Economic Growth in Latin America

Economic Growth in Latin America

Economic Growth in Latin America and Asia: A Literature Review 1.0. Introduction Economic growth rates around the world have greatly differed over the last five decades. Economic growth rate of the four East Asian giants- Singapore, Taiwan, Hong Kong, and South Korea averagely grew by 6 percent per capita annually between 1960 and 2000. Contrastingly, most Latin American nations recorded less than 1 percent per capita GDP growth during the same period. [1]The comparison between the high economic growth rate of East Asian nations with the stagnating economic performance of Latin America leads to the questions: What are the fundamental factors for explaining economic differences between Latin America and East Asian regions, and what the affected countries should do in order to spur economic growth. Since the Second World War ended, the global spotlight has excelled on reforms and developments among the Third World countries. [2]Although Latin America and East Asia were neither aligned with the Communist Bloc nor the NATO, the regions enjoyed comparative successes with increased industrialization; this is why the two regions attracted scholarly interest. After the WWII, Latin America found it challenging to sustain their economic growth level it had before the war begun. On the other side, East Asia shined in all social and economic development indicators. Latin America notably started industrializing decades before the newly industrializing countries (NICs) in East Asia. However, the Asian nations quickly overtaken Latin American countries economic growth rate. The world-systems/ dependency theory and neoclassical economic theory help in describing the varying economic growth paths in Latin America as well as East Asia. The perspectives of dependency theory and neoclassical economic theory reflect the ideas of the new comparative development economy which help in exploring the relationship between international relations, government policies, and the economic growth. The frameworks of neoclassical economic theory support laissez-fair trade policies of free labor market with little or no government intervention in the economy?. [3]In reference to neoclassical theory, the East Asia region countries maintained an environment conducive for high rates of savings and investments as well as keeping their economies open to foreign capital and technology. On the other end, dependency/ world-systems theory argues a hierarchy of major, semi-peripheral, and peripheral countries where development of less powerful and peripheral countries is constrained by its relative obstacles and resources. The case for Latin America suits in this theory, for the region had trouble in growth sustenance since it could not become completely modernized due to the complete capitalist world system dominant in the top nations such as the U.S.A. ORDER NOW 2.0. Factors of Development In this section, factors of economic growth differences between Latin America and East Asia will be analyzed. [4]In reference to cross country economic growth regressions, the traditionally important growth factors- rate of investment, quality of human resources, and population growth explain 50 percent of per capita GDP difference between Latin America and East Asia. Further, economic policies and other institutional factors such as government consumption, degree of openness, rule of law, and macroeconomic stability explain the other 50 percent economic growth difference between East Asia and Latin America. Also, crises in balance of payments (BOP) between the two regions have also led lower growth of economy at Latin America when compared to Asia. Factors of economic development between the two regions namely; statecraft, long/short term development economic plans will be analyzed to suit the aforementioned growth factors, economic policies and other institutional factors. 2.1. Statecraft Although neoclassical economic theory and dependency/ world systems theory provide insig

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