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 insights to the literature, the models do not explain the particular factors that amount to the diverse economic growth paths between Latin America and East Asia. Additionally, scholars such as [5]Leon Jose have emphasized the “statecraft” concept or the roles of state government in national development. In his article, Leon undertook a comparative study analysis to find out the relative economic growth rate difference between South Korea and Mexico from 1950 to the year 1999. In the course of this economic period, the economic GDP growth rate rose from 4.33 percent to 7 percent in South Korea while Mexico’s GDP growth fell to 4.8 percent from 6.31 percent. From this article, different state autonomy levels between Korea and Mexico contributed to this variance. In this context, state autonomy concept was defined loosely for the rate of state participation and influencing factor in shaping of state economic growth policies. For instance, the South Korean state government possessed high autonomy level since President Park Chung’s rule in 1961, which worked together with Korean economic conglomerates and nationalized banks. Due to this, the government of Korea maintained close relations to the business world sector and improved its economic policies and support towards export-led industrialization that contributed to the “Miracle of the Han River”. Contrastingly, the case was different for Mexico. [6]Mexican government authority was questioned after the Mexican Revolution in which the conflict between private sector and the Mexican state intensified during Luis Echeverria administration in the 1970’s. Instead of the Mexican government advocating for economic reforms, state leaders depended on new conglomerates in order to take privatization advantage, deregulation, and financial liberalization in attempts to midget their competition. National-scale reforms made it difficult for these private players to pursue their business interests, hence unable to institutionalize. In simple terms, the Korean high degree of state relative autonomy greatly contributed in directing efforts and investments into national long-term economic development goals. ORDER NOW

2.2. Short/ Long Term Development

Another economic growth difference between Latin America and East Asia is their varying emphasis on both short and long term economic plans. [7]The analysis of economic development strategies of East Asia and Brazil by Masiero indicates that the economic success of East Asian countries primarily originate from their long-term economic plans and strategies. Most of Latin American nations operated in total adherence to the Washington Consensus, a neo-liberal economic policy that entails macroeconomic stabilization, openness in trade relations, and expansion of the domestic market. Despite Latin America’s success in creating stable macroeconomic conditions through the Consensus applications, stabilization fatigue made the region suffer economically. For instance, initially there was a significant GDP surge in Brazil through the PND II Plans and Metas in the early 1970s.  However, external debt for Brazil approximated $50 billion with inflation rates soaring to 77 percent by the year 1979. This implies that there was not real economic growth materialization despite Brazil’s adherence to the established Consensus policies. The Consensus emphasized short-term economic development by only market reforms, and this is why Masiero postulates that other significant factors for long-term development reforms such as education and institutional building were overly ignored and assumed in Latin America.

2.3. Non-Market Variables

Non-market variables as evidenced in Korea and Japan are also important in the promotion of economic development and maintenance of long-term economic growth. Economic growth policies for Korea and Japan are nicknamed “strategic pragmatism” for they are market oriented and also rational. Ideologically, strategic pragmatism policy is no different from the Washington Consensus which advocates for market changes. However, the East Asian region employs its focus on human resources in order to ascertain that development would be maintained even when initial macroeconomic transformations within the market are executed. [8]On the same note, Stiglitz argues that the success of East Asia was grounded on an integration of factors, specifically the interaction of high rates of savings with high rates of human capital accumulation. Thus, the continued lack of sufficient valuation of human resources derailed the long-term applications of initial economic success levels in Latin America nations such as Brazil.

2.4. Cooperation between Latin America and East Asia

[9]Although most economic researchers apprehend that comparative analyses of Latin America and East Asia offer a wide contrast and gap in economic development, Nishijirima and Akio postulates that there is room for cooperation between the two regions. The scholars postulate that trade and investment patterns drastically transformed in the 1990s. [10]The nations of East Asia and Latin America significantly raised their trade shares within their own regions as a percentage of their foreign trade. For instance, in exclusion of Mexico, Latin American nations improved trade with their regional partners to 31.4 percent from 13.7 percent between 1990 and 1998. Similarly, the intraregional trade in East Asia increased to 43.4 percent from 35.7 percent within the same time span. These improvements in intraregional trade were brought by the free trade agreements (FTAs) and multilateral agreements which contributed to strong regional integration.

A close look and analysis of Mexico, Chile, and Japan, the researchers postulate there are new approaches for bi-regionalism between Latin America and East Asia. For instance, the Mexico-Japan Economic Committee of Keidanren has proposed for the establishment of FTA between the two countries, and this contributed to the 2012 Japan-Mexico Economic Partnership Agreement. [11]Interregional integration prospects look mutually substantial since Latin America region is an excellent source of market commodities for East Asian; and that East Asia is Latin America’s most promising and newest trade partner. Other than the Asia-Pacific Economic Cooperation (APEC) forum created in 1989, the Forum for East Asia- Latin America Cooperation (FEALAC) was born in the year 1999 to enhance further harmony and dialogue among the 36 member nations. Such organizations and forums have established a common goal to mutually position and reinforce the interregional initiatives, Pacific networks, and bilateral links.

3.0. Price Distortions, Growth, and Divergence in Latin America

Latin American economic policies epitomized the inward-looking development model since 1930s to 1980s. There were massive structural variances in growth dynamics for Latin America than East Asian regions. These economic distortions in form of price, growth and divergence had profound and pervasive impacts to development patterns in the region.

3.1. Price Distortions

[12]On the forex, Latin American nations undertook devaluation strategies that were aggressive, having widespread adoption of multiple-exchange-rate systems in an attempt to discourage imports through price distortions. Lip service was the only approach given towards parity restoration. In this time, only passive nations in the region strived to maintain their pegs. Despite the disastrous memory of the late 19th century inflations in the region under paper policies, devaluations were added by decision makers to their toolkit. Economies slack in Latin American countries increased inflationary pressure of significant devaluations in the region.

Exchange rate control mechanisms were required in order to sustain external equilibrium rates for the genuine floating currencies were very rare. [13]The impact of such competitive devaluations in Latin America was typically a response policy in East Asia and other economically established countries such as the US. There was limited fiscal experimentation in the region, a consequence of restricted tax bases. However, other aggressive public institutions initiatives completed aggregate demand management. A good example is Argentina, a country that struggled in closing the fiscal gap created, while Brazil adopted a countercyclical policy in a more enthusiastic manner. All the Latin American nations were committed in tax bases diversification. Here, reduced foreign borrowing was evidenced after 1930 when debt burdens for the region increased as interest rates shoot high during deflation. Foreign direct investment furthered to import substitution activities. These price distortion crises in FDI scooped the limited domestic resources in the region away from the ensured defaults and debt servicing activities. ORDER NOW

3.2. Growth

The late 1930s decision makers used various tools in making economic growth policies across Latin America. [14]Most policy makers fundamentally responded to external macroeconomic shocks- worsened balance of payments disequilibrium, long term trade barriers, curtailed lending, which implied large scale structural adjustments were derailed by interim costs of adjustment. In both home demand, import-substituting industrialization, and export growth attracted most attention from the state policy makers. This rebound during late 1930s became more rampant in Latin America that East Asia, something which encouraged heightened use of similar economic tools. The new autarky enforced via WWII contributed nothing towards dislodging the new economic growth policy, rather it appeared augmenting to its reputation. There were high growth rates allover, and the economies increased their aggregate demand and supply shocks with more resilience, and this encouraged satisfaction smug among decision makers. The typology of inward-looking transformed, and reflected less on size but more on geography, and this was pursued in Argentina, Chile, and Brazil.

Although there were strengthened interventions across the board when it came to trade policies and terms of exchange controls, devaluation policy across Latin America economies became weakened. [15]This is because the 1950s overvaluations kick started during the international monetary system reconstruction by ironically guaranteeing further crises in balance of payments and increased chronic resort to the devaluation instruments. Thus, the market growth structure in the 1950 at Latin American economies greatly differed in comparison to that of 1929. Global economy retreat by the regional members became rapid and persisted; this made Latin America’s share in market trade to start decreasing.

3.3. Divergence in Latin America

A great divergence of Latin American economies structures markedly differed between 1929 and 1950. The postwar strategy for Latin America was ISI and aimed at breaking the center-periphery laid to enhance economic unorthodoxy in line with autarkic responses such as protectionism, delinking, capital and trade controls. Columbia, Uruguay, and Mexico adopted this strategy hence success in heightened resource reallocation in the manufacturing industry as stipulated in the strategy. However, the prices to be incurred on the strategy brought massive economic distortions and inefficiency levels which had a precluded effect on the export products manufactured.

[16]Unorthodox financial initiatives such as multiple exchange rate systems and exchange controls necessitated this divergence war and depression of economy for international monetary pressures discouraged this prominence. Now, tariff impositions turned as the most critical monetary policy equipment to Latin American economies. By the end of the 1950s, high tariffs imposition was the general norm across the board. Flat tariff rates were used at the expense of pursuing the market oriented ISI approach scheme. A considerable heterogeneity across the Latin American region was felt as larger nations tried to graft export advancement measures and other reforms. Smaller countries were disadvantaged by this initiative, hence establishing economic downturns in Latin America as compared to other regions such as East Asia.

4.0. Confronting Statistical Realities of the East Asian Growth Experience

Factor accumulation plays fundamental roles in the explanation of extraordinary postwar economic growth at Korea, Hong Kong, Taiwan, and Singapore. Education levels, participation rates, and investment rates have increased extensively in all East Asian economies. Additionally, large inter-sectoral labor reallocations, manufacturing employment, and non-agricultural growths in the four economies have been witnessed. [17]While output per capita growth in these East Asian economies averages 6-7 percent per year per every effective worker, the output per capita income growth has been 3-4 percent per annum on every worker in the non-agricultural industry. The doubling, tripling, and quadrupling of these economies investment to the ration of GDP makes economic experts arrive to a total factor productivity in growth rates; both in manufacturing and non-agricultural economic sectors. All these successes have been enjoyed by Latin American economies over a long period of time since the end of WWII.

4.1. Labor input

One of the most crucial factors of trade and investment accumulation in East Asia since WW2 has been labor input. Birth rates rapidly declined after the WWII, and this reduced dependency levels. At the same time, female labor force participation in international trade and development increased, and this raised the aggregate participation input in the region towards advancing economic level and growth rate. [18]By statistically measuring every workers output, participation rates per worker averagely  turned to 1 percent per year from Hong Kong per capita growth, 1.3 percent per year from Taiwan, and 1.2 percent per annum from Korea.

Another important labor input factor was intersectional transfers. In this perspective, eliminating agricultural impact from the trade and investment factor accumulation analysis lowers each workers average growth rate in South Korea and Taiwan by 0.7 and 0.6 percent per year respectively. Despite the fact that manufacturing output growth has had unusual growth in both economies, growth of manufacturing employment also has the same effect. The proper analysis of labor transfer into the manufacturing sector indicates that pertaining labor productivity growth, manufacturing sector in Taiwan and Singapore indeed contributed less in the aggregate economy.

4.2. Capital input

Also, capital input has had a rapid growth in the NICs. Though capital input investment to the ration of GDP has constantly been maintained in Hong Kong, it has risen substantially in the other East Asian economies over time. [19]In Singapore, price investment to the ration of GDP has had a constant price, with 10 percent in 1960s, 39 percent at 1980, and having reached 47 percent by the year 1984. However, the price investment to GDP ratio had drastically declined before starting to increase in the late 1980s. For Korea, investment rates that initially maintained at 5 percent at the early of 1950s increased to 30% by the end of 1970s, and closely approached 40 percent by the year 1991. Lastly, the case for Taiwan was different. The constant price investment to GDP ratio that amounted to 10% at the beginning of 1950s advanced to as high as 27% before 1975, in which the country experienced market fluctuation and settled at 22 percent.

4.3. Human capital accumulation

Another factor that experienced rapid growth in the East Asian NICs was human capital accumulation. [20]After the WWII, a substantial number of working population was promoted in all East Asian economies and the requirement was just secondary education or more. As we approached 1990/91, between 18 to 20% of all working people in all NICs had acquired post-secondary education. The chances for getting better jobs increased for these populations in all the economies. By weighing labor input by sex, age, and educational attributes- advancing educational levels attainment by the workers resulted to about 1% growth addition in labor input per annum for all these East Asian nations.  This indicates that the increased participation rates by people in labor transfers, advanced education levels, and expanded investment rates served a productive way to the current century economic growth experienced and enjoyed by East Asian countries.

5.0. The Political Economy of Industrialization

South Korea and Taiwan are the two East Asian modern industrial performing economies and in Latin America, Argentina, Brazil, and Mexico are the newly industrializing nations. The excellent economic performance in East Asia is not a result of trade orientation differences or high degrees of government intervention, but rather based on its policy intervention effectiveness. Historically, determined political class structure is much advanced in East Asia when compared to Latin America. [21]Industrial policies are effectively designed and enacted into law at East Asia by the state government, and this contributes to political economy stability which benefits the region economically.  Effective social change processes are adopted in managing state relations with the industrial sector, a crucial move that builds East Asian economic development by removing politically constrained barriers that hinder industrial success. On the other region, Latin American political economies use incompatible policies that emphasize on power distribution and no industrial integration in policy making processes. The Latin American societies have no voice in political leadership; hence the systems used by the government in economy building such as education and labor acquisition do not favor the population. As a result, the region lags far behind Asia in terms of industrial policing and political economy stability.

5.1. Economic growth and income inequality in East Asia and Latin America

[22]In the beginning of 1960, economic growth in Argentina exceeded that of Taiwan and South Korea by more than three times. The 1960 Brazil economy was poorest among the four Latin American nations, but richer than Taiwan which was wealthiest in East Asia. However, by 1985 the case was different. Economic growth rate and GDP per capita rate for Taiwan and Korea surpassed that of Argentina. The East Asian countries registered faster growth rate in GDP per capita between 1960 and 2010 that all Latin American countries. Income distribution, demographic factors, and income inequality rates explain this U-turn of events between the two regions. Income inequality persisted from 1960 to 2010 in all the main Latin American economies when compared to any of the two East Asian countries. Demographic dividends across East Asian economies accelerated the region’s economic growth unlike lack of demographic dividends evidenced in Latin American nations. Difference witnessed in age gaps and structures accounted to approximately less than 10 percent of growth gap between Latin America and East Asia from 1965 to 1990. As a result, economic resurgence, unemployment rates, increased product prices, and reduction in wage premium compensated to skilled workers in Latin America was thwarted.

5.2. Economic policies and development outcomes

Economic policies and their applicability across East Asian and Latin American economies contradicted development of economy achievements differently in both regions. The two regions broadly fall into market-friendly and industrial policy initiatives and approaches. [23]Market friendly approaches depicts that the smaller the roles of state government in economic growth and more open the economy looks to the international trade patterns and capital flows, then the faster the rate of economic development and growth. In relation to industrial policy approaches, East Asia reaped steady economic success that Latin America counterparts for their industrial policies overrode all market forces, and that these initiatives got facilitated by class pressure state autonomy. In Taiwan and Korea, the state government voluntarily involved itself in building economic development by not only redistributing skills, land, and employment opportunities but also prohibiting international flows of labor, capital, and goods. This land, labor, and job redistribution accelerated economic development in Taiwan and South Korea. However, the initiative downplays the importance of these factors relative in the promotion of manufactured goods exports.

5.3. Industrial policy

Industrial policy in the two regions involves import substitution and export promotion. [24]In late 1950s, foreign exchange rate was becoming scarcer in East Asia and Latin America due to overvaluation of currency, higher tariffs by Europeans on Latin American exports, and increased reluctance of the US government officials to continue providing Taiwan and Korea huge foreign aids. Around 1960, there was diversification of industrialization strategies. The Argentine, Chilean, Brazilian, and Thailand governments attempted to lower their long-term foreign exchange demand, while the Taiwan and Korean governments attempted to raise their short-term domestic market supply.  Heavy import-substitution industrializations were advocated for by the two regions in order to eliminate massive economic chaos that was capped by political violence. In this perspective, contrast between Latin America and East Asian development models does not deserve to be exaggerated. The governments in Brazil and Argentina started using tax rebates, subsidies, and free trade zones; this promoted exports for their manufactured commodities. Similarly, the South Korea and Taiwan governments advocated for steel and vehicles production in the domestic market.

6.0. Post War Economic Policy Patterns

6.1. Post- World War I and II Economic Policy Patters in Latin America

After the WWI, Latin American nations pursued export-led growth. However, due to unfavorable external environment, export growth rate became modest. Monetary and fiscal policies turned more orthodox creating a problem in industry promotion.  By the time the Great Depression occurred, no Latin American state had succeeded in escaping from primary products dependence. Thus, the region was vulnerable to the subsequent collapse of commodity prices. [25]The economic difficulties encountered by all Latin American nations on their primary products after 1913 were unbearable even prior to collapse in prices in the late 1920s. Additionally, exporters in the Latin American region encountered sharp fall in prices in the 1920-21 depression. The volume of prices recovered following the next years, but through 1913 to 1929, just few nations experienced a rise in their net barter trade terms.

The major economic issue was the slowed rate of world trade growth in the Latin America. After 1913, annual dollar value growth of world exports increased by 3 percent over the following 16 years. The modest nature of this 3 percent rise is justified by the fact that majority of it encompassed price increases. Moreover, the annual rise in world trade volumes was less than 1 percent given the total increase of 3 percent over sixteen years. Economically, this stimulus was insufficient under normal conditions for the Latin American countries since they all followed an export-led growth. As a result, a modest progress towards industrialization was manifest. Recent economic disparities and stagnation in Latin American countries especially the currency fluctuations and crises in Brazil 1998-99 and in Mexico 1994-95 have promoted economic researchers to debate about the right fiscal and monetary policies that the region has ignored.

6.1.1. Fiscal and Financial Systems

The export-led model, with its exports growth emphasis was subject to strong economic cycles whose reflections related to the export industry itself. [26]The financial and fiscal policies, distanced from running in a countercyclical fashion, strengthened the cycles that originated from the export sector and led to the exchange rates, nominal incomes, and prices instability in Latin America.

Typically, the fiscal system in Latin America was pro-cyclical.  The value of exports seemed to move in line with imports value for this high government revenue proportion was obtained from government revenue, custom duties, and government expenditure tended to run in line with external trade. Transformations in exports value had a huge correlation with money supply changes. Hopes to terminate economic hostilities in Latin American would help in terminating the outstanding economic challenges in the region. But this was underpinned by the sharp economic depression in 1920-21.

Extreme nature of export instability in the period after 1913 made Latin American governments favorable on fiscal and financial reforms which could assist in the elimination of export-led model excesses. [27]Currency instability was also another huge economic challenge in Latin American countries, and returning to the use of fixed exchange rates turned as the new orthodoxy symbol. The increased emphasis provided to the gold standard by League of Nations, Latin American countries arose under pressure to join the new system and adhere to the new rules. ORDER NOW

6.1.2. Export Sector

The slow rate of aggregate world trade growth did not necessarily mean that demand for all commodities was turning slow. However, the general effect on aggregate demand for products was becoming low. The 22 world commodities that dominated Latin American countries exports at that time recorded exports decreased apart from oil, rubber, and cocoa which recorded yearly levels of export increase above 5 percent by 1928 since 1913. Fifteen important products recorded below 3 percent rates of increase per annum over the same period. As a fact, six important Latin American commodities wool, silver, barley, gold, cotton, and rye world production volumes in terms of exports did not rise by even 1 percent per year during this period.

Challenged by these difficult world trading conditions, all Latin American countries had to embrace various trade strategies to boost exports growth rate. [28]One option was relying on commodity lottery. Whether the region’s leading export commodity was among the products enjoying heightened world demand growth, exports value would at the same time increase steadily given that the market share was maintained. Yet Latin America endured a huge market share loss in cacao and rubber, two of the main commodities that sold high in the market. Wild-rubber exports from Bolivia and Brazil collapsed in the realm of rubber plantation exports from the Far East; Venezuela, Brazil, Dominican Republic, Ecuador, and Haiti lost market share for their commodities to most European colonies in Africa, where cacao exports were greatly promoted. Latin America region was only favored in the case of oil commodity exports. Option two was increasing market share for commodities in which world demand was becoming modest. However, this market share strategy did not work in all cases. Some Latin American countries evens failed to raise export earnings in reference to world trade growth in the 16 years before 1929. Due to unstable nature of product prices, the risk of competition from synthetic products from East Asia heightened.

6.1.3. Industrialization

The First World War interrupted with the normal modern manufacturing environment that had arisen before 1914 in Latin America. [29]By the time WWI begun, modern manufacturing had started in Latin American nations including Uruguay, Argentina, Brazil, Chile, Peru, and Mexico, and such progresses were being evidenced in Venezuela and Colombia. After 1914, exports declined drastically in this region due to shipping and other challenges. Imports tariffs were replaced by quotas, while prices for domestically manufactured products were free to rise until when market stabilizes.

However, there were import prohibitions that cut across all commodities and companies constantly lacked access to capital goods imports thus unable to expand their production capacity. As a result, increased world market demand had to be serviced using more intensive capacities, which always turned impossible. [30]Relative import products prices fall sharply due to tariff rates erosion. Also, the protection given by regional tariffs was undermined by domestic inflation in Latin America by 1919, and collected duties amounted to 7.5 percent of imports in Argentina, 11.2 percent in Uruguay, and 9.6 percent in Peru. Due to this, it is difficult for domestic companies to compete with cheap imports. This marked the beginning of economic disparities and lack of stability in Latin America while the case was opposite for East Asia.

6.2. Post- World War I and II Economic Policy Patters in Asia

The WW2 positively impacted on East Asian economy. [31]Demographic factors, income distribution, and equity aspects differentiate economic development divergence between the two regions after WWII ended. Economic transformation is among the most remarkable development that occurred in East Asian countries after the WW2. Rapid economic growth and increased industrialization was observed in the region. These East Asian countries included South Korea, Japan, Hong Kong, Taiwan, China and all nations of the Association of Southeast Asian Nations (ASEAN). In ASEAN, conventional wisdom on the possibility of, and preconditions for external economic development of the main industrialized economies in North America and Western Europe was substantially challenged.

6.2.1. Regional Political Economy

After the WW2, the most imperative consequence evidenced from industrialization process timing was the development of a strong regional production hierarchy. Japan was the first East Asian country to go, and then followed initially by Taiwan, Singapore, South Korea, and Hong Kong. [32]The most significant interpretation of this evolved industrialization and production hierarchy was ‘flying geese theory’, a notion supported by a good number of Japanese public officials and economists. This implies that Japan was the ‘lead goose’ and hence the first country to industrialize, giving a significant stimuli for East Asian regional economic development in which the model would help in pulling along all other economies to its wake, making its possible to replicate Japanese success. Today, East Asian countries have embraced modern technologies in their manufacturing processes, and hence maintaining the continued production success and economic growth when compared to Latin American countries who still continue to struggle economically.

6.2.2. Trade Investment Links

Proper integration of East Asian economic policies into the modern global political world economies has contributed to the recent constant growth of East Asia economy. The economic strategic innovations have been vital to the increased economic growth in East Asia. The East Asian nations emerged as the most powerful economies from the WWII aftermath. As a result, the region was able to establish strong trade investment links with other strongly positioned economies such as the U.S. The type of industry policies and trade protectionism done by Japan and other regional members were reminiscent. [33]The Asian countries were enabled to exploit the late development advantages, copying excellent economic growth strategies from Japan, and emulating the technologies that had proved successful to their colonizer, Japan. Also, state capacities for Asian countries that included Japan, Singapore, Taiwan, and Korea relatively become competent and honest of bureaucracies.  Due to this, the state economies enjoyed the power to generate and implement new economic policies that furthered national interest and accelerated the region’s economic development.

7.0. Conclusion

In summary, the literature has provided two major problems on the economic progress for Latin America and East Asia since the 19th century until the 21st century. First and foremost, the regional generalizations from the evidenced comparative case studies analyzed of only a few nations are challenging. Laurence clearly finds that cross-regional comparisons possess massive limitations and are subjected to misuse for specific concern and diligence is called for in defining the regional boundaries in question as well as the issues requiring resolution. This finding implies that economic researchers can select the nations that suit their arguments properly and undertake empirical studies to pinpoint through either using critical or less critical case studies and designs in the two regions. In this way, it is easy for researchers to present misleading image that inaccurately reflect the true picture for the region of interest. For instance, Rhys generalizes that Latin American economies struggled with economic growth and development due to lack of supportive state autonomy. Nevertheless, his generalization did not apply or look applicable to all Latin American countries. Though state governance of countries like Mexico had faced difficulties on controlling its divided political businesses and groups, the Chilean state government enforced the proposed policy makers’ reforms through the adoption of free-market technocrats under Augusto Pinochet dictatorship.

Second, different economic researchers overplay the contrast that underlie between East Asia and Latin America. The fact that East Asian economies relatively succeeded in economic growth and development, the comparisons have been all the time exaggerated and one sided. As a consequence, scholars such as Masiero made it a customary habit by arguing that East Asian countries were able of generating and enforcing efficient long term economic strategies. Contrastingly, Latin America was viewed as rickety and weakened by the set anti-static reforms. The development initiatives embraced by Argentina in 1990s were transformative and as long-run as those taken by East Asian countries. Nonetheless, such instances are always ignored since they are not compatible with the typical East Asian economic dominance and success over Latin America. To individual nations, a reasonable integration can be established between economic growth patterns and national economic development success. Firm internal validity exists and helps in explaining the casual relationship that exists between economic achievement variables. However, assuming such findings is dangerous for this can be applied externally in the entire economic region. Varying contextual circumstances are evidenced in the individual countries of East Asia and Latin America, and attempting to generalize them into two contrasting development models ignores other important variables such as cultural developments, regional political structures, and regime types. Therefore, economic stability needs to be encouraged worldwide in order to boost growth and development agendas across the board.

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