The Limits of Stabilization: Infrastructure, Public Deficits and Growth in Latin America (Latin American Development Forum) [Paperback]

William Easterly (Editor), Luis Serven (Editor)

Book Description

ISBN-10: 0821354892 | ISBN-13: 978-0821354896 | Publication Date: October 1, 2003

Over the 1980s and 1990s, most Latin American countries witnessed a retrenchment of the public sector away from infrastructure provision and an opening up of infrastructure activities to the private sector. This book analyzes the consequences of these policy changes from two perspectives. First, it reviews in a comparative framework the major trends in infrastructure provision in Latin America over the last two decades. Second, it evaluates the implication of these trends for economic growth and public deficits in the region. The book shows that in most countries private participation did not fully offset the public sector retreat. The result was a slowdown in infrastructure accumulation, which entailed a significant growth cost and weakened the intended impact of the infrastructure spending cuts on public sector insolvency.

Editorial Reviews

Review

“This fascinating book highlights a neglected cost of two decades of fiscal austerity in Latin America. The authors’ careful analysis reveals that the decline in public investment in infrastructure may have been expensive not only for growth but for long-term fiscal solvency as well. Deserves to be read by every IMF economist (and many others besides).” —Dani Rodrik,John F. Kennedy School of Government, Harvard University

“The lessons from this research are likely to be valuable not only for developing countries but also for the European countries that are part of the Euro zone.” —Sergio Rebelo,Kellogg School of Management, Northwestern University

--This text refers to an alternate Paperback edition.

From the Inside Flap

Latin America’s macroeconomic crises of the 1980s and ‘90s forced a severe fiscal adjustment across the region. More often than not, fiscal stability was achieved at the cost of a drastic compression of public infrastructure spending, accompanied by the hope that the private sector would take the leading role in infrastructure provision.
This book documents the major trends in infrastructure provision in Latin America over the past two decades n order to assess the consequences of this changed public-private partnership from the perspective of economic growth, public finances, and the quantity and quality of infrastructure services. It will be of particular interest to those in the fields of infrastructure, fiscal policy, and economic growth, and anyone concerned with Latin America’s development.
For orders originating outside of North America, please visit the World Bank website for a list of distributors and geographic discounts at http://publications.worldbank.org/howtoorder or e-mail [e-mail].

--This text refers to an alternate Paperback edition.

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Product Details

• Paperback: 226 pages
• Publisher: World Bank Publications (October 1, 2003)
• Language: English
• ISBN-10: 0821354892
• ISBN-13: 978-0821354896
• Product Dimensions: 8.9 x 6 x 0.6 inches
• Shipping Weight: 15.5 ounces
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #5,340,535 in Books (See Top 100 in Books)

Customer Reviews

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4.0 out of 5 stars lesson for the US ?!, January 20, 2009

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W Boudville (Terra, Sol 3) - See all my reviews
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This review is from: The Limits of Stabilization: Infrastructure, Public Deficits and Growth in Latin America (Latin American Development Forum) (Paperback)

This book is a reaction to the Latin American fiscal crisis of the early 80s. When several countries ran up huge debts often denominated in foreign currencies. The debts were large relative to the countries GDPs. The International Monetary Fund and the World Bank weighed in with technical advice about reducing these debts. Often, one of the line items was a reduction in national spending on infrastructure.

The authors of the papers in the book argue that such cuts were extremely ill wrought. Because infrastructure is generally conceded to contribute from 19% or more per annum in terms of rate of return on the investment. Whereas the debts have lower interest rates. In sum, as the introduction suggests, this was a very short sighted measure. The bulk of the book goes on to expand on this thesis.

Now [2009], as the entire world goes into a recession, the book's argument takes on a new relevance. Granted, many key developing countries learnt from the 80s experience, and now have strong currency reserves, and much less foreign debt. The governments tend to understand the merit of running surpluses, both at the governmental level and for their citizens. But the returns from infrastructure investment are compelling enough that some deficit spending might be incurred here.

Ironically, one key measure for the US in the new [as I write this, Obama got inaugurated this morning] administration is a proposal for vast infrastructure spending. So maybe the book's thesis also applies to the US.