Economic Policies Chosen in the 1940s-1960s Flashcards
LA experiencing a protected market
US providing LA guarenteed prices during WW2.
Post WW2, LA expected protectionist policies but US concerned with
security issues.
LA wants to focus on economic development with protectionist policies by the US.
US wants to focus on security issues regarding Communism and don’t want LA to move toward Communism).
Western Hemisphere Alliance
Keep Communism out of LA (Main concern of the US)
Why is US encouraging Neo-liberalism?
Anti-Communism
Rebuild after the war
US wants to open a free market bc they are at an advantage over countries, more opportunities to export
Clayton Plan (1944&1945)
US plan post WW2, encouraging Neo-liberalism / “Fair Field & No Favor”
LA has been cast aside.
George Marshall - Marshall Plan
US provides money to Asian and European countries–including previous enemies bc don’t want to see a return of war, especially if they are neighbors to Communism. Want to build these countries into the free market.
Autarky
Self-sufficiency
LA doesn’t like the free market model. They prefer…
Structuralism, a solution to experiencing market closure
Infant Industry Protection
Temporary protectionist policies for industries entering the market.
Linkages: Backward
Need iron, energy, oil to make -> Steel -> Use Steel to make cars ->
“ “ Need engine, rubber, plastic, leather, glass ->
Raul Prebisch
Free Market economist, trying to promote more industrialization may be the key for LA development
Democratization takes off 1944-1946, why?
Fascism is unpopular, associated with Communism. Bandwagon for democracy. Be on the winning side after the war.
Why would democracy promote ISI policies?
ISI calls for building factories, which will then create jobs. With increased wages and positive work conditions, build popularity for democracy. Fitting into goal of politicians to be reelected.
Financing ISI: Use of protected tariffs with different products - problem?
Firms will lobby the government for protection.
More issues involving financing ISI - What are the options?
1) Private or domestic or foreign investors (FDI)
–problem: not enough capital, foreign investors also have ill intent
2) Tariffs
3) Taxation
–problem: Tax avoidance/evasion
(Value Added Tax currently most successful tax in LA)
4) Issue bonds
-problem: Don’t want to rely on US
5) Loans
–problem: Can’t borrow from US, don’t want to be under them
6) Expropriation
7) Tax Breaks
–problem: Already thrown under the bus by the US
State Marketing Boards (SMBs)
solution for LA funding ISI
Middle man between company and global market.
Perverse Incentives
“Killing the goose that laid the golden egg.”
Taking ISI away will lead to…
many people losing their job, hurting the economy and popularization of democracy.
NICs placing
High tariffs on finished goods after becoming export-oriented
