Latin America and Foreign Capital in the Twentieth Century: Economics, Politics, and Institutional Change
AbstractLatin America began the twentieth century as a relatively poor region on the periphery of the world economy. One cause of a low level of income per person was capital scarcity. Long run growth via capital deepening requires either the mobilization of domestic capital through savings, or large inflows of foreign capital. Latin America's capital inflows were large by global standards at the century's turn, and even up to the 1930s. But after the 1930s, Latin America was not so favored by foreign capital as compared with other peripheral regions for example, the Asian economies. The Great Depression is conventionally depicted as a turning point in Latin America for commercial policy and protectionism, thus marking the onset of import substitution and a long-run increase in barriers in international goods markets. However, this paper argues that policy responses in the 1930s, and subsequent decades of relative economic retardation, can be better understood as the cause and effect of the creation of long-run barriers in international capital markets. To support this notion, I discuss the quantitative extent of these barriers and their effects on economic growth. As for causality, I argue that the political economy of institutional changes in the 1930s in the periphery might be understood in similar terms to those economic historians have used to discuss the macroeconomic crisis in the core. Such a political-economy model might thus have universal (rather than core-specific) use. It might predict the 'reactive' and 'passive' responses by periphery countries to external shocks, and the persistence of such shocks in the postwar period. In conclusion, I touch on the important implications of these ideas for the current situation in Latin America, where recent policy reforms aim to undo the last sixty years of isolation and reintegrate Latin America into the global economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7394.
Date of creation: Oct 1999
Date of revision:
Note: DAE IFM ITI
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-11-08 (All new papers)
- NEP-CDM-1999-11-15 (Collective Decision-Making)
- NEP-HIS-1999-11-15 (Business, Economic & Financial History)
- NEP-IFN-1999-11-08 (International Finance)
- NEP-PKE-1999-11-15 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
NBER Working Papers
3541, National Bureau of Economic Research, Inc.
- Jeffrey D. Sachs & Andrew Warner, 1995.
"Economic Reform and the Process of Global Integration,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
- Levine, Ross & Renelt, David, 1991.
"A sensitivity analysis of cross-country growth regressions,"
Policy Research Working Paper Series
609, The World Bank.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
- Taylor, Alan M., 1994. "Tres fases del crecimiento económico argentino," Revista de Historia Económica, Cambridge University Press, vol. 12(03), pages 649-683, December.
- Easterly, William, 1993.
"How much do distortions affect growth?,"
Journal of Monetary Economics,
Elsevier, vol. 32(2), pages 187-212, November.
- Dornbusch, Rudiger & Edwards, Sebastian, 1989.
"The macroeconomics of populism in Latin America,"
Policy Research Working Paper Series
316, The World Bank.
- Alesina, Alberto, et al, 1996.
" Political Instability and Economic Growth,"
Journal of Economic Growth,
Springer, vol. 1(2), pages 189-211, June.
- Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
- J. Bradford De Long & Lawrence H. Summers, 1990.
"Equipment Investment and Economic Growth,"
NBER Working Papers
3515, National Bureau of Economic Research, Inc.
- Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
- N. Gregory Mankiw, 1995.
"The Growth of Nations,"
Harvard Institute of Economic Research Working Papers
1732, Harvard - Institute of Economic Research.
- Obstfeld, Maurice & Taylor, Alan M, 1997.
"The Great Depression as a Watershed: International Capital Mobility over the Long Run,"
CEPR Discussion Papers
1633, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Alan M. Taylor, 1998. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 353-402 National Bureau of Economic Research, Inc.
- Maurice Obstfeld & Alan M. Taylor, 1999. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February.
- Jeffrey G. Williamson, 1995. "Globalization, Convergence and History," NBER Working Papers 5259, National Bureau of Economic Research, Inc.
- Edwards, Sebastian, 1992.
"Trade orientation, distortions and growth in developing countries,"
Journal of Development Economics,
Elsevier, vol. 39(1), pages 31-57, July.
- Sebastian Edwards, 1991. "Trade Orientation, Distortions and Growth in Developing Countries," NBER Working Papers 3716, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 1995.
"Trade Strategy, Investment and Exports: Another Look at East Asia,"
CEPR Discussion Papers
1305, C.E.P.R. Discussion Papers.
- Dani Rodrik, 1995. "Trade Strategy, Investment, and Exports: Another Look at East Asia," NBER Working Papers 5339, National Bureau of Economic Research, Inc.
- Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc.
- Alan M. Taylor, 1994. "Three Phases of Argentine Economic Growth," NBER Historical Working Papers 0060, National Bureau of Economic Research, Inc.
- Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
- Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996.
"Political Instability and Economic Growth,"
4553024, Harvard University Department of Economics.
- Rudiger Dornbusch & Sebastian Edwards, 1991. "Macroeconomic Populism in Latin America," NBER Working Papers 2986, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
- Pereira, Luiz Carlos Bresser & Nakano, Yoshiaki, 2002. "Economic Growth With Foreign Saving?," Textos para discussÃ£o 118, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.