Vanishing Growth in Latin America

Vanishing Growth in Latin America

The Late Twentieth Century Experience

Edited by Andrés Solimano

Economic growth in Latin America and the rise of material welfare has lagged behind that of more dynamic areas of the world economy. In a region prone to policy experiments, the policies of the Washington Consensus applied since the 1990s failed to bring sustained growth to most of Latin America. Andrés Solimano and an impressive set of contributors analyze the last 40 years in order to determine the role of economic reforms, external conditions, factor accumulation, income inequality, political instability and productivity in explaining GDP increases. The book also looks at cycles of growth, identifying periods of rapid growth and contrasting them with periods of stagnation and collapse.

Chapter 1: Introduction and Synthesis

Andrés Solimano

Subjects: development studies, development economics, economics and finance, development economics, regional economics


Andrés Solimano 1.1 INTRODUCTION Economic growth is the main source of wealth creation and material welfare to the population. In fact, as an indication of the centrality of the process of wealth creation in economics, Adam Smith entitled his main contribution to economic science, An Inquiry on the Causes of the Wealth of Nations, where he investigated the various causes that lead to wealth creation as opposed to the dilapidation of material wealth. The importance of economic growth cannot be overstated. Even relatively small differences in annual growth rates in Gross Domestic Product among countries, when they accumulate over time, can generate large differences in living standards for a country’s population. Getting the right (or wrong) policy mix for growth can have far-reaching consequences for the welfare levels (or misery) of its citizens. Nevertheless, in spite of the importance of the topic, our knowledge of the subject is far from complete. The causes that initiate, propagate or stop economic growth are numerous in practice and vary across nations and time. Understanding the causes of growth has important practical implications for the personal fortunes of many people around the world. Economic growth theory has focused on the relative role of factor accumulation (labor, physical and human capital, natural resources) and productivity growth (due to new knowledge and changes in efficiency with which productive factors are combined) in explaining output growth. This approach is often referred as the ‘mechanics of growth’ in which factor accumulation and TFP growth constitute the...