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Tarkol · 12-10-01, 15:51

The second concept is the distinction between actual productivity and potential productivity. "Potential" is a somewhat misleading term, since it implies something imaginary, but this productivity does indeed exist. Potential productivity reflects our nation's productive capacity (in the form of our workers, factories, etc.). Actual productivity reflects how much of that capacity is actually being used. For example, a factory may have the potential to turn out 3,000 cars a month. During a recession, however, its actual productivity may fall to only 1,500 cars a month. Actual growth would occur if the factory returned to a full capacity of 3,000 cars. Potential growth would occur only if a second factory were built.

During a recession, actual productivity drops as millions of workers are laid off and factories sit idle. But all the potential productivity is still there. During a recovery, actual productivity climbs closer to its potential, as millions of laid-off workers return to empty factories. This gives the appearance of growth — and we should note that this type of growth is relatively quick and easy to achieve. But what happens when all the workers have returned? Then any further growth will have to involve potential growth — that is, the construction of factories and the birth of new workers. As you might imagine, this type of growth is considerably more difficult to achieve.

So this is all that happened that during Chile's "Economic Miracle" — laid-off workers returned to their old jobs. When you take both the recession and recovery into account, Chile actually had the second worst rate of growth in Latin America between 1975 and 1980. Only Argentina did worse. (6)

And even then, much of Chile's growth was artificial or fictitious. Between 1977 and 1981, 80 percent of Chile's growth was in the unproductive sectors of the economy, like marketing and financial services. Much of this was speculation attracted to Chile's phenomenally high interest rates, which, at 51 percent in 1977, were the highest in the world. (7)

Chile's integration into the world market would leave it vulnerable to world market forces. The international recession that struck in 1982 hit Chile especially hard, harder than any other Latin American country. Not only did foreign capital and markets dry up, but Chile had to pay out stratospheric interest rates on its orgy of loans. Most analysts attribute the disaster both to external shocks and Chile's own deeply flawed economic policies. By 1983, Chile's economy was devastated, with unemployment soaring at one point to 34.6 percent — far worse than the U.S. Great Depression. Manufacturing production plunged 28 percent. (8) The country's biggest financial groups were in free fall, and would have collapsed completely without a massive bail-out by the state. (9) The Chicago boys resisted this measure until the situation became so critical they could not possibly avoid it.

The IMF offered loans to help Chile out of its desperate situation, but on strict conditions. Chile had to guarantee her entire foreign debt — an astounding sum of US$7.7 billion. The total bailout would cost 3 percent of Chile's GNP for each of three years. These costs were passed on to the taxpayers. It is interesting to note that when the economy was booming, profitable firms were privatized; when those firms failed, the costs of bailing them were socialized. In both cases, the rich were served. (10)

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12-10-01, 15:51	#9 (permalink)
Tarkol Member Data registrazione: May 2000 Messaggi: 24,863 Popolarità: 0	...continua... The second concept is the distinction between actual productivity and potential productivity. "Potential" is a somewhat misleading term, since it implies something imaginary, but this productivity does indeed exist. Potential productivity reflects our nation's productive capacity (in the form of our workers, factories, etc.). Actual productivity reflects how much of that capacity is actually being used. For example, a factory may have the potential to turn out 3,000 cars a month. During a recession, however, its actual productivity may fall to only 1,500 cars a month. Actual growth would occur if the factory returned to a full capacity of 3,000 cars. Potential growth would occur only if a second factory were built. During a recession, actual productivity drops as millions of workers are laid off and factories sit idle. But all the potential productivity is still there. During a recovery, actual productivity climbs closer to its potential, as millions of laid-off workers return to empty factories. This gives the appearance of growth — and we should note that this type of growth is relatively quick and easy to achieve. But what happens when all the workers have returned? Then any further growth will have to involve potential growth — that is, the construction of factories and the birth of new workers. As you might imagine, this type of growth is considerably more difficult to achieve. So this is all that happened that during Chile's "Economic Miracle" — laid-off workers returned to their old jobs. When you take both the recession and recovery into account, Chile actually had the second worst rate of growth in Latin America between 1975 and 1980. Only Argentina did worse. (6) And even then, much of Chile's growth was artificial or fictitious. Between 1977 and 1981, 80 percent of Chile's growth was in the unproductive sectors of the economy, like marketing and financial services. Much of this was speculation attracted to Chile's phenomenally high interest rates, which, at 51 percent in 1977, were the highest in the world. (7) Chile's integration into the world market would leave it vulnerable to world market forces. The international recession that struck in 1982 hit Chile especially hard, harder than any other Latin American country. Not only did foreign capital and markets dry up, but Chile had to pay out stratospheric interest rates on its orgy of loans. Most analysts attribute the disaster both to external shocks and Chile's own deeply flawed economic policies. By 1983, Chile's economy was devastated, with unemployment soaring at one point to 34.6 percent — far worse than the U.S. Great Depression. Manufacturing production plunged 28 percent. (8) The country's biggest financial groups were in free fall, and would have collapsed completely without a massive bail-out by the state. (9) The Chicago boys resisted this measure until the situation became so critical they could not possibly avoid it. The IMF offered loans to help Chile out of its desperate situation, but on strict conditions. Chile had to guarantee her entire foreign debt — an astounding sum of US$7.7 billion. The total bailout would cost 3 percent of Chile's GNP for each of three years. These costs were passed on to the taxpayers. It is interesting to note that when the economy was booming, profitable firms were privatized; when those firms failed, the costs of bailing them were socialized. In both cases, the rich were served. (10) ...