Lectures 7

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Lectures 7

  1. 1. A brief history of Latin American Economics
  2. 2. <ul><li>Latin American Development </li></ul><ul><ul><li>Development? </li></ul></ul><ul><ul><li>Measurements </li></ul></ul><ul><ul><ul><li>Poverty </li></ul></ul></ul><ul><ul><ul><li>Inequalities </li></ul></ul></ul><ul><ul><ul><li>Human Development Index (HDI) </li></ul></ul></ul><ul><ul><ul><li>Capabilities </li></ul></ul></ul><ul><ul><li>Definitions </li></ul></ul><ul><ul><ul><li>Rostow </li></ul></ul></ul><ul><ul><ul><li>International emphasis </li></ul></ul></ul><ul><ul><ul><li>Newer views </li></ul></ul></ul>
  3. 5. Why is Latin America considered an LDC? <ul><li>Economic factors of production </li></ul><ul><li>K – Capital </li></ul><ul><li>L – Labour </li></ul><ul><li>T – Land </li></ul><ul><li>E – Entrepreneurship </li></ul><ul><li>Lack of Investment? Insecure property? Protectionism or foreign influence? Low technology? </li></ul>
  4. 6. <ul><li>Colonial states: </li></ul><ul><ul><li>Extractive states – Latin America funds counter-reformation </li></ul></ul><ul><ul><li>Anti-industrialization </li></ul></ul><ul><ul><li>Anti-trade </li></ul></ul><ul><ul><li>No system of checks and balances </li></ul></ul><ul><ul><li>Contrast to North American settlers </li></ul></ul>
  5. 7. <ul><li>16 th C </li></ul><ul><ul><li>Mining </li></ul></ul><ul><ul><li>Looting to tribute </li></ul></ul><ul><li>17 th C </li></ul><ul><ul><li>International competition </li></ul></ul><ul><li>18 th C </li></ul><ul><ul><li>Bourbon/Pombal reforms – trade and industry </li></ul></ul><ul><ul><li>Costs of independence </li></ul></ul>
  6. 8. <ul><li>Building national economies </li></ul><ul><ul><li>Fights between conservatives and liberals </li></ul></ul><ul><ul><li>Neo-imperialism vs role of elites </li></ul></ul><ul><ul><li>Exporting primary goods </li></ul></ul><ul><ul><ul><li>Backward bending supply curves </li></ul></ul></ul><ul><ul><ul><li>Market shifts </li></ul></ul></ul><ul><ul><ul><li>1850-post WWII exports grow 4% per year. </li></ul></ul></ul><ul><ul><ul><ul><li>Led by industrialization of the North </li></ul></ul></ul></ul><ul><ul><ul><li>Regional inequalities </li></ul></ul></ul>
  7. 9. <ul><li>Great Depression </li></ul><ul><ul><li>D commodities </li></ul></ul><ul><ul><li>foreign currency </li></ul></ul><ul><ul><li>St intervention – new deal, Keynes </li></ul></ul><ul><ul><li>Rural-urban migration </li></ul></ul><ul><li>WWII </li></ul><ul><ul><li>D raw materials </li></ul></ul>
  8. 10. ISI – Import Substitution Industrialization <ul><ul><li>Singer-Prebisch thesis </li></ul></ul><ul><ul><ul><li>Deteriorating terms of trade </li></ul></ul></ul><ul><ul><ul><li>Zero-sum game </li></ul></ul></ul><ul><ul><ul><li>Autarky </li></ul></ul></ul><ul><ul><ul><li>Improve BoP </li></ul></ul></ul><ul><ul><ul><li>Easy to implement </li></ul></ul></ul><ul><ul><li>Results </li></ul></ul><ul><ul><li>Problems </li></ul></ul>
  9. 11. <ul><li>ISI problems: </li></ul><ul><ul><li>Lack of strategic implementation </li></ul></ul><ul><ul><li>Rent seeking </li></ul></ul><ul><ul><li>Lack of progress into later stages </li></ul></ul><ul><ul><li>Worsened BoP </li></ul></ul><ul><ul><li>Overvalued exchange rate </li></ul></ul><ul><ul><li>Limited markets </li></ul></ul><ul><li>International lending </li></ul><ul><li>Cold War </li></ul>
  10. 12. The Oil Crises <ul><li>1973 – P due to OPEC embargo </li></ul><ul><ul><li>Petrodollars – banks NEED to lend </li></ul></ul><ul><ul><li>Inflation v growth </li></ul></ul><ul><li>1979 – P as a result of the Iranian revolution </li></ul><ul><ul><li>Vs inflation, increase interest rates </li></ul></ul><ul><ul><li>oil P (later) </li></ul></ul><ul><ul><li>D for Latin American products </li></ul></ul>
  11. 13. 1980s – The lost decade <ul><li>Sudden stop to international lending </li></ul><ul><li>1982 – Mexico cannot service its debt </li></ul><ul><li>Decade lost in re-scheduling debt </li></ul><ul><ul><li>New loans to pay off interest on previous loans </li></ul></ul><ul><ul><li>No new investment in development </li></ul></ul><ul><ul><li>Cut back on social investment </li></ul></ul><ul><ul><li>$500 for every man, woman and child in Latin America </li></ul></ul>
  12. 14. Washington Consensus <ul><li>Stabilization </li></ul><ul><ul><li>IMF led </li></ul></ul><ul><ul><li>inflation, G, M </li></ul></ul><ul><li>Structural adjustment – WB led </li></ul><ul><ul><li>Open the economy </li></ul></ul><ul><ul><ul><li>Trade </li></ul></ul></ul><ul><ul><ul><li>Financial markets </li></ul></ul></ul><ul><ul><ul><li>Labour? </li></ul></ul></ul><ul><li>Quick solution -- Privatization </li></ul>
  13. 15. <ul><li>Controversial </li></ul><ul><ul><li>Kuznet’s inverted U </li></ul></ul><ul><ul><li>Liberalization leads to growth] </li></ul></ul><ul><ul><li>Order of liberalization – financial runs </li></ul></ul><ul><ul><li>China, Asian Tigers </li></ul></ul><ul><li>‘ Turn to the left’ </li></ul><ul><ul><li>Inequality </li></ul></ul><ul><ul><li>Limited internal industries </li></ul></ul><ul><ul><li>Short-lived, limited industries </li></ul></ul>
  14. 16. <ul><li>Regional trade agreements </li></ul><ul><ul><li>Mercosur </li></ul></ul><ul><ul><li>NAFTA </li></ul></ul><ul><ul><li>FTA </li></ul></ul><ul><ul><ul><li>Promises </li></ul></ul></ul><ul><ul><ul><li>Problems </li></ul></ul></ul>
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