Monthly Archives: April 2011

DEVELOPMENT, NEOLIBERALISM AND ELECTORAL POLITICS IN LATIN AMERICA

DEVELOPMENT, NEOLIBERALISM AND ELECTORAL POLITICS IN LATIN AMERICA

R. Espinal

Development and Change Vol. 23

 A Summary

In a Nutshell

The notion of development has been changing in Latin America, as well as the ideas linking democracy and development.  Modernization theory has seen several challenges. Firstly it was surprising given the progress of modernization in the 50s and 60s that authoritarian regimes emerged where the theory posited a strong link between socio-economic development and democracy. Dependency theory then argued that democracy was not viable in the midst of widespread poverty and exploitation – a strong state was needed to pursue the much needed redistributive agenda. And yet contrary to the predictions of both of these theories democracy re-emerged in a time when poverty not only persisted but had intensified. Some  academics stressed ideological shifts in favour of democracy as a result of discredited military governments. Others thought it emerged due to international pressures, particularly coming from the US.

From Developmentalism to Neoliberalism

  • From the 1940s – 70s the state remained the central actor in the process of development. And yet it was the negative effects of developmentalism and particularly the recession in the mid-70s that led to a change of thought in the region, pioneered by Chile, and later followed in the 80s by the majority of LA economies. The state increasingly was the target of criticism.
  • In the midst of economic decline and crisis, neoliberalism that emphasised the market as the best means of organising production and income distribution, became the dominant ideology. The crisis served to unravel the problems inherent in developmentalism, and also liberalism was seen as a sign of modernity. The problem of development was no longer cast in terms of dependency or periphery, but as a problem of a corrupt and inefficient state that was preventing growth and modernization.
  • Yet with the exception of those that could form links with the international economy, the adjustment process proved catastrophic and the emphasis on technocratic leadership was antagonistic to a broad-based democracy.
  • As the region began to democratise, civilian governments were engaging with neoliberal reforms. This was an innovation as previously they had been imposed from the top down.  Additionally it acquired a more broad interpretation and application, moving from questions of a purely economic nature to an ideology that was redefining the relationship between the citizens and the state.

Electoral Politics and the New Right

  • As the dominant discourse in the region was neoliberalism, the populist parties that came to power were forced to implement policies that were in many ways alien to their traditions (PRI, Peronistas). These policies in turn helped to weaken corporatist ties with e.g. labour. E.g. Menem, fujimori etc.
  • What was curious was that the reforms, ideologically the mainstay of right of centre parties, were enacted by populists. This is because the populists were able to transform their politics to adopt an neoliberal agenda which pre-empted the growth of the parties of the Right. The Right were also unable to organize successfully.
  • In Mexico the Salinas government accepted neoliberal reforms, and confronted powerful union bosses, thus challenging corporatist ties. This is because the policies of export promotion, trade liberalisation etc. required weaker unions as the policies were in many respects an attack on organised labour.
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SIXTY YEARS Of ECLAC

SIXTY YEARS Of ECLAC: STRUCTURALISM AND NEO-STRUCTURALILSM

R. Bielschowsky

CEPAL Review 97, (April 2009)

 A Summary

In a Nutshell

This is a review of the thought coming out of CEPAL since its inception in 1948. The main point is that there has been a long continuity of ideas all centred around structuralist interpretations of development. Broadly though the period from 1950-1990 was the structuralist period.

  • The 1950s thought was focussed on industrialization.
  • The 1960s was concerned with industrial deepening as well as the reduction of inequality.
  • The 1970s saw focus shift somewhat to the reorientation of development styles.
  • The 1980s was a period of hiatus when ECLAC sought to concentrate more on macroeconomic issues of stability in response to the crisis that pervaded the region.

Since 1990 however, there has been a reformulation of the structuralist paradigm which has earned itself the moniker “neo-structuralism”. In essence this preserves the two main objectives of developing the productive to engage with the international economy whilst building a fairer and more equal society. However, the thinking was updated to encompass the realities of the international trading environment i.e. globalisation had progressed to such an extent that a wholly inward looking development model was no longer feasible. However, it also preserved alternative strategies and policies that were at odds with the neoliberal agenda. The programme was hetoerdox on macroeconomic issues, development oriented in terms of resource allocation and state intervention, and universalist in the social sphere.

The Structuralist Stage 1948-1990

  • The central countries were the producers of industrialised goods whereas as the periphery was characterised by production of primary products, a lack of productive diversity, varied levels of sector productivity with an unlimted supply of labour at subsitence wage levels and an institutional setting poorly oriented toward investment and technological progress.
  • Industrialisation which had been progressing spontaneously in the 30s and during WWII, progressed without the support of devlopment policy meaning an inability to close the widening gap between the centre and the periphery.
  • Overcoming the peripheral status required investment in multiple sectors, introducing technical progress and income redistribution. This project was critical due to the basic asymmetry between world demand for primary products, and the burgeoning peripheral demand for industrial products that would mean structural deficits in the balance of payments with negative repercussions for inflation and growth. This was particularly the case given the decline in the terms of trade in the post war period.
  • In the 60s it was recongised that the industrialization that had occurred was not eradicating poverty etc. and so institutional reform, including land reform, in order to link institutions with development.
  • The 70s carried forward these analyses but industrial deepening was now thought to be dependent on export promotion (as in the NICs) together wit expansion of the domestic market. This was put forward as a way to reduce external vulnerability as well as an alternative to excessive foreign borrowing. Additionally the message was pro income redistribution meaning the restoration of democracy in the region.
  • The 80s shifted toward renegotiation of debt to allow adjustment with growth. In general ideas were heterodox. There was a general rejection of neoliberalism in favour of what would become known as neo-structuralism.

The Neo-Structuralist State 1990-2008

  • A reconsideration of neoliberalism was urged, meaning new trade policies, control of capital flows and new social policies. The thinking was not anti neo-liberal as such as CEPAL had to build bridges with those economies that had undertaken neoliberal reforms. Particularly, whilst state participation in the economy needed to be reviewed, CEPAL continued to advocate a key role for the state in the socio-economic development agenda.
  • Trade openness should be selective and strengthened with a high and stable exchange rate to create genuine competitiveness i.e. that based on productive capacity and innovation with human capital development, rather than that based on wage advantages, or exchange rates.

New Developments

a)      Reform evaluation: based on the performance of the 1990s, the neoliberal reforms were evaluated. On the light side there was inflation control, reduction of deficits, increased fdi, export diversification. On the dark side there was volatile growth, continued crisis, unstable flows of capital, increased poverty and inequality.

b)      A Global Agenda: new ideas about how to relate to a globalised world.

c)      Countercyclical macro policies: instability of growth linked to financial capital volatility. Macroeconomic policy should not be pro-cyclical and it should target the real economy.

THE POLITICS Of ANTIPOLITICS

THE POLITICS Of ANTIPOLITICS

CHAPTER 27 B. LOVEMAN

PROTECTED DEMOCRACIES: ANTIPOLITICS AND POLITICAL TRANSITIONS IN LATIN AMERICA, 1978-1994

A Summary

In a Nutshell

Despite the conversion to democracy in Latin America fundamental aspects of antipolitics remain. The aspects most antithetical to democracy are

a)      The wide constitutional provisions that allow for regimes of exception.

  • These provisions ranged from partial or complete suspension of civil liberties to suspension of the constitution, and even to military law.
  • These were not new innovations, they have been a constant part of Latin American constitutionalism.
  • Such measures have frequently legitimised tyranny.
  • Regimes of exception were invoked frequently in Peru and El Salvador, in response to guerrilla warfare.

b)      The continued and in some cases expanded role of the military as guardians of the constitution, and arbiters of peace in the face of challenges both external and internal.

  • In the 50s and 60s the military expanded its mission by widening the definition of national security. The military saw itself as the founder of their nations as well as the guardians.
  • The transition constitutions not only continued to recognise this role, but they often expanded it. In Guatemala the military is charged with preventing presidents seeking re-election.
  • In effect the measures make the military an autonomous branch of government – the political arbiter of the new democracies.

c)      Draconian national security laws founded on a very wide principal of national security that allows for rights to be suppressed.

  • Examples being censorship, political repression etc.
  • They outlaw certain types of political activity based on the preservation of national security. In effect however they are no more than a permanent limit on civil liberties and rights.

The above factors question the depth of democracy in Latin America, and even if the provisions are not used, their presence in the constitution etc. is indication that Latin American states will continue to be protected democracies.

Their existence is nothing new, indeed they have been present in Latin American politics since the colonial era. Thus one of the reasons for their continued existence is that they were inherited by the transition governments. However, notwithstanding the truth of this statement, it is still the case that in many cases the measures were expanded under the transition rulers. This is the case with the national security laws in Peru.

Although there may have been some will amongst politicians to purge the law of antidemocratic provisions, the nature of transition governments meant that such a project was not feasible. This is because the military were not willing to allow their power to be curtailed; this manifested itself in an inability for governments to convict military personnel guilty of human rights violations under authoritarian regimes, and also a continued special place for the military in public life, including policy formation.

As the military governments were not ousted by popular uprising, they were not entirely discredited as an institution. Therefore a delicate tension remains between civilian governments and the military. The civilian regime must be careful not to enact policy that would impel the military to take action. This was no easy task in Latin America, as neoliberalism was provoked angry protest in several cases – Venezuela and Brazil being the most important examples. Thus pragmatism and centrism were the fundamental tenets of policy debate, rather than wide ranging political debate. That being said, the feeling that there were no alternatives to neoliberalism severely limited the ability of the military to object, no matter how unpopular the reforms were. There was a constant concern that there would be a military response should civilian governments act “imprudently” in matters of concern to the military.

Thus the transition democracies were based on compromise. Whilst power was transferred to civilian governments by free elections, this could only occur if a number of conditions held:

  • Impunity from prosecution for human rights crimes for military personnel.
  • Acceptance of military imposed restrictions on who may stand for office (continued exclusion of the Left).
  • Observance of significant restraints on incoming governments.

In sum, the civilian governments had to accept the reality of military guardianship meaning that the transfer of power had as a price tag surrender to the traditional impediments to full democracy.

THE POLITICS OF MARKET REFORM

THE POLITICS OF MARKET REFORM

K. Weyland

Chapters V and VI

A Summary

 

In a Nutshell

Weyland interprets the conversion to market economics using prospect theory. This essentially postulates that the crisis affecting Brazil, Argentina and Peru meant that a majority of the population saw themselves in the “domain of losses” mostly due to inflation. They thus made a risk seeking response in electing political outsiders (Collor, Menem and Fujimori respectively). These new chief executives also saw themselves in the domain of losses thus becoming highly risk acceptant and therefore led their countries down a path of market reforms. They were not tied down by previous decision bias, and they had learnt from the recent failure of heterodoxy. In choosing the reform measures they were far more drastic and draconian than even the IFIs were advocating. They imposed high short-term costs on important sectors, and strata of society. Yet, the public were initially supportive. This fact reflects the acceptance of costs due to risk seeking in the domain of losses.

 Venezuela’s public did not accept the reforms. Perez was not a political outsider, and when tried to push through reforms there were major riots in the streets. The driving factor behind acceptance in the other cases, and failure for Venezuela was the severity of the crisis. In Venezuela, inflation had not reached anything like the levels it had in Peru, Argentina, Brazil, and as such the majority did not see themselves in the domain of losses meaning that the high costs imposed by stabilization were thought to be unjustified.

 The politics of this time should be classified as neo-populist due to reliance on the anti-establishment credentials by the politically outsider presidents of BAP, as well as the invocation of the will of the people against entrenched interests.

 The Rise of Political Outsiders

  • The huge losses suffered due to hyperinflation looked set to continue, so in Braz, Arg and Peru, the voters took a risk by electing political outsiders with weak track records. By contrast, Venezuelans elected a former president, Perez, as the economic decline was much more gradual and so the populace did not see themselves in the domain of losses.
  • The governments of BAP had been thoroughly discredited (collapse of spring plan [Arg], summer plan [Braz]). Thus risk seeking in the domain of losses induced voters to reject decisively the incumbents. Critically for the argument, there were much more moderate alternatives, that offered change at a much lower risk than the candidates actually chosen as they had technical know-how, organizational capabilities etc. However, the risk seeking led electorates to reject the political class as a whole and vote for outsiders. The politicians themselves reinforced their outsider credentials by populist campaign rhetoric which attacked established elites.

 The Initiation of Drastic Adjustment

The Depth of the Crisis

  • On taking office the presidents were privy to the previously private information about the full extent of the crisis, so they took over under much worse economic conditions.
  • Conditions varied: Venezuela did not have hyperinflation. Argentina was worse than Brazil as Arg had been in stagnation for years whereas Braz had been growing. Also Brazil was fully indexed so the population did not feel the effects of inflation in the same way. The burden there fell mostly in the large informal sector.

 External Constraints and Pressures

  • IFIs recommended orthodox adjustment. But in none of the countries was this decisive. The IMF had a lot of influence in Venezuela and Peru, but the programmes in Argentina and Brazil were designed by domestic economists, although they did follow broadly the Washington Consensus. All plans were radically bolder and more risky (e.g. debt moratorium and capital freezing in Brazil, and the convertibility plan in Arg) than the IFIs recommended who were worried about domestic backlash. 

 Learning from Prior Experiences

  • Heterodoxy had lost its appeal.
  • So there was learning, but no real learning about how to enact market reform. Additionally, the experience of Chile was not good – the early stabilization there caused a huge increase in poverty and eventually the crisis of the early 80s. There were only really positive results when reforms were made in a more incremental way with sustained growth. Moreover the violent reaction by the people of Venezuela to the neoliberal reforms was widely interpreted as a rejection of the paradigm.

 Domain of Losses

  • The presidents overshot IFI influence and owned the policies. As soon as the crisis passed and growth resumed they reverted to risk aversion.
  • They were not tied down by prior decision bias so could chart a new course.
  • They saw themselves in the domain of losses. This led them to choose particularly risky policies.

Venezuela:

  • Raised public sector prices, reduced public spending, opened up the country to trade.
  • Deep recession caused by enactment at high speed.
  • The oil bonanza of 1990-91 caused Perez to slack off it austerity program, using the funds for public spending to ease the pain of adjustment.

Argentina:

  • Menem also proceeded at high speed, diverging from his campaign rhetoric by trying to dismantle ISI model
  • 1st plan failed at end of 1989, so he upped the ante by forcibly retaining financial assets (highly risky due to offence caused to capitalists).
  • Convertibility plan tied the government’s hands to non-intervention in ex-rate policy which sent a signal to international investors.

Brazil:

  • Collor chose the most radical plan on the table.
  • Spending cuts, tax hikes, privatization, liquidity confiscated for 18 months, froze savings accounts.

Peru:

  • Abrupt devaluation, tax increases
  • Painful stabilization especially given the already high level of poverty.
  • In all cases the paths chosen had lower expected values than some of the more prudent alternatives. Yet they held the promise of a quick turnaround, and this promise was enough to risk potentially total economic meltdown. The more moderate response was particularly feasible in Venezuela due to the absence of hyperinflation.

 The Popular Response

  • Divergence in the severity of the problems facing the citizens determined the different levels of support for reform.
  • Presidents diverged from their campaigns, and could not have foreseen the popular support, showing that they did not act as simple agents of the citizens.
  • In BAP initial support was very strong. There was even support when Fujimori closed down the Congress. Not the case in Venezuela.

 Neo-Populism

  • Outsiders + heterogeneous support networks + “will of the people” rhetoric against special interests, meant that neoliberal economics and populist politics went hand in hand [although the working classes were the hardest hit by the reforms, so their welfare was not at the top of the priority list as it was with more traditional populism].
    • They weakened interest groups, extended personal latitude, dismantle bureaucratic structures etc. which allowed them to assault the numerous subsidies and protections that were part of the reform.
    • Neo-populist rhetoric legitimized the reforms
    • Increase tax takings allowed new forms of discretionary spending further boosting support. [See Schamis].
    • In the end Collor went the same was as Perez whereas Fujimori and Menem won re-election. Whereas Collor was constrained by the Brazilian congress, Fujimori was able to shut congress due to the extraordinary depth of the crisis in Peru which made such an action acceptable.

 Slowdown of Reform

  • The Argentine convertibility plan controlled inflation and growth between 1991-1994 reached 7.5%.
  • Peru grew at 7% in 1993 and 14% in 1994.
  • As the economies recovered, leaders and population entered into the domain of gains, so Menem and Fujimori gave up their initial boldness and became much more cautious. Labour market deregulation and social security reform languished in congress, and continued privatization required ever more concessions.
  • The Mexican crisis of 1994 motivated the Menem government to give a renewed push.

 Political Failure of Neoliberal Reform in Brazil

  • Collor was unable to achieve stabilization. Prices were on the rise again in 1991 after two shock plans had failed. He was politically isolated without much political support so was unable to enact audacious reforms like the convertibility package in Argentina. He lacked the clout to push policy through congress.
  • He did however set in motion the processes that enabled the subsequent Franco government to undertake adjustment efforts.

THE POLITICAL ECONOMY OF RECENT CONVERSIONS TO MARKET ECONOMICS IN LATIN AMERICA

THE POLITICAL ECONOMY OF RECENT CONVERSIONS TO MARKET ECONOMICS IN LATIN AMERICA

D. E. Hojman

Journal of Latin American Studies, Vol. 26, No.1 (Feb., 1994)

A Summary

 

In a Nutshell

The free market reforms that occurred in LA in the 1990s were remarkable particularly as they occurred under conditions of democracy at a time when it was thought such reforms could only be successfully implemented under authoritarian rule. However, there is no single sufficient factor that can explain the conversion. Different factors took on different significance in different countries, and what was of particular importance was the differing interaction between factors. Hojman outlines the 6 most important factors.

  1. Lessons learnt from the debt crisis and its aftermath
  2. More highly qualified technocrats
  3. Development of an entrepreneurial middle class
  4. Exhaustion of ISI
  5. Tax reform, export diversification and financial modernization
  6. Public opinion

 The Debt Crisis and Environment of Ideas

  • Free market reforms are easier to accept if the country is in crisis [Weyland – and the depth of the crisis may help understand the strength of the response, and public support for it]. Additionally policy makers may have learnt from recent mistaken attempts at heterodoxy e.g. the Menem government that followed Alfonsin in Argentina. Indeed, reforms did occur post crisis, but not always e.g. Chile in the 70s.
  • Temptation to see structural reform as imposed, but it is important to distinguish between stabilization and structural adjustment. Often academics confuse the two notions, but it was only the latter that was required by the IFIs. Part of the reason for the confusion is that structural reforms were undertaken as stabilization measures [see Weyland piece summarized this week].
  • There was an intellectual shift toward free market reforms. Whereas this had previously only been supported by the Chicago school economists, now MIT (Dornbusch) and Harvard (Sachs) were on board too.
  • Free market policies are rewarded by loans and investment, and populism is punished by withdrawal. This aspect is related to the internationalization of the world economy. Perhaps the forces of globalization were simply not capable of being resisted.
  • Chile’s reforms had little to do with the debt crisis. The reforms were a continuation of past experiments at export promotion, and perhaps inspired by the Chicago boys who were very active in that country.
  • Mexico can be more directly linked to the crisis, but there were important factors such as the new presence of highly trained technocrats, as well as the pressures arising from the close proximity to the US, and the lure of gains to be had from the NAFTA agreement.
  • Bolivia follows partly the crisis/acceptance idea [Weyland].

 Technocrats

  • Colombia has always had high academic standards in the finance and related ministries. A PhD is a prerequisite. This may explain the absence of populist policies in recent history as well as relative macroeconomic stability.
  • Venezuela is the opposite. They have been unable to train and maintain tax specialists, meaning tax reform has been very slow etc.
  • Chile’s reforms under the military regime were suggested by the Chicago economists.
  • Not present in Bolivia.
  • Technocrats could not persuade Brazil to adopt reforms.

 Entrepreneurial Middle Classes

  • The presence of a middle class does not start free market reform, but it may help sustain it. [I am not sure on what basis he says that reforms have ideological or political rather than sociological bases, but it is stated as a given in the text.] The main evidence for this is that middle classes have been developing for some time in LA, but it was not until the 80s that free market reforms were enacted in a broad range of economies.
  • The Sachs thesis that populist policies are easier to accept in countries with higher inequalities as the poor have little to lose seems to fit here. Chile had the most advanced middle class, and they were also the first to go for market reforms. Argentina likewise has a more even distribution than say Brazil, and this meant that reforms were more readily accepted.
  • In Mexico, a large middle class associated with the maquilas sprung up and demanded more openness. They were clearly to benefit from the NAFTA agreement.

 Exhaustion of ISI

  • Exhaustion had been forecast since the 1960s, but in the 80s/90s, many scholars now saw its decline as inevitable and irreversible.
  • The effects of this were felt differently in the different economies. In the medium sized economies of Chile, Colombia, Peru etc. exhaustion was felt earlier as domestic markets were too small to sustain industry. This meant some protection levels were at 1000% for the car market for example. The Andean pact was an attempt to extend ISI by increasing the market size, but it failed. In the larger economies such as Brazil, Argentina and Mexico, ISI continued to be more or less successful and there as an eventual switch to export promotion alongside ISI.
  • The size etc. of Brazil can explain why free market reforms were slower and less enthusiastically adopted there than in other states. Subsidies are still high, and industries are supported e.g. computer industry. Additionally, free market reforms are associated with Collor and he was thrown out on corruption charges so they have a bad name.
  • There was a significant demonstration effect provided by the East Asian miracle growth countries.

 Tax Reform, Financial Modernization and Export Diversification

  • None of these are necessary nor sufficient, but they did help the implementation of the reforms as once they are performed regression to a more backward policy regime is harder to achieve.
  • Colombia pioneered tax reform. Followed by Uruguay and Chile. They have generally been value added rather than progressive income taxes. Thus it has been necessary to leave behind the idea of income redistribution through taxation.
  • Diversification of exports has occurred. Between 1970 and 1990 primary exports fell from 66% to 41% of total exports, as manufactures rose from 11, to 35%. Export diversification occurs when a number of domestic products become competitive on an international market and as such is not the result of subsidies, but of micro-processes connected to the discovery, adoption and diffusion of technological capabilities etc. This is more a result of rather than a cause of free market reforms. But once it occurs and new middle classes of exporters arise, dynamic pressures are generated to pursue the reforms further.

 Public Opinion

  • Media has been behind the reforms (Chile ESP.).
  • There is broad support for the reforms.
  • Voter learning.
  • It is often argued that reform damages the poor [which I agree with in terms of poor design, sequencing, lack of focus on the poverty etc.]
  • [See Weyland piece for more in depth analysis of public opinion.

Other Possible Factors

  • Collapse of Soviet Union.
  • Bolivia demonstrated the ability to cut inflation from 1000s to single digits – i.e. a bandwagon.
  • Mexico encouraged by special relationship with US

TENSIONS IN THE BUREAUCRATIC-AUTHORITARIAN STATE AND THE QUESTION OF DEMOCRACY

TENSIONS IN THE BUREAUCRATIC-AUTHORITARIAN STATE AND THE QUESTION OF DEMOCRACY

G. O’Donnell

In D. Collier (ed.) The New Authoritarianism

A Summary

 

In a Nutshell

This article is not strictly about the emergence of BA, but rather the evolution of it once in place. The central idea is this: A tension exists between the logic of the regime and its survival; a rejection of the basis of its own legitimacy. Popular classes are excluded from the benefits of BA and as such are expected to be tacitly consensual i.e. not put up any resistance due to the climate of fear based on violence. Initially much of the industrial sector and bourgeoisie are part of the supporting coalition. However, the orthodox policies pursued in the initial stages of BA alienate most of the middle classes and reveal that the only natural supporters of the regime are foreign capital and large domestic capital. The new losers join the ranks of the tacitly consensual popular classes. Thus the support base is extremely narrow.

 The solitude of power leads eventually for calls for more participation particularly by the somewhat excluded middle classes. Absent the ability to unite the nation behind a common narrative, such as the PRI in Mexico (based on revolutionary history); there is no way for the state to mediate between these conflicts. The excluded entrepreneurs lobby the state institutions for favours and special treatment and this causes an erosion in the state institutional capacity. Corporatism is not an option as the upper bourgeoisie do not want to be incorporated into the state. In this climate and absent other options for mediation between the state and the citizenry, there is nostalgia for democracy.

 If there is some democracy the state can base its authority on a source exterior to the state, whereas once the popular classes and middle classes are excluded it becomes obvious that the basis for the state is nothing more than its own conception of itself. It is revealed as operating for solely the highest bourgeoisie, and being based on coercion. The restoration of democracy would also mean that problems of succession would be solved, which were a frequent source of clash between governments and the military backers (no leader in Brazil was able to appoint his successor, and there was always tension surrounding the appointment.)

 Yet it would need to be the type of democracy that is still capable of excluding the popular classes, or at least preventing social mobilization based on class, whilst still giving enough legitimacy for the regime to be able to maintain its hegemony. In societies where the “threat” the popular classes posed to the established order pre-BA was very strong (such as Chile) such a suggestion of democracy cannot come from within the regime, as it is much securer in its purpose to prevent the mobilization of the working class. Where however, the threat was weaker (such as in Argentina), democratization in 1966 was incorporated into the regime as the ultimate goal toward which they would move. [This level of threat analysis is extended to many other variables in the works of O’Donnell, and will be summarized in the Remmer and Merx article also in this week’s selection.]

 He provides a useful list of characteristics of BA regimes:

 The regime is the guarantor of the domination of the upper fractions of a highly transnational bourgeoisie. This upper echelon is the sole social base of the regime.

  1. Institutionally it is based on normalization of the economy and restoration of order. This means political deactivation of the popular sector.
  2. It is a system of political exclusion of a previously activated popular sector which becomes subject to strict controls in order to remove it from the political life of the state. This is part of an attempt to impost “order” necessary to achieve growth, and to remove politics from the chaos of civilian rule.
  3. This exclusion involves the suppression of citizenship i.e. liquidation of political democracy, the channels of access to government, popular organizations, and channels of appeal for social justice. It places itself as before a “sick” nation expressed in rhetoric based on the severity of the crisis immediately before the imposition of BA.
  4. It promotes a pattern of capital accumulation based on a highly skewed distribution toward large oligopolistic units, private capital and some state institutions.
  5. It promotes the internationalization of the productive structure resulting in denationalization of society. This includes foreign debt financing, FDI etc.
  6. Through its institutions staffed by technocrats it seeks to appear objective in terms of economic rationality, and this rationality compliments the prohibition against invoking causes of substantive justice (redistribution).
  7. Access to the government is limited to those who stand at the apex of large corporations.  

ON THE CHARACTERISTICS OF AUTHORITARIAN REGIMES IN LATIN AMERICA

ON THE CHARACTERISTICS OF AUTHORITARIAN REGIMES IN LATIN AMERICA

F.H. Cardoso

In D. Collier (ed.) The New Authoritarianism

A Summary

 

Bureaucratic-Authoritarianism

  • Although military in nature the regimes are not headed by a single general who imposes order by decree (as in past episodes of military rule in LA). Rather the military rules as an institution in order to restructure the economy and society along the national security ideological line of modern military doctrine.
  • This is different from European fascism as BA fears popular mobilization whereas fascism relied upon it. It is precisely the fear of the popular classes that drives their repression under BA, and leads them to repress wages, cut organizational links between civil society and the state, and to control the election process. The army as guarantor of stability prefers a technocratic relationship between citizen and state.
  • The regime made no attempt to promote the doctrine of harmony amongst the classes by way of stimulating class organization. Nor was it corporatist. It did not in other words build links with society in a consistent manner.
  • It was not nationalist as fascism, or populism was. This is because it relies on being a dependent economy, and part of the economic strategy is industrialization based upon foreign investment and capital.
  • Mexico was not BA as the military was not involved.

Regime and State

  • Mexico highlights a distinction for Cardoso as between state and regime. Regime is the set of formal rules that binds institutions together, and the citizens to the rulers. The state meanwhile is the “pact of domination” that exists amongst the dominant classes, and the norms which guarantee their dominance.
  • Thus the “state” in LA could broadly be defined as dependent capitalist, and this explains why we see many similar traits between countries such as Brazil and Mexico (similar means of capital accumulation, wage control, income distribution). However, the regime in those countries was different, Braz being BA, and Mexico being something similar to liberal authoritarianism. Thus states that are the same can sustain a variety of regimes including both democratic (Colombia, Venezuela) and BA (Argentina, Brazil etc.).
  • There is room for exploring the compatibility between different forms of dependent capitalist state, and different types of regime. So it is valid to ask under what circumstances a democratic regime can be sustained given a capitalist state based upon increasing inequality. Some even argue that this is the reason for BA in Arg, Chile, Uruguay. However, the achievements of Venezuela and Brazil (pre-coup) in attaining similar patterns of development show it is possible under democracy as well. Furthermore, it is hard to believe that exclusively economic motives were behind the military mobilizations in the region.
  • Moreover it is hard to identify a homogenous set of economic interests within the BA states. So whilst Chile was concerned to dismantle state owned enterprises, Brazil enlarged the sphere of state production

 

  • “There is no greater irrationality than the belief that history can be fully understood through formal rationality.” Thus it is hopeless to look at political event from a purely economic perspective.
  • It is likewise simplistic to think the dependent capitalist process can only occur through authoritarianism.

OVERVIEW OF THE BUREAUCRATIC-AUTHORITARIAN MODEL

OVERVIEW OF THE BUREAUCRATIC-AUTHORITARIAN MODEL

D. Collier

In D. Collier (ed.) The New Authoritarianism

 A Summary

In a Nutshell

Modernisation theory in development literature suggested that socio-economic modernization and democracy go hand in hand, this is why the conversion to authoritarianism in LA proposed such a challenge to academics. More generally the change happened in an era where the expectations of the 50s and 60s that greater economic and social equality would lead to a more democratic form of politics, were eroded. In place of these ideas it was now suggested that in late developing nations, more advanced industrialization may coincide with the collapse of democracy, and an increase in inequality. Indeed it was posited that the social, political and economic tensions generated by the particular type of dependent capitalist industrialization led to the collapse of the populist regimes, and hence as the popular sector as one of political strength. The elimination of the popular sector from politics, and the associated regressive move of income toward the middle and upper classes greatly increased inequality under BA.

The remainder of the chapter summarizes the key points of the O’Donnell thesis:

Political Systems and Change

  • Regime: the structure of politics – repression, representation, freedoms etc.
  • Coalition: class and sectoral composition of dominant political forces.
  • Policies: specific tools for allocating resources.

There are three types of “constellation” for O’Donnell that have different patterns of regime, coalition and policy

  1. Oligarchic: limited political competition. The elite is based upon primary product exports, and policy is geared toward this end (open economy). The system is not yet incorporating or excluding as the popular sector is not yet activated
  2. Populist: incorporating, multi-class coalition of urban-industrial interests including industrial elite and working classes. Economic nationalism is common. The state promotes industrialization based upon consumer goods.
  3. Bureaucratic-Authoritarianism: excluding systems that are non-democratic. Central actors are technocrats, military and civilian. Policy is concerned with advanced industrialization, and representation, elections etc. are eliminated.

The political transformations that move us from one to the other derive from social and political tensions produced by industrialization and by changes in the social structure. There are three particularly relevant factors:

  1. Industrialization: different phases linked to political changes as payoffs accrue to different class groups. Consumer goods production associated with the move from oligarchy to populism. This allows for the incorporation of the working class as wage setting can be generous without import competition, and also beneficial in expanding the domestic market. Thus workers receive important material benefits. Once this phase is complete, there are tensions as opportunities for expansion become more limited. The cost of importing the capital and intermediate goods is driving inflation, a balance of payment deficit, foreign indebtedness etc. Thus a shift to more orthodox policies is needed to create deepening of industry through domestic manufacturing of intermediate and capital goods. However in order to do this technology, managerial experience and capital is needed, and these things are often associated with multinational corporations. The need to attract this type of investment drives the adaptation of the move to orthodoxy.
  2. Activation of the Popular Sector: The popular sector will challenge the move to orthodoxy. There is thus a gap between demands and policies leading to strikes, and political/economic crisis.
  3. Technocratic Rules: Technocrats perceive high levels of popular sector mobilization as an obstacle to economic growth. They are thus bale to form a coup coalition.

The above process was evident in Brazil (1964), Argentina (1966, and 1976), Uruguay and Chile (1973). The case of Mex was once where phases one ISI was completed in an already fairly authoritarian society meaning the transition to advanced industrialization were accompanied by a continuity of political institutions.

The Evolution of Bureaucratic-Authoritarianism

  • Groups that initially supported the coup (entrepreneurs and middle classes) soon find themselves hurt by the orthodox polices. This means the principal class that supports the government is foreign capital. After a while there are increased called for this relationship to expand to include the middle classes.
  • This transition occurs according to the level of threat existent in the pre-coup society. i.e. the greater the threat to capitalism in the pre-coup era, the stronger the technocratic coalition will be, and so they will be better able to maintain order. This is seen in Brazil where the pre-coup crisis was severe and the subsequent regime strong, as compared to Argentina where the crisis was far less serious meaning elite cohesion post-coup was weaker which ultimately led to the regime falling.

Conclusion

  • At a general level the framework focuses on the interaction between crucial features of politics in LA – dominant collation, regime and policy.
  • At a more specific level it focuses on economic problems associated with different levels of industrialization and the perception of threat as a driving force of the evolution of BA.

POLITICAL REGIMES AND ECONOMIC PERFORMANCE IN LATIN AMERICA

POLITICAL REGIMES AND ECONOMIC PERFORMANCE IN LATIN AMERICA

J. Hartlyn & S. Morely

Chapter 2 from Hartlyn & Morely Latin American Political Economy: Financial Crises and Political Change (1986).

 A Summary

Political Regimes

They define political regimes according to

  1. The right to free association, free speech and associated rights
  2. That the leaders compete in elections for periodic validation of the right to govern
  3. The ability of all citizens to effectively participate.

Authoritarian regimes are those that are lacking in one or more of the qualities.

Regime oscillations have been particularly dramatic in Argentina, Brazil and Peru. Chile and Uruguay were democratic for years before the turn to authoritarianism [which makes their fall all the more surprising, as the norms of democracy were presumably to some extent institutionalized. This could be a foil to the Huntington argument.]

  • Regime change has been associated with dramatic shifts in economic policy [indeed the dramatic shifts in some way seem to explain the prevalence of economic based arguments for the conversion to BA.] The moderate nature of politics in Colombia may thus explain why the economic changes have been rather more gradual [e.g. the beginnings of export promotion and mini devaluations – see Hirschman and Serra].
  • They define Mexico is semi competitive, although it may be better described as liberal authoritarian. In any event, the PRI have a legitimacy stemming from the revolution [Hirschman thinks this allows for unequal growth with social stability – this type of share experience narrative does not seem to form part of the Huntington thesis], but control has been extensive with occasional bouts of repression.

Bureaucratic Authoritarian Regimes

  • Brazil 1964, Arg 1966 – the military ruled as an institution rather than as individual military leaders. They had a technocratic approach to policy. Chile fell in 1973, as did Uruguay. A new BA regime installed in Arg in 1976.
  • Depoliticize and thus scale back the demands of labour based upon the threat from left wing mobilization from below and the need to impose economic growth and stability. This involved the erosion of forms of representation, unions, parties, etc.

Economic Growth and Social Equity

  • Growth in the post war period was good. It peaked in the 60s and growth fell in the 70s. Performance was very much conditioned on whether the country underwent an enforced contraction e.g. Brazil in 1964-67.
  • The 80s were obviously a disaster.
  • Although the region made huge increases in investment over the period, the rate of domestic saving was very low, meaning it was funded by foreign saving, i.e. debt. This is with the exception of Colombia. Thus much of the investment goods carried with them a serious liability, and repayment was contingent on the ability to earn forex. In other words, capital constraints were met by borrowing.
  • The balance of payments constraints were similarly met by foreign debt.
  • The period of ISI up to 1965 saw import ratios fell, and neglected exports which also fell. As the system wound up its usefulness and BA regimes came to power which started to think about new ways of developing based on market principals. In many countries tariff levels were cautiously reduced, subsidies for exports introduced, and a more realistic exchange rate pursued. This trend for more openness continued into the 70s except in Mexico. However, ISI was still in full swing, and Brazil regressed somewhat in response to the oil shocks. However, the region was more open
  • There were great advances made in life expectancy, and education whose potential has not fully been met by the lack of absorptive power of the formal labour market. This leads to potential unrest [Huntington].
  • By and large the growth did nothing to improve the state of income inequality as capital and skills intensive growth was pursued (consumer durables etc.). This ignores to some extent upward mobility, but nevertheless the picture is bleak.

 

 

POLITICAL ORDER IN CHANGING SOCIETIES

POLITICAL ORDER IN CHANGING SOCIETIES

Samuel P. Huntington

A Summary of the opening chapters

 

In a Nutshell 

“Economic development and political stability are two independent goals and progress toward one has no necessary connection with progress toward the other.”

  •  Huntington is arguing that institutions are not a necessary condition for economic growth nor modernization. Economic growth and specifically modernization do not wait to be invited by a set of good institutions, they force themselves on societies and governments without waiting for certain conditions to exist that would enable them to continue in a persistent and sustainable manner. So what role do institutions plays for Huntington? Are they thus non-essential components of society? Quite the contrary: Huntington states that that very stability of society is founded on the institutions in place. Modernization and growth are destructive forces for him, and they have a tendency to rip societies apart if strong political institutions are not in place to mediate the chaos that can ensue. Therefore, although good institutions may not be essential for growth and modernization, an absence of such institutions in the face of the unstoppable tide of modernization will lead to political and social decay, and eventually to failed states, constants coups, political violence and stagnation.
  • He uses the USA, USSR and GB as counterexamples drawn from Latin America (LA), Asia and Africa. I am going to leave out of this summary a lot of the country specific examples as I think the ideas are more important in this case.

The Political Gap 

“The most important distinction between countries concerns not their form of government but their degree of government.” 

  • In the US/GB/USSR the people and the government share a vision of the public interest and the principals upon which political order is based. There is consensus as to the legitimacy of the rulers. This gives them power to execute policy, collect tax etc. In short, it allows them to govern, and for Huntington nothing is more important than in a complex group of people, there is effective government.
  • In LA government do not govern – the political community is fragmented and institutions have little power. This difference between US/USSR/GB etc. and LA/Africa/Asia is the “political gap”.
  • There is also an “economic gap” but the two are not identical, although they are related. Countries with underdeveloped economies can be highly developed politically and vice-versa.
  • Huntington observes chaos is developing countries: coups (17 from 20 LA countries experienced coup since WWII), revolutionary violence, oligarchic dictatorships (Nicaragua etc.) – i.e. instability. He asks, what is the cause of this instability?
  • Thus the core thesis of his book was that it was caused by rapid social change brought on by modernization coupled with the slow development of political institutions (the political gap).
  • Modernization is increasing political participation before people have learnt how to associate with each other i.e. political and institutional development is lagging behind political participation and the result is instability.
  • Modern aid and overseas development plans are too focused on economic development rather than addressing the promotion of political stability as they assume that the latter follows the former. But this is not the case, as you see in the opening quotation.
  • Indeed it seems that preoccupation even with democratic institutions is folly. American always believe that free elections are the solution but Huntington says that in many modernizing countries they only exacerbate problems and tear down the structure of public authority. “The primary problem is not liberty but the creation of a legitimate public order. Men may of course have order without liberty but they cannot have liberty without order.” Thus in the chaos of competing forces Communism can provide an alternative. It may be no better at creating a prosperous society, but they do provide effective authority. [I am not sure of the extent to which he is approving or even recommending authoritarianism here. It would seem he is at least tacitly saying that authoritarianism is better than chaotic democracy, but then perhaps he is simply stating what appears to be an intuitive truth that we cannot have absolute liberty for all without governing structures to mediate human relationships when they reach out beyond the immediate family or clan level.

Political Institutions

“The level of political community a society achieves reflects the relationship between its political institutions and the social forces which comprise it.” 

  • Political community and institutions are only needed when societies move beyond interaction merely within their own clan. If all belonged to the same social force, conflict would be resolved through the structure of that social force. In modern, heterogeneous societies no single force can rule without creating political institutions that exist outside of the forces that created them.
  • When communities form outside of the clan or family men relate themselves to something other than themselves, an idea, a myth, a principal or code of behaviour. This is commonwealth – an agreement on the laws and rights that allow all to participate in mutual advantages. This type of complex community is thus ”produced by political action and maintained by political institutions”.

The strength of the community thus depends on the support for the organizations and the “level of institutionalization” How do we judge institutionalization?

  1. Adaptability/Rigidity – the more adaptable the more institutionalized they are, the more rigid, well, you get the idea. Institutions are set up for a specific purpose. Once the purpose is spent the institution may adapt or die. It must also adapt as new situations come along. Eventually this process of adaptation makes the organisation exist beyond its initial function – it valued by leaders and members for its own sake and it thus “develops a life of its own”.
  2. Complexity/Simplicity – the more complicated an organisation the more institutionalized they are. This involves multiplication of subunits, hierarchy etc. Simple systems are overburdened by modernization and will destroyed, a political system with several different political institutions is more likely to be able to adapt. It is more likely to be a mixed state which is more stable and will not dissolve into tyranny (if pure kingship), oligarchy (if pure aristocratic rule) nor mob rule (if pure democracy).
  3. 3.       Autonomy/Subordination – the more political institutions exist outside of other social groupings the more institutionalized they are. They are insulated from social pressures from particular power groups. “Political organisations and procedures which lack autonomy are, in common parlance, said to be corrupt.” Complexity contributes to autonomy.
  4. 4.       Coherence/Disunity – the more unified and coherent the more institutionalized. Effective organisations require substantial consensus about functional boundaries, conflict resolution etc. and that consensus must extend to those active in the system [rule of law]

Political Institutions and Public Interests

“The public interest in this sense is not something with exists a priori in natural law or the will of the people. Nor is it simply whatever results from the political process. Rather it is whatever strengthens government institutions. The public interest is the interest of the public institutions.” 

  • E.g. the public interest if GB might be approximated by the interests of the Crown, the Cabinet, and the Parliament.
  • Representative theory states that government institutions/actions are legitimate if they represent the will of the people. Huntington says this is wrong, rather they are legitimate to the extent that these institutions have distinct interests of their own apart from other groups [I do not fully understand this point. Perhaps it is just an extension of the autonomy criterion].
  • How are institutions related to the culture of a country? One of their key functions is to institutionalize trust that already exists at the heart of society. But they cannot do this without the existence of some trust ex ante the work of institutions. Thus, those societies where there is no trust will have difficulty building good institutions. He gives the example of LA where “self-centred individualism and distrust and hatred for other groups in society have prevailed”. The prevalence of such distrust means societies cannot progress beyond familial boundaries. [Putnam]
  • This problem is compounded by the fact that economic change and modernization erode or destroy traditional bases of association.

Modernization and Political Decay

  • Modernization involves social mobilization where major clusters of old ties and commitments are broken down. This means a change in values and attitudes. It also involves economic development (however measured). Modernization requires both these factors.
  • This is a disruptive process that can cause instability.

Effect of Modernization on Politics and Institutions

        I.            Political modernization means replacement of large number of traditional authorities by one single national authority. Government becomes the product of man not of God.

      II.            Political functions become differentiated

   III.            There is increased participation by groups in society. Whether this means greater control of the state by the people or the other way around depends on the general consensus. More people participate and more people are affected by politics.

  • The fact of social modernization (urbanization, industrialization, GNP rise, mass media expansion etc.) does not mean a necessary political modernization. E.g. LA progress toward democracy, stability etc. is “at best dubious”.
  • The effect of social modernization is disruptive to political systems – traditional loyalty is undermined; local chiefs are challenged by elite beaurocrats. Identity is eroded . There is a growth of group consciousness and this has an integrating and disintegrating effect on the social system e.g. it creates prejudices and conflicts between groups due to competition for resources, inequalities of economic development, unequal distribution of power etc.
  • “It is not the absence of modernity but the efforts to achieve it which produce political disorder. If poor countries appear to be unstable it is not because they are poor, but because they are trying to become rich. A purely traditional society would be ignorant, poor and stable.” [This refutes the poverty thesis – that countries are unstable because they are poor]. The evidence for this claim is that it was generally low middle income countries that experienced violence and coups, rather than the poorest of the poor.
  • Thus modernization creates instability and the higher the rates of change the greater the instability. This idea explains why when change was spread over centuries in US/GB etc. there was little violent instability, whereas in developing countries “problems of the centralization of authority, national integration, social mobilization, economic development, political participation, and social welfare have arisen not sequentially but simultaneously.”

 Social Mobilization and Instability

  • Urbanization, education, media etc. give rise to increased aspiration which produces tension if the aspirations cannot be met. It will also increase the public’s voice in politics. In the absence of strong and adaptable institutions such increases in participation will cause instability.
  • In general the higher the level of education of the unemployed the more extreme the destabilizing behaviour: “alienated university graduates prepare revolutions”.

Economic Development and Instability

Economic development provides the capabilities social mobilization demands so it should tend to reduce tension. However, it also leads to social frustration:

  1. Disrupts social groupings
  2. Produces “new money” classes who want power and status to reflect their wealth and are imperfectly assimilated into the social order
  3. Increases geographical mobility which undermines social ties. Increased urbanization can lead to political extremism.
  4. Widens gap between rich and poor and all the tension that goes with that
  5. Relative incomes do not rise for all so there is dissatisfaction
  6. Increased literacy and aspiration levels beyond what can actually be provided
  7. Aggravates regional/ethnic conflict over distribution and consumption
  8. Increases organizational capabilities of groups to make demands on the government which it will most likely be unable to satisfy.
  • There is much evidence in favour of the idea that economic development creates instability (Mexican revolution after 20 years of excellent growth/French Revolution the same), but much evidence against (USSR, Japan, West Germany). The conflicting evidence suggests the link is complicated. It is hypothesized that the relationship varies with the level of development. At low levels of development, economic growth creates instability. The effect is neutralized somewhat for middle development countries, and the link is reversed in highly developed countries.

The Gap Hypothesis

“Social mobilization…expose the traditional man to new forms of life, new standards of enjoyment, new possibilities of satisfaction. These experiences break the cognitive and attitudinal barriers of traditional culture and promote new levels of aspirations and wants. The ability of a transitional society to satisfy these new aspirations however, increases more slowly than the aspirations themselves. Consequently a gap develops between aspiration and expectation, want formation and want satisfaction…This gap generates social frustration and dissatisfaction.”

The reason for the frustration is found in a lack of social opportunity, and a lack of adaptable political institutions.

 Civic and Praetorian Polities

  • Political systems can be distinguished by their levels of institutionalization (INS) and their political participation (PP). The former can be either high or low (for Huntington) and the latter can be highly participatory (populace at large) middle (middle classes) low (aristocratic or other elite). The stability of a system depends on both of these factors. It depends on the ratio, and so a country with similarly low levels of both may be in fact more stable than a country with a highly institutionalized system and an even more highly participatory system.
  • Countries with low INS and high PP are societies where social forces act directly in the political sphere these are “praetorian polities”. High INS and low PP conversely are “civic polities”

 

Political Participation Ration of Institutionalization to Participation
 

HIGH: CIVIC

LOW: PRAETORIAN

Low: traditional Organic (Ethiopia) Oligarchical (Paraguay)
Medium: transitional Whig (Chile) Radical (Egypt)
High: modern Participant (USSR) Mass (Argentina)

 

  • Essentially the difference between civic and praetorian is that one set of systems are law abiding legitimate states, and the others are law neglecting systems where rulers act in general in their own interest.
  • Praetorian: fragile, fleeting forms of authority, charismatic leaders, military junta, populist dictator. All forms of government whirl and change in unpredictable manner. Politics and political participation are neither stable nor institutionalized.
  • Civic: recognizable, stable patterns of institutional authority, feudal or centralized, or federal. Parliamentary assemblies etc.
  • “Institutions impose political socialization as the price of political participation. In a praetorian society groups become mobilized into politics without becoming socialized by politics.”

 [Huntington goes on to talk about differences in these types of societies. However, I have no teased out his main ideas and the summary is quite long enough.]

 

THE TURN TO AUTHORITARIANISM IN LATIN AMERICA

THE TURN TO AUTHORITARIANISM IN LATIN AMERICA AND THE SEARCH FOR ITS ECONOMIC DETERMINANTS

A. O. Hirschman

In D. Collier (ed.) The New Authoritarianism

A Summary

 

In a Nutshell

This is a very strange article indeed. Its basic function is to criticize the O’Donnell thesis and provide alternatives. The strange thing is he seems to provide three alternative theses.

  1. The need for orthodoxy – given the state of ISI, a move to orthodox policy was needed and this was achieved by BA regimes. He then dismantles this thesis by showing that Chile and Colombia managed the transition without recourse to authoritarianism.
  2. Ideological stretching – rather a bizarre argument and one which I will not further summarize below. The general idea being that LA was called to industrialize, then to plan the economy, then to integrate regionally, then to redistribute, and finally to break its dependency. This ideological explosion of demands from academics gave a general feeling that the predicament that LA was in was very serious indeed. This in some way contributed to the instability upon which the BA regimes preyed.
  3. Growth functions – growth is based on two functions, firstly entrepreneurial which is the unbalancing function, and secondly redistributive which is the balancing function. For growth to be sustainable both need to be present but their interaction determines the quality of that growth and also the social stability it produces. In the case of LA the redistributive function emerged too soon as much capital was foreign owned making the entrepreneurial function much weaker. Ideological support moved from the entrepreneurs to the reformists. If the reform drive appears too early it will paralyze the entrepreneurial forces and lead to stagnation and discontent and the attempt to accumulate capital by dint of an authoritarian government.

Economic Arguments

  • He runs through the O’Donnell thesis about deepening which I summarized in the J. Serra piece also in this week’s reading. He concludes that only in Argentina did problems of deepening occur before the first attempt to implant an authoritarian regime.
  • Nevertheless the thesis maybe should not be abandoned but broadened. Of course the great fear of Communism, the use of force by the Left, Cuba, and the wish of the US to prevent spread of the left contributed to the regimes that were installed. However, a link between this politic and economics is still relevant.

The alternative candidate would be the need for more orthodox policy. As ISI stage one ground down due to traditional exports losing ground, inflation etc. Policy makers found an ingenious cure for the structural problems associated with the early post war economy but then applied to excess the magic formula. During this period of decline of ISI there were a number of important developments:

  1. The world economy went into rapid expansion, bringing back the possibility of export led growth which were hidden from view due to the overvalued exchange rate pursued as part of the ISI policies.
  2. Industrial investment could now be financed out of profits, so the intersectoral transfers that originally performed this function (i.e. from traditional exports to manufactures) were dispensable.
  3. Industrialization and the expansion of the domestic market meant that income taxation and capital market borrowing by the government was now possible.
  • As a result it seemed that it would be profitable to dispense with the declining ISI system to ensure a non-overvalued ex-rate (which would reverse the situation whereby capital imports were cheaper to import than produce domestically, thus sending most of the backward linkages from growth abroad), realistic public service prices and capital market rather than inflationary borrowing. In other words, more orthodox, market-oriented policies.
  • This transition was by no means easy due to vested interests.
  • This is different from the O’Donnell thesis – exports is about widening not deepening. Tax, capital market reform, nothing to do with deepening.
  • The extent to which these policies motivated the coup makers is disputable. They were primarily concerned with inflation and the balance of payments problems and based on an anti-ECLA backlash. The international economic debate of the time was not focussed on deepening but on market reform.
  • Nevertheless, many of the regimes did implement these market reforms, and as such they moved toward orthodoxy and this has given the impression that it takes an authoritarian government to make these transitions. However
    • Colombia – export subsidies and several mini devaluations have promoted agricultural and industrial exports as average levels of protection were lowered. Interest rates rose and there was income tax reform, and this occurred without an authoritarian government.
    • Chile (pre-Allende) saw similar transitions policies particularly with respect to the exchange rate.

Inequality

  • Hirschman deals briefly with the idea that when countries with income distributions such as LA move into the industrial phase whereby consumer durables are relied upon as the engine of growth, the natural result is authoritarianism. This is because of the need to bolster the incomes of the middle classes who are the natural consumers of these products, and this means both a transfer of wealth to them, and a compression of the wages of the lower classes. In order to achieve this type of consumption profile political repression and authoritarianism are needed. [This is different from the Shliefer hypothesis that in order to expand the market for durables you need to raise the incomes of the agricultural sector such that they can enter the durables markets….]
  • This is intriguing, but none of the regimes were established with this motive. Additionally, there have been boom of durables sector before the BA regimes came to power.
  • This pattern does describe quite well what happened in Brazil: wages were compressed and they gave lots of credit to consumers to buy durables. However, this is not an economic explanation of authoritarianism, but a political explanation of Brazilian economic policy.

The Entrepreneurial and Reform Functions

Growth creates inequalities, sectoral, geographic, and social and income. In time pressures arise to correct these imbalances. Indeed the continuation of growth requires they be corrected in part because they bring with them social and political tensions, protest and action.

  1. Entrepreneurial Function: domestic enterprise, foreign capital, and the state. After this function has run its course there will be attempts by the sectors/regions/groups that lag behind to catch up. Those performing this function are often unaware and opposed to the reform function being performed.
  2. Reform Function: the drive by the lagged groups to improve their welfare via social programmes and redistribution in particular. This function is essential for growth to be sustained after a powerful by disequlibrating drive by the entrepreneurs. It is likely that these groups will be hostile to the entrepreneurs.
  • It is the interaction of these functions that determines both economic and political outcomes of the growth process.
  • The strength of the entrepreneurial function depends both upon the opportunities for profitable investment and the pull of ideological forces. The force of ideology was far weaker in LA than it had been in Europe during its industrialization. There was 10 years of support for industrialization, but then there was a dramatic shift, and those same intellectuals who had called for industrialization now called for reform. This may have had something to do with the leadership assumed by foreign capital in the industrialization process. The shift in thinking was particularly evident in Chile, Argentina and Brazil.
  • The weakness of the entrepreneurial function allowed demands for reforms and redistribution to be heard sooner, than had the economy been in the hands of domestic producers. E.g. foreign ownership of mines in Chile led to early calls for tax on foreign investors.
  • Other weaknesses came from the closed nature of those benefiting from the ISI system. If development was broad based there would have been more tolerance for the inequalities produced. This tolerance was short lived when much of the economy was either in foreign hands, or in the hands of a very small elite such as was the case with land owners in Uruguay, and mine owners in Chile.
  • A common dialogue or history such as war can often extent the tolerance for inequality. E.g. Mexico where Cardenas was associated with the revolution, meaning unequal development could be pursued with relative stability.
  • The breakdown of pluralist forms may be related to the degree and nature of the hostility between the two functions [this is very similar to the Huntington hypothesis which I have included in the readings for this week].
  • In Colombia the success of pluralism could be attributed to the elite being able to assume both functions, as reformers and entrepreneurs. The individual identities were different, but the class structure was the same, meaning that plurality rule could be maintained.
  • In Venezuela because of the oil wealth, the state could play both roles, as entrepreneur, but at the same time improving social services, education and instituting agrarian reform.

THREE MISTAKEN THESES

THREE MISTAKEN THESES REGARDING THE CONNECTION BETWEEN INDUSTRIALIZATION AND AUTHORITARIAN REGIMES

J. Serra

From D. Collier (ed.), The New Authoritarianism in Latin America (1979)

A Summary

 

In a Nutshell

The main purpose for Serra is to dissuade from the view that bureaucratic-authoritarianism (BA) was a direct consequence of the type of industrialization that occurred in Latin America. That is, he refutes the claim that there is a necessary causal relationship between the form of regime and the economic conditions that existed at the end of the “easy” phase of ISI. He does show by showing that such an interpretation cannot explain why certain countries that followed the ISI method did not turn to BA (Colombia and Venezuela), and moreover it cannot explain important differences among the BA regimes that did emerge. He details problems both with the economic analysis that underpins economic explanations as well as the difficulties of convincingly arguing from economic conditions to political outcomes.

Specifically he examines three theses:

  1. Superexploitation thesis
  2. Deepening thesis
  3. Economic rationality thesis

 

Examples come from Brazil unless otherwise stated.

Superexploitation

  • Especially seen in the work of Marini.
  • Superexploitation of the working class a necessary condition for capitalist development in LA, and as such BA was needed to enforce relevant policies of wage/personal repression. BA was a means of preventing the working class from jeopardizing or frustrating growth by protest etc.
  • Wage compression is necessary both as a political tool of emasculating labour, and also to increase profits and hence capital accumulation by capitalists. Additionally consumer durables were the most dynamic source of growth for the economy, but as these were never likely to be part of the consumption bundles of the lower classes it was unnecessary to increase their wages as to do so would not increase domestic demand. In fact income had to be transferred to the middle classes. This means that productivity in the sector need not be increased. As the consumption power of the lower classes decreased, demand for “wage goods” declined thus ensuring that there was little technological change in that sector, such that the durables sector which was the most technologically absorptive could dominate. Authoritarianism was a fundamental condition for such exploitation.
  • There was significant wage compression.
  • According to ECLA etc. the consumer durables was indeed a leading sector.
  • There is indeed a disparity between income need to generate consumer durable demand and normal wage good demand given the per capita income of most LA economies at this time.
  • However, deriving a law that such economies should superexploit or perish involves an enormous step that involves both theoretical and empirical errors:

 

  • It is wrong to think that productivity need not be increased as workers do not consume durables. Between 1959 and 1970 productivity increased 75% in the industrial sector, and even more in the durables sector.
  • Between 1969-1970 32% of lower wage families’ expenditures were devoted to goods other than food and shelter. Also, many of the foodstuffs items were industrially processed.
  • Output and productivity in the “wage goods” sector increased in the period although less than the other industrial sectors.
  • The wage squeeze occurred due to weak unions, lack of popular organizations, and the political reasons for repression (fear by the regimes of an extreme threat to the established order), rather than merely as a tool to implement the superexploitation logic.

 

Deepening

  • According to ECLA and other structuralists IS had produced an excessive diversification of finished consumer goods (horizontal diversification) because the regressive income distribution that industrialization failed to reverse had generated over diversified demand of consumer goods and this led to a pattern of importing that prevented a “deepening” of industrial production i.e. away from consumer goods and toward intermediate and capital goods. This in turn led to a greater demand for imported technology in the consumer goods market, less inclination to invest in capital goods production (as goods could be imported cheaply), and closed market in exportable industrial goods. The implications of this are a fragmented pattern of imports and a large portion of the “backward linkages” from growth going abroad.
  • The O’Donnell thesis is that BA regimes correspond to economies at this point of industrialization, and they are necessary in order to implement the much needed deepening of industry. The deepening was necessary for the very survival of capitalism due to the problem of external bottlenecks. i.e. the bottlenecks were exacerbated by inflationary pressures causing a sociopolitical crisis, meaning the next step of development had to be domestic production of those goods (industrial/capital imports and eventually technology).
  • Thus the regimes pursued deepening as a fundamental objective.

 

To summarize the argument:

a)      Given the prior crisis of this type of capitalism and

b)     Its tendency to generate threatening processes of popular activation and assuming

c)      The defeat of non-capitalist alternatives we can conclude that

d)     Economic changes will tend to occur in the direction of deepening and will be associated with

e)      The emergence and expansion of BA, and

f)       In the 1st stage of BA one will find an orthodox approach to economic policy to achieve deepening.

Assessing the Hypothesis

  • Deepening had been pursued actively by the pre-BA regimes in the 50s and beginning of 60s [the coup in Brazil was in 1964].
    • The shift from the easy phase to the difficult phase had largely been achieved by 1964. Production of intermediate and capital goods was expanding rapidly and imports of these goods were falling.

 

  • The idea of exhaustion of ISI refers to a specific cycle of ISI, meaning it is not logically exhausted forever, but it reaches a stage where it can no longer be the principal engine for growth absent increasing the domestic market or changing the terms of trade. Thus the economies could undergo substitution cycles. However there was significant resistance from the vested entrepreneurial interests to moving to next cycle as it would change the industrial makeup of LA. However, had there been overcome the ISI system could have been maintained. Therefore, the situation LA found itself in the 60s did not imply a logical end to ISI, only political inability to continue it.
  • Deepening was not a particular concern for the BA regimes and was not seen as part of the core economic policies of the first two economic phases of BA 1964-67, 1967-71 and was pursued only to a limited extent in the following phase. Indeed Serra argues that deepening was never pursued until the last phases of the regime, and it was this attempt at deepening, once, the model of development had been found wanting, that caused the destabilization that toppled the regime.
    • The economists close to the regime did not discuss deepening. They basically adhered to orthodox thought according to O’Donnell. And yet, if the link between external bottlenecks and deepening is correct, then this is very far away from orthodox thought, as it essentially entails improving the forex position by restricting imports, domestically producing capital goods etc. This is not orthodox thought which was more likely to involve exporting primary products, FDI etc.
    • Serra suggests that deepening was not a serious contender to get Brazil out of the growth contraction hat occurred in the early 60s as it would have meant discrimination against the consumer durables sector (thought to be an engine of growth), and also as it would meant have meant a contraction of incomes whilst investments matures and problems of scale were overcome. It would also have met with strong resistance from the IFIs etc. Indeed the belief in the ability to internationalize the economy, and the existence of slack in the durables sector meant that there was a belief that durables could lead the next phase of growth.
    • The post 1964 growth trajectory was fairly amazing, but it was driven by the same sectors: durables and construction and non-traditional exports, with a key role played by the idle capacity. Levels of investment hardly increased form the 1962 level, all indicating that deepening was not a priority. There was little movement in the capital good sector; indeed policy gave incentives for purchase only of imported capital goods and machinery. Imposts of these goods between 1966-69 increased at 20% annually. This fact limited technological progress in this area.
    • In 1971 the consequences of a technologically backward capital goods sector were realized and there were incentive programmes for domestic purchases. However, the deepening was not accompanied by a contraction of horizontal expansion (large infrastructure projects, consumer durables projects, new car factories, Brasilia building etc.) and this overexpansion lead in 1974 to inflation and a balance of payments crisis. This period saw a vast increase in oil imports, meaning that the underlying economic problems accompanying expansion in this way were compounded with the first oil shock in 1973. The policy response to extreme inflationary pressure was heterodox price controls and increasing foreign debt.
    • The government that came to power in 1974 embarked on a more traditional deepening i.e. diverting growth from durables to producer goods, and an expansion of primary exports. They attempted to curb the exponential growth of consumer goods, particularly autos. However, this deepening was in no way more rational of effective than the deepening that occurred pre BA regime, and indeed deepening in some ways has been antagonistic for the BA regime, as they had to limit consumption expansion in a context of a declining demand growth, increasing inflation and major changes to investment patterns. These factors greatly reduce the predictability of economic policy and increase the conflict amongst different sections of the bourgeoisie, and industry.
    • Thus during the period up to 1974 the Brazilian economy greatly increased its dependence on the international economy despite some attempts at deepening.

Chile: the military regime did want to eliminate problems of horizontal diversification, but not so much by deepening, as by de-industrialization pursuant to opening the economy to international forces.

Economic Rationality

  • This thesis posits the existence of a rationality in the economic policy making process of BA regimes. This is because decision making is more efficient, resources are more efficiently allocated, and growth goals are no longer subverted to the turmoil of the civilian political process.

a)      Authoritarianism prevents premature social aspirations driven by mass media and electoral competition from getting in the way of growth goals [Huntington relevant here – i.e. without pre-existing institutions of moderation, countries that experience such growth as was seen in the 50s will tend to break down into authoritarianism].

b)     Political tranquility is needed to attract international capital and carry out major investment works

c)      Better resource allocation as planning is undertaken by objective technocrats, enabling the functioning of a healthy price system and a system of financial intermediation which reduces inflation.

  • Growth: Growth from 1968-74 was vigorous, around 10%. However between 1962-67 it was only about 3.7%, so the later growth could have been part of the upswing consequent of depressed growth early in the decade which created significant idle capacity to allow for subsequent expansion.
  • Balance of Payments:exports diversified and increased especially after 1968. This is attributable both to the export incentives, principally the mini-devaluations from August 1968 onwards, but there was also favourable conditions of external demand at this time.
    • It is hard to say that the export policies and ability to capitalize on external demand necessitated an authoritarian government. The wage compression can’t meaningfully explain the growth in manufactured exports relative the export incentives which could have been undertaken by the democratic government (e.g. Chile, Colombia). Additionally, there is no good argument to show that stability is more a precursor of investment for export than it had been for investment for domestic consumption.
    • Inflation: Inflation was reduced to around 20% from 80% but this is still a very high number and reflects the inability of the regime to balance deepening with a reduction in horizontal diversification.

Conclusions

  • The policies followed by the BA government may have been initially successful, but they proved unsustainable by 1974. The oil crisis is blamed, but the sectorial imbalances and un-deepening that occurred pre-1974 were responsible for the strain on the economy which was then aggravated by the oil shocks. As Hirschman notes, blaming the oil shocks for the decline in the expansion cycle is like blaming reality for not having behaved according to the requirements of an illusion: that forex was unlimited…
  • It seems that arguments from economic conditions to BA outcomes are foundationless on exampination of the empirical evidence.
  • Additionally the crisis and heterodox solutions pursued shows how changes in objective conditions lead policy makers previously noted as orthodox, to make decisions that would horrify the Chicago school: compulsory deposits for exports, return to ISI, price controls etc.

BEYOND THE RUNNING TALLY

BEYOND THE RUNNING TALLY: PARTISAN BIAS IN POLITICAL PERCEPTIONS

L. M. Bartels

Political Behavior, Vol. 24, No.2 Special Issue: Parties and Partisanship, Part One (Jun., 2002)

A Summary

In a Nutshell

The Michigan framework posited that partisan loyalties are formed early in life and remain stable throughout adulthood and they serve as the determinants of more specific political attitudes. This means that party-identification on attitudes toward politics is far more important than the influence of these attitudes on party identification itself (Campbell).

More recent work has described a running tally of retrospective evaluations of party promises and performance as being the driving force behind party identification (Fiorina), and this is consistent with the view that voters maximize their expected utility based on past political experience.

An essay by Gerber and Green argue that whilst political beliefs do change, including evaluations on the performance of the economy, they change to approximately the same degree amongst those with different political allegiances. Thus “biased learning” (coloured by partisanship) appears to have little support. For these authors Bayesian learning means that people with substantially the same prior information, but different partisan affinities, will learn from new information in a similar direction and to a similar extent, and the evidence for this is that opinion shifts (mapped from survey data) are largely parallel i.e. unaffected by partisan bias.

What Bartels argues is that within the Bayesian framework parallel shifts are impossible unless partisan bias is built into the groups, as if it were not there would be a convergence of opinion. Thus empirical evidence that suggests that shifts in opinion are parallel are evidence against unbiased information processing.  Thus it is the failure to converge that needs explanation.

Bartels points to a number of survey responses to political issues and examines trends in opinion of both Democrats and Republicans. He shows that the parallel trends in opinion over management of the Gulf War, Bush’s performance and economic conditions can only be explained by a significant partisan bias, otherwise the result would have been convergence of opinion. Furthermore, whilst opinion on certain policies may present a bias accounted for by the intrinsic value differences between the two groups it is harder to argue that opinion over e.g. The Gulf War, are driven by value differences between the groups. The case for the existence of partisan bias is even stronger when opinions differ over objective facts i.e. the level of unemployment/inflation. In such circumstance differing values cannot explain stark partisan differences in opinion.

In this regard he uses as an example unemployment under the Reagan administration which fell from 7.1% to 5.5%, and inflation which fell from 13.5% to 4.1%. In response to surveys 50% of Democrats thoughts that inflation had got worse, or somewhat worse, and only 8% thought it had got better. The results were 13% and 47% respectively for Republicans. This is evidence of substantial partisan biases in perceptions of how the country fared during the Reagan years. A similar story is told regarding the Clinton administration.

Thus the evidence suggests that partisan loyalties have pervasive effects on perceptions of the political world. In some cases this produces divergence of opinion, but in a great many more cases it significantly inhibits what would otherwise be a strong tendency to convergence. Thus partisanship is not based on a running tally, but is a dynamic force in opinion formation.

CORRUPTION AND GROWTH

CORRUPTION AND GROWTH

W. Easterly

Chapter 12 from The Elusive Quest for Growth W. Easterly

A Summary

In a Nutshell

Corruption as theft retards growth. So to do bribes paid to get licences to produce etc.  as they act as a direct tax on production [although only in the case of corruption without theft where the government goods are more expensive – Shleifer]. Corruption and growth are inversely related, as are corruption and investment.

He distinguishes between decentralized and centralized corruption as having different effects. [This is the same as the Shleifer independent monopolists point.] This has the effect of implying that under certain conditions it may be better to have strong dictatorship as opposed to a weak democracy. This is really just another way of saying that a strong state can prevent corruption, or at least can centralize it such that it is not as dangerous for growth.

What are the determinants of the level of corruption?

  • Weak government – see above
  • Foreign Aid – a resource to be captured, especially in ethnically heterogeneous economies.
  • Institutional quality – checks and balances good incentives for workers, little red tape.
  • Property rights – strong contracts mean that payments are not necessary to maintain property rights. Expropriation risk increases corruption as people pay not to have their property expropriated.
  • Macro policy – e.g. an overvalued exchange rate means an incentive to create a black market. Trade policy/restrictions leads to incentives to get around them etc.

POLITICS, DONORS AND THE INEFFECTIVENESS OF ANTI-CORRUPTION INSTITUTIONS

POLITICS, DONORS AND THE INEFFECTIVENESS OF ANTI-CORRUPTION INSTITUTIONS IN UGANDA

R. Tangri & A. Mwenda

Journal of Modern African Studies, 44, 1 (2006)

A Summary

 

In a Nutshell

Anti-corruption drives in Africa have been focussed largely on reducing routine levels of corruption. Replacing the state economy with market mechanisms, promoting accountability and transparency in government operations and other measures have reduced the opportunities for corruption as well as increasing the chances of getting caught. However, the reforms necessary to reduce corruption at the highest level, such as promoting political competition, and institutions that oversee the prosecution of corruption at high levels depend for their effectiveness to a large degree on both financial capability (which is often low), and cooperation from the elite leaders (which is often absent). This latter phenomenon persists despite continued rhetoric by leaders as to their willingness to tackle corruption.

This indicates that the nature of a country’s political system cannot be ignired when thinking about corruption. For example, Uganda has been a virtual one party system for decades and this constrains the possibility of the legislature and the judiciary holding the government to account. Whilst corruption is undoubtedly used for private gain, it is also used to perpetuate the regime through the use of funds for campaigning, and this explains why top political leaders have shown limited political will to contain such corruption. It also means that those charged with overseeing corruption prosecutions have an incentive not to proceed as they depend for their existence on one very firm set of political benefactors. Because elite corruption is am important means of consolidating the government in power, top leaders have influenced and controlled anti-corruption bodies whenever they have threatened to expose the corrupt ways of Uganda’s state elites.

Also at fault are IFIs and donors who are more focussed on economic goals than corruption reduction.