Market vs state

THE REGION FROM THE 1950s TO THE 2000s

The 1950s, 1960s, and 1970s can be characterized as period of more state in Latin America: heavy investments in infrastructure and basic industries as steel and energy, education, public health, etc. It was a period of stimulating economic growth, which plainly greater than what would follow in the 1980s and 1990s. The paradigm of import- substitutionindustrialization and protecting national industries worked better in larger economies: Brazil and Mexico. In the 1970s, ELAC encouraged a gradual opening of the region’s economies and their eventual integration into a common market. ECLAC sought to reduce the structural heterogeneity and inefficiencies that had long undermined Latin American economies.

The reforms introduced in the 1980s weredriven by the debt crisis and the need to adapt the region’s economies to globalization. The powerful pro-free market ideological was launched by the governments of R. Reagan (US) and Margaret Thatcher(UK) and their counterparts in Latin America. The state was considered as the problem, so the consequences were: state-owned companies were privatized, markets deregulated, and external tariffssummarily reduced; financial adjustments that severely weakened the state’s ability to act; resources for social protection were drastically reduced. Some countries (Chile, Mexico and Argentina) were affected by the macroeconomic policies of automatic free-market adjustment, particularly a sudden opening of the capital account accompanied by fixed exchanges rates; the consequences were: overindebtedness of the state and the private sector; macroeconomic evaluation, recession, unemployment: political consequences: rotating governments; a crisis of the party system; and lack of confidence in democracy where it had existed.

The opening of domestic economies triggered a powerful export dynamism and compelled increased efficiency in a significant segment of the production apparatus. The stategave up the responsibilities that it was carrying out poorly and that were draining resources away from social priorities or infrastructure modernization. The 1990s underscored the positive result of these changes, which resulted in vigorous growth. This growth was unfortunately interrupted by a new external shock: The East Asian financial crisis. However, attributing a low growth rate solely to theeffects of external shocks and mistaken macroeconomic policies provides only a partial explanation. About that the Inter American Development Bank said: “In the region there is as much a deficit of the state as there is of the market”. Due to above, The author says:”I argue that a more integrated vision is required, one that lays out new areas and tasks for both the market and the state”.

MOREMARKET?

The principal role of the market is to induce competition- that is, to encourage a more efficient economy that better allocates scarce resources, reduces costs, and constantly evolves and in so doing enables the private sector to find new opportunities for production and exports.
Latin American economies have advance substantially in the direction of greater reliance on the market,deregulation, and lower external tariffs. The unilateral opening of these economies has been reinforced by a network of bilateral and multilateral free trade agreements (FTAs), along with ambitious agreements on sub-regional economic integration.

Most Latin American governments have been active and constructive participants in the multilateral negotiations, known as the Doha Development Round,that are intended to liberalize trade under the world Trade Organization. This supports reflects a conviction that more open markets would benefit their economies. The negotiations, however, have stalled. Leaders of the G20 have pledged to complete the Doha Round, but in the integration within the Latin American region. A proliferation of sub-regional groups-such as Mercosur, The Andian Community...