Abstract
Economic growth became the catch word for many countries in the postwar period, no matter their ideological preferences and political realities. New theories try to explain the laws of capital accumulation and how the process can be improved so as to ensure a balanced and sustainable trajectory. Two off-springs of Keynesianism offered competing explanations on capital accumulation, while countries in Latin America attempted to achieve it by curtailing imports and mobilizing domestic resources. In most cases, inward economic development was mired with rising indebtedness and countries ended up with heavy-handed adjustment programs and external surveillance. In other cases with a thin domestic accumulation, development was encouraged by international aid. Yet again, misallocation and abusing of foreign resources trapped many poor countries into high debt. Economic theories faced several challenges on how a debt-crisis is efficiently handled and what kind of institutions can minimize the recurrence of malpractices.
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Notes
- 1.
The Marshall Plan provided approximately 13 billion dollars for European reconstruction. Including other aid programs, total financial assistance provided by the United States after the war represented about 10 % of American GDP. For a description see Wexler, The Marshall Plan Revisited: The European Recovery Program in Economic Perspective (1983).
- 2.
For a revealing description of this problem see Krugman, The Myth of Asia’s Miracle (1994).
- 3.
For an analysis on increasing returns see Barro and Sala-i-Martin, Economic Growth (1995).
- 4.
- 5.
A study published by the European Investment Bank (EIB) shows that the EU is hit by “a historically unprecedented collapse in fixed capital formation”; see Kolev et al., Investment and Investment Finance in Europe (2013).
- 6.
For a comprehensive overview of Latin American economic history in the nineteenth and twentieth centuries, see Bulmer-Thomas, The Economic History of Latin America since Independence (2003).
- 7.
Bulmer-Thomas, op. cit., Chap. 9.
- 8.
This happened because industrial products have more value added and lower demand elasticity, thanks to advanced specialization in comparison to the predominantly raw exports from Latin America.
- 9.
Singer passed away in 2006, at the age of 95. He was such an enthusiastic researcher that at the age of 86 he signed up for a speed-reading course (The Economist, Obituary, March 9, 2006).
- 10.
A collection of articles written by Prebisch and Neo-Marxists can be found in Kanth, Paradigms in Economic Development: Classic Perspectives, Critiques, and Reflections (1994, Part II).
- 11.
In her book The Shock Doctrine (2006), Naomi Klein argues that the juntas were instruments of neoliberal policies designed by the “Chicago School”, under the guidance of Milton Friedman. Friedman categorically denied any ties to the Pinochet regime in Chile, despite praising its economic policy.
- 12.
In most countries the new model was implemented by brutal dictatorships. An exception was Peru, where a dictatorial regime ran the course of inward development with monetarist policies being adopted after the return of parliamentary democracy.
- 13.
Stiglitz, Globalization and its discontents (2002, p. 20).
- 14.
For a detailed account, see Herz, IOU: The Debt Threat and Why We Must Defuse It (2005).
- 15.
Nicholas Brady was then US Secretary of Treasury. He proposed to convert bank loans to Latin American countries into new, lower valued but tradable bonds. The new bonds were called Brady Bonds.
- 16.
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Christodoulakis, N. (2015). Development, Collapse and New Theories. In: How Crises Shaped Economic Ideas and Policies. Springer, Cham. https://doi.org/10.1007/978-3-319-16871-5_13
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