Proposal preview

Contrasting Development Paths in Latin America and Scandinavia: What Can We Learn?

This session aims to compare the stark different development pathways that countries in Latin America and in Scandinavia have followed as well as the distinctive social and economic outcomes they have achieved. Unlike the traditional comparative approach, which focuses on rather similar countries (e.g. the patterns of industrialization in England and France, or the common roots of income inequality across Latin America), this session’s motivation lies in contrasting seemingly unrelated development experiences and, as in Pomeranz (2000), Hatton, O’Rourke, & Taylor (2007), and Huberman (2013), bringing to light neglected issues and connections.

The session intends to emphasize three dimensions of the two regions’ radically different development pathways: industrialization and productivity growth; income distribution; and labor market institutions. Papers may rely on comparison either between a pair of Scandinavian–Latin American countries, several countries from each region or all countries of the two regions.

As regards the first issue, Latin America’s failure in catching up with developed countries is usually attributed to the pattern and timing of industrialization (Bértola & Ocampo, 2014). From a historical perspective, two features distinguish manufacturing in Scandinavian and Latin American countries. First, Scandinavia joined the second wave of industrialization still in the closing decades of the nineteenth century, benefiting from an early start that allowed the manufacturing sector to account for a relatively large share of employment in the 1960s, declining afterward (Rodrik, 2013). Second, industrialization was accompanied by rapid and sustained improvements in labor productivity, closing the gap with the US and the UK at the end of the twentieth century (Prado, 2008; Inklaar & Timmer, 2012). In contrast, Latin America was quite slow to respond to the challenges of the second industrial revolution, embarking on capital-intensive industrialization only in the 1940s (Bértola & Ocampo, 2012). In addition to the late start, Latin America was severely hit in the early 1980s by the prolonged external debt crisis, which reversed the trend of productivity catch up that had prevailed since WWII. Severe macroeconomic imbalances in the following years combined with long-standing institutions and policies that curbed competition, investment and entrepreneurship, led that region to reach in the 2000s a labor productivity level lower than half the frontrunners’, as has happened in Brazil (Aldrighi & Colistete, 2015).

On the second issue, looking at the income distribution spectrum across the world along the second half of the twentieth century, Latin America and Scandinavia appear as remarkable outliers, standing out as very unequal and highly egalitarian, respectively. As a case in point, the Gini coefficient was about 0.6 in Brazil and 0.2 in Sweden in the early 1980s (Björklund & Jäntti, 2011; Baer, 2008). What are the roots of Latin America’s hugely unequal income distribution? Do they trace back to the colonial past (Engerman & Sokoloff, 1997; Acemoglu et al., 2001) or to the fact that Latin America missed the “Twentieth-Century Leveling”, as Williamson (2015) argues? Likewise, while some scholars claim that Scandinavian egalitarianism was shaped in the medieval period (Rothstein & Uslaner, 2005), more recent research provides evidence that the very low current income concentration in Sweden stems from developments during the twentieth century (Roine & Waldenström, 2008; Gärtner & Prado, 2014).

As to the third issue, since at least the 1930s, labor market institutions in Scandinavia and Latin America have evolved along very different lines. In Sweden, for instance, the conflict-ridden regime of mistrust and bitterness prevailing in the 1920s and early 1930s was superseded by the Saltsjöbad Accord, which was a successful institutional landmark that terminated the costly systematic labor unrest and has ensured regular channels of negotiation between labor unions and employers’ associations. Besides the capital–labor cooperation environment, the Swedish labor market has other three distinguishing features. First, blue-collar workers benefited from unbroken growth in real wages between 1942 and 1976 (Prado, 2010). Second, wage differentials across industries and sectors diminished sharply in the 1940s and between 1960 and 1980 (Gärtner & Prado, 2014; Hibbs, 1990), making Sweden’s wage structure one of the most compressed in the OECD countries in the 1980s (Blau & Kahn, 1996). Third, Sweden was also the first country to experience a marked decline in the female to male pay ratio, notably in the 1960s.

In sharp contrast with Sweden, the relations between industrialists and trade unions in Brazil have mostly been antagonistic and confrontational, even over periods of economic growth and democratic regime, as during the almost two decades following the end of the II World War. High income inequality helped to fuel conflicts, and workers’ demands for better labor conditions and social welfare were often dealt with repression and state intervention. Moreover, industrial wages fell behind labor productivity even over the golden age of the post-war rapid growth, reinforcing confrontation in industrial relations (Colistete, 2007).

Submission of papers addressing the distinguishing experiences of Scandinavian and Latin American countries in industrialization patterns, income distribution, and labor market institutions are welcome.

Organizer(s)

  • Svante Prado, University of Gothenburg, svante.prado@econhist.gu.se,
  • Renato P Colistete, Universidade de Sao Paulo, rcolistete@usp.br,

Session members

  • Joacim Waara, University of Gothenburg, joacim.waara@econhist.gu.se
  • Erik Bengtsson, Lund University, erik.bengtsson@ekh.lu.se
  • Kerstin Enflo, Lund University, kerstin.enflo@ekh.lu.se
  • Cecilia Lara, Universidad de la República, cecilara@gmail.com
  • Dante M Aldrighi, Universidade de Sao Paulo, aldrighi@usp.br
  • Felipe P Loureiro, Universidade de Sao Paulo, felipeloureiro@usp.br

Proposed discussant(s)

  • Luis Bértola, Universidad de la República, lebertola@gmail.com