Table Of Content

American Divergences in the Great Recession Globalization is quite different from internationalization: the by-now global market economy overwhelmed the sovereignty of the old national states. Close to the 2007 crisis, some de-coupling effects were conse- quent in most developed countries in comparison with the ex-Third World. Latin America seemed to entail a “divergence” with the First World, as unlike the past, it was not hit by the financial crisis, but old historical fragilities invalidated the short positive cycle produced by high international prices. This work deals with this crisis and its basic differ- ences from the older crises of the Thirties and Seventies. Daniele Pompejano is full professor of the History of Latin America pro- gram at Università di Messina. Routledge Studies in the History of the Americas 1 The Johnson Administration’s Cuba Policy From “Dirty War” to Passive Containment Håkan Karlsson and Tomás Diez Acosta 2 The Unheard Voice of Law in Bartolomé De La Casas’ Brevísima Relación de la Destruición de las Indias David T. Orique 3 The Nixon Administration and Cuba Continuity and Rupture Håkan Karlsson and Tomás Diez Acosta 4 Translating Cuba Literature, Music, Film, Politics Robert S. Lesman 5 Rio de Janeiro in the Global Meat Market, c. 1850 to c. 1930 How Fresh and Salted Meat Arrived at the Carioca Table Maria-Aparecida Lopes 6 American Divergences in the Great Recession Daniele Pompejano 7 Social and Political Transitions During the Left Turn in Latin America Edited by Karen Silva-Torres, Carolina Rozo-Higuera and Daniel S. Leon 8 A New Struggle for Independence in Modern Latin America Edited by Pablo A. Baisotti For more information about this series, please visit: https://www. routledge.com/Routledge-Studies-in-the-History-of-the-Americas/ book-series/RSHAM American Divergences in the Great Recession Daniele Pompejano First published in English 2022 by Routledge 605 Third Avenue, New York, NY 10158 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Taylor & Francis The right of Daniele Pompejano to be identified as the author of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. The whole work was published in Italian by Bruno Mondadori, Milan 2018. Library of Congress Cataloging-in-Publication Data Names: Pompejano, Daniele, author. Title: American divergences in the great recession / Daniele Pompejano. Description: 1st Edition. | New York : Routledge Taylor & Francis Group, 2021. | Series: Routledge studies in the history of the americas; vol 23 | Includes bibliographical references and index. Subjects: LCSH: Latin America—Economic conditions—1982– | United States—Economic conditions—21st century. | Global Financial Crisis, 2008–2009. Classification: LCC HC125 .P65827 2021 (print) | LCC HC125 (ebook) | DDC 330.98/00411—dc23 LC record available at https://lccn.loc.gov/2021011971 LC ebook record available at https://lccn.loc.gov/2021011972 ISBN: 978-0-367-45799-0 (hbk) ISBN: 978-1-032-06858-9 (pbk) ISBN: 978-1-003-02542-9 (ebk) DOI: 10.4324/9781003025429 Typeset in Sabon LT Std by KnowledgeWorks Global Ltd. Contents List of Figures vi List of Tables vii Introduction: The Dilemma of Currency 1 1 Without Gold and After the Dollar 16 2 Cycles of Crisis 34 3 Meanwhile, in Latin America… 75 4 The “Invisible Hand” of the Market 105 Conclusions: “Do Those Who Don’t Obey the Rules Win”? 125 Index 133 Figures 1.1 Latin American, Chinese and South-East Asian Involvement in International Trade in Percentages (1953–2004) 18 1.2 Index of Commodity Prices (Except Oil), 1865–2010 24 2.1 Total US Currency Supply 56 2.2 Monetary Aggregate in Dollars, Dollars/gold and Total Monetary Aggregate (M3*)/gold. *M3 Includes M1 and M2 Plus the Total Value of Bank Bonds, Repurchase Agreements, and Money Market Fund Participations 57 3.1 Gross Fixed Capital Formation and Economic Growth in Latin America (1961–2008) 77 3.2 Latin America: Contributions of Public and Private Investment to Gross Fixed Capital Formation, 1991–2010 (in Dollars and at Constant 2005 Prices) 78 3.3 Foreign Debt (% of GDP) (1990–2013) 79 3.4 Global Flow of Foreign Investment in Latin America and the Caribbean, 1990–2014 (in Billions of Dollars and Percentages) 88 3.5 Total Foreign Direct Investment Flow by Groups of Economies and Shares in Latin America, 1990–2014 (in Billions of Dollars and Percentages) 91 4.1 Latin American Exports in the Main Sectors and Broken Down According to the Fox Corresponding Percentage of Value Added 2000–2011 106 4.2 Total Factor Productivity 1960–2005 (1960=1). AL 7: Averages for the seven most Developed Latin American Economies. AL 17: Averages of all Economies (except Guatemala and Cuba) 109 4.3 Unweighted Averages of Tax Collection in Latin America as a Percentage of GDP and by Item (1970–2000) 112 4.4 Latin America: Rate of Change in GDP and Contribution of aggregate Demand 1991–2014 116 Tables 2.1 Developing Countries: Resource Flows 1970–2002 (in Millions of US Dollars as a Percentage of GDP) 46 3.1 Composition of External Flows in Latin America 1970–2010 (in % of the Total) 90 4.1 Latin America and More Developed Economies: Tax Burden as a Percentage of GDP. AL 7: Averages for the Seven Most Developed Latin American Economies. AL 17: Averages of All Economies (Except Guatemala and Cuba) 113 Introduction The Dilemma of Currency Known as the “Triffin dilemma”, the concept emerged well before the release of the dollar from gold on August 15, 1971. Given the insuffi- ciency of the precious metal, the currency of the country with the strong- est economy – the pound, and, more recently, the dollar – is historically assumed as a unit of account but also as an essential complement to reserves. It, therefore, responds to the domestic needs of the issuing country, but also provides the actors in international trade with means of payment. The paradox is that the seigniorage in the issue corresponds to a non-financial current account deficit, which, in the long run, may undermine the confidence placed in the currency used as a reserve. But it is no less important that the country that issues the currency of refer- ence ends up importing capital from countries whose economies require resources (Triffin, 1961). We can link this contradiction to several more fundamental ambi- guities. The oldest and most primal speaks of the nature itself of the currency; that is, metal commodity money and then the so-called fidu- ciary money, banknotes printed by commercial banks or by the central bank. For just under a century, the latter has been entrusted with the task of dispensing credit as a last resort and intervening in support of financial institutions in temporary difficulty. But this function, which seems completely natural today, has been the result of a complex process involving the intertwining of the dynamics of private and public, internal and international interests (Fergusson, 2009). From the reduced bound- aries of national sovereignty, the function of a currency as the fulcrum of compensation systems has expanded internationally and far beyond its function as a mediator of trade. In the First World War, the issuance of money and the production of credit instruments were essential in sus- taining the mobilisation of the war and the subsequent reconstruction in a regime of so-called suspended money supply (Maier, 1984).1 Almost all of the countries involved in the war had been obliged to abandon the gold standard; namely, the mechanism designed to engender confidence in a national currency through its convertibility. The task of going back to tying national currencies to a common denominator, in itself difficult in