The main objectives of this article are:
(i) to present a summary concerning the major features of the theory of
globalization, as a theoretical contribution within the field of economics of
development, and its link with network analysis models as a research tool; and
(ii) to discuss the main foundations to establish economic adjustment programs
in non industrialized nations. These
are important topics, elements of a framework in which efforts for economic
integration of Third World countries are carried out.
Here we will have three sections. The
first one will summarize the theory of globalization as a theory of development.
This set of theoretical principles have implications for the Third World
countries´ insertion into the international economic system.
The second part will show the more factual characteristics under the
current circumstances. Here we will
have a general perspective in reference to the globalization features and the
network analysis perspective of economics of development.
A particular point to keep in mind is the important impact that processes
of globalization are having in reference to the development conditions,
especially those of the less advanced nations.
These repercussions include international trade issues and exporting
policies. These are topics
discussed at the end of the second part. Finally
the third part will show the major foundations to carry out economic adjustment
programs at a macroeconomic level.
The main argument in this paper is based on the following elements:
(i) one of the main assumptions from the theory of globalization is the
increasing connection and interdependence, in a particular sense in terms of the
international trade links; (ii) based on the aforementioned element, it is
important to discuss, taking into account elements of globalization, conditions
related to network analysis models as an instrumental tool for research, export
leading policies and the macroeconomic adjustment models.
These
economic adjustment policies were aimed, among other things, to reinforce the
role of exports as a central axis to achieve economic growth. One of the main conclusions is the evidence that, even though
economic adjustment programs have a theoretical ground in its design, one of the
main problems for their implementation and success is related to the nature of
export. As long as the less
developed nations persist in exporting raw materials and mainly products from
the primary sector -or manufactured goods, with important restrictions in major
markets of the world, and a persistent decline in terms of trade, adjustment
programs cannot result in sustainable levels of economic growth.
Development theory:
Globalization
For the purposes of this study, the concept of globalization will be
based on the inferences of Dean Baker, Gerald Epstein and Robert Pollin.[2]
These authors recognize that globalization is not something exactly new
and they emphasize the relative and different effects that this phenomenon is
having in different areas of the world. A
compressed summary of his basic approach toward globalization establishes two
principal meanings:
a)
As a phenomenon it implies that a greater interdependence exists among
different regions and countries of the world in terms of finances, trade and
communications. This dissertation
will work with the international trade links in two ways: (a) among Latin American countries; and (b) from Latin
American nations with their main international trade partners;
b)
As a theory of economic development one of its major assumptions is that
a greater level of integration is taking place among different regions of the
world, and that this integration is having an important impact on economic
growth and social indicators.
According
to Klein and Pauly, the fundamental premise of globalization is that an
increasing degree of integration among societies plays a crucial role in most
types of social and economic changes. This premise is widely accepted.
However, there is much less consensus on its fundamental organizing
principles and laws of motion. Neoclassical
economic theories that are based on comparative advantage (Klein, Pauly and
Voisin 1985), international relations approaches that stress geopolitics
(Keohane 1993, and Thompson 1991), and world-systems perspectives that emphasize
“unequal exchange” (Amin 1989; Frank 1979; Wallerstein 1991) offer
contrasting models of the international system.
Particularly Baker, Epstein and Klein,
agree in recognizing that the theory of globalization emerges from the
global mechanisms of greater integration with particular emphasis on the sphere
of communications and economic transactions.
In this sense, this perspective is similar to the world-systems approach.
However, one of the most important characteristics of the globalization
position is its focus and emphasis on cultural aspects and their communication
worldwide. In addition to technological, financial and political ties,
globalization scholars argue that modern elements for development interpretation
are the cultural and economic links among nations.
In this cultural communication, one of the most important factors is the
increasing flexibility of technology to connect people around the world.
Following
the main arguments from Keohane, Voicin, Thompson, Moore and Maddison, the main
aspects of the theory of globalization can be delineated as follows:
a)
To recognize that global communications systems are gaining an increasing
importance every day, and through this process all nations are interacting much
more frequently and easily, not only at the governmental level, but also within
the citizenry;
b)
Even though the main communications systems are operating among the more
developed nations, these mechanisms are also spreading in their use to less
developed nations. This fact will increase the possibility that marginal groups
in poor nations can communicate and interact within a global context using the
new technology, and therefore can integrate themselves with the “global
village,” which represents the current scenario in worldwide communications
and transactions;
c)
In terms of economic activities, the new technological advances in
communication are becoming more accessible to local and small businesses.
This situation is creating a completely new environment for carrying out
economic transactions, utilizing productive resources, equipment, trading
products, and taking advantage of “virtual monetary mechanisms.”
From a cultural perspective, the new communication products are unifying
patterns of communications around the world, at least in terms of economic
transactions under current conditions;
d)
The concept of minorities within particular nations is being affected by
these new patterns of communication. Even
though these minorities are not completely integrated into the new world system
of communications, the powerful business and political elites in each country
are a part of this interaction around the world.
Ultimately, the business and political elite continue to be the decision
makers in developing nations;
e)
Social and economic elements are determinant circumstances which affect
the standards of living of every particular nation.
Social aspects will be considered in this study concerning the specific
impacts that social and economic variables can have on social indicators in the
Latin American region during the period 1960-1995.
Specifically
Robert Pollin, Gerald Epstein, and Michael Moore emphasize that the main
assumptions of the theory of globalization can be summarized in three principal
points. First, cultural and
economic factors are the determining aspect in every society.
Second, under current global
conditions, and when we are studying a particular system -i.e., financial or
trade sphere- it is not as important as previously thought to use the
nation-state category as a unit of analysis, since global communications and
international ties are making this category less useful.
Third, with more standardization in technological advances, more and more
social sectors will be able to connect themselves with other groups around the
world, which implies faster and easier communications and economic transactions.
This situation will affect the dominant and non-dominant groups from each
nation.[6]
Sunkel
and Carlsson underline that, in more specific terms, globalization theory
implies a key element concerning integration
-integration regarding international trade, the international financial
system, technology and communications, and cultural values from the more
developed countries (DeMar 1992; Carlsson 1995).
Economic integration at the systemic level -among countries- means
stronger worldwide relationships. At
the subsystemic level -within individual countries- it implies social and
economic integration from the different social sectors (Sunkel 1995).
At the systemic level there are some nations which are able to achieve
more integration into the new world economic conditions than other countries.
At the subsystemic level there are some social sectors which integrate
themselves into the new economic dynamic derived especially from the economic
growth, and sectors which become more marginalized in social terms (Sunkel 1995;
Paul 1996; Scholte 1996).
Lubbers
claims that even though the term globalization in recent years has been
utilized, especially following the technological revolution in communications
and the creation of cyberspace, the first major argument on “Globalization of
the Markets” can be found in a 1983 article by Theodore Levitt in the Harvard
Business Review.
The functionalist aspect of the globalization concept is what
distinguishes it from the mere notion of internationalization, which refers to a
quantitative process but not necessarily to an epochal shift of a more
qualitative kind.
According
to Peter Dickens, globalization processes are qualitatively different from
internationalization processes. They
involve not merely the geographical extension of economic activity across
national boundaries, that is internationalization, but also and more
importantly, the functional integration of such internationally dispersed
activities. The current proces of
globalization produces a new global-functional unity.
Following
the basis shown by Porters and Held, the theory of globalization coincides with
some elements of the theory of modernization.
One aspect is that both theories state that the main direction of
development should be that which was undertaken by the United States and Europe.
These schools hold that the main patterns of communication and the tools
to achieve better standards of living originated in those more developed areas.
The modernization perspective differs from the globalization approach in
that the former follows a more normative position -stating how the development
issue should be solved. The latter reinforces its character as a “positive”
perspective rather than a normative claim.
Globalization
theories emphasize cultural and economic factors as the main determinants which
affect the social and political conditions of nations, which is similar to the
“comprehensive social school” of Max Weber’s theories.
From this perspective, the systems of values, beliefs, and the pattern of
identity of the dominant and the subordinate groups within a society are
important elements to explain national characteristics in economic and social
terms.
For the globalization position, this statement from the
Weberian theory from the 1920s must apply to current world conditions
especially in terms of the
diffusion and transference of cultural values through communication systems that
are increasingly affecting many social groups in all nations.
Based
on the aforementioned elements, it is clear that the globalization and
world-systems theories take a global perspective as the unit of analysis, rather
than focusing strictly on the nation-state as was the case in the modernization
and dependency schools. The contrasting point between world-systems theory and
globalization is that the first contains certain neo-Marxist elements, while the
second bases its theoretical foundations on the structural and functionalist
sociological movement. Therefore,
the globalization approach tends more toward a gradual transition rather than a
violent or revolutionary transformation. For
the globalist authors, the gradual changes in societies become a reality when
different social groups adapt themselves to current innovations, particularly in
the areas of cultural communication and the economic sphere.
The
globalization and world-systems theories take into account the most recent
economic changes in world structure and relations that have occurred in the last
two decades; for example: a) In March
1973, the governments of the more developed nations, began to operate more
flexible mechanisms in terms of exchange rate control.
This situation allowed for a faster movement of capital among the
world’s financial centers, international banks, and stock markets; b)
Especially since 1976 trade transactions base their speculations on the
future value of the products, which is reinforced through the more flexible use
of modern technology in information, computers, and in communication systems;
c) The computer revolution
of the eighties made it possible to carry out faster calculations and
transactions regarding exchange rates values and investments, which was
reinforced by the general use of the fax machine; d) During the nineties the
main feature is the Internet system which allows the achievement of more rapid
and expansive communication. The
Internet is increasingly creating conditions to reinvigorate the character of
the “virtual economy” in several specific markets.
Under
current conditions, the main aspects under study from the globalization
perspective are: a)
new concepts, definitions and empirical evidence for hypotheses
concerning cultural variables and their change at the national, regional and
global level; b) specific ways
to adapt the principles of “comprehensive
sociology” to the current “global village” atmosphere; c)
interaction among the different levels of power from nation to nation and
from particular social systems which are operating around the world;
d) how new patterns of
communication are affecting minorities within each society; e)
the concept of autonomy of state in the face of increasingly flexible
communication tools and international economic ties, which render obsolete the
previous unilateral effectiveness of national economic decisions; and f)
how regionalism and multilateralism agreements are affecting global
economic and social integration.
Globalization
and network analysis concerning economics of development
Based on the section of literature review dealing with globalization,
this is a theory whose aim includes the interpretation of the current events on
the international sphere. These
events are characterized by (a) increasing
worldwide active communication systems; and (b) increasing fluent economic
conditions, especially those circumstances and factors regarding mobility of
financial resources and trade.
Through
this process of globalization, the assumption is that more nations are depending
on worldwide conditions in terms of communication, the international financial
system, and trade. Therefore the
world scenario is more integrated in international economic transactions
(Sunkel: 1995; Carlsson: 1995; Scholte 1995).
This study will take into account circumstances, units of analysis and
their relationships in terms of the international economic environment and
specific conditions within countries. On
the external level -or systemic approach-, the unit of analysis will be
countries; at the domestic or internal conditions within nations -sub-systemic
approach- the units of analysis will be those corresponding to national
variables of economic growth.
Torres Ocampo accentuates that, in terms of the globalization process
that is taking place under current worldwide economic conditions, two main
topics in international political economy are: (a) the structure of the
international economic system; and (b) how this structure has changed.
They can be addressed through the application of the theory of
globalization from the development perspective.
This
globalization approach suggests that the structure of the global system, and the
roles that countries play within the international division of trade and labor,
is crucial in understanding a wide array of social, political, and economic
changes within particular countries. The basic claim is that international connections, roles, and
relationships are important variables in any analysis which tries to explain
various dimensions of development -economic growth, for example- and trade among
countries.
Smith and White support the concept that network analysis models are
powerful tools for formally describing and testing theories of complex
interactive systems. For example, the five empirical components addressed by the
various theories of international economic systems are:
(a) the constituent economies of states (or cities, and regions) that
produce, distribute, consume and exchange exports and imports; (b) links or
directed flows between these economies at the country level, and international
policies that regulate or deregulate these flows; (c) the political-economic
networks formed by these links or flows; (d) the positions occupied by
constituent economies in these networks; and (e) the structure of these networks
as patterns of flows between positions (Smith 1992).
Network analysis models of the international economic system are equipped
to map each of the last configurations. If
performed at multiple time-points, network analysis also enables researchers to
examine change in each of these components as well.
Conceivably, it could lead to empirical tests of alternative theoretical
models of the global system (Smith 1992).
The network analysis model can also be a means for identifying empirical
data using the concepts of different scenarios and actors within their dynamic
pattern of relationships. For
example, Ronald Burt in his studies concerning “structural holes”
has analyzed the relationships that are derived from centralization as a
characteristic of the system which is affecting each one of the actors’
positions. In Burt’s studies we
can see the potential for the application of network analysis models to
enterprises working in the international market in terms of the actual
globalization process.
Studies in terms of social institutions within local areas can be found
in the work of Roberto de Leon in his book “The Left Coast City.”
In this work de Leon applies multiple regression models to the study of
social and political groups in San Francisco, California, from 1989 to 1993.
Related to a theoretical level and in reference to institutions and
particular conditions of political power within more developed countries, we
have the work of Anthony Giddens, “Consequences of Modernity”.
In this work, Giddens studied the processes of economic and social
transformations derived from globalization in more developed cities.
His main argument is that we are presently experiencing an “extreme
modernization” instead of a “post-modernism”
stage in world relations, particularly with regard to institutions of
international trade.
Network analysis models are particularly appropriate in testing
globalization aspects that stress the importance of the global economic exchange
in terms of exports and imports. Wallerstein
(1991), Frank (1979), and others have attempted to provide sophisticated
historical descriptions of the origin, operation, and organization of the modern
global economy. Unlike early
concepts of dependency (Frank 1969; and Chilcote 1974) that underline the
particular two-way relationships between core and periphery countries, the
globalization and world system approaches stress the importance of capturing the
unity and structure of a hierarchic, differentiated world economic system.
Here the major references are trade, financial, technological, and
communication links operating at a world level (Smith 1992 and Evans 1992).
The main areas under dispute concerning the globalization theory and
network analysis models are related to four main aspects:
(a) The fact that countries can have more than three levels of placement:
core, semiperiphery, and periphery countries (Schott 1986); (b) The
positional characteristics of several countries in terms of sharing the same
patterns of relationships can be related to the “clique” characteristics
from the network analysis models (Snyder 1989); (c) Even inside the same
position from the network analysis model, i.e. the periphery position, the
features of countries can have a lot of variation in terms of the size of their
economies, internal effective demand, export structure, and level of historical
and/or current economic growth (Smith 1992); and (d) There is strong evidence
that the patterns of economic concentration among nations especially in the
fields of international trade and financial systems, are related to the
dependent development patterns claimed by the neostructuralist authors (Cardoso
1992).
Concerning the relationships between exports and economic growth, one of
the main positions is the neoliberal one.
According to this position, promotion of exports, through several macroeconomic
measures, including devaluation or depreciation of currencies, was necessary in
order to achieve better standards of economic growth following the “outside
approach”
(World Bank 1995), especially for economies of developing countries who
were facing the external debt problem. Complementary
to this promotion of exports and the aims of increasing economic production, it
was necessary for countries to undertake fiscal policies to control governmental
deficit, and to keep inflation in check.
Devaluation or depreciation of currencies
to promote exports to a more competitive level resulted in the impoverishment of
middle class sectors and worsening social indicators of those social classes
already living below the poverty level (Cardoso, 1992).
This set of macroeconomic measures reduced the internal effective demand
preventing this internal market from being a dynamic force in the
encouragement of economic growth (Cardoso, Dos Santos 1992).
Nevertheless, the World Bank and the International Monetary Fund expect
that the positive effects from economic growth, more competitive standards of
exports, and higher levels of investment will also be beneficial to the lower
classes within the next 5-7 years (World Bank 1995).
Khan, Mohsin, Villanueva and Delano have studied the relationship between
export leading policies and economic growth in 23 developing countries.
Their study, which focused on the period 1975 to 1987, found that the
rate of growth of per capita income was significantly higher and had a positive
effect from (a) the export component in national economies; and (b) the national
investment rate -the formation of fixed capital.
These authors also concluded that monetary expansion within macroeconomic
systems has a negative impact on economic growth.
The aforementioned results are not universally accepted.
In a study concerning economic growth and exports, Helliner took into
consideration underdeveloped countries mainly from the sub-Saharan region of
Africa, during the period 1960-1980. He
was not able to find any significant statistical relationship between changes in
exports and economic growth. Even
more, the relationship was negative.
However, in this case we need to evaluate whether the countries of Sub-Saharan
Africa were really implementing an export leading policy during this time
period, whether they were restructuring their agricultural export pattern, and
whether these countries were able to compensate for the two oil price shocks of
1973 and 1979.
Michaely claims that the positive relationship between economic growth
and exports expansion within the GNP is stronger as countries have a higher
degree of economic and social development, and it is less significant, almost
nonexistent, in poor countries.
In the more developed
countries we have better market conditions which include more production in
terms of added value,
more expansion in the internal or domestic demand, and a greater institutional
efficiency framework.
In terms of social effectiveness from Latin American governments, the
World Bank and the Inter-American Development Bank propose to carry out economic
adjustment agendas. They expect
that as a natural consequence of economic growth, more opportunities and better
standards of living will be available for each nation’s population.
During the nineties, however, international organizations have been
trying to implement specific programs with focus on the most marginal social
groups. The Economic Commission for
Latin America and the Caribbean have presented a set of considerations and
policy measures to take into account more the structural economic problems of
the region, looking to implement a social policy with economic growth and
equity.
Major
theoretical foundations of economic adjustment programs
Conditions to carry out the economic adjustment programs existed in many
middle income countries by the end of the seventies.
In 1979 many small nations had difficulty surviving the second oil price
increase after the first in October, 1973.
By the end of the 1970s, there were fewer financial resources in the
international bank system to continue the lending cycle which had spiraled many
developing nations into large national debts as in 1974.
At the beginning of the 1970s, as a result of the increase of in prices
engineered by the Organization of Oil Export Countries in October 1973, those
nations who lacked the capacity to produce oil had sufficient international
financial resources to avoid the pain of economic adjustment.
At this time, private international banks were maintaining significant
levels of liquidity and were willing to lend to developing nations.
These resources generated the problem of external debt and, in immediate
terms, they solved the problem of lack of money for many underdeveloped nations.
At the end of the seventies, the international scenario was characterized
by the fact that international financial resources were not readily available,
the more developed nations were facing recession in their economic systems, and
the international prices of commodities -which are the most important exports
from many developing nations- were falling in international markets.
In summary, the general situation of middle income countries worldwide at
the beginning of the eighties was characterized by:
a) dealing with the recession of the more developed nations; b) facing a lack of financial resources in the private
international bank system for continued loan opportunities; and c) grappling with the need for monetary funds to compensate for
the second oil price increase and the already contracted external debt duties.
These factors forced many nations to negotiate with international
institutions for financial assistance, especially with the International Bank
for Development and Reconstruction, the World Bank -WB- and the International
Monetary Found -IMF-. These
international organizations formulated several terms for lending money to
nations. These terms were known as
“conditionality”, and they established the main framework for macroeconomic
decisions to be implemented at a national level.
This conditionality was a prerequisite to be carried out in order for a
nation to become eligible to borrow financial resources and as a means of
guarantee for the payment of previously contracted debt.
In general terms and based on the theoretical
foundations of macroeconomics, the main characteristics of borrowing
nations were:
a) A significant deficit in
the balance of payments, mainly because of instabilities which
occurred in the trade balance -more imports with less exports.
One of the main factors affecting this situation was the low price of
exports due to the economic recession in the more developed nations.
In addition, the higher interest rates in the United States automatically
increased debt duties. It is
important to consider here, as a complementary but not less significant fact,
that many middle income countries need to import equipment and several means of
production from the more developed nations;
b) High levels of
unemployment derived not only from structural economic limitations within each
nation, but also from the fact that investments from the private and public
sectors were at lower levels than in previous years;
c) High levels of inflation
which in turn did not allow for stability in the
implementation of productive processes from private and public sectors.
It also did not breed confidence in international transactions, but
created an environment of uncertainty. In
addition, many nations were facing decreasing levels of international monetary
reserves;
d) Significant levels of governmental fiscal deficit, which was one of
the main factors in causing a rise in inflationary rates in the domestic market. Because governments were receiving lower amounts of taxes,
they printed domestic currency and created the internal debt problem, which
increased the amount of money at the local level and therefore increased the
level of inflation.
This general picture and the interaction of its elements can be analyzed
according to a macroeconomic perspective. From
this point of view it is possible to say that the higher the level of production
of a particular country, the higher is the tendency to increase its imports.
When economic growth is low, imports have a tendency to also be low.
With a low level of economic growth, a positive situation can be seen in
the balance of trade, because exports usually are higher than imports; however,
in the case of a stagnant economy, higher levels of unemployment are
unavoidable. The opposite situation
is evident when there are higher levels of economic growth.
In this case, there are lower levels of unemployment, but usually this
condition has negative results in the balance of trade since a stronger economy
tends to yield more imports than exports.
When a country has the two “extreme” conditions of either high level
economic growth, or low level economic production, there are clear choices in
terms of macroeconomic prescriptions. When
the levels of national production are low, there are positive results in the
balance of trade and negative effects on the employment variable. In this case it is necessary to implement expansionary fiscal
and monetary policies which will decrease, at least temporarily, the level of
taxation, and provide more money to the national system.
All that is being done in this case is to “push” the economy.
As a result of these actions it is expected that the balance of trade
will decrease, but levels of employment will increase.
When the economy of a country is experiencing high levels of economic
growth, it has negative numbers in the balance of trade and favorable numbers in
terms of unemployment. In this
case, it is important to implement fiscal and monetary contractionary policies,
such as increasing taxes, and reducing the amount of money available in the
national economic system. Another
measure consists of increasing the interest rate, which makes lending more
difficult and reduces the total output of the national economy.
As a result, there will be better figures from the balance of trade, even
when we expect to have relatively more unemployment.
The contractionary fiscal and monetary policies aim to avoid an
“overheating” of the economy.
In both “extreme” conditions there is no controversy concerning the
macroeconomic dispositions. However,
problems arise in a case where there is an economic system such as those of the
small economies of developing countries, which can be characterized in the
following manner:
a) Small economies in which market mechanisms are not working
“normally” according to macroeconomic models of more developed nations;
b) High levels of inflation
mainly due to the printing of new money by the government;
c) High levels of
unemployment combined with a negative situation in the balance of trade.
With these characteristics, many underdeveloped nations faced an
environment of stagflation, that is to say inflation with economic recession and
thus unemployment. In addition they
had negative numbers in the balance of trade.
Here lies the controversy. If
expansionary fiscal and monetary policies are applied, the economy is being
“pushed,” and thus the problem of unemployment is solved to some extent, yet
the balance of trade deteriorates. If
the contractionary fiscal and monetary policies are applied, the balance of
trade problem is solved, but there will be an increase in unemployment.
In order to solve this problem, it is important to realize the
significant limitations of traditional fiscal and monetary approaches.
The solution provided through the terms of conditionality of
international organizations mainly consisted of the following aspects:
a) To promote exports as a
means to improve both the balance of trade and the current levels of employment,
avoiding the unilateral approach of the application of traditional fiscal and
monetary policies alone;
b) To reduce governmental
fiscal deficits. Indeed, at the
beginning of the eighties, the IMF established a governmental deficit limit of 3
percent of the gross national product in a particular country;
c) To generate revenues for
the government based on indirect taxes, that is to say taxes on consumption
rather than taxes on income and property. By
implementing this measure an even larger reduction in imports was expected;
d) To depreciate and
devaluate national currencies to stimulate investment and to improve conditions
in international reserves.
All of these terms were factors in generating positive results in terms
of controlling inflation, obtaining better results from the trade balance, and
increasing employment in some sectors of economic activity.
The main problem could be identified in an increase in the number of
people living below the poverty level and within conditions of social
marginality, due largely to the following principal causes.
First, an increase in taxes was supported by social sectors which
depended on wages and salaries, because they did not have significant levels of
property in fixed factors of production. In addition to this circumstance it is
necessary to keep in mind that, even before the adjustment process, a
significant part of society was already living under high levels of
unemployment.
Second, concerning the trade liberalization processes, the contraction in
import levels tended to elevate the prices of basic goods mainly because imports
are not only constituted by luxury products, but also of technological products
that were indispensable in many cases in national production spheres.
In many underdeveloped nations, their industrial capacity of production
is usually aimed at producing terminal goods, instead of intermediate products,
such as fertilizers, machinery, and equipment parts.
Third, in developing nations conditions of high competitiveness and open
market economies do not exist as in more developed nations.
This made it possible for functional monopolies to act within the
conditions of the domestic market of a particular nation.
Therefore, the distortion in prices of several goods was affected by the
speculation of a few suppliers of a particular product.
This situation is a distortion of the free price movement due basically
to supply and demand mechanisms. Again,
the result was an even larger contraction in the levels of effective internal
demand, and thus another factor which increased poverty levels.
Broader conditions of marginality are defined as the fact that poor
sectors are living in the margin of regular economic mechanisms in the domestic
market, because they have needs but they do not have the economic capacity to
acquire the products to satisfy them. This
condition of marginality can be compensated for by the mechanisms of the
marginal or informal economy in the urban centers, or by the activities of
peasant economy in rural areas, by which families in the countryside can take
advantage of family work and can produce for self-sustainment in terms of basic
food production.
With a basis in the aforementioned elements, the basic foundations for
explaining the implementation of economic and social adjustment programs in
developing countries are apparent. These
measures attempted to solve problems in the national accounts, but they actually
increased the conditions of poverty in these nations.
These programs of economic adjustment can be studied as “pragmatic”
dispositions, and they can be interpreted in a more concrete sense using the
theories of world-systems and globalization.
This analysis is possible because these programs were a response to
national conditions which were in turn greatly influenced by the international
economic state.
Factors from the foreign arena in applying economic adjustment measures
included inflationary pressures from the devaluation of currencies, the higher
costs of oil, the significant degree of high external vulnerability, especially
in small economies, and the low level of value-added for the main exports of
agricultural products, which in turn are largely affected by the fact that they
are not essential products and they depend on weather conditions for production.
These elements lead to the consideration that to have higher degrees in
successfulness concerning the results of the economic adjustment processes it is
important to change the structure of export for many developing countries.
Bibliography
Alexander,
R. Financiamiento
externo, deuda y transformacion productiva. (San Salvador, El Salvador:
UCLA, 1990).
Bulmer-Thomas,
V. Studies in the economics of Central America.
(London: MacMillan Press,
1992).
Coatsworth,
J. Central America and the United
States. (New York:
Twayne Publishers, 1994).
Fisher,
S. Macroeconomics.
(New York: MacMillan, 2001).
Keith,
N. New
perspectives on social class and socioeconomic development in the periphery.
(New York: Greenwood Press,
1990).
Kouri, P.
Debt, stabilization and
development. (New York:
Basil Blackwell, 1999).
Krugman,
P. Pop
internationalism. (Cambridge,
Massachusetts: The MIT Press, 1997).
Krugman,
P. Rethinking international trade.
(Cambridge, Mass.: MIT press, 1990).
Martinez,
M. Democracias de fachada.
(San Jose, Costa Rica: FLACSO,
2000).
Ragan,
J. Principles
of economics. (New York: Harcourt Brace Jovanovich, Publs., 1991).
Saca,
N. Politica de estabilization y deuda externa.
(San Salvador, El Salvador: UCA,
1991).
Sethuraman,
V. The
urban informal sector in developing countries.
(Geneva: International
Labour Office, 1991).
Torres-Rivas,
Las democracias posibles, Op.
Cit.
Vuskovic,
P. Pequeños países periféricos en America Latina.
(Managua, Nicaragua: CRIES,
2001)
Walther Ted. The world economy.
(New York: John Wiley &
Sons, Inc. 2002).
-------------------------0-------------------------