Inflation is inevitable in a developing country

: Inflation is no coincidence ...


Read on one side

The underdeveloped areas (or, as those countries lagging behind in economic progress are now called: the developing countries) have moved more and more into the foreground of world interest from year to year since the end of World War II. The developing countries have also become an object of the Cold East-West War. But while Moscow is trying to win the favor of these countries with strategically targeted and cleverly arranged credit actions, there is growing concern and the understanding in the West that even the most costly and generous aid programs will not be enough to rebalance economies which are subject to the greatest inflation slipped into it. Our colleague, who recently returned from a one-year information trip through the Latin American countries, reports here on Chile, which, although it cannot be counted among the "classic" developing countries, is one of those areas that tackled huge development projects and took on themselves in the process to have.

The core problem developing countries have to deal with is this Inflation. At a different pace, it hit almost all those countries which, not least for political reasons, have now set themselves the ambitious goal of making up a centuries-old deficit in just a few years. The lessons that can be drawn from the "example of Chile" do not necessarily apply to developing countries in the narrower sense of the word. Nonetheless, the reasons that led to inflation in this country, and the measures that are being taken or, more correctly, are not being taken to combat it, can provide very concrete reference points for the discussion of a subject which is now highly topical.

One of the main reasons for Chile's economic backwardness is this low productivity of its agriculture. The low productivity becomes particularly evident when its share of the national income (1955: 13 per cent) is compared with the number of people employed in agriculture, which alone makes up a third of all employed persons. In addition, as a further obstacle to economic development, there is a property structure that has remained unchanged for centuries, with a strong predominance of large estates and extensive land cultivation at the same time. About 50 BC H. of all landowners have less than five hectares and together own only 0.6 percent. H. the agriculturally usable area. On the other hand, 0.3 v. H. of all landowners more than 5000 hectares and cultivate 58 per cent. H. of usable soil.

In addition to agriculture, the Mining, especially in the Chilean foreign trade, a very important role. If one accepts the foreign trade dependence of an economy on a single or at least a very few products as one of the characteristics of developing countries, Chile must be one underdeveloped economy par excellence be considered since 1955 about 57 BC. H. of exports to the copper and 17 per cent. H. accounted for the saltpetre exports.

Of all branches of industry, the Fastest developing industry. The great impetus for industrialization, as in all other Latin American countries, was triggered by the Second World War, when trade relations with Europe were largely interrupted and the need arose to create, at least to a small extent, its own consumer goods industry. Since it was considered proven that in the underdeveloped countries of Europe and North America there was a direct correlation between prosperity and increasing industrialization during the last 150 years, it was believed in the developing countries that that industrialization could serve as a panacea for economic development plans. Thanks to the Heavy industry Chile now has the basis for a metalworking industry. Despite all of this, the two most important prerequisites for harmonious industrialization, which can be outlined by the keywords traffic and energy, still exist today not a satisfactory one Find out the solution. But above all, there were difficulties with the from the start financing of these costly development projects.

The solution to this problem is all the more serious than it has always been in Chile little thrift duration. Even today there is still a lack of a sufficiently broad middle class in this country that would be able and above all willing to voluntarily renounce consumption and thus free up funds for investments.

In the absence of a national capital market, Chile has a large part of its structure with it Foreign loans have to carry out, whose amortization and interest service is an important item on the liabilities side of the foreign exchange budget today. A developing country must carefully consider whether and to what extent foreign loans should be taken out. Most of the time it overlooks the stresses that inevitably affect the Balance of payments impact.