The Latin American Development Debate.

The essays in this timely and well-conceived book focus upon the lessons to be learned (or perhaps relearned) from the so-called "lost decade" of the eighties throughtout Latin America and the Caribbean. A decade during which Latin America experienced its second-worst economic crisis of this century; a decade which witnessed the widespread implementation of severe stabilization measures and market-based programs of structural reform in order to deal with the onset and aftermath of the debt crisis; a decade which brought great economic and social hardship to the majority of the people of the region - the poor and working poor; lastly, it was a decade during which the region's overall rate of capital formation plummeted, thereby undermining its future prospects for sustained growth and development.

Patricio Meller, a distinguished Latin American economist and executive director of the Corporacion de Investigaciones Economicas Para Latinoamerica (CIEPLAN) in Santiago, Chile, has brought together the contributions of other Latin Americanists (a great number of them Chilean economists and practitioners) in order to reexamine the relative merits or demerits of the various development strategies pursued in the region during the post-world War II period, and more importantly, assess their future relevance in light of the current privatization and liberalization movement sweeping the region. As a Latin Americanist it is refreshing to read a well-balanced and carefully researched assessment of the various competing paradigms (e.g., structuralism vs monetarism, liberalism vs. statism, etc.) and policy-related issues such as the proper mix, timing, and sequencing of adjustment programs from economists and policy makers of the region (a perspective from the "South" rather than the "North," if you will).

The book contains eight chapters organized around the following conceptual, historical, and policy-oriented themes. Chapter 1, by Ricardo Ffrench-Davis and Oscar Munoz, provides the reader with a well-balanced overview of the major economic developments and policies pursued by the various countries of the region as they attempted to (and did) industrialize rapidly via the implementation of ISI policies during the fifties and sixties. The authors, to their credit, review the basic arguments advanced by economists at the Economic Commission for Latin American (ECLA) for pusuing an inward, as opposed to an exportoriented strategy. Among some of the more prominent arguments discussed, but by no means exclusively confined to them, are the region's deterioration and excessive fluctuation in its commodity terms of trade and the supply inelasticities and low productivity of the region's agricultural sector resulting from a highly unequal land tenure system. In addition to reviewing these structuralist arguments for abandoning a growth strategy based on the export of primary goods, the authors review the various economic, social, and political developments that led to the exhaustion of this strategy in the late 1960s and 1970s. Lastly, the chapter never looses sight of the importance of international economic and financial factors such as the commercial boom of the 1960s and the oil shocks of the 1970s in conditioning, as well as, contraining the growth possibilities of the countries of the region.

The next three essays provide an in-depth discussion of the historical, theoretical, and ideological roots of structuralist thought. Of particular note is the chapter by Nora Lustig entitled, "From Structuralism to Neostructuralism," where she identifies some of the key assumptions underlying structuralist analyses such as the prevalence of price makers in key market structures, the endogeneity of the money supply, and the potential complementarity between public and private investment, to name a few. She alludes to the work of "early" structuralists such as Juan Noyola[1] and Osvaldo Sunkel[2] and points out that they were careful to distinguish between "basic" or structural factors responsible for inflationary pressures and so-called "propagating mechanisms" such as the fiscal deficit, the wage-price spiral, and accomodating monetary policy in fueling inflationary pressures and expectations. These so-called propagating or transmission mechanisms could become structural in nature in countries with high and persistent inflation rates. Lustig points out correctly that the later structuralists failed to pay enough attention to these propagating mechanisms which, in turn, opened the door to devastating criticisms from orthodox economists, particularly economists trained in the monetarist tradition during the late 1960s and 1970s. According to Lustig, one of the by-products of this challenge from orthodoxy has been the emergence, in recent years, of a neostructuralist perspective in the works of Carlos Bazdresch, Osvaldo Sunkel, Patricio Meller, Jaime Ros and Lance Taylor, which not only takes into account the "original" structural factors responsible for inflationary pressures, but also focuses on the need to address the underlying transmission mechanisms. In other words, these neostructuralists stress that inertial factors such as widespread indexation must be confronted and eliminated, and income policies with political support from key segments of society (such as the PECE in Mexico) should be implemented to defuse the distributional struggle that often takes place in the presence of hyperinflation.

If there is a weakness in this section of the book, it has to do with the lack of a systematic discussion of the intellectual roots of the structuralist perspective. To their credit, Nora Lustig and Andres Velasco, point out that structuralist thought has been heavily influenced by the works of Marx, Schumpeter, Keynes, and Seers (they fail to mention Paul Baran, however), but there is no in-depth discussion and/or analysis of the nature or historical forms of this intellectual debt.

In the next two chapters, the book turns away from an overall macro analysis of the problems and issues facing the economies of the region, and addresses the sectorial problems of both the industrial and financial sectors of the region. In Chapter 5 Carlos Ominami compares and evaluates the different evolution of the industrial sectors of Argentina, Brazil, and Chile. He points out that the industrial retrogression of the 1980s affected the industrial sectors of these countries in very different ways. For example, the impact of the crisis of the early 1980s, in terms of relative decreases in production and employment, was far less serious in Brazil than in Argentina and Chile. The rate of recovery in the mid-1980s has also been highly uneven, with average growth rates in Brazil and Chile significantly above those in Argentina. Ominami points out that part of the answer for this difference in industrial and manufacturing performance can be traced to the size and dynamism of the Brazilian economy on the one hand. and on the other, the rapid and thorough implementation of neoliberal policies in Argentina and Chile "with a strong anti-industrialist bias" [p.81]. According to Ominami, the differences in recovery rates between Chile and Argentina can be explained, in part, by the significant restructuring of the manufacturing sector in Chile (as opposed to Argentina) towards technologically unsophisticated but dynamic exports such as fishmeal, lumber, and nonferrous metals. In general, the economic analysis in this rather lengthy chapter is carefully researched and well-documented with respect to tables and figures. The only weakness of this chapter is that, at times, Ominami explains the dismal performance of the Argentine economy in terms of platitudes such as "industrial sclerosis" or "undynamic private agents" which only serve to detract from the overall level of the analysis.

The final two chapters of the book, by Sebastian Edwards and Patricio Meller, respectively, deal with the economic, social and political impact of the short-term adjustment policies adopted in the region, as well as the long-term consequences of the trade liberalization and privatization movement sweeping countries such as Mexico and Chile.

In a long, but carefully researched chapter, Edwards argues that in order to establish both creditworthiness and a recovery in output and consumption levels, the countries of the region are faced with the dilemma of effecting a resource transfer to meet the first objective while, at the same time, increasing the rate of capital formation and the productive efficiency of their nontraded sector in order to meet the second. Obviously, the speed and severity with which the transfer is effected will determine whether the countries in question can resume positive rates of economic output per person. According to Edwards, it is here where the industrialized countries can, thru multilateral organizations such as the IDB and World Bank as well as variants of the Brady plan, slow the speed and reduce the severity of expenditure-switching and expenditure-reducing policies by providing additional lending and forgiving portions of the debt. Edwards further notes that one of the key ingredients for a long-run solution to the structural problems besetting the countries of the region resides in their governments' adherence to policies that diversify their exports away from primary products and towards export manufactures and non-traditional agricultural products (as in the Chaean case). Lastly, Edwards makes a compelling case for not initiating substantial trade liberalization and privatization reforms at the same time that severe adjustment measures are being implemented. To buttress his argument, he correctly points out that the trade liberalization experience of the East Asian countries does not imply zero or very low tariffs rates or, for that matter, relatively little government intervention in the economy.

Meller's chapter, although repetitive at times, does a nice job of bringing together some of the major themes and issues examined in the previous essays. Its review and analysis of the adjustment process in Latin America during the 1980s is well-written and organized, and it is particularly effective because it provides the reader with historical and empirical evidence showing the relatively greater magnitude of the net resource transfers that Latin America has had to make to the creditor nations as compared to those that Germany had to make in the form of war and interest reparations during the 1925-1932 period. Meller's chapter also traces the evolution and changing role of both the IMF and World Bank in the region, and concludes that their roles have converged during the 1980s towards a far greater reliance on market-oriented measures, thereby exerting a sort of double-conditionality on the countries of the region. This has generated logistical problems in the mediation process because unless all negotiations are finished among the various parties, needed financing is not forthcoming at a crucial moment in the adjustment process. More importantly, in Meller's opinion, it has created political and economic difficulties for those Latin governments that question the theoretical basis, consistency, and complementarity of the neoliberal policies advocated by these institutions. A case in point is the simultaneous and severe application of expenditure-switching and expenditure-changing policies in economies plagued by highly inequitable distributions of income and wealth (e.g., Brazil and Venezuela).

All in all, this is a fine collection of essays by competent Latin scholars and practitioners in the economic development field. Its critical, but balanced, assessment of current stabilization and adjustment measures implemented in the region should prove of great use to scholars interested in these problems and/ or issues; it is also highly recommended as a accompanying text in both undergraduate and graduate courses devoted to the economic and political problems facing the Latin economies.

References

[1.] Noyola, Juan F., "El Desarrollo Economico y La Inflacion en Mexico y Otros Paises Latinoamericanos." Investigacion Economica, Vol. 16 (1956): 603-48. [2.] Sunkel, Osvaldo, "Inflation in Chile: An Unorthodox Approach." International Economic Papers, No. 10 (1960): 107-31.