Thursday, February 28, 2013

The sources of growth: Latin America and its growth expectations (II)

For the purpose of economic growth explanation, the state of mind issue is considered a cultural variable. It is based on Motivations dealing with needs, values and expectations. Within economics development literature, there is a school of thoughts, which concern with this factors as the source of growth. According to the so called Cultural thesis, there are industrial values which are key to unlocking the economic potential of poor countries. These values includes hard work, responsibility, punctuality, and achievement .Most adherents to this view, believe that these values can be inculcated through a deliberated effort, let say education and improvement of human capital endowments. (Excerpted from Development and Underdevelopment: The political economy of global inequality, 4th edition. Seligson, M and Passé –Smith ,J.2008). Thus, the success of Asian countries in the last decades of the XX century, has led some to believe that there are cultural values found there; which boosted Asian economies growth and which jas been labeled as the “Confucian ethic”, a variant of the notion of “Protestant Ethic”, and its relevance for the success of immigrants in the USA, and the post WW II experience in Europe . Following this approach, in the Latin America case, it should be important to clearly identify the “Catholic ethic” and its impact on the incentives for economic growth, quite below expectations for a long time. The same would apply in other regions struggling for economic progress.However,this would wrongly suggest that these later regions, have in its cultural values a constraint. The first implication of overemphasizing this variables, might be to hide the negative incidence of other ones, like the impact of the State and weak Institutions,short run minded politicians,corruptions and the like . But,in Latin America,(XV century) quite the opposite to the USA , two hundred years later (the XVII century), the State was not defined to support individual achievement and entrepreneurship. Instead, it was conceived as an instrument to collect taxes and manage rents, not much different as others cultures did before. Therefore, the complementary nature of those cultural variables with institutions,and good public virtues, did not worked properly in Latin America, at the time of the Birth of Plenty (1820). It was only in the last decades of the XX century, coupled with efforts to modernize the State, when this cultural values have become more relevant in its complementary nature from the economic pint of view. Now, is the time when the state of mind matter most, as long as there is a wider space for individuals to seek for achievements, whatever its inspirations,as long as Latin America has engaged itself in pursuing a better and moder State. However, a second implication,(perhaps a key one) deal with the “Catholic ethic”, and the timing for the “Birth of plenty” in Latin America. My hipothesis is that Latin America is whithin the timing for plenty( by the way this timing might be fifteen years or so), but Does the Catholic ethic add up to this current timing?.I guess the answer goes beyond economists.

Thursday, February 14, 2013

The sources of growth: Latin America and its economic growth expectations (I)

Within my summer reading list I included this time a book: “The birth of Plenty : How the prosperity of the western modern world was created “ by William Bernstein(2004). Although, I am far from finish the reading, it is quite clear the central argument about the forces which ignites economic growth in western world specially since 1820 up to the XX century. These are :: a.- Property rights b.- Scientific rationalism c.- Capital markets d.- Transportation and communication facilities Some either might agree or disagree with them, but they get right into the core of the capital accumulation process, key ingredient of economic growth: It all comes down to the institutional setting. Other authors, have also stressed key variables to understand economic growth. But “The Birth of plenty”, place them all that out as boosting forces at a specific period of time (1820), which became like an inflection point in terms of a new trend for improving standard of living of mankind. The book focus the attention on “when”, rather than “how”. ¿Why did world economic growth and the technologies progress underlying it, suddenly exploded when it did?. (Preface ,page VIII). Challenging and interesting question. Following that approach ,economic growth is also a matter of timing, and we might be wondering whether Latin America is currently in the “right timing” for higher expectations concerning steady trend of economic growth, sustainable development and its implications. Sure, we move into trouble waters. The phrase “birth of plenty”, suggest something beyond usual economic, sociological or whatever variables a researcher can identify dealing with the explanation of economic growth forces. It is. The “ State of mind” concept (Harrison,Robinson), which deals with emotions, desires, beliefs, thoughts, perceptions, and intentions leading people to cope with higher goals.Thus, What does influence that State of Mind? .

Friday, February 01, 2013

Latin America-European Union Summit: 2013

From January 26th -27th, 60 Chiefs of States and Prime Ministers met in Santiago, Chile, to discuss the future of cooperation and integration between Latin America and European Union. The main purposes is to make it deeper and specially aimed to seek an strategic alliance for sustainable development. Previously it was held in Madrid (2010), Lima (2008),Wien (2006), Guadalajara (2004),Madrid (2002) and Rio de Janeiro (1999). With 1070 million of inhabitants, the two sides of the Atlantic have strong cultural, historical and economical ties which goes as far back as the XV century, when it happened the “Encounter of two cultures”. Actually, the EU is the second commercial partner of Latin America and the Caribbean, the first foreign investor, and an active partner to support integration further . Latin America and the Caribbean are also working toward more integration, to solve challenges dealing with economic growth, economic development, reducing inequality and poverty. Latin America Integration, has been a long distance goal which have endured tough times because of ideology, geostrategic and political reasons ,each one at its own time. The XX century, did not allow strong results on integration, despite the effort in the sixties (for instance the Andean Pact and Latin America Free trade Association ), basically because it was a political driven process, therefore constrained to Government changes policies. Later in the nineties, it began a sort of second round following the external debt crisis ,with a draft of a Free Trade agreement from Alaska up to the extreme south America proposal , which was based on trade and investment as the basis for integration, very similar to the approach applied in Europe by then:”Politics inspired by business” .This approach meant to have the private sector as a key player , with a whole set of economic policies pro markets rightly designed for such purposes, which it was needed as well. This approach did not last too long. In the final years of that decade (1998-1999),It arose ideology as an alternative for integration goals: “Business inspired by politics”. The outcomes looks heterogeneous because while those countries which followed the “Politics inspired by business” approach, have made substantial progress ,the others with the alternative “Business inspired by politics” focus , face more difficulties with the economic fundamentals such as inflation ,public spending, exchange rates, wages, productivity and investment .Thus this Summit was a very useful space for reflection. analysis and evaluations . Based on the current European Union situation, It seems that the dilemma of politics or business as integration drivers ,might complement to each other.