In Left Behind, Sebastian Edwards explains why the nations of Latin America have failed to share in the fruits of globalization and forcefully highlights the dangers of the recent turn to economic populism in the region. He begins by detailing the many ways Latin American governments have stifled economic development over the years through excessive regulation, currency manipulation, and thoroughgoing corruption. He then turns to the neoliberal reforms of the early 1990s, which called for the elimination of deficits, lowering of trade barriers, and privatization of inefficient public enterprises—and which, Edwards argues, held the promise of freeing Latin America from the burdens of the past. Flawed implementation, however, meant the promised gains of globalization were never felt by the mass of citizens, and growing frustration with stalled progress has led to a resurgence of populism throughout the region, exemplified by the economic policies of Venezuela’sHugo Chávez. But such measures, Edwards warns, are a recipe for disaster; instead, he argues, the way forward for Latin America lies in further market reforms, more honestly pursued and fairly implemented. As an example of the promise of that approach, Edwards points to Latin America's giant, Brazil, which under the successful administration of President Luis Inácio da Silva (Lula) has finally begun to show signs of reaching its true economic potential.
As the global financial crisis has reminded us, the risks posed by failing economies extend far beyond their national borders. Putting Latin America back on a path toward sustained growth is crucial not just for the region but for the world, and Left Behind offers a clear, concise blueprint for the way forward.
The American economy is strong in large part because nobody believes that America would ever default on its debt. Yet in 1933, Franklin D. Roosevelt did just that, when in a bid to pull the country out of depression, he depreciated the U.S. dollar in relation to gold, effectively annulling all debt contracts. American Default is the story of this forgotten chapter in America's history.
Sebastian Edwards provides a compelling account of the economic and legal drama that embroiled a nation already reeling from global financial collapse. It began on April 5, 1933, when FDR ordered Americans to sell all their gold holdings to the government. This was followed by the abandonment of the gold standard, the unilateral and retroactive rewriting of contracts, and the devaluation of the dollar. Anyone who held public and private debt suddenly saw its value reduced by nearly half, and debtors--including the U.S. government—suddenly owed their creditors far less. Revaluing the dollar imposed a hefty loss on investors and savers, many of them middle-class American families. The banks fought back, and a bitter battle for gold ensued. In early 1935, the case went to the Supreme Court. Edwards describes FDR's rancorous clashes with conservative Chief Justice Charles Evans Hughes, a confrontation that threatened to finish the New Deal for good—and that led to FDR's attempt to pack the court in 1937.
At a time when several major economies never approached the brink of default or devaluing or recalling currencies, American Default is a timely account of a little-known yet drastic experiment with these policies, the inevitable backlash, and the ultimate result.
Together these studies offer a new understanding of the empirical relationship between capital flows, international trade, and economic performance, and also afford key insights into realms of major policy concern.
Economists and political scientists from the United States and Latin America detail in this volume how and why such programs go wrong and what leads policymakers to repeatedly adopt these policies despite a history of failure. Authors examine this pattern in Argentina, Brazil, Chile, Mexico, Nicaragua, and Peru—and show how Colombia managed to avoid it. Despite differences in how each country implemented its policies, the macroeconomic consequences were remarkably similar.
Scholars of Latin America will find this work a valuable resource, offering a distinctive macroeconomic perspective on the continuing controversy over the dynamics of populism.
In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.
Among the questions addressed are: What are the requirements for a stabilization policy that reduces inflation in a reasonable amount of time at an acceptable cost? What are the effects of structural reforms, especially trade liberalization, deregulation, and privatization, on growth in the short and long runs? How do macroeconomic instability and adjustment policies affect income distribution and poverty? How does the specific design of structural adjustment efforts affect results?
In this companion to Macroeconomics of Populism in Latin America, the authors confirm that macroeconomic stability has a positive effect on income distribution. The volume presents case studies that describe in detail the stabilization experiences in Brazil, Israel, Argentina, and Bolivia, and also includes discussion of Chile, Mexico, Peru, and Turkey.
Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds).
Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.
A group of experts here examine rapidly globalizing financial markets with regard to capital flows and crises, domestic credit, international financial integration, and economic policy. Featuring detailed analyses and cross-national comparisons of countries such as Brazil, Argentina, Uruguay, and Korea, this book will shape economists’ and policymakers’ understanding of the effectiveness of restrictions on capital mobility in the world’s most fragile economies.