Development and underdevelopment in America

BOOK REVIEWS Bernecker, Walther L. and Tobler, Hans Werner (eds) (1993), Development and Underdevelopment in America, Walter de Gruyter (Berlin). vi + 336 pp.DM168 hbk. This book is a collection of articles concerned with explaining the relative poverty of South America in comparison with the northern countries of the hemisphere. The authors explore South American economic history searching for clues to the underdevelopment of Latin America. The articles make for interesting reading, but they do not provide any clinching argument. Owing to space limitations, I shall discuss only two essays here. If I concentrate on their shortcomings, it is because their arguments are worth thinking about. The criticisms below are also a form of compliment. The first article is by a Harvard historian, John Coatsworth. He argues that Latin American growth rates per capita ‘roughly equalled (and in some cases surpassed) those of the United States’ (p. 10) since the late nineteenth century, and the present lower level of per capita GDP obtaining in Latin America can be traced to experiences prior to the twentieth century. Coatsworth accuses development economists of paying too much attention to alleged poor performance in the twentieth century. He maintains, instead, that in this century, ‘the major, unsolved analytical puzzle is how the region’s [Latin America] economies managed to perform so well over the long run in the face of persistent social and institutional instability’ (p. 13). Coatsworth fails to appreciate that the twentieth century is important because of the compounding effect of growth rates over time. If Mexico had achieved an annual average growth rate of 3.5 per cent between 1990 and 1987, not an impossible task given the post-war experience of many Asian countries, per capita GDP in Mexico would almost reach the US level in 1987. Historians must ask what went wrong. What appear to be ‘roughly’ equal growth rates could still lead to largely divergent growth patterns if compounded over a century. Consider, for example, the case of Mexico. Per capita GDP in Mexico in the year 1900 was 22.3 per cent of the corresponding figure for the USA. The annual average growth rates of real per capita GDP for Mexico and the USA were 1.6, and 1.8 per cent, respectively, between 1900 and 1987 (p. 11). By the year 1987, the Mexican per capita GDP had fallen to 19.7 per cent of the US level. There is a compounding of the disadvantage-l .6 per cent growth rate in Mexico, but 1.8 per cent in the USA-over 87 years. The two growth rates could be considered roughly equal only if one were to study a short period in history. If 1.6 is roughly equal to 1.8, then one might argue that 2.0 is also roughly equal to 1.8. What might have happened if Mexico registered a per capita growth of 2.0 per cent per annum during the period 1900-l 987? The Mexican per capita GDP in 1987 would have stood at 26.4 per cent of the US level in 1987. If the Mexican rate reached that of Brazil, the Mexicans would enjoy a level of per capita GDP in 1987 which was 37 per cent of the US figure. We have already considered the dramatic effect of 3.5 per cent annual growth rates compounded over 87 years. Recent experience of the countries of the Pacific rim suggests that sustained annual average per capita growth rates above 3.5 per cent are possible to achieve. Latin America could not attain the Asian rate because of ‘persistent social and institutional instability’ (p. 13). Part of that instability derives from the nature of the growth process in Latin America. Hansjorg Siegenthaler accepts too readily that inequality ‘inevitably follows economic growth (p. 37). That was true in Latin America, and that was a contributing factor for the persistence of social and institutional instability to which Coatsworth refers. Extreme inequalities in income distribution do not allow for a national consensus to develop about the direction of economic policy. The extent to which this distributive conflict has hindered economic growth in Latin America can be gleaned from a comparison of South Korean and Latin American experience in the

BULLETIN

OF LATIN AMERICAN

RESEARCH

1980s of adjusting to the international debt crisis. ‘Korea suffered only one year of negative growth, 1980, and was able to restore rapid growth by 1983’ (J. Sachs, ‘Managing the LDC Debt Crisis’, Brookings Papers on Economic Activity, No. 2: 415,1986). For Latin America, the entire decade of the 1980s was a lost decade for growth. S. P. Chakravarty UniversityCollege of North Wales

Baer, Werner and Tulchin, Joseph S. (eds) (1993), Brazil and the Challenge of Economic Reform, The Woodrow Wilson Center Press, distributed by The Johns Hopkins University Press (Baltimore). xii + 160 pp. E 11.50 pbk. The book presents six papers that had been prepared for a seminar in 1991 plus an epilogue that tracks the reasons for the failure of the Collor government. All the papers aim to discuss new orientations for economic development in Brazil after the exhaustion of the import substitution model. By and large, the contributions miss this aim. Their quality is heterogeneous and, on the whole, the volume does not reach the quality of other recent collections (e.g. M. D’AlvaG. Kinzo (ed.), Brazil-the Challenges of the 1 %XIs,British Academic Press, London, 1993). The essay by Gilbert0 Dupas, which outlines a new development model, is correct to claim that import substitution is exhausted. Yet, it is somewhat superficial in analysing why this is so and what is the heritage of import substitution in terms of industrial and political structures. The attempt to point to an alternative is outright dangerous. According to Dupas, the state should concentrate on social programmes and on setting up appropriate framework conditions for industrial development. In terms of industrial policy, it should support the adjustment in three fields with a high competitive potential, namely steel, pulp and paper, and agroindustry, and it should support the build-up of technological and productive capacity in new industries, namely computers and microelectronics, new materials, and biotechnology and genetic engineeiing. The fate of the rest of the industry should be left to the market forces. It does not become clear what distinguishes this view from the neoliberal prescriptions that Dupas actually intends to criticise. Luciano Martins’ contribution on the political reasons of the economic crisis also suffers from being somewhat superficial. Both Martins and Dupas fail to address the fundamental reason of inflation, namely the inability of the Brazilian society to establish an adequate distribution of the development costs. For instance, Martins is wrong to claim that the crisis of governance does not reflect profound social conflicts but is rather due to inflation and governmental disorganisation. In fact, the inflation reflects the persisting political and social distortions, and the crisis of governance is therefore the result of a long history of missing adjustments. The essay by Amaury Port0 de Oliveira is a typical example of the lafora syndrome that is not infrequent among Brazilian scholars. After a lengthy analysis of the East Asian pattern of development, he fails to come forward with clear conclusions as to what this has to do with Brazil. The essay by Frenando de Holanda Barbosa on pricesetting in oil products, electricity, and telecommunications presents much interesting information about price distortions in these sectors. However, he is quite brief in his discussion of the reasons for this pattern, and he does not match the expectations he