- Email: [email protected]
Economic policymaking in a conflict society: The Argentine case
306
Book Reviews
not seem to be understood clearly, - except by a few economic advisers to the government. It is fojr this reason that India cannot as yet be said to be firmly in the Phase III of the Bhagwati-Krueger anatomy of trade control regimes, and there remains the danger that at some time in the near future it may slip back, once again, into the Phase II type regime which has beeu the dominant one in the past. Thus, in conclusion, though the policy prescriptions flowing from the careful analysis (suitably quantified, where data availabilities permitted) in the present volume may appear to have been accepted by the Indian government at f:he moment, and would (by now) seem to be the conventional wisdom of developmer,t economists, they are not, however, as yet part of the instinctive intellectual baggage of the intellegentsia and ‘policy makers’ in India. If this book can help persuade them of these seemingly ‘old verities’, it will have been well wo$h writing. Deepak La1 University College, London
R.D. Mallon and J.V. Sourrouille, Economic Policymaking in a Conflict Society: The Argentine Case (Harvard University Press, Cambridge, i975) pp. ii -t 264, $16.00. Jan Tinbergen suggested in the preface of his Principles of Economic PoZicy that the author of a book should disclose immediately the novelty of his contribution. Since this also seems a worthwhile recommendation for book reviewers, I begin by stating that the present volume by Mallon and Sourrouille represents a valuable contribution to the literature of formulating economic policy ‘without prerequisites, ’ i.e. of economic policy that is relevant to the Argentine economy as it exists today. Specifically, the ‘lack of prerequisites’ refers to the authors’ insistence that the conception and implementation of economic policy, both in its objectives and instruments, should be based on the reality of Argentina being a pluralistic and conflictivc society rather than on the fiction of its being a monolithic and authoritarian society. I fully share this point of view. At the very outset, a few words about the conventional chapters of the volume. The authors judiciously complement their analysis by ‘periods’ and ‘problems.’ Thus, ch.apter 1 dea.ls with the chronology of events and chapters 2 to 6 respectively with agriculture and export expansion, industrialization and foreign trade, sustained growth with external equilibrium, secular inflation and stabilization policy, and inflation, the distribution of income and the financing of growth. The volume includes a set of technical appendices and an almost complete list of
Book reuiews
307
bibliographical references. The book spans the period 1948-70. The analysis starts in 1948 when the so-called stop-go policies began to be applied and ends in 1970. The book makes sumptuous and skilful use of the available statistict,l data on the Argentine economy in a manner which both economists and noneconomists would find profitable; throughout, it is interspersed with observations which are generally refreshing, sometimes challenging and at times controversl;Tl to the point of being inaccurate. Thus, there are interesting statements such as: ‘It is not true that before 1950 the import substitution industrialization policy operated only at the final commodities level’ (p. 69), ‘the import substitution industrialization policy was ended by the change in the demand pattern (p. 79), ‘the Argentine manufacturing sector was initially quite export-oriented, since before 1930 about 15-20 % of the industrial product was exported’ (p. 79), ‘the period from the balance of paymenes crisis of 1948 to the fall of the Ongania administration in 1970 embraced at least eight major payments adjustments’ (p. 92); highly disputable statements, such as: ‘It is dificult to resist the imprzssion that Frondizi’s extravagant initial policies were motivated only to produce an economic crisis of sufficient proportions to justify a clean break with past policies so that he could introduce his ovvn “developmentalist” strategy’ (p. 19); inaccurate statements, such as: “Alvaro Alsogaray was appointed Minister of Economy before December 1958’ [in fact IX was appointed in Aprii 19591 (p. 21), ‘Krieger Vasena was appointed in January 1967’ [in fact, in March 19671(p. 30); and finally, even frightening statements ,such as: ‘ I . . at the same time that it applies an antiinflationary program, the government could apply pressure selectively on those who violate incomes and stabilization policies by scrutinizing their tax records.’ Two points, one historrc.il and the other technLLi! deserve :;peciaI mention. From the historical point o!Tview,the book represems the Grst t~alanced analysis of the 1964-66 period of the Rlldicales de1 Ptrcblo alministration. At the technical level, the authors’ analysis of the domestic l?rice effect of a subsidy on nontraditional exports is of special interest. Applying the ehmentary microeconomic analysis of the simple monopoly case, they show that regardless of the returns to scale or short-run marginal costs of the industr),, an ‘extremely generous’ scheme of subsidy (i.e. of subsidy greater than the dHerence between the world price and the marginal domestic cost at the.Dreviouslev;:lof production) on nontraditional exports would increase the domestic price of’ the exportable even in the case in which the previous domestic pril:e was greater than the new effective export price. From the point (1. /:,.:.v of the content of the p!)licy package, the authors’ recommendations a ::,:I striking - at least not fc r a reformist. The recommended strategy cons;ses essentially of the imp!en :ntrttion of a land tax, the adoption of the crawling peg and the introduction of ‘1policy ofneutral inflation. It is, however, their insistence on the relevance of economic policy to the
308
Buok reviews
Argentine situation that is refreshing. Thus they state: ‘This book therefore represents the search for a policy approach appropriate for constitutional democratic governments in pluralistic, conflict societies’ (preface). This insistence arises from the authors’ conviction that Argentina has failed to achieve the *expected’ target;s of economic policy more from the Imanner in which economic policies have sought to be elaborated and implemented rather than from the choice of a wrong development strategy. More specifically, while Argentine society is conflictive and pluralistic, and has been from the forties on, the remedial measures have consisted of a permanent rotation of sectorialist policy schemes. As stated before, I fully share the authors’ point of view. In my opinion, the tension between the pluralistic and conflictive Argentine society and the manner in which economic policy is sought to be carried out by each successive minister of the economy has produced massive short-run fluctuations in the economy; these ministers have either operated unde.r the illusion of their being so brilliant as t,o convert every Argentinean to their way of thinking on the basis of their initial address or have sought to apply rational but myopic maximization policies knowing as they did that, after a certain period of time, they would be fired independently of their actions. It is almost certain that these fluctuations have affected the long-run performance of the economy in a downward direction. Hence, the main recommendation of the authors that these characteristics of the Argentine society should be explicitly incorporated in the formulation r nd &mplementation of economic policy. However, ,the authors do recognize the difficulty of making their chief recommendation operationally feasible. As they state: ‘Economists seem more at home under strong, stable governments’ (preface). They emphatically suggested thilt in this type of society, logrolling does not work; they further emphasize the need of implemerting a macroeconomic policy that increases the size of tht:: coalition in power; and poinr out that to the extent that a ‘correct economic policy improves the existing institutions, more structural modifications will become feasible in the future. ‘The task of the leaders and policymakers would be greatly facilitated if they could count on a team of pragmatic technocrats uncommitted to any norm of economic behaviour. Provision of this kind of analysis and advice constitutes a major challenge to the economic development profession in the years ahead, especially as wore nations join the conflictive club of the semi-industrialized’ (p. 17). As a ‘pragmatic technocrat uncommitted to any ideal norm of economic behaviour,’ I am indeed enthusiastic about the idea. The analysis of the last several years of the Argentine economy, however, raises the pertinent question of whether the provision of ‘pragmatic technocrats’ constitutes a supply or a demand problem. Juan Carlos de Pablo Instituto para el Desarrollo de Ejecdtivos en la Argentina
Book Reviews
not seem to be understood clearly, - except by a few economic advisers to the government. It is fojr this reason that India cannot as yet be said to be firmly in the Phase III of the Bhagwati-Krueger anatomy of trade control regimes, and there remains the danger that at some time in the near future it may slip back, once again, into the Phase II type regime which has beeu the dominant one in the past. Thus, in conclusion, though the policy prescriptions flowing from the careful analysis (suitably quantified, where data availabilities permitted) in the present volume may appear to have been accepted by the Indian government at f:he moment, and would (by now) seem to be the conventional wisdom of developmer,t economists, they are not, however, as yet part of the instinctive intellectual baggage of the intellegentsia and ‘policy makers’ in India. If this book can help persuade them of these seemingly ‘old verities’, it will have been well wo$h writing. Deepak La1 University College, London
R.D. Mallon and J.V. Sourrouille, Economic Policymaking in a Conflict Society: The Argentine Case (Harvard University Press, Cambridge, i975) pp. ii -t 264, $16.00. Jan Tinbergen suggested in the preface of his Principles of Economic PoZicy that the author of a book should disclose immediately the novelty of his contribution. Since this also seems a worthwhile recommendation for book reviewers, I begin by stating that the present volume by Mallon and Sourrouille represents a valuable contribution to the literature of formulating economic policy ‘without prerequisites, ’ i.e. of economic policy that is relevant to the Argentine economy as it exists today. Specifically, the ‘lack of prerequisites’ refers to the authors’ insistence that the conception and implementation of economic policy, both in its objectives and instruments, should be based on the reality of Argentina being a pluralistic and conflictivc society rather than on the fiction of its being a monolithic and authoritarian society. I fully share this point of view. At the very outset, a few words about the conventional chapters of the volume. The authors judiciously complement their analysis by ‘periods’ and ‘problems.’ Thus, ch.apter 1 dea.ls with the chronology of events and chapters 2 to 6 respectively with agriculture and export expansion, industrialization and foreign trade, sustained growth with external equilibrium, secular inflation and stabilization policy, and inflation, the distribution of income and the financing of growth. The volume includes a set of technical appendices and an almost complete list of
Book reuiews
307
bibliographical references. The book spans the period 1948-70. The analysis starts in 1948 when the so-called stop-go policies began to be applied and ends in 1970. The book makes sumptuous and skilful use of the available statistict,l data on the Argentine economy in a manner which both economists and noneconomists would find profitable; throughout, it is interspersed with observations which are generally refreshing, sometimes challenging and at times controversl;Tl to the point of being inaccurate. Thus, there are interesting statements such as: ‘It is not true that before 1950 the import substitution industrialization policy operated only at the final commodities level’ (p. 69), ‘the import substitution industrialization policy was ended by the change in the demand pattern (p. 79), ‘the Argentine manufacturing sector was initially quite export-oriented, since before 1930 about 15-20 % of the industrial product was exported’ (p. 79), ‘the period from the balance of paymenes crisis of 1948 to the fall of the Ongania administration in 1970 embraced at least eight major payments adjustments’ (p. 92); highly disputable statements, such as: ‘It is dificult to resist the imprzssion that Frondizi’s extravagant initial policies were motivated only to produce an economic crisis of sufficient proportions to justify a clean break with past policies so that he could introduce his ovvn “developmentalist” strategy’ (p. 19); inaccurate statements, such as: “Alvaro Alsogaray was appointed Minister of Economy before December 1958’ [in fact IX was appointed in Aprii 19591 (p. 21), ‘Krieger Vasena was appointed in January 1967’ [in fact, in March 19671(p. 30); and finally, even frightening statements ,such as: ‘ I . . at the same time that it applies an antiinflationary program, the government could apply pressure selectively on those who violate incomes and stabilization policies by scrutinizing their tax records.’ Two points, one historrc.il and the other technLLi! deserve :;peciaI mention. From the historical point o!Tview,the book represems the Grst t~alanced analysis of the 1964-66 period of the Rlldicales de1 Ptrcblo alministration. At the technical level, the authors’ analysis of the domestic l?rice effect of a subsidy on nontraditional exports is of special interest. Applying the ehmentary microeconomic analysis of the simple monopoly case, they show that regardless of the returns to scale or short-run marginal costs of the industr),, an ‘extremely generous’ scheme of subsidy (i.e. of subsidy greater than the dHerence between the world price and the marginal domestic cost at the.Dreviouslev;:lof production) on nontraditional exports would increase the domestic price of’ the exportable even in the case in which the previous domestic pril:e was greater than the new effective export price. From the point (1. /:,.:.v of the content of the p!)licy package, the authors’ recommendations a ::,:I striking - at least not fc r a reformist. The recommended strategy cons;ses essentially of the imp!en :ntrttion of a land tax, the adoption of the crawling peg and the introduction of ‘1policy ofneutral inflation. It is, however, their insistence on the relevance of economic policy to the
308
Buok reviews
Argentine situation that is refreshing. Thus they state: ‘This book therefore represents the search for a policy approach appropriate for constitutional democratic governments in pluralistic, conflict societies’ (preface). This insistence arises from the authors’ conviction that Argentina has failed to achieve the *expected’ target;s of economic policy more from the Imanner in which economic policies have sought to be elaborated and implemented rather than from the choice of a wrong development strategy. More specifically, while Argentine society is conflictive and pluralistic, and has been from the forties on, the remedial measures have consisted of a permanent rotation of sectorialist policy schemes. As stated before, I fully share the authors’ point of view. In my opinion, the tension between the pluralistic and conflictive Argentine society and the manner in which economic policy is sought to be carried out by each successive minister of the economy has produced massive short-run fluctuations in the economy; these ministers have either operated unde.r the illusion of their being so brilliant as t,o convert every Argentinean to their way of thinking on the basis of their initial address or have sought to apply rational but myopic maximization policies knowing as they did that, after a certain period of time, they would be fired independently of their actions. It is almost certain that these fluctuations have affected the long-run performance of the economy in a downward direction. Hence, the main recommendation of the authors that these characteristics of the Argentine society should be explicitly incorporated in the formulation r nd &mplementation of economic policy. However, ,the authors do recognize the difficulty of making their chief recommendation operationally feasible. As they state: ‘Economists seem more at home under strong, stable governments’ (preface). They emphatically suggested thilt in this type of society, logrolling does not work; they further emphasize the need of implemerting a macroeconomic policy that increases the size of tht:: coalition in power; and poinr out that to the extent that a ‘correct economic policy improves the existing institutions, more structural modifications will become feasible in the future. ‘The task of the leaders and policymakers would be greatly facilitated if they could count on a team of pragmatic technocrats uncommitted to any norm of economic behaviour. Provision of this kind of analysis and advice constitutes a major challenge to the economic development profession in the years ahead, especially as wore nations join the conflictive club of the semi-industrialized’ (p. 17). As a ‘pragmatic technocrat uncommitted to any ideal norm of economic behaviour,’ I am indeed enthusiastic about the idea. The analysis of the last several years of the Argentine economy, however, raises the pertinent question of whether the provision of ‘pragmatic technocrats’ constitutes a supply or a demand problem. Juan Carlos de Pablo Instituto para el Desarrollo de Ejecdtivos en la Argentina