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The Economic Development of Latin America in the Twentieth Century

Author(s):Hofman, André H
Reviewer(s):Maurer, Noel

Published by EH.NET (October 2000)

Andr? Hofman, The Economic Development of Latin America in the Twentieth

Century. Northampton, MA: Edward Elgar Publishing, 2000. xvi + 322 pp.

$100 (cloth), ISBN: 1-85898-852-7.

Reviewed for EH.NET by Noel Maurer, Centro de Investigaci?n Econ?mica,

Instituto Tecnologico Autonomo de Mexico (ITAM).

Latin America’s economic performance over the past fifty years has been

highly disappointing. The region’s economies have lost ground against both the

OECD countries and East Asian NICs. Many scholars have devoted a great deal of

effort in attempting to pin down the ultimate causes of the region’s economic

failure. Unfortunately, we still know too little about the immediate causes of

slow growth. Low levels of capital accumulation? Educational failure? Poor

total factor productivity growth? All of the above?

Andr? Hofman’s volume is a vital contribution to the region’s economic

history. It attempts to assess the proximate causes of Latin America’s

economic performance over the past few decades. Hofman carefully constructs

comparable time series for factor inputs for each country. He then uses the

time series to assess the contribution of each factor to the region’s growth.

Much of the book has a “just the facts, ma’am” tone which serves it well.

Hofman’s most surprising result comes from his calculations of total factory

productivity. Until 1980, changes in capital and labor inputs accounted for a

remarkably high percentage of the region’s growth. This suggests that growth

in Latin America before 1980 was not unlike growth in the Soviet Union.

Countries piled up capital and improved labor, albeit at relatively slow

rates. After 1980, TFP growth turned substantially negative. In fact, declines

in TFP overexplain the region’s poor performance.

The book’s chapters proceed in a logical way. Chapter 2 provides a brief

historical overview, and Chapter 3 identifies the patterns of growth over the

past century. Chapter 4 then discusses the difficulties is assembling coherent

and comparable time series on the region’s gross labor and human capital

inputs. The discussion is excellent, and allows the reader to accept or reject

the assumptions used in constructing the series. Chapter 5 does the same for

measures of physical capital. Chapter 6 conducts a comparative growth

accounting exercise for Latin America. Its message is one of relative failure.

Latin America’s gross capital stock per worker lagged behind the OECD and the

NICs between 1950 and 1994. The gap grew. In education, Latin America’s

failure was less glaring. It substantially closed the gap with the OECD,

although less rapidly than the NICs. TFP contributed much less than in the

OECD, and even less than in the Asian NICs.

In Chapters 8 and 9, Hofman speculates about the ultimate causes of the

region’s poor TFP performance and low level of capital accumulation. These

speculations, however, are presented as hypotheses to be tested rather than

definitive conclusions.

The volume’s largest flaw is that there is often insufficient information

about how statistical authorities collected the raw data. The lack is

particularly glaring in the case of Mexico. The above should not, however, be

taken as a serious criticism. Hofman’s achievement in collecting and

standardizing the various national series is a major contribution. The

appendices are detailed, and contain much useful data. The appendices alone

make Hofman’s book invaluable to any economic historian of Latin America.

Noel Maurer is the author of The Power and the Money: Credible Commitments

and Financial Markets in Mexico, 1876-1931, forthcoming from Stanford

University Press. His current research concerns how non-democratic and

non-constitutional governments can make credible commitments to protect

property rights even under political instability.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):Latin America, incl. Mexico and the Caribbean
Time Period(s):20th Century: WWII and post-WWII