Please enable JavaScript.

Coggle requires JavaScript to display documents.

LATIN AMERICA - Coggle Diagram

- - - - 1. Unit of Analysis: The primary unit of analysis is not the nation-state but the global capitalist system. A nation's development can only be understood through its historical insertion into this system.
      - 2. Centre-Periphery Dynamic: The global system is characterized by an unequal relationship between a dominant "centre" (or "metropolis") of developed nations and a dependent "periphery" of underdeveloped nations. The development and enrichment of the centre are intrinsically linked to the underdevelopment of the periphery.
      - 3. Critique of Comparative Advantage: The international division of labor did not lead to parallel development. Instead, peripheral economies were reinforced in their role as primary good exporters, a structure that benefits the center.
      - 4. Internal Structures of Dependency: External dependency shapes internal class structures, political alliances, and institutional arrangements. Dominant local groups often have interests aligned with preserving the dependency relationship, as it is the source of their wealth and power.
      - 5. Rejection of Linear Stages of Growth: Dependency theorists argue it is inconceivable for peripheral nations to replicate the evolutionary path of developed nations, as their development occurred under entirely different global conditions.
- - - - ◦ Holistic Development: There is now greater emphasis on the critical importance of institutions, the quality of governance, and equity.
      - ◦ Countercyclical Policy: The IMF, once criticized for imposing procyclical fiscal tightening during downturns, has become a strong advocate for countercyclical policies in countries with sufficient fiscal space.
      - ◦ Capital Controls: After the Asian financial crisis of 1997, the IMF retreated from its push for full capital account liberalization and now recognizes the occasional utility of capital controls and managed exchange rates.
  - - - ◦ A minimum of 3% annual per capita income growth in developing countries.
      - ◦ A significant and rapid reduction in the energy and raw-material content of every unit of production.
      - ◦ Policy reform to eliminate environmentally destructive subsidies (e.g., in agriculture and energy).
      - ◦ Resolution of the debt crisis, which perpetuates a net transfer of wealth from developing to developed nations. Since 1982, this reverse flow has amounted to over $43 billion annually.
- - - - Harrod-Domar Model: This early model posited that growth is a function of the savings rate and the capital-output ratio. It emphasized capital accumulation as the engine of growth but was characterized by an inherent instability, often referred to as "knife-edge" equilibrium. Any deviation from the "warranted" rate of growth would lead to either explosive inflation or deepening depression, suggesting that stable, long-run growth was unlikely without external management.
      - Neoclassical Growth Model (Solow-Swan): This model introduced the concept of variable proportions between capital and labor and a production function with diminishing returns to capital. A key conclusion of the neoclassical model is that long-run growth is stable. The economy automatically adjusts and converges to a steady-state growth path, where the growth rate is determined by exogenous factors like population growth and technological progress. However, the adjustment process can be extremely slow, potentially taking decades or even a century to achieve 90% completion, meaning the Harrod-Domar assumption of fixed proportions can remain a practical reality for policy-relevant time horizons. **
    - - The Role of Technology and Human Capital: Models such as those proposed by Paul Romer incorporate factors like research and development (R&D), knowledge spill-overs, and human capital accumulation as the primary engines of growth. In this view, technology is not an external force but a product of intentional investment decisions by firms and individuals.
      - The Technical Progress Function: An alternative approach, articulated by Nicholas Kaldor, links the growth of productivity directly to the rate of capital accumulation. The "technical progress function" posits that investment is the primary vehicle for introducing new techniques and innovations. This framework suggests that a higher rate of investment leads to a higher rate of productivity growth, creating a virtuous cycle. It successfully explains empirically observed long-term constancies in the capital/output ratio and the share of profits in income as outcomes of endogenous economic forces.
      - Trade as a Growth Engine: Endogenous growth models show that international trade promotes growth through two main channels: an aggregate scale effect (larger markets increase profitability and R&D) and technology transfer. More fundamentally, trade in factors of production (e.g., capital goods) can raise growth rates through the principle of comparative advantage alone. This process can effectively equalize technology between trading partners even without direct knowledge transfer, as countries specialize and import factors embodying superior technology.
  - - - Market Penetration: An effort to increase sales without departing from the original product-market strategy. The firm seeks to improve business performance by gaining a larger market share.
      - Market Development: An effort to adapt the company's existing products to new missions or markets.
      - Product Development: A strategy that retains the present market mission but pursues the development of products with new and different characteristics to improve performance.
      - Diversification: The final alternative, which calls for a simultaneous departure from the current product line and market structure.
- - - - A ratio of 1.00 suggests the provincial sector's prominence matches the national average. A ratio greater than 1.00 suggests greater dependence on that sector compared to the national average. A ratio less than 1.00 suggests less dependence on that sector.
      - Composite Index: The individual sector indices are summed to create a composite Economic Diversification Index (EDI).