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Latin
America's economic performance since the
beginning of neo-liberal reforms has been
poor; this not only contrasts with its
own performance pre-1980, but also with
what has happened in Asia since 1980.
I shall argue that the weakness of the
region's new paradigm is rooted as much
in its intrinsic flaws as in the particular
way it has been implemented. Latin America's
economic reforms were undertaken primarily
as a result of the perceived economic
weaknesses of the region - i.e., there
was an attitude of 'throwing in the towel'
vis-à-vis the previous state-led
import substituting industrialisation
strategy, because most politicians and
economists interpreted the 1982 debt crisis
as conclusive evidence that it had led
the region into a cul-de-sac. As Hirschman
has argued, policymaking has a strong
component of 'path-dependency'; as a result,
people often stick with policies after
they have achieved their aims, and those
policies have become counterproductive.
This leads to such frustration and disappointment
with existing policies and institutions
that it is not uncommon to experience
a 'rebound effect'. An extreme example
of this phenomenon is post-1982 Latin
America, where the core of the discourse
of the economic reforms that followed
ended up simply emphasising the need to
reverse as many aspects of the previous
development (and political) strategies
as possible. This helps to explain the
peculiar set of priorities, the rigidity
and the messianic attitude with which
the reforms were implemented in Latin
America, as well as their poor outcome.
Something very different happened in Asia,
where economic reforms were often intended
(rightly or wrongly) as a more targeted
and pragmatic mechanism to overcome specific
economic and financial constraints. Instead
of implementing reforms as a mechanism
to reverse existing industrialisation
strategies, in Asia they were put into
practice in order to continue and strengthen
ambitious processes of industrialisation.
JEL classifications:
B52, D31, E20, F13, F59, H54, J20, L50,
N16, N36, O16, O40, P50
A shortened
version of this paper will be published
in JA Ocampo and J Ros (eds.),
The Handbook of Latin American Economics,
OUP, 2010
September 30, 2010.
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