Latin American Economy: Development and Underdevelopment

Introduction

In his seminal work, "Latin American Economy: Development and Underdevelopment," Celso Furtado provides a comprehensive analysis of the economic history of Latin America, from the colonial period to the mid-20th century. Furtado argues that Latin America's underdevelopment is not a natural or inevitable condition, but rather the result of specific historical processes and structural factors.

The Colonial Period

Furtado begins by examining the economic structure of Latin America during the colonial period. He argues that the region's economy was based on the extraction of natural resources, such as gold, silver, and sugar, for export to Europe. This extractive economy generated enormous wealth for the European colonizers, but it did little to develop the local economies of Latin America.

The Post-Independence Period

After gaining independence from Spain and Portugal in the early 19th century, Latin American countries faced the challenge of building their own economies. However, Furtado argues that these countries were hampered by a number of factors, including:

• A lack of capital: Latin American countries had little access to capital, which made it difficult to invest in infrastructure and other productive activities.
• A dependence on foreign trade: Latin American countries were heavily dependent on exports of primary products, such as coffee, bananas, and meat, to earn foreign exchange. This made them vulnerable to fluctuations in world commodity prices.
• A high level of inequality: Latin American countries were characterized by a high level of inequality, with a small elite owning most of the wealth and land. This inequality made it difficult to generate domestic demand for manufactured goods.

The Structuralist Approach

Furtado's analysis of Latin American underdevelopment is based on the structuralist approach to economics. Structuralism argues that the economic problems of developing countries are not simply the result of individual market failures, but rather of deep-seated structural problems in the economy. These structural problems include:

• A dual economy: Latin American economies are often characterized by a dual economy, with a modern, export-oriented sector coexisting with a traditional, subsistence-oriented sector. This dualism makes it difficult to achieve balanced economic growth.
• A lack of technological development: Latin American countries have a low level of technological development, which makes them dependent on imported technology. This dependence makes it difficult to develop competitive industries.
• A high level of external debt: Latin American countries have a high level of external debt, which makes them vulnerable to financial crises.

The Need for Structural Change

Furtado argues that Latin American countries need to undergo structural change in order to overcome their underdevelopment. Structural change involves transforming the economic structure of a country in order to make it more productive and less dependent on foreign trade. This can be done by:

• Investing in infrastructure: Latin American countries need to invest in infrastructure, such as roads, bridges, and ports, in order to improve their transportation and communication networks.
• Promoting industrialization: Latin American countries need to promote industrialization in order to diversify their economies and reduce their dependence on primary product exports.
• Improving education and health care: Latin American countries need to improve their education and health care systems in order to improve the quality of their labor force and reduce poverty.

Conclusion

Furtado concludes that Latin American underdevelopment is not a natural or inevitable condition, but rather the result of specific historical processes and structural factors. He argues that Latin American countries need to undergo structural change in order to overcome their underdevelopment and achieve sustainable economic growth.

Why You Should Read This Book

"Latin American Economy: Development and Underdevelopment" is a must-read for anyone interested in the economic history of Latin America. Furtado's analysis is insightful and thought-provoking, and his recommendations for structural change are still relevant today. This book is essential reading for anyone who wants to understand the challenges facing Latin America and the potential for its future development.