The Politics of Economic Development Theory in Latin America

By Deiner, John T. | MACLAS Latin American Essays, March 1996 | Go to article overview
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The Politics of Economic Development Theory in Latin America

Deiner, John T., MACLAS Latin American Essays


By the middle of the 1990s national economic policy in Latin America was dominated by neoliberal (neoclassical) economic ideas.(1) This situation represented the third major change in economic thinking in the twentieth century.

At the beginning of the century economic development ideas were based on an import export model, which called for Latin American nations to emphasize their comparative advantages in the world economy and concentrate on the exportation of raw materials; minerals and agricultural goods, in exchange for finished materials that could be imported from industrialized countries.(2)

A second model, Import Substitution industrialization, (ISI) dominated Latin American economic thought from the 1930s (especially after 1945) into the 1970s. It continued into the 1980s, until being almost universally rejected following the debt crisis and the abysmal economic performance of the "lost decade" of the 1980s.(3) The current neoliberal model came into preeminence starting with some of the bureaucratic authoritarian military governments of the 1960s and 70s, and increasingly with the civilian governments which came to power in the 1980S.(4)

All three of the economic development models have been influenced by changing philosophical currents and by changing economic and political realities in Latin America and throughout the world. Externally, World political and economic events have significantly impacted Latin America's economies, and have influenced the choice of models used for guiding Latin American development policies. Internally, new political actors in Latin America's national political systems have had a large impact on the successes or failures of the policies implemented under the three models, and on the transitions from one model to another.

This paper discusses some of the major political, economic, and philosophical ideas of the three models, and discusses events and political actors which affected the initiation and outcomes of policies pursued under the three models. The paper pays special attention to the relationships between Latin America and world events which have had an impact on the changing nature of economic development thinking. In its final section the paper points out some problems of making generalizations about economic policy and outcomes in Latin America, citing the need to disaggregate events and outcomes both temporally and spatially, and also the advisability of taking institutionalist economic models into account.(5)

Politics and Economic Models

Politics has been defined in many ways over the past two millennia, but most definitions revolve around one of two central concepts. On the one hand politics is described as the process of authoritatively allocating values in society (who gets what, and how).(6) Another conceptual pole for defining politics involves normative philosophical debate about what constitutes the good society.(7) Both definitions of politics address central issues of the relationship between the individual and the community (the one and the many), participation and stability, and distribution of benefits in society.

In economic terms these political concepts are often expressed as tensions between growth and distribution. The economic development models which have prevailed in twentieth century Latin America have placed differing emphases on growth and distribution, and have given differing answers regarding the best means of achieving greater growth or better distribution. Policy issues concern how best to achieve growth, and how to distribute benefits within society. There is some disagreement about the possibility of simultaneously achieving both increased economic growth and increasingly equal distribution.

Import Export Model

The import export model of economic development was introduced into Latin America by Portuguese and Spanish conquerors. Both colonial powers conceptualized Latin America's economic role to be a source of wealth for the mother country.

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