Conditionality, Restructuring, and the Reperipherization of Latin America

By Adkisson, Richard V. | Journal of Economic Issues, June 1998 | Go to article overview
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Conditionality, Restructuring, and the Reperipherization of Latin America

Adkisson, Richard V., Journal of Economic Issues

During recent decades, many Latin American nations have undertaken market-oriented economic reform programs. These reforms have arisen in response to perceived failures of the structuralist-inspired import substitution approach to development of prior decades. Structuralist policies were designed with hopes of narrowing the economic gap between the developed nations at the center of the world trading system and the less developed nations at the periphery. In a sense, neo-liberal reformers promise the same thing. The purpose here is to ask whether neo-liberal reform has fulfilled its promise or whether it has instead ushered in an era of reperipherization in Latin America. The paper begins with a review of the center-periphery distinction and briefly outlines the forces driving the neo-liberal reform efforts.

Structuralism as a Precursor to Neo-liberal Reform

Latin American structuralism developed in reaction to perceived inequities in the world trading system as it had operated through the early decades of the twentieth century. The Ricardian promise of mutually beneficial specialization and exchange based on comparative advantage appeared to have failed the world's agricultural and primary product producers, the peripheral nations. It seemed that the industrial nations of the center were reaping all, or most, of the benefits of trade. Raul Prebisch, Hans Singer, Ragnar Nurkse, Gunnar Myrdal, and other early structuralist writers proposed that the existing pattern of trade had denied the peripheral nations the opportunity to industrialize and thus enjoy the dynamic benefits of industrialization. Their analysis led them to conclude that if Latin American nations were to achieve the economic dynamism they desired, they would have to resist the siren song of the market and develop national and regional import substitution strategies to direct their economies toward industrialization. The Economic Commission for Latin America was especially important in promoting these policies, and beginning in the 1950s structuralist ideas found wide acceptance in Latin America.

The center-periphery distinction was the centerpiece of structuralist methodology. Structuralists claimed that there were fundamental differences in economic structure that gave the center nations several advantages over the peripheral nations with respect to technology, export price stability, and market power. The periphery, on the other hand, was marked by technological backwardness, a high degree of openness, volatile export prices, terms of trade deterioration, economic shocks originating in the center, a shortage of savings, a low rate of capital formation, and a lower standard of living than that experienced by residents of the center [Jameson 1986].

Available evidence suggests that Latin American nations had some early success with import substitution. Duncan Green summarizes some evidence of this success.

Although now widely derided by the new generation of liberal economists, import substitution transformed the region's economy. By the early 1960s, domestic industry supplied 95 per cent of Mexico's and 98 per cent of Brazil's consumer goods. From 1950 to 1980 Latin America's industrial output went up six times, keeping well ahead of population growth. Infant mortality fell from 107 per 1000 live births in 1960 to 69 per 1000 in 1980; life expectancy rose from 52 years to 64 years. In the mid-1950s, Latin America's economies were growing faster than those of the industrialized West [Green 1995, 17].

In spite of apparent early success, by the late 1970s and certainly by 1982, the structuralist experiment was largely viewed as a failure. Osvaldo Sunkel [1990], once sympathetic to the structuralist cause, acknowledged that the import substitution strategy had several rather serious defects. For example, Latin American nations continued to rely on exports of primary goods and, although industrialization had created some high-paying jobs, there were still too few jobs to employ the masses of workers attracted to the urban centers by their promise.

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