Structuralist economics
Structuralism in the 1950s arisen in Latin America economic development approach. As structuralism, this approach is referred to, as he dealt with global economic structures, obstacles to development and market imbalances. The starting point was the structure of relationships in a center-periphery model of the world economy. The Latin American structuralists were the first who explored the economic differences between developing countries ( periphery) on the one hand and the industrialized nations ( center ) on the other hand, systematically.
Structuralism led to policy recommendations that were directed specifically at the situation from developing and emerging countries. A corresponding structuralist economic policy was largely by the Economic Commission of the United Nations for Latin America ( CEPAL (Spanish ) / ECLA (English ) ), especially during the tenure of Raúl Prebisch ahead. She was in the Latin American economic policy from the 1960s to the mid-1980s dominant.
- 3.1 Previously structuralism
- 3.2 Development in the 1970s
- 3.3 Development in the 1980s
- 3.4 Effects
Historical classification
Beginning of the 20th century was run in South America an export-oriented economic policy, which was inspired by the classic economic liberalism and particularly of Ricardo's model of comparative advantage. In the world economic crisis in 1929, the export-oriented developing countries but proved to the effects of depression in the world economy as particularly vulnerable. So, for example, collapsed within a short time the strongly export-oriented Brazilian coffee production. Coffee had identified 70 % of Brazil's exports before the crisis. Also observed contemporary economists that the prices of primary goods such as food and raw materials during the crisis fell faster than the prices of manufactured goods. As a result of the problematic results of the export-oriented economic policies in the world economic crisis spread to Latin America, the view that the specialization of developing countries is economically more detrimental to primary goods exports (export skepticism ). Due to the massive slump in commodity exports ( cash crops ) resulted in a shortage of foreign exchange, which limited the import of goods strong. The need to fill the gaps in the market caused by the lack of foreign exchange, brought the first wave of import substitution industrialization in Latin America. This was continued in the phase structuralist economic policies in the 1960s, the import substitution industrialization a reasonable direction by a stronger planning (eg, input-output analysis) should also be given. The structuralist economic policy was largely driven by the Economic Commission for Latin America of the United Nations ECLAC, especially during the tenure of Raúl Prebisch ( 1964-1969 ). This reaching in the 1980s from one to around the year 2000 phase of the Washington Consensus oriented economic policy was replaced.
Theoretical foundations
Precursor
A European root of structuralism is the Historical School of Economics. In particular, in the spirit of Friedrich List, the structuralists assumed that there are different economic development stages, each requiring a different economic policy. In order to participate fully in the economic progress, a country must reach the top level of development " developed country ". Only in the industrialized economies, the full economic dynamics unfolding through progressively higher processed products. This dynamism has a positive effect on the scientific and technical development and on training and development of the population. In underdeveloped countries such processes were taking place not. The characteristic of these economies is and remains a finite occurrence exploitation of natural resources to finance the luxury consumption of the elite of the periphery. Following the theory Lists the structuralists assumed that due to the greater competitiveness of existing foreign industries, the highest stage of development without a temporary period of protectionist economic policy is not reachable (education inch thoughts).
Influential also were early development economists such as Albert O. Hirschman, William Arthur Lewis and Gunnar Myrdal. These authors went contrary to the neoclassical notion of market equilibrium assumes that the free market has no equilibrium inevitable trend. The market forces would tend away depending on the circumstances at equilibrium or away from equilibrium. Smallest advantages or disadvantages of certain regions could thus grow over time to major advantages or disadvantages compared with other regions. Therefore, the structuralists advocated international development assistance and an active role of the state, which should trigger the industrialization in the developing countries.
Overview
The Latin American structuralists drew first attention to the fundamental differences between the Latin American economies and the economies of the traditional industrial nations of Europe and North America. They argued that these differences were not seen in the neoclassical theory of the part or not sufficiently taken into account ( see below international trade theory and deformation of the market process in developing countries).
"Development policy must be based on a correct interpretation of the actually existing circumstances in Latin America. The theories which we have hitherto followed, and which we continue to follow, come from countries in the center of the world economy and are therefore not fully applicable. We who live in the periphery must correct these theories and introduce the necessary dynamic elements to reflect our situation. "
Following the work Hirschman's set among the structuralists, the strategy of unbalanced growth by. This strategy is characterized in that the limited financial resources of developing countries in the concentrated promotion of individual key industries should ( production stages ) flow. Of these key industries from a positive development on suppliers and ultimately to the rest of the economy would then go out. This development strategy was considered because of the lower capital requirements, as more realistic than the strategy of balanced growth.
World Trade Theory
Classical Trade Theory postulates that the international division of labor to a welfare at stimulating all leading trading countries. According to the Heckscher- Ohlin theorem, the factor incomes of all countries involved in world trade would equalize. The underdevelopment of developing countries is seen, therefore, as a result of defective integration into world trade. In contrast, the structuralists see the income gap between developed and developing countries as a consequence of world trade, namely the international division of labor.
In contrast, structuralism distinguishes a center of world trade from a periphery of world trade ( center-periphery model). The center is formed by the industrialized countries, which have a relatively homogeneous economic structure and a diversified offer. The periphery, however, has a diverse economic structure ( inter alia dualism, high unemployment ) and can only offer certain primary goods (mono structure). World trade favors the structuralist 's view only the center, since the peripheral 'll disadvantaged by unequal terms of trade ( terms of trade ) ( Prebisch -Singer thesis ). After the Prebisch -Singer thesis, the international division of labor in developing countries is disadvantageous since these export predominantly primary commodities.
Thus in primary goods a low income elasticity of demand: Rising incomes lead not therefore mean that equally demand, for example, rises to the coffee. On the other hand, a high income elasticity of demand was found in industrial goods. Rising incomes would immediately mean that the demand for industrial goods increases disproportionately.
Simultaneously, a high price elasticity of demand was observed in primary goods, a price increase for a Primärgut often leads that the sales decline, since it can be easily replaced with nearly identical goods other supplier.
Because of productivity gains, income ratios would actually continuously improve. This is the structuralist 's view, but only in the industrialized countries of the case, because on the one hand much higher productivity growth is expected as in the primary production of goods in industrial production. Secondly, increases in productivity act in industrialized countries regularly in the form of higher wages, because the production is largely skilled workers are needed that will have a better bargaining position. In developing countries, however, productivity increases do not lead to rising incomes, but falling prices of export goods, as for the production of primary goods are mostly unskilled workers sufficient. An unskilled work force, however, there is an oversupply, so that the workers are in a weak bargaining position and accordingly can only demand low wages and salary increases. Thus, an increase in productivity comes mainly foreign customers benefit as discount. It follows in turn that the way the International division of labor in the industrialized countries and increasing in developing countries leads to falling real incomes.
Due to these circumstances, developing countries to low import capacity (foreign exchange gap), which hinders the development of the economies of the periphery. These foreign exchange gap can not be closed by an expansion of exports of primary products, since (by volume ) of higher export only speeding the decline in prices of primary products. The only way out of the worsening terms of trade, the diversification of the offer was considered, to consumer and industrial goods.
Deformation of the market process in developing countries
The structuralists assumed that the price mechanism in developing countries works in principle, since the prices are flexible and reflect the supply and demand situation correctly. However, the market mechanism leads in developing countries, contrary to the neoclassical textbook theory of perfect markets are not in a steady economic growth, but to permanent stagnation and underdevelopment. The reasons are seen in the specific structures of the developing countries (ie in the typical developing country market imperfections ). For one thing, this is the arising of colonial dualism and the heterogeneous income structure. Another reason is seen in structural rigidities that cause the price orientation of economic agents leads to suboptimal results.
Dualism and income concentration
In the structuralism is a theory of modernization. The underdevelopment of the economies of the periphery was not there regarded as a kind of automatic transitional stage on the way to an industrialized nation, but as a self-perpetuating condition. In particular, the dualistic structure of the developing countries is seen as an obstacle to development that must be overcome.
The dualistic structure results from the division of the developing countries in
This structure is created in the colonial era, when the colonizing entrepreneurs and skilled workers formed enclaves from the colonial mother countries in the colonies that remained lifted and isolated from the rest of the economy of the country. As a result of Enklavenbildung the local population took little technology and entrepreneurship of immigrants. Even after the end of colonialism was continuing this dualistic structure.
From the dualistic structure also results in an extremely unequal distribution of income. This is regarded as a complex problem that must be overcome. Due to the unequal distribution of income may set up a large part of national income for their purposes, a numerically small segment of the population. This segment of the population also differs from the mass of the population by a strong cultural orientation on the way of life of the former colonial mother countries. This means that the overall savings ratio remains below the potential for resource allocation and necessary level, because the high-income segment of the population based on "Western" standard of living and that's why you - fine for South African conditions - income largely being consumed. Middle and lower income have to be largely spent on the necessities of life hence there is here a priori no great saving potential. The "Western" patterns of consumption also meant that large-scale consumer goods are imported from industrialized countries, be scarce foreign exchange reserves used up, then are no longer available for the import of means of production available lead. A limitation of the growth potential is thus obtained from the savings and investment gap. Because of the low levels of income in the informal sector, a large part of their income for consumption must be used. In the modern sector, however, is done though a capital accumulation. Due to the narrowness of the domestic internal market, which is due to the low purchasing power in the informal sector, but few go beyond the export sector investments. The low income in the informal sector in turn results in low productivity. The low productivity in the informal sector is the result of underinvestment. Together all of the vicious circle of poverty.
From this dualistic structure results in the narrowness of the internal market of developing countries. The informal sector is due to the low income, a weak basis for the internal market, while the modern sector captures only a small population whose Komsumverhalten is also oriented to the present in the industrialized world wide product range. This results for the aligned to the internal market production no positive scale effects, which weakens the competitiveness of domestic products over imported products. As a result, even those consumer goods must be imported, which could be produced by the technical presuppositions in developing countries. The result of these consumer goods imports is that the domestic demand only a small part shall take effect on the internal market.
Structural rigidities
Market imperfections in developing countries lead the structuralists, according to the fact that the price system provides insufficient control signals. In particular, a steady growth and an acceptable distribution of income would be more difficult. This stems from the fact that the countries of the periphery restrictions and structural rigidities subject, from which they can free themselves only by a structural change ( industrialization, less unequal income distribution). As an obstacle to growth structuralists see the specially observed in developing countries Angebotsrigiditäten. So in the peripheral countries mainly products are manufactured, which have a low price elasticity of supply (mainly agricultural products ), although, an increased demand for these goods (eg due to population growth ) triggers price increases, but the increase in price leads to no or only a minor expansion of the bid amount. Increases in demand for these goods are therefore likely to trigger inflationary effects than growth. The insufficient production adjustment was attributed to four main factors:
In order to overcome these problems has been a radical change in the structures through active state intervention in economic activity in the context of a development plan deemed necessary.
Structuralist economic policy
After structuralist observation fails in the periphery of world trade often the market; prices in developing countries are therefore systematically distorted. As a result, fewer goods and services would be offered, as it allow the production potential of the respective economies. There is thus an under supply of goods and services at the same time over-supply of labor. The private market actors are unable to afford their own efforts contribute to overcome underdevelopment. Either they did not respond due to damping of socio-economic factors on market signals, or they raise prices as demand increases rather than expand production. A catch-up development of the developing and emerging countries therefore require state intervention. From this grew a development program that focused on the internal market and the import substitution industrialization of the economy.
Import-Substituting Industrialization in Latin America was practiced even before the establishment of the CEPAL in 1948 in a large extent. As a result of the global economic crisis in 1929 were producing for export agricultural products ( cash crops ) hardly any buyers, exports collapsed. Forex missing therefore to import at a normal Umgfang goods. This caused the first wave of import substitution industrialization in Latin America: Far economic theory had to market gaps to be filled.
The propagated by the ECLAC 's structuralist economic policy tried to influence this development. Three phases were distinguished. In the first phase, the import of simple consumer goods that can be produced in domestic production is replaced by domestic production. In the second phase, the production of intermediate products and consumer goods is initiated, the production is technically more difficult. In the third phase, the production of capital goods is initiated. Structuralist economic policy was there - at least in theory - not geared solely to the nation state domestic markets. In order to achieve economies of scale, also a common internal market of the countries of the periphery has been advocated. However, the Andean Pact realized this intention only to some extent.
Previously structuralism
Main subject of the structuralist economic policy was initially the industrialization of the South American economies. Through import substitution industrialization and by improving the competitiveness of domestic companies, the economy should grow rapidly and increase the per capita income. The industrialization wanted to escape the predicted continuous deterioration in the terms of trade for primary products. Also, it seemed promising to increase in industry than in agriculture through technological innovation productivity. A high economic growth should create jobs for the rapidly growing Latin American population.
A limiting factor of this policy was the foreign currency requirements. To build domestic industries namely first had more machines and other equipment are imported as before. In order to limit the need for foreign exchange, an overvaluation of the domestic currency was sought. This exports were indeed difficult, but the required imports favors priced. Since the export goods were predominantly primary products, which had a low price elasticity according to structuralist analysis, the structure of the secondary sector was promoted at the expense of profit margins of the primary sector. This discrimination of the primary sector was taken into account, because of this little development impulses were expected. A policy of export promotion through currency devaluation was considered only makes sense when a sufficient quantity and quality industrial base is created. The influence of foreign trade through tariff and non-tariff measures (customs duties, etc.) would have been common and have a more targeted control allows. However, such measures could not be enforced against the influential mining and large landowners. Since there were 1944 to 1973 no free exchange rates (see Bretton Woods system ), Raul Prebisch was able to introduce as President of the Argentine Central Bank at that time a system of "multiple " exchange rates. The exchange rates were hanging here on what category of imported or to be exported. A system of multiple exchange rates was introduced later in many other South American countries.
As one of the first countries in Brazil operational since 1945 a systematic import-substituting industrialization. In strategic economic sectors, state-owned enterprises were established. These include above all, the development bank Banco Nacional de Desenvolvimento Econômico e Social, the mining giant Companhia Vale do Rio Doce and the oil company Petrobras. An important role was played by the Brazilian Planning Minister Celso Furtado 1961-1964, who had worked with Raúl Prebisch in the ECLAC. In Chile, the import substitution industrialization through the CORFO was continued.
Development in the 1970s
For the initial phase of industrialization, the strategy of unbalanced growth was monitored. A worsening of the income differences took the structuralists in this purchase. Actually from the successes of industrialization in the growth centers of large sections of the population excluded. This resulted in significant social tensions result that shook some South American countries in the 1970s.
But other problems were not eliminated by the incipient industrialization. The economic elites consumed, for example, still more than they invested; the overall savings ratio was below the requirements of accelerated industrial development. The high imports of consumer goods also weighed on the foreign exchange reserves and domestic demand has also been effective only to a small extent in the internal market.
This situation was not satisfactory. To tackle the problem of income distribution, emphasized the structuralist economic policy from the mid-1970s as an equal goal in addition to the industrialization overcoming poverty. This should be achieved through a fuse of real wages and the basic needs of the population. Such a policy should also serve well as social harmony. The real wage assurance was performed by wage indexation. So the face of high inflation frequent labor disputes could be reduced, which caused high economic costs. The better meet the basic needs of the population served a ( rudimentary ) redistribution policy. From the redistribution were hoping the economy politicians that they would create a broader domestic demand, which would in turn utilize the new created local production capacities better.
However, the policy of import-substituting industrialization in Latin American countries led to high costs. The structuralist theorists of economic policy recommended a devaluation of the domestic currency and a tax reform. However, an effective tax system without loopholes and tax progression could be a long time not prevail politically. The widespread since the mid- 1970s, devaluation fears and the fear of political instability now met on a more liberalized international capital market, which is easier to transfer money Latin American capital in foreign countries. Thus, the South American countries were forced loans increasingly abroad, especially in the United States to take. Foreign debt rose sharply in the second half of the 1970s. A borrowing seemed to make sense at this time, since the real interest rate mid-1970s was negative. The extent of long-term investments decreased, however.
Development in the 1980s
The second oil crisis in 1979 also led in South America at the beginning of the 1980s to a recession. The State taking the South American countries plummeted. The rapid rise U.S. budget deficit under President Reagan in the early 1980s led to high interest rates for loans in U.S. dollars. Since a large part of the foreign debt of Latin American countries consisted in short-term, denominated in U.S. dollar loans, several countries could service their debt in a recession no longer afford ( Latin American debt crisis ).
The debt crisis led to a massive outflow of capital, which meant that the Latin American currencies depreciated sharply and thus real interest rates and inflation rose sharply. Against this background, moved into the 1980s, the attempt to limit inflation by means of a heterodox shock program in the foreground. Unlike suggested by the competing, coined by Milton Friedman monetarism ( " Chicago Boys" ), tried to limit the rising inflation by government price controls structuralist economic policy. According to Eliana Cardoso / Albert Fishlow both approaches explained the phenomenon inadequate and led each to adverse economic stabilization programs.
The heterodox shock program of the structuralists were in the core of a monetary reform. Since in developing and emerging countries traditionally a large inflation expectation is the structuralist economists were of the view that the currency reform had to be supplemented by legal prohibitions. So it was about time to time to index forbidden by law contracts, so to arrange an automatic adjustment of the price to the general price development. Similarly, a wage-price freeze was enacted, that the prohibition negotiate higher wages and prices increase.
Effects
The successes in industrialization were quite different. The great South American countries such as Mexico, Brazil, Argentina, Chile and Venezuela had achieved substantial success (see also Mexican miracle ). In Argentina and Chile, it came in the 1970s, namely to problems, but they were more likely caused by political instability. In the smaller South American countries, however, the structuralist economic policy was less successful.
Although not all measures were efficient, there was in the 1960s and 1970s in South America, high economic growth that led to the emergence of a significant industrial sector and diversification of the tertiary sector. It was the emergence of a middle class and to increased urbanization. It was mainly operated a highly protectionist trade policy. This resulted not least from the pressure on the government to find employment for the unprofitable from agriculture to urban employment pressing crowds. Despite the impressive growth and some land reforms extremely unequal income and assets for South America remained influential, especially women and indigenous populations were excluded. Also, the informal sector could not in principle be overcome so that the market remained relatively small for domestic industrial products.
The economic development of South America during the time of structuralist economic policy can be, Celso Furtado following, differ in three phases:
The damage caused by the early successes Überenthusiasmus led to the success of the import-substituting industrialization overestimated and the costs were underestimated. Due in part to a reckless lending due to the petrodollar glut came there in the 1970s to an excessive borrowing, which led, together with a later occurring high interest rates around 1980 in the Latin American debt crisis.
Due to the Latin American debt crisis took over the IMF and the World Bank the task of debt restructuring. In this context, the IMF provided loans to Latin American countries under the condition that these countries led by structural adjustments. The enforcement of structural adjustment programs they led constant consultations with the economic elites of Latin American countries. These structural adjustment programs were an implementation of the Washington Consensus, which was the political program of the hegemonic forces at this time of economic policy in the U.S., which were organized in the IMF, the World Bank, the U.S. Treasury and the numerous Washington think tank.
This made the continuation of a policy of import-substituting industrialization impossible and led to economic, political and social problems.
Differences to the dependency theory
The dependency theory took up the issues raised by the structuralists main themes, but developed their own explanations and solutions. While sees structuralism as a modification of the economic mainstream ( orthodox economics), is the dependency theory, a modification of Marxist economic theory dar. For structuralists, the dependence shows the center of the world economy in the sum of all the factors that limit the discretion of their own nation-state. The dependency theory understands addiction as exploitation and domination on a global scale. Structuralists adopt a structuralist economic policies and hope for a transformation of External Relations for a New International Economic Order, as well as through regional integration (Mercosur ). According to dependency theory, however, a run at the national level structuralist economic policy is doomed to failure because a single nation-state dependence could not shake. Accordingly strives dependency theory to a revolutionary transformation of the capitalist system on a world scale. A political representative of the dependency theory was Che Guevara who tried after the revolution in Cuba and Bolivia to carry out a revolution to break the chain of the world capitalist system.
Reception
The import substitution industrialization had to push the positive effects that the learning processes of managers and workers, and thus to promote technological innovation and productivity. The negative effects were that the overvaluation of the national currency, the export terms for traditional primary goods deteriorated and thereby obtain foreign currency was difficult. The new industries were often lighthouse projects in which each branch of industry usually only one company could occur on a protected by high import duties internal market monopolistic, inflationary tendencies which reinforced. A common mistake was to prioritize the construction of capital-intensive heavy industry, which could overwhelm the financial possibilities of developing and emerging countries.
In the 1980s, the World Bank gave up her supportive attitude towards the policy of import substitution industrialization and joined the criticism by some economists. This indicated that the structuralist economic policy for the existing problems in the 1980s, the Latin American debt crisis and high inflation that have been referred to as macro mess, was responsible. Other economists declared later that problems such as the overvaluation of the domestic currency, trade deficits and government budget deficits worse monetary and fiscal policy was not primary sequence of a structural economic policy, but the result. The Latin American debt crisis was based primarily on the strong fluctuations in the capital market, which had been in the 1970s with low interest rates and a great willingness to lend ( petrodollar effect) incentives to increase borrowing while then in the 1980s occurred a high interest rate cycle at restrictive lending. In this situation, the South American countries came under diverse conditions in the debt crisis, such as Chile also that was already passed in the 1970s under the economic governance of the Chicago Boys to a liberal economic policy.
The " condemnation " of import-substituting industrialization is rejected by some economists as ahistorical. A comparison with the successful Asian tigers shows that the creation of an industrial base, import-substituting industrialization was also by a kind. A study by the Oxford economists Astorga, Berges and Fitzgerald found that Latin America in the 20th century in terms of the standard of living in the years 1940-1980 at the best stage, ie the stage of import substitution industrialization. In this phase, Latin America experienced an average economic growth of 2.7 % per year. In the phase of export-oriented economic policy 1900-1939, the largest South American economies experienced an average economic growth of 1.3 % per year. In the phase of the Washington Consensus oriented economic policy between 1980 and 2000, economic growth averaged 0.6 % per year. Even if economic growth was not only influenced by the economic policy but on many factors, the results indicate that the import substitution industrialization was more successful than anticipated by their critics. The results of this economic policy should not be measured by pure textbook theories, but to the results of other really actualized development strategies.
The propagated in the 1980s by the World Bank, the Washington Consensus oriented, economic policy was imposed from critics as the South American countries from abroad neoliberal -inspired policy considered. They caused a below average when compared to earlier stages of economic growth and proved to be very unpopular than in the population. Beginning with the election of Ricardo Lagos in Chile a number of center-left governments were elected in Latin America, which went to a pragmatic economic policy, which took up some ideas of structuralist economic policy again and further developed. This is referred to as neostructuralism.
The South American structuralism exerted a strong influence on the development of dependency theory. Following the analyzes of some of the structuralists discovered rigidities were included in neoclassical models.