 Philippines, 174, 177(table), 184, 185 Pinedo, Federico, 104, 107, 115(nl2) Pinochet, Augusto, 34, 38, 160, 163 Pinto, Aníbal, 261 Political repression, 22, 35, 36, 38, 42(nl8). See also individual countries Population, 3; control, 64, 65(n24); growth rate, 315, 318(table), 323(table); urban, 74, 75(fig), 79 Poverty, 4, 22, 25-26, 75, 76-77, 78(table), 79(table), 80, 80(n3), 379; eradication, 45-49, 51; household, 69, 71, 72(table), 73, 75(fig), 77, 79(table); income, 46, 49, 51, 74, 75(table), 76-77, 79-80; line, 69, 70(table), 71; rural/urban, 61, 71, 73, 74, 76(fig), 77, 78(table), 79-80, 316. See also Indigence; Poor PREALC. See Regional Employment Programme for Latin America and the Caribbean Prebisch, Raúl, 30, 37, 84, 99, 161, 191, 261, 367-368; early career, 100-101, 102, 103-104, 110, 118(n40); on endogenous development, 367-368. See also Centerperiphery hypothesis; Structuralism; Trade, terms of; Unequal exchange theory; United Nations Economic Commission for Latin America Prebisch-Singer hypothesis, 84-87, 111. See also Center-periphery hypothesis Prices, 122, 133, 245-246, 287; centerperiphery hypothesis, 85, 105, 110, 111, 119(n68), 122, 123, 124; contract negotiation, 247; control, 247, 266, 267; in

index development model, 127; elasticity, 140, 140(n3), 246, 306(n5); hyperinflation, 303; monopoly, 105, 111-112, 113, 119(n68), 256; 1960s-1980s retail, 253, 254(table), 255, 264; 1970s increase, 256, 258-259, 260(table); stabilization, 112, 301; subsidy, 175; supports, 139. See also Inflation; Primary commodities; Trade, terms of; individual commodities Primary commodities, 1; in center-periphery hypothesis, 85, 86, 87, 88(nl), 105, 121-122, 123; export, 6, 7, 8, 10, 18(n3), 134-135, 139, 146, 169, 170(fig), 180, 214; prices, 110, 111, 112, 129(table), 130-131, 132(table), 133, 135, 139, 258, 259, 260(table). See also Agriculture Primary export substitution (PES), 180, 183; Asian, 145, 170(fig), 171-173, 182-183; export market share, 181, 182 Primary import substitution (PIS), 169, 170(fig), 171, 172(table), 184. See also Import substitution industrialization (ISI) Privatization, 366, 380(n4) Protectionism, 115(nl2), 124, 150, 159, 160, 161, 163, 171, 172, 173, 174(table), 175, 180, 182, 183, 370(table) Public sector. See State Public services, 51, 60, 362. See also Social services Public utilities, 206, 208(table), 210 Puerto Rico, 3, 194, 195 Purchasing power, 85, 156-157. See also Trade, terms of Ramirez, Pedro, 30 Ramos, Joseph, 248, 370 Ranis, Gustav, 145 Raw materials. See also Primary commodities Recession (1980s). See Adjustment programs; Stabilization programs Regional Employment Programme for Latin America and the Caribbean (PREALC), 61, 319, 325 Regional economic integration, 87, 162-163 Rents, 191, 193; contract negotiations, 257 Repression. See Political repression Ricardo, David, 84, 101 Roca-Runciman Pact (1933), 102, 103 Rosenstein-Rodan, P., 276 Rosenthal, G., 374 Ruiz Cortines, Adolfo, 211, 231(nll) Sachs, Jeffrey, 191

397 St. Kitts and Nevis, 3 Samuelson, Paul, 112 Sanson, Pedro, 220 Sarkar, P., 128, 129(table) Savings, 55, 126, 171, 176, 186-189(tables), 371 Scandizzo, P., 130, 133 Secondary export substitution (SES), 170(fig), 173 Secondary import substitution (SIS), 170(fig), 171, 173, 174, 175, 184 Seers, Dudley, 191 Semi-industrialized countries (SICs), 167, 168-169, 184. See also individual countries Semiperiphery, 203, 212, 226, 228, 229(n2) Serra, J., 56 Services sector, 228, 316, 339 Sharpe, Kenneth, 219 Silva Henriquez, Raul, 34 Singapore, 168, 169, 173 Singer, Hans, 85, 111, 112, 122. See also Prebisch-Singer hypothesis Socialism, 60, 63, 272 Socialist Party (Argentina), 102 Socialization. See Socialism Social justice, 63, 242, 379 Social services, 45, 46, 61, 62, 375. See also Public services Sociedad Rural (Argentina), 100, 115(nl2) Spain, 4-5 Spraos, J., 129(table) Stabilization programs, 38, 42(nl8), 250, 255, 268, 271, 276, 280, 282, 301, 307(nl3); and recession, 286, 299, 300, 301, 302; in repressive government, 37-38. See also Adjustment programs; Inflation Standard of living, 8, 133, 223, 306, 376, 379, 380(n5) State, 1-2, 9-10, 192-193, 351, 356; economic populism, 272; employment in, 316, 329330; endogenous development proposal, 374; and private sector, 193, 200, 212 Street, James, 21 Streeten, Paul, 22 Stroessner, Alfredo, 28, 35 Structuralism, 15-16, 33, 37, 63, 84, 356-357, 358; inflation and stabilization, 246, 280, 282, 293-294, 297, 305; suppression of study of, 21, 28, 31, 34, 36, 39-41. See also Center-periphery hypothesis; Neostructuralism; Prebisch, Raul Subsidies, 60, 61, 64, 65(n22), 147, 175, 183, 211, 224, 225, 275, 288

398

index

Sugar. See Foodstuffs Sunkel, Osvaldo, 261, 352 Suriname, 334(table) Swett, Jorge, 34

Trinidad and Tobago, 164, 321(table), 334(table) Tropical beverages, 87, 129(table), 130, 132(table), 133, 174(table)

Taiwan, 168, 169, 172, 173, 176, 177(table), 181, 182(table), 185, 187(table), 193, 284 Tariffs, 102, 115(nl2), 146, 160, 162, 193, 211, 249, 282 Tavares, M. C., 56 Taxation, 46, 60, 63, 64, 225, 267, 275, 285, 299, 362 Technological development, 29, 83, 84, 90-94, 96-97, 192, 376; Asian, 196, 198(n7); center-periphery hypothesis, 85-86, 108, 111; dependence, 21, 36; indigenous development, 147, 376; trade, 124-125, 138, 139, 147 Textiles, 164, 169, 207, 225 Tin, 130, 135

UNCTAD. See United Nations Conference on Trade and Development "Underdevelopment," 109 Underemployment, 176, 318(table), 320, 331(n5) Unemployment, 39, 49, 51, 160, 176, 262, 318(table), 320, 347; dualism, 47, 48; gender, 313, 341, 343(table); inflation and adjustment, 73, 74, 261, 262, 301, 322, 323(table), 325-326, 341-342, 343(tables), 344; insurance, 256; urban, 61, 320, 331 (n5), 321(table), 326; youth, 342. See also individual countries Unequal exchange theory, 99, 105, 113. See also Center-periphery hypothesis; Dependent development Unidad Popular (Chile), 276, 356 Unions, 85, 181, 183 United Nations Conference on Trade and Development (UNCTAD), 99, 112, 161 United Nations Development Programme: human development index, 23, 24(table) United Nations Economic Commission for Latin America (CEPAL; ECLA), 61, 99, 100, 109, 110, 111, 112, 113, 162; industrialization, 160-161, 367-368; labor organization, 119(n63); manifesto, 110, 112. See also United Nations Economic Commission for Latin America and the Caribbean United Nations Economic Commission for Latin America and the Caribbean (ECLAC), 61, 84 United Nations Food and Agriculture Organization (FAO), 327 United States, 14, 93, 95; in center-periphery hypothesis, 108, 111; imports, 225; investment, 10, ll(fig), 12, 206, 212, 215, 230(n7), 242-243; investment in Brazil, 208-209(table), 210, 228; investment in Mexico, 204, 206, 208-209(table), 210, 228, 230(n9); trade, 87, 102, 103, 107, 222. See also Transnational corporations Universities: political repression of, 27, 28-29, 36 University of Bahia Bianca (Argentina), 32 University of Buenos Aires, 30, 31, 100 University of Chile, 34, 35

TNCs. See Transnational corporations Tradable/nontradable production. See Adjustment programs Trade, 6 - 8 ; center-periphery, 6-8, 84-87, 111; cycle, 106, 108, 110, 114; development model, 123-125, 126-128; free, 7, 84, 86, 160, 161; surplus, 113, 120(n72), 138, 249, 283, 287, 288, 305(n2), 306(n5), 362, 379(n3); terms of, 85, 103-104, 121-128, 129(table), 133, 137(fig), 138, 140, 183, 247, 281-282, 370(table). See also Centerperiphery hypothesis; Comparative advantage; Trade policy; Unequal exchange theory Trade policy. See Classical trade policy; Heterodox trade policy; Institutionalism; Liberalism; Neoclassical trade policy; Neoliberalism; Neostructuralism; Orthodox trade policy; Structuralism Transfer of resources, 249, 281 (table), 282, 283-284, 285(table), 286, 287, 289, 293, 304, 305(n2), 307(nll), 364(table), 365(fig), 370-371, 379(n2) Transnational corporations (TNCs), 10, 12, 21, 56, 83, 196, 200, 204; defined, 230(n5); denationalization, 217; export promotion, 214, 231(nl4), 314; and home countries, 223, 224, 225, 232(nl9); intracompany sales, 223(table), 224; local interests, 200, 205, 212, 217, 231(nl6), 237-240, 241; political stability, 238, 242-243; trade balance incentives, 222. See also individual countries

index Urban migration, 47, 153, 315 Uriburu, Enrique, 100 Uriburu, José, 101 Uruguay, 36, 38-39, 159, 163, 356; employment, 321(table), 330(n2), 333, 334(table), 335(table), 338(table), 342; income and wages, 73, 366(table); inflation and adjustment, 254(table), 255, 259, 265, 285(table), 306(n8), 366(table); political repression, 29, 35, 38; poverty, 70(table), 71, 72(table), 73, 75(fig), 77, 78(table); trade, 136(table), 138; unemployment, 73; women, 333, 335(table), 338(table), 340, 342 Vargas, Getûlio, 207, 210, 211, 226, 2 3 0 ( n l l ) Veblen, Thorstein, 27, 40, 90, 91, 92, 94 Velasco Alvarado, Juan, 60, 356 Venezuela, 163, 228, 264, 356; agrarian reform, 158; employment, 321(table), 330(n2), 334(table), 337(table); income, 58, 59(table), 73, 344, 345(tables), 346; industrial production, 157, 164, 165; inflation and stabilization, 254(table), 259, 285(table), 288, 294, 307(nl5), 366(table); poverty, 70(table), 71, 72(table), 73, 75(fig), 77, 78(table); trade, 136(table), 138; unemployment, 341, 342, 343(tables); women, 337(table), 340, 343(tables), 344, 345(tables), 346 Videla, Jorge Rafael, 31, 32 Villarreal, René, 39, 43(n27) Viner, Jacob, 112 Virgin Islands, 3

399 Vuskovic, P., 56, 274 Wages, 321 (table), 327(table); Asian, 173; center-periphery hypothesis, 85, 110, 112, 119(nn 62, 68), 122; contract negotiations, 247, 256, 257, 267, 298; controls, 247, 256, 266, 267; in development model, 126, 127; economic populism, 272, 274, 275, 276; endogenous development proposal, 375; and GDP, 319, 330(n3); industrial, 156-157, 176, 177( table), 181, 183; inflation and adjustment, 62, 288, 301, 322, 328-330, 365, 366(table), 375; minimum, 61, 181, 321 (table), 327(table), 329, 375; sectoral, 319, 327-330; in trade cycle, 112, 119(n62) Wallerstein, Immanuel, 99 War, guerrilla, 259, 361 Wars of Independence, 6, 11 (fig) Westerkamp, Gustavo, 33 Westerkamp, José, 33 Women: domestic work, 313, 336, 339-341; employment, 48, 313, 315, 316, 321, 330(nl), 335, 336, 344; occupations, 336, 337(table), 338(table), 339; unemployment, 326. See also individual countries Wood, 131, 132(table) World Bank (IBRD), 3, 22, 49, 112, 129, 130 Wurgaft, J., 325 Youth: employment, 316, 321, 333, 342, 347 Zedillo, Ernesto, 266

About the Book This revised edition of Latin America's Economic Development continues to provide a heterodox perspective on Latin America's economic problems, with institutional and neostructuralist views dominating. The selections richly convey that there are viable alternatives to the neoliberal approach dominating so much of policymaking, as well as academic debate, since the 1980s. The book addresses fundamental areas of concern: the relationship between economic growth and equity; import substitution vs. export-oriented strategies; the role of transnational corporations; new objectives for both market and state; employment and unemployment; inflation; debt; and the impact of neoliberal adjustment policies. Chapters new to the second edition touch particularly on persistent inflation, populist economic policies, women in the work force, poverty, structural adjustment, and the neostructuralist alternative to neoliberalism. The section introductions identify key issues in the readings and, where appropriate, suggest approaches to the problems explored. This is the perfect book for use as a core text in combination with other collections, or as a complement to a text such as Cardoso and Helwege's Latin America's Economy. James L. Dietz is professor of economics at California State University, Fullerton.

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