Table Of ContentAmerican Divergences in the
Great Recession
Globalization is quite different from internationalization: the by-now
global market economy overwhelmed the sovereignty of the old national
states. Close to the 2007 crisis, some de-coupling effects were conse-
quent in most developed countries in comparison with the ex-Third
World. Latin America seemed to entail a “divergence” with the First
World, as unlike the past, it was not hit by the financial crisis, but old
historical fragilities invalidated the short positive cycle produced by high
international prices. This work deals with this crisis and its basic differ-
ences from the older crises of the Thirties and Seventies.
Daniele Pompejano is full professor of the History of Latin America pro-
gram at Università di Messina.
Routledge Studies in the History of the Americas
1 The Johnson Administration’s Cuba Policy
From “Dirty War” to Passive Containment
Håkan Karlsson and Tomás Diez Acosta
2 The Unheard Voice of Law in Bartolomé De La Casas’ Brevísima
Relación de la Destruición de las Indias
David T. Orique
3 The Nixon Administration and Cuba
Continuity and Rupture
Håkan Karlsson and Tomás Diez Acosta
4 Translating Cuba
Literature, Music, Film, Politics
Robert S. Lesman
5 Rio de Janeiro in the Global Meat Market, c. 1850 to c. 1930
How Fresh and Salted Meat Arrived at the Carioca Table
Maria-Aparecida Lopes
6 American Divergences in the Great Recession
Daniele Pompejano
7 Social and Political Transitions During the Left Turn in Latin America
Edited by Karen Silva-Torres, Carolina Rozo-Higuera and
Daniel S. Leon
8 A New Struggle for Independence in Modern Latin America
Edited by Pablo A. Baisotti
For more information about this series, please visit: https://www.
routledge.com/Routledge-Studies-in-the-History-of-the-Americas/
book-series/RSHAM
American Divergences in the
Great Recession
Daniele Pompejano
First published in English 2022
by Routledge
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© 2022 Taylor & Francis
The right of Daniele Pompejano to be identified as the author of
this work has been asserted by them in accordance with sections
77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted
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The whole work was published in Italian by Bruno Mondadori,
Milan 2018.
Library of Congress Cataloging-in-Publication Data
Names: Pompejano, Daniele, author.
Title: American divergences in the great recession / Daniele Pompejano.
Description: 1st Edition. | New York : Routledge Taylor & Francis
Group, 2021. | Series: Routledge studies in the history of the
americas; vol 23 | Includes bibliographical references and index.
Subjects: LCSH: Latin America—Economic conditions—1982– | United
States—Economic conditions—21st century. | Global Financial Crisis,
2008–2009.
Classification: LCC HC125 .P65827 2021 (print) | LCC HC125
(ebook) | DDC 330.98/00411—dc23
LC record available at https://lccn.loc.gov/2021011971
LC ebook record available at https://lccn.loc.gov/2021011972
ISBN: 978-0-367-45799-0 (hbk)
ISBN: 978-1-032-06858-9 (pbk)
ISBN: 978-1-003-02542-9 (ebk)
DOI: 10.4324/9781003025429
Typeset in Sabon LT Std
by KnowledgeWorks Global Ltd.
Contents
List of Figures vi
List of Tables vii
Introduction: The Dilemma of Currency 1
1 Without Gold and After the Dollar 16
2 Cycles of Crisis 34
3 Meanwhile, in Latin America… 75
4 The “Invisible Hand” of the Market 105
Conclusions: “Do Those Who Don’t Obey
the Rules Win”? 125
Index 133
Figures
1.1 Latin American, Chinese and South-East Asian
Involvement in International Trade in Percentages
(1953–2004) 18
1.2 Index of Commodity Prices (Except Oil), 1865–2010 24
2.1 Total US Currency Supply 56
2.2 Monetary Aggregate in Dollars, Dollars/gold and Total
Monetary Aggregate (M3*)/gold. *M3 Includes M1
and M2 Plus the Total Value of Bank Bonds, Repurchase
Agreements, and Money Market Fund Participations 57
3.1 Gross Fixed Capital Formation and Economic Growth
in Latin America (1961–2008) 77
3.2 Latin America: Contributions of Public and Private
Investment to Gross Fixed Capital Formation,
1991–2010 (in Dollars and at Constant 2005 Prices) 78
3.3 Foreign Debt (% of GDP) (1990–2013) 79
3.4 Global Flow of Foreign Investment in Latin America
and the Caribbean, 1990–2014 (in Billions of Dollars
and Percentages) 88
3.5 Total Foreign Direct Investment Flow by Groups of
Economies and Shares in Latin America, 1990–2014
(in Billions of Dollars and Percentages) 91
4.1 Latin American Exports in the Main Sectors and
Broken Down According to the Fox Corresponding
Percentage of Value Added 2000–2011 106
4.2 Total Factor Productivity 1960–2005 (1960=1). AL 7:
Averages for the seven most Developed Latin American
Economies. AL 17: Averages of all Economies (except
Guatemala and Cuba) 109
4.3 Unweighted Averages of Tax Collection in Latin
America as a Percentage of GDP and by Item
(1970–2000) 112
4.4 Latin America: Rate of Change in GDP and
Contribution of aggregate Demand 1991–2014 116
Tables
2.1 Developing Countries: Resource Flows 1970–2002
(in Millions of US Dollars as a Percentage of GDP) 46
3.1 Composition of External Flows in Latin America
1970–2010 (in % of the Total) 90
4.1 Latin America and More Developed Economies:
Tax Burden as a Percentage of GDP. AL 7:
Averages for the Seven Most Developed Latin
American Economies. AL 17: Averages of All
Economies (Except Guatemala and Cuba) 113
Introduction
The Dilemma of Currency
Known as the “Triffin dilemma”, the concept emerged well before the
release of the dollar from gold on August 15, 1971. Given the insuffi-
ciency of the precious metal, the currency of the country with the strong-
est economy – the pound, and, more recently, the dollar – is historically
assumed as a unit of account but also as an essential complement to
reserves. It, therefore, responds to the domestic needs of the issuing
country, but also provides the actors in international trade with means
of payment. The paradox is that the seigniorage in the issue corresponds
to a non-financial current account deficit, which, in the long run, may
undermine the confidence placed in the currency used as a reserve. But
it is no less important that the country that issues the currency of refer-
ence ends up importing capital from countries whose economies require
resources (Triffin, 1961).
We can link this contradiction to several more fundamental ambi-
guities. The oldest and most primal speaks of the nature itself of the
currency; that is, metal commodity money and then the so-called fidu-
ciary money, banknotes printed by commercial banks or by the central
bank. For just under a century, the latter has been entrusted with the
task of dispensing credit as a last resort and intervening in support of
financial institutions in temporary difficulty. But this function, which
seems completely natural today, has been the result of a complex process
involving the intertwining of the dynamics of private and public, internal
and international interests (Fergusson, 2009). From the reduced bound-
aries of national sovereignty, the function of a currency as the fulcrum
of compensation systems has expanded internationally and far beyond
its function as a mediator of trade. In the First World War, the issuance
of money and the production of credit instruments were essential in sus-
taining the mobilisation of the war and the subsequent reconstruction in
a regime of so-called suspended money supply (Maier, 1984).1 Almost all
of the countries involved in the war had been obliged to abandon the gold
standard; namely, the mechanism designed to engender confidence in a
national currency through its convertibility. The task of going back to
tying national currencies to a common denominator, in itself difficult in
