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Building New Democracies

Building New Democracies: Economic and Social Reform in Brazil, Chile, and Mexico

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  • Book Info
    Building New Democracies
    Book Description:

    Duquette analyses the main public policies of Brazil, Chile, and Mexico to explore examples of how countries make the transition from an authoritarian regime to a democratic society.

    eISBN: 978-1-4426-7163-8
    Subjects: Political Science

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-2)
  4. Introduction
    (pp. 3-28)

    This essay joins the intense current debate issuing from a growing concern about the viability of new democracies, even as clouds gather in their skies. Whether in Russia or Peru, the use of force on the part of presidents of praetorian democracies brings to mind the methods of Bonapartism. Wily politicians such as the Russian nationalist Vladimir Zhirinovsky are strategically preying upon the frustration, resentment, and exhaustion of the majority. Ordinary people are disgusted by a tide of economic reforms which have benefited the few while deepening the daily hardship of the many. In President Carlos Carlos Menem’s Argentina, constitutional...

  5. Part I Domestic Determinants of Economic Reforms

    • 1 Identifying the Variables Relevant to the Study of Adjustment
      (pp. 31-35)

      Until recently, comparative literature tended to underestimate the relationships among regime variation, the process of policy making, and policy implementation. Either international factors were made responsible for the drastic economic changes experienced in most of Latin America, or other ‘structural,’ non-political variables in the domestic arena were said to play a fundamental role in determining policy choices. In recent years, sophisticated analyses have made a bold effort to relate international to domestic factors in the making of policy. However, recent experiments undertaken by Latin American governments to restructure their economies have offered few conclusive successes (Mexico’s failure being the main...

    • 2 The Determination of the Political Executive to Undertake Market Adjustment
      (pp. 36-50)

      Determination means the capacity to persuade oneself as well as others. The democratic leaders should be able to formulate and impose a vision of their own to which the bureaucracy and the corporate elites will gradually but decisively commit themselves. Paradoxically, it is said that relations of dependency upon public subsidies and central planning must be replaced step by step by the informal laws of a competitive market. These in turn will allow the free circulation of capital, skill, and investment initiatives in an economy that was previously highly protected. The state must cease to view protectionism as the prerequisite...

    • 3 The Role of Competent and Honest Technicians
      (pp. 51-62)

      In the context of reform policies, two categories of Latin American political regimes were identified from the data gathered in our survey. The first was characterized by the presence of strong political executives such as those in Chile and Mexico. Both these countries meet Remmer’s precondition for economic stabilization, to wit ‘the existence of a cohesive group of economic technocrats’ closely associated with decision-making circles. These regimes were obviously not democratic at the time liberalism was adopted, although the relationship between the character of a regime and the cohesiveness of its economic team is not clear. Under the military regime,...

    • 4 The Autonomy of the Reformist State
      (pp. 63-73)

      It is expected that the orderly orthodox blueprint of a reform package echoes the usual, well-publicized IMF monetary tenets. Foxley is convinced that there is a rationale behind the measures taken. What is at stake here is not a collection of independent policies but a process of closely interlocked measures whose ultimate goal lies in a comprehensive reorganization of the relationship between state and society, labour and capital, the local and the foreign:

      I was firmly convinced that the piecemeal approach of evaluating an economic program, so frequently advocated by monetarist-conservatives – that is, examining each economic instrument separately and...

    • 5 The Influence of Electoral Cycles
      (pp. 74-78)

      This chapter examines a limited selection of public policies that can be related to electoral cycles. A selection was made because a thorough review of all electoral events and the study of their relationship with each and every decision affecting reforms would need a book in itself. As we suggested earlier, electoral politics may play a significant part in influencing government policy. A few examples drawn from our three case studies should substantiate this point.

      The year 1994 being an electoral one in Mexico, the Salinas de Gortari administration resorted to much the same practices it had adopted on previous...

    • 6 Privileged Linkages with Corporate Interest Groups
      (pp. 79-87)

      Notwithstanding the necessity for the democratic state to achieve a level of relative autonomy from interest groups, Nelson has convincingly argued that an alliance with mobilized interest groups is a precondition for pursuing deeper economic reforms. This is especially true of the privatization agenda. Once monetary policy is set, stabilization achieved, and political executives equipped to handle their social consequences, the stage is set for subsequent more complex policies. Less dramatic than monetary policy and budget cuts, but still invested with a strong nationalist component (most important in Latin American political culture) is the paramount issue of privatization. As is...

    • 7 A New Relationship between State and Labour
      (pp. 88-96)

      The political problems associated with structural change and labour unrest have received a somewhat impressionistic and unsophisticated treatment in the conventional economic literature. Such scholarship was obviously more concerned with quantitative results than with the political and social consequences of government intervention.

      Governments must first run the political juggernaut of public opinion and interest groups, and implement these broad changes before beginning to sell off firms. This is why the most successful privatization efforts in major Latin American nations have been accomplished in those countries with the strongest political executives. (Business International Corporation, 1991)

      Simplistic as it may seem, the...

    • 8 Assessing the Economic Performance of Reforms
      (pp. 97-108)

      Brazil had a thriving economy in the 1960s and 1970s, with annual growth often exceeding 10 per cent; these rates have never been matched since (table 1). Although the 1973 oil crisis affected growth, Brazil remained a respectable newly industrialized economy until 1981. The following decade presented a very different picture, as the country failed to pursue a consistent set of adjustment reforms in response to a changing world economy marked by growing competition. Per capita growth peaked, the net flow of foreign capital dried up, and savings fell sharply, which strongly affected government reserves. Sporadic attempts at structural reforms...

  6. Part II International Determinants of Economic Reforms

    • 9 Gaining International Support for Domestic Reform
      (pp. 111-122)

      The international environment has become less than congenial to democratic experiments, and by the early 1990s, new democracies were feeling the weight of international factors more heavily than ever. A rampant, long-lasting recession has hit Third World countries particularly hard. Political leaders, opening their eyes to the legacy of the ‘lost decade’ of the 1980s, now question their previous policies. The performance of their respective countries in a global economy, and therefore of the liberal reforms themselves, has been more limited than expected. Political and clientelist schemes involving systematic corruption diverted large amounts of money from public, social, and economic...

    • 10 Adjustment through Regional Integration
      (pp. 123-130)

      Aid packages, conditional or not, are only palliative measures in periods of adjustment. It could well be that an enduring solution to recurrent economic setbacks will only come from long-term regional projects which foster economic complementarity among neighbouring countries, assistance from the stronger economies for the weaker ones, and eventually the setting up of a regional industrial strategy under the umbrella of free-trade agreements or unions. The European experiment could provide an interesting precedent for such arrangements, possibly transposable to the Latin American context. François Perroux offers the following definition of integration:

      Integration consists in creating tighter economic relationships among...

    • 11 Regional Integration in Support of Market-Oriented Policies
      (pp. 131-144)

      A long-standing and well-developed hypothesis describes regional integration as a shield against globalization, which is defined as worldwide deregulated free trade. The favoured model is that of the EEC, which uses the principle of ‘community preference,’ though this principle has recently been relaxed by the Maastricht Treaty. It has its origin in the political culture of various nations, and has found new support among nationalist circles in Brazil and Argentina which have denounced the Enterprise for the Americas Initiative (Folha de São Paulo, 07.07.90). The Economic Commission for Latin America and the Caribbean (ECLAC) was, in 1956, the first to...

    • 12 Obstacles to Integration in Partially Liberalized Markets
      (pp. 145-152)

      Any regional integration project constitutesipso factoa shift from a self-centred national development paradigm, and leads to questioning the previous model of industrialization through import substitution; it is a natural successor to reforms aiming at opening up new markets. It is not, however, devoid of ambiguity. By establishing a common customs tariff, it aims to establish a reserved market which gives more breadth to local industry, redefined as regional, thanks to the agreements reached among partners, who in fact probably can exercise little choice in the matter. Such is the view proposed by Brazil and agreed to, at least...

    • 13 Theoretical Linkages between Regional Determinants and Endogenous Variables
      (pp. 153-165)

      Our conclusions concerning the validity of hypotheses put forward in the current literature take into account the motivations of systems considered as wholes. These motivations appear at first sight to converge towards an integrative project, in spite of the variety of shapes taken by reform in the countries involved. It is time now to look further into the structure of these motivations, distinguishing between those of the public and the private sector. The motivations of the first group have to do with the issue of political action in new democracies, and may help identify the role and place of MERCOSUR...

    • 14 Will MERCOSUR Support the Consolidation of Southern Cone Democracies?
      (pp. 166-172)

      To conclude Part Two, we consider the capacity of regional integration agreements to foster the rule of moderate democrats and to avoid any unwelcome return to authoritarian regimes, MERCOSUR being the main case in point. While it is fairly clear that it may act as a partly protected market and a transition to total market exposure in the middle term, the Southern Common Market must show solid dividends to its participants if it is to retain credibility in its pursuit of an upward trajectory. In this sense, MERCOSUR competes with other blocs committed to regional integration (the European Union and...

  7. Part III Determinants of Social Reforms

    • 15 Adjustment against Justice
      (pp. 175-184)

      Two years after the United Nations’ 1995 Social Development Summit in Copenhagen, persistent poverty is still widespread in Latin America, while greater access to communications has only increased people’s frustrated expectations, according to a recent report prepared by the Santiago-based UN Economic Commission for Latin America and the Caribbean (ECLAC) (Chronicle of Latin American Economic Affairs, 02.09.95; 23.03.95). The UN agency estimates that an annual economic growth rate of at least 6 per cent is needed for the region to catch up in technological and social development. Nevertheless, in the first five years of this decade, regional growth averaged about...

    • 16 Agrarian Reform and the Modernization of Agriculture
      (pp. 185-195)

      Several factors are responsible for political change in Latin America, many of which can be traced back to the authoritarian period, and many more to postcolonial times. With the active support of nationally organized and independent information networks in Brazil, non-governmental organizations (NGOs) in marginal regions and union solidarity movements were involved in rural mobilization operations. They called repeatedly for agrarian reform and political participation. They fostered a high degree of social awareness concerning the people’s basic rights. It happened that government reformers were not in a political or financial position to fulfil all legitimate demands. However, they were interested...

    • 17 The Issue of Science and Education
      (pp. 196-201)

      What of public policies aimed at fostering quality rather than quantity? What of enhancing human resources, which are plentiful and under-used in Latin America, rather than only crops and shipments of commodity goods? Everywhere in Latin America there is growing interest in national (or even regional) systems of higher education, and in public support to science and technological innovation. Investment in science and technology, higher education, and in skill training, along with a new concern for creative human input, are favourite issues for social reformers, and therefore they are at the forefront of the ongoing political agenda. All Latin American...

    • 18 Public Intervention against Marginality
      (pp. 202-209)

      The history of social policy in Chile precedes adjustment. It is worth remembering that the political program put forward by the Unidad Popular government (1970–3) aimed at making profound changes in Chile’s economy that would achieve key improvements in redistribution and growth. In the first year of his mandate, President Salvador Allende allowed credit from the central bank to the public sector to increase by 110 per cent. A sharp growth in real wages of 22 per cent and ongoing efforts to keep pace with price inflation, which abruptly rose from 152 per cent in 1972 to 363 per...

    • 19 In Search of Political Conditions to Pursue Social Policies
      (pp. 210-220)

      The Brazilian reforms in the area of social policy, symbolic as they may appear to citizens of the First World, are highly illustrative of the main obstacles new democracies meet on the path to structural change. Social reforms require considerable money and must be seen as long-term investments. Chile’s Concertación regime was able to undertake a temporary tributary reform that became permanent. This was obviously the price to be paid, for a peaceful transition to democracy, by a delinquent corporate sector too closely acquainted with the military. In return, local industrialists expected to cash in abroad on the enhanced image...

  8. Conclusions
    (pp. 221-230)

    Most authors set the power of the political executive as a strictly necessary condition for successful structural reforms. Nevertheless, the nature and the boundaries of such power have never been made explicit in their writings. Is there sufficient power when there is authoritarian or semi-authoritarian methods of making public decisions? Authoritarianism is only moderately reformist, if at all. Who will dare to affirm that General Pinochet wished to restore a free-network of producer-to-consumer relationships or that he was devoted to freeing both society and the economy from state controls and ideological preferences? We doubt that the principles of a free...

  9. Appendix: Tables
    (pp. 231-250)
  10. References
    (pp. 251-260)
  11. Index
    (pp. 261-287)