Transcript Document

Growth:
The Long-Term Economic
Failure in Developing
Countries
Mark Weisbrot
Growth
• Economic growth is important
• In general, it is even more important for low
and middle income countries than for high
income countries such as the United States
• Basic measure: Gross Domestic Product
(GDP) per capita
• Need benchmark: compare growth
(and progress) to past decades
Over the last 25 years, there has
been a sharp slowdown in
economic growth for the vast
majority of low- and middleincome countries
As would be expected in a period of
reduced economic growth, there has
also been a decline in progress on
health and education outcomes for
the vast majority of low- and
middle-income countries
The Economic Failure in Latin America
1980-2005
Economic Reforms Over the
Past 25 Years
• Reduced restrictions on international trade
and financial flows
• Tighter fiscal and monetary policies
• Privatization of state-owned enterprises
• Labor market and public pension reforms
• Abandonment of state-directed industrial
policies or development strategies
• Increased accumulation of foreign
reserve holdings
Growth in GDP per capita, Latin America
Start of 25-year period
Argentina
20,000
18,000
Real Per-Capita GDP
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1988
1990
1992
1994
1996
1998
2000
2002
2004
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 2.5% 1988-1998
Argentina
Total Grow th in Real Per-Capita GDP
(Percent)
55
48
45
35
25
15
3
3
1980-2000
2000-2005
5
-5
1960-1980
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
Bolivia
8,000
7,000
Real Per- Capi ta GDP
6,000
5,000
4,000
3,000
2,000
1,000
0
1968
1973
1978
1983
1988
1993
1998
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 2.7% 1968-1978
2003
Bolivia
Total Growth in Real Per-C apita GDP
(Percent)
70
60
60
50
40
30
20
10
2
0
-4
-10
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
Bolivia: Reformas Estructurales (1985-1999)
Índice de Reforma Estructural
0.8
Bolivia
0.7
Latin American Average
0.6
0.5
0.4
0.3
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
19
85
0.2
Fuente: Lora, Eduardo (2001). “Structural Reforms in Latin America: What Has Been Reformed and
How to Measure it,” Banco Interamericano de Desarrollo.
Brazil
35,000
Real Per- Capi ta GDP
30,000
25,000
20,000
15,000
10,000
5,000
0
1970
1975
1980
1985
1990
1995
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 5.5% 1970-1980
2000
2005
Brazil
Total Growth in Real Per-C apita GDP
(Percent)
140
123
120
100
80
60
40
20
8
4
0
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
Costa Rica
25,000
Real Per- Capi ta GDP
20,000
15,000
10,000
5,000
0
1969
1974
1979
1984
1989
1994
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 3.2% 1969-1979
1999
2004
Costa Rica
Total Growth in Real Per-C apita GDP
(Percent)
90
81
80
70
60
50
40
30
24
20
9
10
0
1960-1980
1980-2000
Years
Sources: Angus Maddison, WEO 9/05, and author's calculations
2000-2005
Ecuador
5,000
4,500
Real Per- Capi ta GDP
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1987
1989
1991
1993
1995
1997
1999
2001
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 1.3% 1987-1997
2003
2005
Ecuador
Total Growth in Real Per-C apita GDP
(Percent)
100
80
80
60
40
32
20
0
-20
-21
-40
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
Haiti
8,000
7,000
Real Per- Capi ta GDP
6,000
5,000
4,000
3,000
2,000
1,000
0
1970
1975
1980
1985
1990
1995
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 3.7% 1970-1980
2000
2005
Haiti
Total Growth in Real Per-C apita GDP
(Percent)
30
24
20
10
0
-10
-12
-20
-30
-37
-40
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
Mexico
30,000
Real Per- Capi ta GDP
25,000
20,000
15,000
10,000
5,000
0
1971
1976
1981
1986
1991
1996
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 4.4% 1971-1981
2001
Mexico
Total Growth in Real Per-C apita GDP
(Percent)
120
100
99
80
60
40
16
20
2
0
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
Uruguay
14,000
Real Per- Capi ta GDP
12,000
10,000
8,000
6,000
4,000
2,000
0
1988
1990
1992
1994
1996
1998
2000
2002
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 2.7% 1988-1998
2004
Venezuela
14,000
Real Per- Capi ta GDP
12,000
10,000
8,000
6,000
4,000
2,000
0
1967
1972
1977
1982
1987
1992
1997
Sources: Angus Maddison, WEO 9/05, and author's calculations. Trend: 1.3% 1967-1977
2002
Venezuela
Total Growth in Real Per-C apita GDP
(Percent)
10
5
5
0
0
-5
-10
-15
-16
-20
1960-1980
1980-2000
Sources: Angus Maddison, WEO 9/05, and author's calculations
Years
2000-2005
For developing countries, the
main selling point of new
commercial agreements such as
the Free Trade Area of the
Americas (FTAA) or the Central
American Free Trade Agreement
(CAFTA) has been the lure of
increased access to U.S.
markets.
-- But will most developing countries will be
able to increase their exports to the United
States in the foreseeable future?
•Problem: US now running an unsustainable
current account deficit -- about 6 percent of GDP.
•This means that the dollar will have to fall, and
the markets for exports to the U.S. will shrink.
•Result: Over the next decade, countries will
have to displace others (e.g. China, Mexico) to
gain access to a shrinking U.S. market for their
exports.
Mark Weisbrot – www.cepr.net
Result:
Developing country governments should be
cautious about making costly concessions
in order to gain access to the U.S. market.
They may well make sacrifices for no
gain.
Policy mistakes have contributed
to the growth failure –
here are some examples:
China’s reforms are different from
those implemented elsewhere
• Liberalized trade after it could compete in world
markets. (Average tariff still over 40 percent in
1992)
• Gradual and careful transition
• Banking system dominated by state-owned banks
• Government shapes and uses foreign investment
in accordance with development goals
• Strict controls over international currency flows
Conclusion
• Sharp slowdown in economic growth in the
vast majority of developing countries
• Social and human consequences are very
important
• Most of the reduced progress on social
indicators probably due to growth slowdown,
rather than any increases in inequality
• Economists and policy makers should be
trying to figure out what has gone wrong
Mark Weisbrot
[email protected]
Center for Economic and Policy Research
www.cepr.net