Economic heterogeneity and Latin America

A loyal MR reader tries to stop me from reaching #50:

Economic Development for the heterogeneous Latin America.  Or how the social, economic and cultural heterogeneity between and within Latin American countries affect their development prospects and/or strategies.  You have mentioned that a stronger (not bigger) state seems necessary; but does that mean different things for Bolivia, Guatemala, Ecuador and Peru, versus Colombia, El Salvador, Costa Rica, Paraguay and Argentina?

In response (non-response?) I’ll quote Jeff Sachs (this link is also an excellent piece on him):

I’m optimistic about Brazil.  And if you look at a map, being
optimistic about Brazil takes you a long way to being optimistic about
the whole of Latin America.  I don’t lose huge sleep over Latin America
– it’s at peace, it’s not riven by terrorism, it’s democratic and it
has made huge strides in human development.  What have been hugely
unequal and divided societies are becoming slowly more equal, and even
very deep ethnic and racial divisions are being ameliorated through
democratic politics.

I’ll add that Latin American states are usually a disaster when it comes to collecting taxes.  This might sound good from a libertarian point of view, but those governments instead resort to distortionary monopolies and corruption to raise revenue or capture political rents.  The solution is not higher taxes per se (governance improvements are also needed), but rather a series of sideways squiggles into the "greater accountability, more tax-based" modes of government.  That doesn’t come easy, and that is also why the usual recipe of privatization so frequently disappoints or backfires.  These territories have yet to build well-functioning nation-states.

Western-style neoclassical economics was designed for settings where national institutions are already in place.  In most of the world, they are not.  The question is not "market vs. government," but how to strengthen the norms and institutions that will build both markets and governments at the same time and in the right directions.  Along that dimension, Latin America is making real strides ahead, and that includes all of the countries listed in the initial query, with the possible exception of Bolivia.

#38 in a series of 50.


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