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The Uruguayan Economy: Its Basic Nature and Current Problems

Published online by Cambridge University Press:  02 January 2018

Herman E. Daly*
Affiliation:
Department of Economics, Louisiana State University, Baton Rouge, Louisiana

Extract

The economic history of Uruguay from the turn of the century up to the early 1950's is characterized by economic growth, by extensive governmental involvement in economic activity, and by an ardent secularist faith in the welfare state ideals of the great José Batlle y Ordóñez and the Batllista tradition which lived on after him. Its small size, stable democracy, and apparent aloofness from the problems of the rest of the continent have earned la Republica Oriental del Uruguay such sobriquets as the “Switzerland” or “Utopia” of South America. Beginning in the early 1950's, however, there were signs that this country which had for so long been a model laboratory for progress and reform to its crisis-ridden neighbors, was itself about to face a crisis. The economic dimension of the Uruguayan crisis is that the annual per capita gross national product (currently about 500 dollars) has not risen for over a decade, and has in fact declined slightly in the last several years.

Type
Research Article
Copyright
Copyright © University of Miami 1965

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References

1 CIDE, Estudio económico del Uruguay. Published by CIDE as an official document and reprinted for sale by the Centro de estudiantes de ciencias económicas y de administración. (Montevideo, 1963). CIDE received technical assistance from ECLA, the OAS, and the IBRD in the preparation of this study.

2 The author is grateful to the Vanderbilt Center for Latin American Studies and to the OAS for enabling him to spend most of 1963 in Uruguay.

3 This is not to deny that changes in the first two elements do occur and are of greatest importance. But the detailed study of change in these elements is a matter for the physical scientist on the one hand and the moral philosopher on the other. Economists are principally concerned with the middle ground.

4 See Lamas, Julio Martinez, Riqueza y pobreza del Uruguay (Montevideo: Tipografía Atlántida, 1964)Google Scholar.

5 Clark, Colin, The Economics of 1960 (London: The Macmillan Company, 1942), p. 80 Google Scholar. Capital is defined by Clark “so as to exclude all land values and also all nonincome yielding personal possessions such as furniture and cars, but to include dwelling houses and useful publicly owned assets such as roads.”

6 As fragmentary indices of agricultural and industrial capitalization one can cite figures on livestock population and energy consumption, respectively. The current livestock population is 8.3 million head of cattle and 22.9 million sheep, giving roughly three head of cattle and nine sheep per person. These figures have remained virtually constant since 1951. Annual per capita gross energy consumption in 1960 was’ .65 tons of petroleum equivalent.

7 The statistical approximation to real income is GNP (consumption plus investment). The value of leisure is omitted because of difficulties of measurement, but is far too important an element in human welfare to be ignored.

8 Julio Martinez Lamas, Riqueza y pobreza del Uruguay. See Chapter III.

9 Carlos Maggi, “La filosofía del maté,” Marcha, May 24, 1963, Montevideo. (Translation by the present author.)

10 See also Fitzgibbon, Russell H., “Uruguay: Model for Freedom and Reform?” in Freedom and Reform in Latin America, Pike, Frederick B., editor (Notre Dame, Ind.: University of Notre Dame Press, 1959). p. 248 Google Scholar and Hansen, Simon G., Utopia in Uruguay (New York: Oxford University Press, 1938)Google Scholar. Note chapter on Batlle's economic creed.

11 Theoretically neither view is really satisfactory since when more than one commodity is produced the dichotomy between production and distribution becomes blurred. Total production must be expressed in common denominator value units or else it is impossible to tell when it increases, except in the rare case where no single commodity decreases as others increase. A value measure requires prices, which are determined by supply and demand, which in turn are strongly influenced by the distribution of income. Thus, which of two physical conglomerations of goods represents a greater value of production depends, among other things, on the distribution of income which underlies the prevailing structure of relative prices. If the status quo distribution of income is within the limits deemed tolerable by the justice constraint then we have a relatively objective maximand and consensus. However, once justice becomes the maximand, objectivity and social consensus are reduced and cooperation becomes more difficult.

12 Theoretically one could also substitute the hypothesis of “satisficing” behavior instead of maximizing behavior to rationalize such choices (i.e., enough is as good as more than enough).

13 For a well-documented discussion of Uruguayan public administration, see Phillip G. Taylor, Government and Politics in Uruguay, Tulane Studies in Political Science, Vol. VII (New Orleans: Tulane University Press, 1960).

14 The New York Times, December 15, 1963. Reported by Edward O. Burkes.

15 This dominance in some measure reflects the fact that the tertiary sector, particularly government services, provides jobs as much for the purpose of distributing income as for reasons of production. The limited employment opportunities of pastoral production and of an industrial sector confined to the small national market, make a large tertiary sector necessary for the maintenance of full employment. But there are plenty of useful services which could be performed by the thousands of idle government functionaries—at the very least they could fish or plant potatoes. They could also provide elementary health and educational services to the poverty-stricken inhabitants of the cantegriles of Montevideo and the rancherías of the interior, whom the welfare state has somehow missed.

16 Carlos Quijano, “La economía uruguaya después de las dos guerras,” Revista de economía, Numbers 40-44 (Montevideo, 1956), p. 205. (Translation by the author.)

17 Both the price level and money supply indices increased by about 4.7 times with the velocity of circulation remaining stable at about 5.4.

18 In 1945 the entire monetary reserve was in the form of bank capital and foreign exchange reserves. By 1957 more than half of the monetary backing was accounted for by rediscounts. See Enrique V. Iglesias, El balance monetario del Uruguay, Instituto de Teoría y Política Económicas (Montevideo: Universidad de la República, 1959), p. 24.

19 The relative size of the public and private sectors is 1 to 4 in terms of employment and 1 to 7.7 in terms of consumption. If we recognize that credit is capacity to purchase and hence represents economic power, then the fact that credit granted to the private sector was 20 times that granted to the public sector during 1957-61 (not 4 or 7.7 times) means that banks contribute greatly to the power of the private sector.