Towards a New Agenda for Macroeconomic Policy Reform

Abstract

In the 1990s, economic and financial characteristics were consolidated that were rooted in long-standing historical developments. In this process, a set of market and production networks were consolidated that surpass the borders of nation-states; however, these processes were not accompanied by an equivalent development of global institutions, whose agenda is incomplete and asymmetric (Ocampo, Bajaray and Martín, 2001).

Globalization has given rise not only to growing interdependence, but also to marked inequality between countries, because economic processes have operated on an “essentially unlevel playing field” (ECLAC, 2004). The following data shows us the playing field.

International trade expanded at rates close to the 6% annual average between 1900 and 2003, two thirds of International Trade is established between transnational companies, foreign direct investment reached close to 1.4 trillion dollars in 2000, that is, seven times more than in the early years of the nineties, however, in 2003 there was a spectacular drop when foreign direct investment amounted to 653 billion dollars, daily transactions in the exchange markets exceeded 1.5 trillion dollars in the first years of this century, while innovations and technological changes accentuated their concentration in developed countries (UN, 2004).

The reform strategy followed in the 1990s promised to create unprecedented prosperity (see the speeches of Carlos Salinas de Gortari for the case of Mexico), however it has failed in an almost unprecedented way. In those years, the promoters of market reforms told us that they were not concerned with the growth of the economies, which was assured, but with its distribution. The reality has been overwhelming with these reforms.

For many regions of the world, especially Latin America, the reforms have not only failed to generate growth, but have also, at least in some places, contributed to increasing inequality and poverty.

One of the many factors that explains the average stagnation of global inequality and poverty is global economic dynamism. Between 1990 and 2003, the growth of the world economy reached an average annual rate of 2.6 percent, placing it at the lowest post-war level for an equivalent period. The growth rate was slightly more than half the rates recorded in the 1950s, 1960s and 1970s. This means that the market strategy is not working as expected.