ABSTRACT
In this chapter, our focus changes essentially from microeconomics to macroeconomics. In most of the previous chapters, we have discussed industries, exports, imports, industrial policy, and other government policies that affected the economic development of Latin America. Gross domestic product (GDP) was mentioned in Chapters 2 and 4, but the coverage concerned economic growth and identifiable periods of economic history for the region. This is different from macroeconomics. Macroeconomics is focused on the movements of GDP, the level of unemployment, and the rate of inflation over shorter periods of time. Typically, the focus of macroeconomics is 1 – 3 years. The focus of the material in the rest of the book inevitably changes in another way. In every country, one is exposed to a steady stream of macroeconomic data concerning the output of the economy, measures of conditions in the labor markets, and various measures of inflation. Even if no domestic data comes out on a particular day, there is always information on other parts of the regional or world economy. What one needs to understand is that prior to World War II, for the most part this data did not exist. Over the last 50 years, economic historians have been painstakingly reconstructing annual data for the years prior to 1945. This is still a work in progress. As a result, short-run macroeconomic data on a monthly or quarterly basis before this time hardly exists for the high-income countries of the world. For the economies of Latin America, such data is virtually nonexistent. The result is that our focus for much of the rest of the book will be on the post-war era in the region. A substantial part of this choice is related to the unavailability of data. The other reason for this choice is that macroeconomic policy as we now use the phrase was not really a part of the economic history of the region prior to 1945. Why this is true will become clearer in the first section of this chapter.
