Strengthening development: the interplay of macro- and microeconomics

Introduction The 1980s can best be understood as a watershed in the experience of the Latin American and Caribbean economies. Despite marked differences in certain features and consequences of the change, all of the countries, some earlier than others, underwent a fundamental transformation in the scope and content of their economic policies and strategies and in the bases of their productive systems. To sum up the changes by saying that the countries shifted from an inward- to an outward-looking strategy, or that they moved from a phase of dirigisme" to one focused on market signals, would be to oversimplify the peculiar nature of a highly complex process of change that has not yet run its course. The reforms initiated in the 1980s --and even earlier in a few countries-- have taken a wide variety of forms that differ in the nature of the policies implemented and the results obtained; yet everywhere a turning-point can be identified. The aforementioned reforms, whose detonator was the foreign debt crisis, are the consequence of the monumental effort carried out by all countries, each according to its means, to adapt their economies to the new conditions created by circumstances both internal (the gradual loss of dynamism of a certain mode of development) and external (economic globalization) in nature. Today, halfway through the 1990s, enough time has elapsed that answers can be attempted to some of the chief questions raised during this period, which has been marked by traumatic adjustment but also by solid achievements (Empirical evidence for the assessment presented in this document can be found in: ECLAC, The Economic Experience of the Last Fifteen Years: Latin America and the Caribbean, 1980-1995 (LC/G.1925(SES.26/17)), Santiago, Chile, 1996.). First: How should the period be assessed? Is the region's economy on a sounder footing now than it was before 1982? Second: Was the choice of policies that shaped a new pattern of development the right one? And, perhaps the most important question of all: What corrections to the choice of policies would be advisable to strengthen the development process? This document attempts to provide answers to these questions. The first section presents an assessment of the economic reforms undertaken to date, weighing advances against shortcomings and factoring in the lessons gained from the great variety of experience accumulated. The second section offers some reflections on the direction that ongoing reforms should take, in the secretariat's view. Under that heading, in order to avoid overly broad generalizations, attention has been focused on the twin goals of securing economic stability while at the same time stimulating growth. This in turn entails an examination of two specific subject areas: development of investment and development of production. The key elements in these two areas --saving/investment and productivity/technological progress-- are analysed in terms of the interplay of macroeconomic scenarios, institutions and microeconomic behaviour."