Latin America’s GDP Per Capita Distance
From Other World Economies
(Baseline, Latin America and the Carribean = 0)
are correct. It all depends on the unit
of analysis. Latin American states
exhibit both extraordinary capacity
and paralyzing handicaps, simulta-
neously. In a typical administration,
Richest Russia China LAC
one ministry can be powerful, com-
petent and resistant to special inter-
est group pressures, while another
is a nest of corruption and patron-
age. Consequently, what one part of
the cabinet achieves, another easily spoils. This is the typical tension
that characterizes relations between
the authorities in charge of finance
and those in charge of infrastructure.
1950 1973 1990 2003 2030
The former design good spending
and fiscal programs, while the latter
squander this effort by providing lax
control over spending.
Frequently, the unevenness is evident within the same cabinet portfolio. This is the case of education. Latin If you are a middle-class student, oligopolistic agro-exporting firms.
American countries have achieved you will complete secondary school, Both models were more firm-friendly
impressive records in universal pri- maybe even enroll at a university, but than market-friendly.
maryeducation—atestamenttostate your skill levels will hardly match Countries began to fix this com-capacity. However, they falter at the those of young people with similar petition-neglecting environment,
secondary and tertiary levels—a tes- years of schooling in Asia and Eu- first in Chile in the 1970s, then else-tament to state incapacity. In second- rope. A recent report estimates that where in the late 1980s, with some
ary schools, coverage is spotty (poor 15-year-old Latin Americans are on av- progress, including the eradication
and remote areas lack access), com- erage three years of schooling behind of stagflation. Ho wever, in many
pletion rates are low for low-income their peers in rich countries, a larger other areas of the economy, prog-students, and academic attainments gap than observed in similarly situ- ress faltered. Latin America emerged
are mediocre. Public universities have ated developing countries. To rem- from the market-oriented era of the
excellent faculty and majors (another edy this gap, many Latin American 1990s, not with pervasive markets,
state achievement), but research is un- college graduates study abroad—and but with fragmented markets.
supported, infrastructure is decaying stay there. They know that they will Fragmented markets mean that
and access by low-income students is not find suitable jobs at home. That market forces exhibit broad ranges
mostly a goal (a state failure). is because the region, with such an within the same country, from very
State unevenness in education uncompetitive human-capital pool, competitive in some sectors to vir-explains the region’s uneven hu- does not generate enough high-skill tually nonexistent in others. For ex-man capital development. Consider jobs. Brain drain, too, is an outgrowth ample, middle-class urban residents
the impact across income groups. If of uneven state development. enjoy access to strong and competitive
you are a low-income Latin Ameri- A similar unevenness characterizes retail markets in most countries. But
can, you will be literate and able to market institutions. Latin America credit and financial markets are still
consume basic information thanks has never been market-friendly ter- closed to all but the wealthy. Mean-to state-provided universal primary ritory. Between the 1930s and 1980s, while, the poorest citizens do not en-school education. But because the the preferred model of development joy markets but “bazaar economies,”
state delivers i nadequate second- among the larger nations was import- in which economic transactions oc-ary education, you will likely quit substitution industrialization, and cur withoutsecurepropertyrights or
or never enter seconda r y school, among the smaller Central American substantial investments. And in rural
joining the labor force with rudi- and Caribbean nations, agro-export- and remote regions, there simply are
mentary skills. In short, you’ll be ed- ing. In the former, the state offered no markets: states are the only source
ucated enough to understand how subsidies and protection to firms. In of reliable employment, if at all.
unfit you are for modernity. the latter, the state often yielded to One could, of course, add to this
Source: Angus Maddison, The World Economy:
A Millennial Perspective/Historical Statistics (OECD, 2007).