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Essays on the economic history of the Argentine Republic
Book
mviews
9-l
hinge o’n general equilibrium terms of trade effects f- Tindividual ccx ntries which Vines had ignored. .Sor e oT the peculiarititt: may also hinge on the constant cost assumption.. In Chapter 9 he allows for production a& demand effects, making again the Graham assumption. He analyses (and finds severe faults with) the Makower-Morton article, and from a model with specific figures comes out with some general conclusions; these are qualitative suggestions of reasonable possibilities, similar in kind to those in Meiide’s book. Finally it should ‘be nc ted that Lipsey explains very clearly Meade’s method of general equihbrium analysis wit!h small changes. In the preface he points out that he now reahses thaI Meade’s method. is ind(eed genera! and not partial equilibtium, contrary to what he thought when he wrote his thesis (a mistake of interpretation others have also ma and he shows the considerable limitations of Meade’s method once discrete. changes are allowed for. This is a very good book, well worth publishing even now. It is a model of careful thecoretical exposition. Thle customs union theorist was obviously father to the successful textlblook author! Trade theorists,, including some renowned ones, should read this book to learn how to expound complex theoretical arguments. The subject has advanced since the book was written, notably thianks to Vanek, but it is still illuminating (perhaps beclause, as Lipsey says, “the techniques are crude”), and challenging ([because. ‘“marly of the ideas are not fully worked out”).
W.M. Corden Nuffield College Oxford
Carlos I.5 L&Z Alejakndro, Essays on the Economic History of the Argentine Republic. (New Haven and London: Yale University Press, 1970. A Publication of the Yale Economic Growth Center., pp. 54.1, Statistical Appendix, Index, $18.50.) The ffamiliar puzzle about Argentina is why a cot&y of the world’s highest growth rates from II 865 been grouped with the world’s rich countries
that had one
92
Book reviews
be a ‘less develope:d’ country., In particular, a comparison is often made. with Australia. By 1929 Argentina hacTreached a GNP per capita >c around $700 (at 1964 prices), cc3tn pared with Austral:ia’s around $1,000; the population growth rate, much inrluerrced by immigration, had been much higher in Argentina than in Australia. In 1930 Argentina had more motor-cars per head than the U.K.! Lengthy chapters in this fascinating and important book review the Argentine economy before 1930, after 1930, the rural sector, the stages in the industrialisation of Argentina, the tariff 1906- 1940, and stop-go cycles and inflation during the post-war period; there is an excellent statistical appendix with 136 tables. Diaz argues that there have been three key features of the Argentine economy since 1930: a low and irregular per capita growth rate (since 1930 the average rate has been less than 1%), marked disparity in sectoral growth rates (against the rural sector), and an absolute decline in export production. The share of manufacturing value added in GNP, and even more of services, increased. The capital accumulation pattern shifted *towards construction, away from machinery and ecpuipment. The proportion of the labor force in services (notably government) increased rirom 42% to 52%. D:iaz argues that t e problem has been not too much manufacturing but too few exports, hence foreign exchange shorl:age and low rates of EQ~ capital formation. If there had been less discrimination against exports, manufacturing expansion would actually have been greater since more capital-goods could have been imported. He emphasizes the excessive growth of the non-tradedgoods sector. His judgment of economic policy 1930-43 - a period of importsubstitution through industrialisation - is much more favorable than is now usual in Latin. American writings. Corrupt governments relied on a team of competent technicians who influenced policy significantly, generating policies more enligh?ened than those followed in more advanced countries (good news for Harvard Advisory Groupers!). He documents the adverse effects on exports and capital accumulation of Peronist and subsequent policies. Efforts z&e 1955 to reverse anti-export policies have not been very successful and have apparently had adverse income distribution ‘effects. Furthermore, the high and haphazard system of protection has not been rationalised. Since the war ~clative domestic prices of investment goods have greatly increased in Argentina owing to foreign exchange controls irnd tariffs, and also to declines in labor productivity in the construction
93
industries. As a result the gross invcistment coefficient in current prices has been high (around 20%), high =I than in many countries with higher growth rates, but at pre-war prj ,.2s iit ha!s only been around 13%. In a lengthy chapter Dl’;szexamines tne dlata on this matter, the reasons for the high relative price of investment goods (compared to prewar and to most other countries), and the consslequences.This chapter i.s most interesting and should influence theollrists (such as this reviewer) who incorporate changes in the investment-consumption-good price ratio into growth-and-trade models. He argues that real capital fomlation was determined mainly by suplply conditions -- in fact, foreign exchan.ge availability and labor productivity - and not by the relaltive price change itself. The price change affected income distribution and the allocation of the savings effort rather thain total real investment. In terms of the simple twosector growth models, the expenditure function which determines the consumption-investment-goods raktioat diifferent relative prices. has a zero substitution elasticity. This book is an admirable product of the Yale Growth Center. It is very smoothly writeen, and is indeeld a pleasure to read. It is economists” history - a model of how this sort of thing should be done: the balanced and intelligent use of economic analysis and statistical material. IJnlike so much written about L,atin Almerica, it is cool and objeo tive, always sub&antiating its arguments, even though social and political factors are not ignored. A charming frontispiece illustrates the elegance of the Argentine economy. W.&l,Corden Nuffield College Oxford
Howard Pack, Structural Change and Economic Policy in Israel. (New Haven and London: Yale University Press,, 197 1, pp. XV + 273) This study is one of a series rlndertaken on behalf of the Economic Growth Center at Yale. Tlhe purpose of t!he serif:s is to encompass a number of developing countries, with each study describing and analyzing the growth process in a particular country. Each study thus should serve a dual purpose: provide not or3y an understanding of that country’s growth,, but also point out insighitsand possible generalizations on the growth of developing countries.
mviews
9-l
hinge o’n general equilibrium terms of trade effects f- Tindividual ccx ntries which Vines had ignored. .Sor e oT the peculiarititt: may also hinge on the constant cost assumption.. In Chapter 9 he allows for production a& demand effects, making again the Graham assumption. He analyses (and finds severe faults with) the Makower-Morton article, and from a model with specific figures comes out with some general conclusions; these are qualitative suggestions of reasonable possibilities, similar in kind to those in Meiide’s book. Finally it should ‘be nc ted that Lipsey explains very clearly Meade’s method of general equihbrium analysis wit!h small changes. In the preface he points out that he now reahses thaI Meade’s method. is ind(eed genera! and not partial equilibtium, contrary to what he thought when he wrote his thesis (a mistake of interpretation others have also ma and he shows the considerable limitations of Meade’s method once discrete. changes are allowed for. This is a very good book, well worth publishing even now. It is a model of careful thecoretical exposition. Thle customs union theorist was obviously father to the successful textlblook author! Trade theorists,, including some renowned ones, should read this book to learn how to expound complex theoretical arguments. The subject has advanced since the book was written, notably thianks to Vanek, but it is still illuminating (perhaps beclause, as Lipsey says, “the techniques are crude”), and challenging ([because. ‘“marly of the ideas are not fully worked out”).
W.M. Corden Nuffield College Oxford
Carlos I.5 L&Z Alejakndro, Essays on the Economic History of the Argentine Republic. (New Haven and London: Yale University Press, 1970. A Publication of the Yale Economic Growth Center., pp. 54.1, Statistical Appendix, Index, $18.50.) The ffamiliar puzzle about Argentina is why a cot&y of the world’s highest growth rates from II 865 been grouped with the world’s rich countries
that had one
92
Book reviews
be a ‘less develope:d’ country., In particular, a comparison is often made. with Australia. By 1929 Argentina hacTreached a GNP per capita >c around $700 (at 1964 prices), cc3tn pared with Austral:ia’s around $1,000; the population growth rate, much inrluerrced by immigration, had been much higher in Argentina than in Australia. In 1930 Argentina had more motor-cars per head than the U.K.! Lengthy chapters in this fascinating and important book review the Argentine economy before 1930, after 1930, the rural sector, the stages in the industrialisation of Argentina, the tariff 1906- 1940, and stop-go cycles and inflation during the post-war period; there is an excellent statistical appendix with 136 tables. Diaz argues that there have been three key features of the Argentine economy since 1930: a low and irregular per capita growth rate (since 1930 the average rate has been less than 1%), marked disparity in sectoral growth rates (against the rural sector), and an absolute decline in export production. The share of manufacturing value added in GNP, and even more of services, increased. The capital accumulation pattern shifted *towards construction, away from machinery and ecpuipment. The proportion of the labor force in services (notably government) increased rirom 42% to 52%. D:iaz argues that t e problem has been not too much manufacturing but too few exports, hence foreign exchange shorl:age and low rates of EQ~ capital formation. If there had been less discrimination against exports, manufacturing expansion would actually have been greater since more capital-goods could have been imported. He emphasizes the excessive growth of the non-tradedgoods sector. His judgment of economic policy 1930-43 - a period of importsubstitution through industrialisation - is much more favorable than is now usual in Latin. American writings. Corrupt governments relied on a team of competent technicians who influenced policy significantly, generating policies more enligh?ened than those followed in more advanced countries (good news for Harvard Advisory Groupers!). He documents the adverse effects on exports and capital accumulation of Peronist and subsequent policies. Efforts z&e 1955 to reverse anti-export policies have not been very successful and have apparently had adverse income distribution ‘effects. Furthermore, the high and haphazard system of protection has not been rationalised. Since the war ~clative domestic prices of investment goods have greatly increased in Argentina owing to foreign exchange controls irnd tariffs, and also to declines in labor productivity in the construction
93
industries. As a result the gross invcistment coefficient in current prices has been high (around 20%), high =I than in many countries with higher growth rates, but at pre-war prj ,.2s iit ha!s only been around 13%. In a lengthy chapter Dl’;szexamines tne dlata on this matter, the reasons for the high relative price of investment goods (compared to prewar and to most other countries), and the consslequences.This chapter i.s most interesting and should influence theollrists (such as this reviewer) who incorporate changes in the investment-consumption-good price ratio into growth-and-trade models. He argues that real capital fomlation was determined mainly by suplply conditions -- in fact, foreign exchan.ge availability and labor productivity - and not by the relaltive price change itself. The price change affected income distribution and the allocation of the savings effort rather thain total real investment. In terms of the simple twosector growth models, the expenditure function which determines the consumption-investment-goods raktioat diifferent relative prices. has a zero substitution elasticity. This book is an admirable product of the Yale Growth Center. It is very smoothly writeen, and is indeeld a pleasure to read. It is economists” history - a model of how this sort of thing should be done: the balanced and intelligent use of economic analysis and statistical material. IJnlike so much written about L,atin Almerica, it is cool and objeo tive, always sub&antiating its arguments, even though social and political factors are not ignored. A charming frontispiece illustrates the elegance of the Argentine economy. W.&l,Corden Nuffield College Oxford
Howard Pack, Structural Change and Economic Policy in Israel. (New Haven and London: Yale University Press,, 197 1, pp. XV + 273) This study is one of a series rlndertaken on behalf of the Economic Growth Center at Yale. Tlhe purpose of t!he serif:s is to encompass a number of developing countries, with each study describing and analyzing the growth process in a particular country. Each study thus should serve a dual purpose: provide not or3y an understanding of that country’s growth,, but also point out insighitsand possible generalizations on the growth of developing countries.