Proceedings of Annual Tokyo Business Research Conference
15 - 16 December 2014, Waseda University, Tokyo, japan, ISBN: 978-1-922069-67-2
Government Intervention in the Economy and Economic
Development: Evidence from Three Latin American and Three Eastern
European Nations, 2000 To 2012
Rutilio Martinez
Government intervention in the economy has been steadily increasing since 2000 in Venezuela. In Argentina
and Ecuador this intervention has also been increasing since, 2002 and 2007, respectively. The motive of this
increase has been to promote economic development. The same objective has led Bulgaria, Poland and
Romania to reduce, albeit erratically and slowly, since the early nineteen nineties the participation of their
government in their respective economies. Clearly, the political and economic ideology of three Latin American
countries is quite different than that of three Eastern European nations.
The table below has the values of income per head, rate of economic openness and inflation rate for each
one of these nations in 2000 and 2012. These figures will be briefly discussed to have a good idea of which
group of countries has obtained better results.
Income per
head 2000
Income per
head 2012
Growth, %
Openness*
2000
Openness 2012
Inflation rate
2000
Inflation rate
2012
Argentina
8,678
Ecuador
1,076
Venezuela
5,016
Bulgaria
1,700
Poland
4,900
Romania
1,800
11,614
5,638
12,734
5,500
9,900
6,500
33.83
423.98
153.82
223.53
102.04
261.11
0.115
0.308
0.175
0.558
0.335
0.381
0.176
0.318
0.203
0.697
0.464
0.453
-0.9
96.1
15.7
10.3
10.1
45.7
10
5.1
21.1
2.4
3.7
3.4
* Imports of goods and sercices/ GDP
Sources: ECLAC for the data of the Latin American nations Eurostat (2014) for the data of the
Eastern European nations.
According to the levels of income reported above, Argentina and Venezuela were ahead of the other
countries; while Ecuador was the most successful in terms of relative growth of income per head. The success
of Ecuador and Venezuela was result of the high price of oil, since these nations have economies that are
heavily oil-dependent. The success of Argentina was result of its large export-oriented agricultural sector, its
well established industrial sector and, to a certain degree, of the price of oil since Argentina has enough oil to
export (CIA, 2014). The Eastern European nations do not have, in either absolute or relative terms, the
amount of natural resources that the Latin nations have, or the industry that Argentina has had for decades.
Thus, in terms of income per head the Latin nations were, quite possibly, not as ahead of the Eastern
European nations as the numbers in the table above suggest.
In terms of economic openness, the Eastern European nations clearly outpaced the Latin nations. From the
perspective of economic well being of society, this is significant since a greater degree of openness usually
means more competition in domestic markets and greater access to more and better products.
The Eastern European nations were also ahead of the Latin nations in inflation rates. This is of much
relevance for high inflation rates hurt the working and poor classes more than the upper classes; thereby
suggesting that the poor in Argentina and Venezuela are worse-off than the poor in the Eastern European
nations.
Not reported in the table above, but of much importance for the economic well being of societies are the
levels of corruption. In this area, the three Eastern European nations, while afflicted by this problem, are not
nearly as corrupt as the three Latin nations (Transparency International, 2014).
Proceedings of Annual Tokyo Business Research Conference
15 - 16 December 2014, Waseda University, Tokyo, japan, ISBN: 978-1-922069-67-2
The figures discussed above present a limited view of the economic progress experienced by these six
nations. This limited view suggests, however, that the Eastern European nations are obtaining better results
than the Latin American nations; which also suggests that a large and growing involvement of government in
the economy may restrain rather than stimulate economic growth.
_____________________________________________________________________________________________
Rutilio Martinez, Monfort College of Business, University of Northern Colorado, rutilio.martinez@unco.edu