ECON%452%–%Fall%2016%The%La4n%American%Economies%UNIVERSITY%OF%ILLINOIS%%AT%URBANA-CHAMPAIGN%Instructor:%Fabrício%d’Almeida%In#memory#of#Prof.#Werner#Baer#(1931-2016)#%Lecture%Notes%#1%ECON%452:%The%La4n%American%Economies%• Historical%forma4on%of%the%economies%of%La4n%America%• Theories%of%economic%development%• Contemporaneous%issues%%• Mix%of%Development,%Macroeconomics%and%Microeconomics%Development%• What%does%development%mean%for%a%society?%– GDP%%– Access%to%basic%needs%– Freedom%vs.%servitude%– Poli4cal%rights%– Projec4on%of% p ower%%%Economic%Development%Today%• Joseph%S4glitz%“%It#used#to#be#that#development#was#seen#simply#increasing#GDP.#Today#[1998]#we#have#a#broader#set#of#objecLves,#including#democraLc#development,#egalitarian#development,#sustainable#development,#and#higher#standards#of#living”%%• Mutually%exclusive%or%complimentary?%Condi4ons%for%Economic%Development%1. GDP:%Inputs%for%produc4on%– Capital:%natural%resources,%machinery%– Labor:%human%capital%– Technology:%%broad%meaning%2. Free%market%vs.%planned%economy%approach%3. Efficiency%vs.%equitability%4. Democra4c%representa4on%vs.%authoritarian%regimes%Condi4ons%for%Economic%Development%1. Capital:%Investments%– Savings%capacity%– Financing%capacity%%2. Labor%– Division%of%Labor%– Human%Capital%%3. Technology:%a. Market%size:%• Free%consumers%• Openness%to%trade%• Economies%of%scale%b. Socio/poli4cal%framework%• Peace%• Rule%of%Law%c. Incen4ves%a. Merit%system%La4n%America%!Chile 22,316!Argentina 22,554!Panama 22,192!U ruguay 21,201!M exico 17,277!Brazil 15,359!Venezuela 14,276!Colomb ia 13,801!Peru 12,402!Ecuador 11,388!Paraguay 8,911!Bolivia 6,630!El!Salvador 8,351!Guatemala 7,454!Nicaragua 4,918!Honduras 4,909Latin!America!Luxembourg 101,926!Norway 61,472!Switzerland 60,535!United!States 55,837!Germany 47,268!Australia 45,514!Canada 44,310!United!Kingdom41,325!France 39,678!Italy 35,897!Spain 34,527!Portugal 29,214!Greece 26,680OECD!Singapore 85,209!Japan 37,322!South!Korea 34,549!M alaysia 26,891!Thailand 16,306!China 14,239!Indonesia 11,035!Philippines6,969!Vietnam5,629!Laos5,321!Cambodia3,263(East)!AsiaGDP%Comparison%(1)%Sour ce:(World(Bank((20 15)in%2015%US%dollars%!Chile 22,316!Argentina 22,554!Panama 22,192!U ruguay 21,201!M exico 17,277!Brazil 15,359!Venezuela 14,276!Colombia 13,801!Peru 12,402!Ecuador 11,388!Paraguay 8,911!Bolivia 6,630!El!Salvador 8,351!Guatem ala 7,454!Nicaragua 4,918!Honduras 4,909Latin!America!South!Africa 13,165!Egypt 10,891!Nigeria 5,911!Zambia 3,904!Cameroon 2,972!Kenya 2,954!Zimbabwe 1,792!U ganda 1,771!Ethiopia 1,500!Mozambique 1,129!Liberia 842!Central!African!Rep. 594Afri ca!Czech!Republic 32,167!Slovakia 28,877!Lithuania 27,730!Poland 26,135!Kazakhstan 25,877!Latvia 24,286!Russia 24,451!Croatia 21,881!Roman ia 21,403!Belarus 17,661!Bulgaria 17,512Old!Eastern !BlocGDP%Comparison%(2)%Sour ce:(World(Bank((20 15)in%2015%US%dollars%!Chile 22,316!Argentina 22,554!Panama 22,192!U ruguay 21,201!M exico 17,277!Brazil 15,359!Venezuela 14,276!Colombia 13,801!Peru 12,402!Ecuador 11,388!Paraguay 8,911!Bolivia 6,630!El!Salvador 8,351!Guatem ala 7,454!Nicaragua 4,918!Honduras 4,909Latin!AmericaGDP%Comparison%(3)%!Qatar 143,788!Kuwait 71,312!Brunei 70,817!U AE 70,238!Saudi!Arabia 53,430!Bahrain 46,946!Oman 38,234Oil!ExportersSour ce:(World(Bank((20 15)in%2015%US%dollars%Popula4on%Growth%• In%2015%popula4on%about%625%million,%growing%at%about%1.3%%per%year%(vs.%over%3%%in%the%1950s%and%1960s)%%Source:%wiki%commons%Urban%Popula4on%• In%the%1940’s,%close%to%80%%of%popula4on%was%rural;%today%about%78%%is%urban,%which%means%that%there%was%a%huge%rural-urban%migra4on%over%a%40-year%period.%Source:%wiki%commons%Income%Distribu4on%• Great%degree%of%concentra4on%in%most%countries%(Gini%Index)%Source:%wiki%commons%%%Life%Expectancy%• %Has%increased%substan4ally%from%about%40%years%in%first%half%of%20th%century%to%over%70%years%today%(in%average).%Source:%wiki%commons%Democracy%• Has%improved%substan4ally%from%the%military%regimes%in%the%70’s%to%a%mix%between%hybrid%regimes%and%full%democracies.%Excep4on%of%Cuba%and%Venezuela%(2016)%Source:%wiki%commons%Food%Security%• Since%the%agricultural%boom%of%the%late%XXth%century%and%social%security%policies,%undernoushired%popula4on%has%been%reduced%from%25%%(1940’s)%to%6%%(2000’s)%on%average%Human%Capital%• Illiteracy:%a%liple%over%12%,%but%this%has%to%be%qualified%–%for%example,%in%Brazil%illiteracy%was%down%to%%7.4%%in%2015,%but%“func4onal%illiteracy”%was%18.9%%Source:%wiki%commons%Big%Picture%on%Development%• Lat.%Am.%made%substan4al%improvements%last%decades%into%a%more%developed%society%• S4ll,%several%complex%deep%rooted%problems%remain%to%be%solved%• A%lot%to%catch%up%with%more%developed%countries%• How?%• A%first%step%is%to%understand%the%origins%of%La4n%American%economies%Origins%of%Lat.%Am.%Development%• What%were%the%condi4ons%for%economic%development%at%the%beginning%of%the%coloniza4on%era?%– Capital%availability:%geography%and%natural%resources%– Labor%availability:%%ini4al%popula4on%and%European%newcomers%%%– Technology:%societal%organiza4on%and%incen4ves%• Most%of%ini4al%condi4ons%are%s4ll%able%to%explain%nowadays%differences%between%La4n%and%Anglo%America%%• Let’s%analyze%history%from%the%perspec4ve%of%economic%development%%• How%incen4ves%work?%Or%beper%how%the%lack%of%incen4ves%harm%economic%development%Origins%of%Lat.%Am.%Development%• Pre%1492:%– Aztec%and%Inca%civiliza4ons:%%• Advanced%technology%compared%to%primi4ve%tribes%elsewhere%in%North%and%South%America%• Primi4ve%compared%to%European%development%at%that%4me%– Very%primi4ve%elsewhere%• Age%of%Discovery%and%Conquest%– Spanish%America%– Portuguese%America%– English%and%Dutch%America%Technology:%Societal%Organiza4on%• Spanish%and%Portuguese%coloniza4on%in%South %and%North%America:%– Hierarchical%society%– Explora4on%to%return%home%– Focus%on%consump4on%in%Europe%• English%and%Dutch%coloniza4on%in%North%America:%– Free%religious%seplements%– Transplanted%socie4es%– Focus%on%consump4on%at%the%new%world%Capital:%Geography%1. Historically%La4n%America%proved%less%propi4ous%to%human%habita4on%than%U.S.%%2.
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