REVIEW #15: When Following Your Own Path Goes Wrong: LatAm, Dependency, and Anti-Trade Mentality

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Olga Łabendowicz & Lotokot Studio

Europe and Latin America have a complex trajectory in terms of their integration processes, with dissimilar elements and other common ones as well. In Latin America, the ideas of protectionism and state interventionism have had a strong impact on the shaping of structures. These ideas truncated the economic growth of countries like Argentina. The sustained impact of protectionism over decades should serve as an experience for the CEEs to promote economic opening and trade agreements of regional blocs.

Three milestones mark the road of Argentina and Latin America (LatAm) to protectionism and fear of commerce. In a chronological order, these are:

  1. the 1929 crisis, which fueled the so-called Import Substitution Industrialization in the region;
  2. World War II, which drove LatAm to develop an economy able to satisfy (in part) the demand of the old continent, but it also meant a tendency towards autarky and protectionism that found in the state its lever for development;
  3. the “Dependency Theory” and the anti-trade agenda set by the United Nations’s (UN) CEPAL (Economic Commission for Latin America and the Caribbean) in the 1950s.

Argentina and the rest of Latin America followed the CEPAL guidelines to the letter – which under the inspiration of the Argentine Raúl Prebisch used protection to defend infant industries that reached senility without ever reaching competitive maturity. Prebisch argued that the price of commodities (raw materials), the main exports of the area at the time, suffered a permanent deterioration compared to the prices of industrialized products, so that the only way out of backwardness was through industrialization forced by governments with obstacles to imports


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FEDERICO N. FERNÁNDEZ & FRANCO MARTÍN LÓPEZ / WHEN FOLLOWING YOUR OWN PATH GOES WRONG: LATAM, DEPENDENCY, AND THE ANTI-TRADE MENTALITY


The results of the nefarious influence of Prebisch’s and CEPAL’s ideas led to planned economies across the region, thus making international commerce suspicious while strengthening the belief that the state should reactivate the economy through increased public spending financed by higher taxes, debt, and monetary printing. These three building blocks of the Latin-American protectionist mentality shall thus be examined with special emphasis on the impact of Prebisch and CEPAL.

Argentina at the Forefront of Latin America’s Protectionist Mentality

The Latin American protectionist mentality was conditioned by its development in Argentina and Brazil. Of these two, the first country was particularly relevant considering the influence of who would become the most prominent school’s intellectual: Raul Prebisch. Three clear periods divide Prebisch’s fate in Argentina and Latin America.


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