Did ISI fail and is neoliberalism the answer for Latin America? Re-assessing common wisdom regarding economic policies in the region

The second phase of Import Substituting Industrialization, commonly known as ISI2, involved the move in Latin America to "heavy" industrialization, from around 1950-80. This period of economic history has been reviled on both the Left and the Right as being one of either heightened dependency or one demonstrating the clear failure of state intervention in the economy. In this research note, a basic statistical analysis is used to back up other descriptive claims that the ISI2 period was rather one of mixed success, with macroeconomic volatility accompanying great progress in GDP and manufacturing growth. In a sense, the ISI2 period succeeded in industrializing the large economies of the period, and contrasts favorably with the record of the succeeding paradigm of neoliberalism. This research note seeks to raise questions about the way we look at the historical period of ISI2, and suggests that a more open-minded perspective could lead to a more effective and sustainable political economy paradigm for the region in the future.

The false promises of the (second) Washington consensus: evidence from Latin America and the Caribbean (1990-2003)

The objective of this paper is twofold. Firstly, we show how, and to what extent, Latin American and Caribbean countries applied the precepts of the second Washington consensus, i.e. a consensus which stresses the capital account liberalization. Secondly, we highlight the effects of this set of reforms on their economies. Thus, we show that countries having most scrupulously followed these recommendations did not experience better economic results. On the contrary, their situation as regards inequality and debt is getting worse than others.

Resuming growth in Latin America: short and long term policies

The authors of this paper assert that the paralysis of the state generated by the crises of the 1970s and 1980s deprived the economies of the region of an important lever to resume and sustain growth. They thus maintain that to overcome stagnation it will be necessary to reconstruct the state's capacity to implement pro-growth policies. Following Keynes and Kalecki's ideas, but also classical development economists, the authors argue, first, that short-term macroeconomic policies, to reduce unemployment and to increase the degree of capacity utilization, should be used to promote the generation of profits to firms and to wake up entrepreneurs' animal spirits. Short-term expansionary policies should be coupled with measures to improve competitiveness and avoid balance of payments problems. They also claim that alternatives to the liberal programme will fail unless a pro-growth strategy is adopted which includes both short- and long-term policies. They thus propose that long-term policies must complete the package, signaling: a) sustained increases of effective demand in the future; and b) investment priorities to ensure that capacities will be created in strategic sectors and branches of the economy.

The effects of the global economic crisis in Latin America

The aim of this article is to analyze the current phase of the global crisis and the way it has manifested itself in Latin America. The global crisis is the most important capitalist crisis since World War II. It is a new type of debt-deflation crisis, highlighting the limits of the finance-dominated regime of accumulation and characterized by securitization. Latin American countries have not been immune to the global crisis. Since it sets limits on globalization, the impossibility of maintaining export-driven accumulation sustained by restrictive monetary and fiscal policies becomes clear. This time, there will be no way out in external markets for any country. That fact will force them to restructure productive systems and search for a way out in domestic markets and in regional spaces for integration.

Fiscal policy and private investment: latin america in a comparative perspective

The main objective of the paper is to assess the impact of fiscal variables on private investment comparing some Latin-American economies to other advanced ones. For such purposes, the authors carry out an econometric analysis for the period 1990-2008. They make use of two dynamic panel models in which they group countries with similar characteristics and development levels. In one of them, they include Mexico, Brazil, Chile, Colombia and Uruguay; whereas in the second one the countries accounted for are the U.S., Canada, Spain, Korea, Ireland and Japan. They specify in both models an investment function using as arguments a wide range of variables, including those related with fiscal policy. From their results the authors infer that governments can, with higher spending, boost up the economy even when they finance spending with higher taxes. In Latin America, where income concentration is enormous, a proposal to boost up the economy through higher government expenditure financed with a progressive income tax, is even more justified.

Alice Amsden's impact on Latin America

On March 15 2012, we lost Professor Alice Amsden, a great intellectual power in development economics. Her work was systematically marked by creativity, originality, relevance and her fearless commitment to always speak truth to power both in academic as well as in policy-making arenas. This In Memoriam concentrates on just one part of her great intellectual legacy: her impact to better understanding Latin America's development challenges, obstacles and policy options. Our paper focuses on three broad areas of her main influence in the region: the role of transnational corporations, the importance of manufactured exports for development, and industrial policy. As we here argue, in all of them, her work is and continues to be a substantial contribution to knowledge that policy makers will be well advised to take into account if the region is to finally enter a path of structural transformation and sustained economic and social development.