Cold War Dynamics and Third World Economic Development

During the Cold War, the USSR (Communist bloc) and the USA (Capitalist bloc) tried to convince the Third World to become part of their respective blocks, each showing distinct advantages.

US Strategy and Latin American Relations

The USA sought to demonstrate strength by controlling Latin America, often through exploitation. The US promoted free trade, but this faced difficulties in Latin America because local governments wanted complete control and resisted economic integration. Factors like product pricing and difficult geography also posed challenges.

US intentions were complicated by the relationship between China and the USSR (Triangulation). This was problematic because Khrushchev criticized Stalin, opposing his brand of communism. Furthermore, the USSR directed more financial aid toward Western Europe, leading China to distrust the Soviet approach. Tito in Yugoslavia split from Stalin in 1948 due to disagreements, notably over aid to Greece. The US showed interest in Tito, who remained outside Soviet control, benefiting both sides by creating a tilt without causing a major collapse.

Third World Aspirations and Autonomy

Many former colonies desired:

• Autonomy through decolonization.
• A fairer economic system.
• Protectionism.

This led to the formation of the Not-Aligned Movement (NAM) for managing the affairs of the Third World.

Economic Theories and Institutions

UNCTAD and CEPAL

Key institutions included:

• UNCTAD (United Nations Conference on Trade and Development), operating within the UN.
• CEPAL (Comisión Económica para América Latina y el Caribe).

Raúl Prebisch, an Argentinian economist, suffered from the Dependency Theory. This theory posits that states become impoverished while rich states are enriched by the very structure of how nations are integrated into the world system.

Dependency Theory Core Idea:

Dependency persists; no matter how poor a nation is, there is an elite that cooperates with external powers to maintain its own power and status.

Import Substitution Industrialization (ISI)

Import Substitution Industrialization (ISI):

According to this model, a growing industry could be protected using high tariffs. Once the industry matured, the tariffs would be removed, and the industry should have become competitive. This approach was adopted by Latin America and accepted by the NAM.

Challenges to ISI

Why did ISI face difficulties?

The US, which designed the Marshall Plan and provided security in Europe, often viewed Latin American societies as not mature enough for democracy. Moreover, American multinationals found ways to circumvent strict tariffs, thus avoiding significant harm. This model was not universally successful; it worked better in large economies like Brazil or Mexico, but smaller nations were often hindered by barriers from their neighbors.

President Kennedy showed greater support for Latin America than his predecessors, promoting investment and land reforms. However, these efforts largely ceased after his death. Later, thinkers like Thomas Mann suggested that Latin American countries needed to be under the control of a dictator for their stability to be viewed positively by the US.

Rostow's Stages of Growth Model (Modernization Theory)

Rostow's model outlined key requirements for economic takeoff:

1. Investment Threshold: Investments must equal at least 10% of GDP, focusing on new machinery and infrastructure.
2. Sectoral Focus: The need for one or two leading manufacturing sectors.
3. Institutional Support: An institutional, political, and social framework must be established to promote these sectors.
4. Takeoff: The resulting phase of rapid economic growth.

Significance of US Involvement

It is important to note that this period marked the first time the US actively did more for Latin America than simply installing leaders or exploiting its economy. This represented a legitimate attempt to promote economic growth in the region.