Liberalization and its Consequences

Liberalization and its Consequences

A Comparative Perspective on Latin America and Eastern Europe

Edited by Werner Baer and Joseph L. Love

The essays in this volume describe, analyse and compare the achievements and the failures of societies that adopted market-based economies within a democratic polity after a long period of communist rule (Russia and Eastern Europe) or military authoritarianism (Latin America). Together, they also trace the rocky course of liberal economic policies over the whole twentieth century.

Chapter 2: Economic performance and the state in Latin America

Victor Bulmer-Thomas and Rachel Schurman


Victor Bulmer-Thomas This chapter begins with an examination of economic performance in Latin America with an emphasis on the 20th century. This is a long enough period to establish which countries have been successes or failures according to wellestablished criteria. The data set used also allows for determination of the sub-periods in which success or failure has been most marked. The regional variations in Latin America’s economic performance have many possible explanations. One of these is the role of the state. In the second part of the chapter I outline the theory of the state with reference to economic development, drawing attention to the different ways the state can influence the allocation of resources and affect the rate of economic growth. The state will have an impact on both the supply- and demand-side of the economy. In the third part of the chapter I look at the supply-side, focusing in particular on the markets for factors of production (land, labor and capital) and on technical progress. In the next part of the chapter I explore the impact of the state on the demand-side and I focus on both macro- and microeconomic policies. In the final section of the chapter, I draw out the main conclusions on the role of the state in Latin America using a chronological approach. This starts with export-led growth up to the 1920s, then moves to the inward-looking phase of development that began in the 1930s and ends with the neo-liberal experiment currently in progress. ECONOMIC...

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