Globalization, Economic Development and Inequality

Globalization, Economic Development and Inequality

An Alternative Perspective

New Horizons in Institutional and Evolutionary Economics series

Edited by Erik S. Reinert

The expert contributors gathered here approach underdevelopment and inequality from different evolutionary perspectives. It is argued that the Schumpeterian processes of ‘creative destruction’ may take the form of wealth creation in one part of the globe and wealth destruction in another. Case studies explore and analyse the successful 19th century policies that allowed Germany and the United States to catch up with the UK and these are contrasted with two other case studies exploring the deindustrialization and falling real wages in Peru and Mongolia during the 1990s. The case studies and thematic papers together explore, identify and explain the mechanisms which cause economic inequality. Some papers point to why the present form of globalization increases poverty in many Third World nations.

Chapter 5: Natural Resources, Industrialization and Fluctuating Standards of Living in Peru, 1950–1997: A Case Study of Activity-Specific Economic Growth

Santiago Roca and Luis Simabuko

Subjects: economics and finance, evolutionary economics, welfare economics


5. Natural resources, industrialization and fluctuating standards of living in Peru, 1950–97: a case study of activity-specific economic growth* Santiago Roca and Luis Simabuko Peru’s recent economic policy, like that of most Latin American countries,1 has followed the so-called Washington Consensus. This set of policies precludes the implementation of strategic industrial policies or any active, deliberate construction of competitive advantages by promoting particular sectors or economic activities. In the Washington Consensus, all economic activities are seen as qualitatively alike. Indiscriminately opening any nation to the ‘magic of the market’ will allow that nation to acquire the necessary long-term external competitiveness, promote economic growth and enhance its standard of living, regardless of the country’s productive specialization. This chapter evaluates whether the type of productive specialization and trade in specific products has affected economic growth and standards of living in Peru. It seeks to determine if the prevalence of producing or trading goods from specific sectors – whether natural resources, industrial or service – has an impact, positive or negative, on the people’s standard of living and well-being. To this end, we analyse Peruvian data for the last 50 years of the twentieth century, paying special attention to expansion and recession cycles and to industrialization policies implemented in Peru’s economy since the end of the 1950s. Our two core hypotheses, which are strongly related, are as follows. (1) In Peru during the last 50 years of the twentieth century, the standard of living was inversely related to the...

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