Capitalism In Latin America

Gary Becker, Nobel Laurette in economics and professor of economics at the University Of Chicago, writes on capitalism in Latin America:

One legitimate reason for the opposition to capitalism in Latin America is that it frequently has been “crony capitalism” as opposed to the competitive capitalism that produces desirable social outcomes. Crony capitalism is a system where companies with close connections to the government gain economic power not by competing better, but by using the government to get favored and protected positions. These favors include monopolies over telecommunications, exclusive licenses to import different goods, and other sizeable economic advantages. Some cronyism is found in all countries, but Mexico and other Latin countries have often taken the influence of political connections to extremes.

In essence, crony capitalism often creates private monopolies that hurt consumers compared to their welfare under competition. The excesses of cronyism have provided ammunition to parties of the left that are openly hostile to capitalism and neo-liberal policies. Yet when these parties come to power they usually do not reduce the importance of political influence but shift power to groups that support them. A distinguishing characteristic of Chile since the reforms of the early 1980’s is the growth in competitive capitalism at the expense of crony capitalism. This shift more than anything else explains the economic rise of Chile during the past 25 years that has made Chile the most economically successful of all Latin American nations.

The full post can be found here. His response to comments can be found here.

One Response to “Capitalism In Latin America”

  1. mike says:

    the biggest reason for illegal immigration is American crony capitalism. Major companies open factories in Latin America. they pay the workers very little, and the working standards are horrible with workers working in dangerous situations with no workers rights whatsoever. the companies pollute with no regard to the environment, then the company closes abruptly because there is cheaper labor somewhere else. leaving the workers with a polluted living condition and no money so they have no choice but to immigrate illegally in order to survive

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