A Post Keynesian Perspective on Twenty-First Century Economic Problems

A Post Keynesian Perspective on Twenty-First Century Economic Problems

Edited by Paul Davidson

This book explores key economic problems and new policies for the global economy of the 21st century. The contributors discuss to what extent past policy errors were due to the incompetence of policymakers, and highlight problems including: international payments imbalances and currency crises, volatile security markets, inflation, achieving full employment, income distribution and alleviating individuals and nations of poverty.

Chapter 1: Latin America'ês quasi-stagnation

Luiz Carlos Bresser-Pereira

Subjects: economics and finance, post-keynesian economics


1. Latin America’s quasi-stagnation Luiz Carlos Bresser–Pereira* Behind Latin America’s 20-year-old quasi-stagnation are not only interest groups of all kinds, but also serious mistakes in macroeconomic policymaking and institutional reform design. The central argument I will develop here is simple. Latin American countries became involved in the 1980s in a debt crisis and, more broadly, in a fiscal crisis of the state. Why did they not overcome the crisis? Why did they not regain the economic stability that had been lost in the crisis? Why were reforms not as effective as one would expect? Economists and social scientists have a general explanation for this: interest groups created obstacles to adequate policy-making. I have no argument with that, but believe, and will argue in this chapter, that there is a second and more important reason: that policy-makers are often incompetent, out of ignorance, fear or arrogance. Often policy-makers did the wrong thing out of conviction, not because of political pressure. Their decisions were the outcome of bad judgement. This was not relevant in the past, when macroeconomic policy and institutional reform strategy did not actually exist. Today they do exist, and often involve strategic, highly important decisions, given the consequences that may arise. Why do we assume that these decisions are always right? Or that right and wrong decisions compensate for each other, so that they may be ignored? The last 20 years has been a time of near-stagnation for Brazil and, more broadly, for Latin America. If the...

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