The UN and Global Political Economy: Trade, Finance, and Development

6. ECLA, Industralization, and Inflation

137 6 ECLA, Industrialization, and Inflation • The Creation of ECLA: “An Act of Audacity” • ECLA before Prebisch • The Preexisting Discourse on Industrialization • The Intellectual Trajectory of ECLA under Prebisch • The Economic Survey of Latin America 1948 • The Economic Survey of Latin America 1949 • Squeezing the Lemon:The Second Stage of ISI • Programming Development • The Early ECLA Theory of Inflation • The Structural Theory of Inflation • Prebisch’s Later View of the Latin American Experience The Creation of ECLA:“An Act of Audacity” In spite of the McCarthyite pressure on radicals at the center of the UN system, the U.S. was markedly less successful at exerting its will on those at the system’s periphery. The proliferation of UN regional commissions was in itself a snub to the original American conception of a strictly global organization ; and of these, the Economic Commission for Latin America in particular proved a fertile ground for ideas on economic development, causing successive U.S. governments, not to mention the IMF and the World Bank, varying degrees of discomfort.The Eisenhower administration,most notably,felt that ECLA, by priming Latin American governments with “technical economic jargon” to back up their claims for U.S. development assistance, was helping to divert attention from the anti-communist cause.Although in the late s this attitude softened, it was under the Kennedy presidency and the Alliance for Progress that U.S.leaders most clearly sought to appeal to the Latin American democratic left, among other groups in the region, in a bid to secure its 138 The UN and Global Political Economy support in the Cold War. A similar appeal was also extended to other underdeveloped regions when Kennedy—in the course of an address largely on Cold War themes—proposed in  that the s should be officially designated the United Nations Decade of Development.1 The UN activities that this initiative helped stimulate—again somewhat to U.S. discomfort—were based on an intellectual agenda that had to an important degree been pioneered by ECLA and by its dominant personality, Raúl Prebisch. The contribution of ECLA and Prebisch to the early controversy on the manufacturing–primary production terms of trade has been described in Chapter .We argued that it was less pioneering than is usually claimed.However , on the question of industrialization strategy for peripheral countries— crucial to understanding the agenda followed by UNCTAD in the s—ECLA and Prebisch move to center stage. This was the issue that most profoundly concerned them and that they explored with relatively little assistance from other UN organs, although it was by no means their exclusive preserve. How did ECLA come into being and what role did it play in relation to the movement toward industrialization in Latin America? How was that role modified by the arrival of Prebisch at ECLA, and what precisely did he help ECLA to add to the pro-industry discourse in Latin America? What were his views on the use of inflation to stimulate investment and growth? This chapter addresses these questions, setting out the general intellectual trajectory of ECLA in the Prebisch years and examining in detail the seminal early Economic Surveys. Fiftyyearson,themainstreameconomicsliteraturestillrecognizesPrebischas anadvocate,andaverypowerfulandimportantadvocate,of import-substituting industrialization (or ISI) as a development strategy for Latin America.2 He was indeed such an advocate. He did believe in ISI, and he was persuasive in arguing for it—he compared his literary style to that of George Bernard Shaw.3 However, this advocacy was only part of his legacy to the region and perhaps not the most important part. A greater contribution, and one that should be able to be seen more clearly today, was his exploration of the limits of industrialization , of the ways in which excessive industrialization can reduce economic welfare. Hernán Santa Cruz, the Chilean representative on ECOSOC, initiated the creationof ECLAastheresultof “an act of audacity.”4 He felt that LatinAmerica was being unjustly ignored by the great powers and conceived the idea of a commission to deal with the region’s economic and social problems. Receiving no orders to the contrary from his government, he took the initiative and submitted his proposal as an item for the ECOSOC agenda.5 On  August , he formally introduced his resolution to a meeting of ECOSOC. He ar- ECLA, Industrialization, and Inflation 139 gued that the Latin American economies needed to develop economically through “both industrialization and diversification.” The countries...