ECONOMIC DEVELOPMENT STRATEGIES OF DEVELOPING COUNTRIES.   Term Paper ID:28987 Click to get this paper

Essay Subject: Examines economic & political results of adoption of one of 3 different strategies: Structuralism, Neoliberalism, Marxism.... More...

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Paper Abstract: Examines economic & polotical results of adoption of one of 3 different strategies: Structuralism, Neoliberalism, Marxism. Focus on 3 countries: Cuba, Argentina, Chile. Describes the 3 strategy thories & how the 3 countries under consideration used them regarding economic growth & reduction of economic inequalities. Problems & outcomes. Paper Introduction: Since World War II, developing countries in the South have been provided with the option of adopting one of three different economic development strategies: structuralism, neoliberalism, and Marxism. The purpose of this essay is to examine the economic and political results engendered by each approach and to determine what these results suggest for future economic policy choices in the region. Three countries lend themselves to this analysis. Cuba, particularly since the overthrow of the Batista regime and the establishment of Castro's Marxist government, has pursued economic development along Marxist lines (Perez-Lopez, 1997). In Argentina, a structuralist economic order under Juan Peron gave way to a neoliberalist orientation (Smith, 1991). In Chile, a neoliberal experiment between 1974 and 1990 took place and this experiment has led to structural change in the national economy Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. This stands in contradictionto the old structuralist position and positions the heart of development asvested in the supply side. The Cuban economy in the age ofhemispheric integration. Third World Quarterly, 21(1), 141-157. Gwynne and Kay(2 ) have suggested that in order to make Latin American countries morecompetitive in a globalizing world, neoliberal reform cannot simply beabout making economies more market-oriented. Gwynne, R.N. (1999). The Cuban economic system has been in a free fall since 1989 andappears to have hit bottom in mid-1994. Real wages were cut in half and publicspending in preventive health, primary education, and public housing wereslashed. Menem's plan involved a number of shock policies designed to createstability. Gwynne and Kay (2 ) have suggested that some form of convergencebetween neoliberalism and structuralism seems to have occurred in someparts of Latin America. Journal of Interamerican Studies & WorldAffairs, 39(3), 3-48. Tariffs were reduced toa uniform 1 percent, a multiple exchange rate system was consolidated, andthe government instituted a crash privatization program under which morethan 3 firms with a total book value of about US $1 billion was returnedto private ownership by the end of 1974. Views from the periphery: Futuresof neoliberalism in Latin America. State, market, and neoliberalism in post-transition Argentina: The Menem experiment. In the case of Chile, where theneoliberal model has also been followed, an initial shock in which povertyand unemployment increase dramatically has been followed by gradualimprovements. However, Smith(1991) contends that the neoliberal approach in Argentina accentuated adecline in investment rates, reduced labor costs, and a major transfer ofincome from the pockets of wage earners into those of capital holders.This suggests that the results of the neoliberalist experiment in Argentinahave not been as positive as might have been anticipated. Unregulated international trade andcapital movements is seen as accentuating rather than diminishinginternational inequalities. In Chile, a new democracy has been characterized as thequintessential model of neoliberal restructuring since the overthrow of thesocialist/Marxist regime of Salvador Allende in 1973 (Sharma, 1999). The neoliberal model (with the exception of Cuba) has tendedto predominate, while simultaneously creating stresses in Latin Americansociety that seem to be falling unevenly on the poor. In Cuba, since the advent of Castro and Marxism, the government hasadamantly rejected any meaningful change or reform. Government-controlled prices were raised, tax breaks wereeliminated, and the currency was devalued. Diversification appears to be key in this process (Spero, 199 ).Institutional and policy regimes which bring the economic infrastructure ofthese countries into closer conformity to the international model ofglobalization will facilitate sustained economic growth and also have thepotential to reduce, if not fully ameliorate, economic inequities. Acatastrophic economic collapse led to a convincing victory by PeronistCarlos Menem in the May 1989 presidential contest. Martin's Press. Though the Cubaneconomy is theoretically based on the three pillars of the Cuban Revolution- health, education, and industrialization - only tourism and cashremittances from Cuban exiles support this devastated economic system(Stearns, 1999). These efforts were succeeded by the Menem Experiment, whichrejected the failed monetarist experiments of the post-1976 authoritarianregime (Smith, 1991). (1991). Gwynne and Kay (2 ) believe that in Argentina, the neoliberal modelstill suffers from low saving rates. Combining theseinstitutional reforms with market-oriented neoliberal policies appears tobe most positively associated with economic growth. In Chile, a neoliberal experimentbetween 1974 and 199 took place and this experiment has led to structuralchange in the national economy (Albala-Bertrand, 1999). (1999). Stearns, J.K. Smith, W.C. Foreign Policy, 116, 152-154.----------------------- 9 Spero (199 ) describes structural theory as falling betweenliberalism and Marxism and is based upon the idea that the internationalmarket structure perpetuates backwardness and dependency in the South andencourages dominance by the North. The principal cause for the Cubaneconomic crisis during the 199 s was undoubtedly the shift in trade andeconomic relations with former socialist countries and Cuba's loss offavorable economic treatment to which it had become accustomed and uponwhich its economy had depended. Structural change in Chile: 196 -199 . In the case of Chile, state intervention was replaced with marketincentives which opened Chile to the global economy and rapidly transformedthe state from a highly protected industrializing economy to an open, freemarket economy based largely on agro-extractive exports. Perez-Lopez (1997) haspointed out that while countries like Chile and Argentina have undertakenprofound economic reforms in a political context marked by emergentmultiparty democracy and free elections, Cuba has taken the oppositecourse. Three countries lendthemselves to this analysis. Theneoliberal model appears to be best suited to facilitating thistransformation. Gwynne and Kay (2 ) have indicated that fiscalreform has emphasized the need for the reduction of budget deficits and thecreation of an independent central bank and basic democratic institutions. Since World War II, developing countries in the South have beenprovided with the option of adopting one of three different economicdevelopment strategies: structuralism, neoliberalism, and Marxism. Cuba's response to the breakdown of trade and economic relationsafter the fall of the Soviet Union, was to institute an emergency programknown as the "special period in peacetime (Perez-Lopez, 1997)." Thisstrategy coupled a variety of austerity measures with policies designed tostimulate key sectors of the economy via a combination of domesticresources and foreign investment. Perez-Lopez (1997) claims that far frombeing an articulated, comprehensive blueprint for transforming a managedeconomy into a market-oriented economy, Cuba's economic reform measuresrepresent a survival strategy that seeks to allow the regime to weather theeconomic crisis and remain in power. Economic Systems Research, 11(3), 3 1-32 . Perez-Lopez, J.F. In the case of Cuba, the risks of investing in the national economyfrom outside are of enormous significance (Stearns, 1999). Structuralism, or what is now called neostructuralism, tends to placegreater importance on market forces, private enterprise, and direct foreigninvestment today (Gwynne and Kay, 2 ). In the three countries discussed above, enormous economicinequalities continue to exist despite efforts to reduce such inequalitiesby either the neoliberal or the Marxist economic orientation (Gwynne andKay, 2 ). References Albala-Bertrand, J.M. This ushered in a waveof neoliberal, free market reforms designed to restructure the Argentineeconomy along the lines of a so-called Washington Consensus (Smith, 1999).In essence, Menem rejected the structuralist, populist, and statistpostulates defended by Peronism since the 194 s. Spero, J.E. Gwynne and Kay (2 ) maintain that independentefforts undertaken from within to achieve self-sustained development mustbe pursued in order to move these vulnerable Southern countries forward tomeaningful participation in the globalized economic order. Thedirection that the economy of a developing nation must take is exportorientation rather than import substitution. The case of Chile suggeststhat substantial and critical institutional reforms have to take place overa lengthy time frame in order for a Latin American country to become morecompetitive and less vulnerable to international crises. In Chile (but notin Argentina), reforms to landholding, the ownership of national mineralwealth, personal pensions and health systems, financial institutions, andtaxation have combined to foster economic success. The Politics of International EconomicRelations. The future of Marxist economic development appears to allbut the most dedicated Marxist theoreticians to be nonexistent. Democracy, neoliberalism, and growth withequity: Lessons from India and Chile. Journal of InteramericanStudies & World Affairs, 33(4), 45-83. Under Raul Alfonsin and the Radical Party, efforts to reconciledemocratization with rapid development and social justice were largelyfrustrated by a succession of failed stabilization plans (Smith, 1991). Formerly, structuralist economiesin both Chile and Argentina tended to inhibit foreign investment. Inflation fell and the plan wasseen as successful in the short-term. At the same time, labor unions were harshly suppressed by executivedecree and allowed to operate only under a repressive labor law (the PlanLaboral) which eliminated nationwide and sectoral collective bargaining,wage negotiation, and other issues. A centrally planned economy and the totaldismantling of the few market-oriented mechanisms in place during the late198 s and early 199 s were also linked to Cuba's lack of economic growth(Perez-Lopez, 1997). (1997). Argentinajoined with other Latin American debtor countries as early as 1984 toresist a proposed International Monetary Fund (IMF) austerity program, givepriority to economic growth, limit debt payments to a reasonable percentageof export earnings, and otherwise ease the debt service burden (Spero,199 ). (199 ). In the case of Argentina, Peronist dogmacreated a situation in which an authoritarian state was succeeded by apurportedly populist democracy. Cuba, particularly since the overthrow of theBatista regime and the establishment of Castro's Marxist government, haspursued economic development along Marxist lines (Perez-Lopez, 1997). By 2 5, it is anticipated that the Americas willbe one large free trade zone (with the possible exception of Cuba). and Kay, C. Sharma, S.D. New York: St. (2 ). State marketing boards were created tooversee trade and other economic activities, but tensions within the labormovement (which supported Peron) were endemic. Structural reforms ultimately led toprivatization and the anticipated free market reform. InArgentina, a structuralist economic order under Juan Peron gave way to aneoliberalist orientation (Smith, 1991). The neoliberal view is that further liberalizationof the world economy is required and that this will benefit the developingcountries considerably. Sharma (1999)believes that at the heart of the Chilean neoliberal restructuring effortwas a draconian economic stabilization strategy which included the rapidand thorough liberalization of capital markets and prices and theelimination of quantitative restrictions on trade. Thepurpose of this essay is to examine the economic and political resultsengendered by each approach and to determine what these results suggest forfuture economic policy choices in the region. Though enormous economic consequences wererecorded for the Chilean workers, peasants, and sections of the middleclass, and worsening poverty and inequality also emerged, the neoliberaleconomic model appears to have served Chile well in terms of its overalleconomic situation. (1999). However, a neoliberal economic order in Argentina was also seen ashaving the capacity to bail the nation out of the debt crisis andhyperinflation which began with the Mexican debt crisis of 1982. Unemployment reached 17.6 percent and hyperinflation averaged 35 percent (Sharma, 1999). Economic exterior. Contemporary South Asia, 8(3), 347-372. Thiswill involve integrating the dominant economy (the U.S.) of the twentiethcentury with the smaller and diverse countries of Latin America.Neoliberal reforms, coupled with the opening up of formerly inward lookingeconomies in the region is likely to facilitate that transformation. 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