Macroeconomics for development: from "financierism" to "productivism"
Summary of article published in CEPAL Review N° 102, December 2010
Author: Ricardo Ffrench-Davis
In contrast with the belief that the region has achieved an
efficient macroeconomic policy, it is argued that this was one
of the weaknesses that contributed to the disappointing
economic and social performance in recent decades.
Over the past 20 years, Latin American and Caribbean
countries have implemented far-reaching economic reforms,
including commercial and financial liberalization, privatizations
and the introduction of financial discipline, and these have
achieved stable prices (with inflation generally under control).
However, this has gone hand in hand with slow average
economic growth of GDP, and considerable instability in the
real economy (that is, in terms of production and
employment).
Although the microeconomy is often what is said to have
failed, the article explains that key macroeconomic variables,
such as the cyclical highs and lows of economic activity, global
demand, access to credit and the exchange rate have
discouraged capital formation, employment and actual
productivity. Financial capital flows have also played a central
role.
The fight against poverty, the level of social equity and
economic growth are thus closely related to the quality of the
macroeconomic environment. This is mainly the result of the
effects of and interrelations between the fiscal, monetary and
foreign exchange policies of the domestic capital market and
the capital account.
Despite the serious recessionary and regressive effects of the
global crisis, it has nonetheless had the positive effect of
strengthening questions about the central role of
macroeconomic policymaking style, and the relevance of
assessing how current practices could be corrected. This is
essential for a development strategy that aims to achieve
growth with equity.
In the article, the author points out that we must move from a
strong “financierist” and short-term bias to an approach that
explicitly prioritizes productive development and the
repercussions this can have on equity. This requires an
integrated view incorporating interrelations between micro and
macroeconomics, taking account of the implications of the
intense structural heterogeneity of national markets and the
intrinsically pro-cyclical nature of international financial flows.
The style of macroeconomic policymaking has a significant
impact on the rate of investment and its effect on
development; on the intensity of value added to exports and
the link with the rest of GDP; on innovation; on the
development of small and medium-sized enterprises; and on
the formal or precarious nature of labour markets. All of this
has had a decisive effect on the modest 3.2% annual growth
rate in regional GDP between 1990 and 2008.
The article summarizes the achievements and failures of all
Latin American countries since 1990. Successes highlighted
include inflationary control, fiscal discipline and export
buoyancy. The article then examines the characteristics of
financial flows and asks why they tend to be intrinsically procyclical in emerging economies.
Lastly, the article presents policy lessons for a developmentbased macroeconomic approach, to move from “financierism”
to “productivism”, with a view to making a more effective
contribution to growth with equity and tackling the lack of
coordination and harmonization in fiscal and monetary policy.
The CEPAL Review was created in 1976 under the leadership of Raúl
Prebisch. The publication has been a vehicle for the ideas that emerge from
ECLAC and the efforts of researchers analysing Latin American and
Caribbean reality and discussing approaches, strategies and policies aimed at
driving equitable development in the region’s countries. Available online:
http://www.eclac.cl/revista/
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