Free Market Democracy and the Chilean and Mexican Countryside available in Hardcover, Paperback
Free Market Democracy and the Chilean and Mexican Countryside
- ISBN-10:
- 052182737X
- ISBN-13:
- 9780521827379
- Pub. Date:
- 04/05/2004
- Publisher:
- Cambridge University Press
- ISBN-10:
- 052182737X
- ISBN-13:
- 9780521827379
- Pub. Date:
- 04/05/2004
- Publisher:
- Cambridge University Press
Free Market Democracy and the Chilean and Mexican Countryside
Buy New
$122.00Overview
Product Details
| ISBN-13: | 9780521827379 |
|---|---|
| Publisher: | Cambridge University Press |
| Publication date: | 04/05/2004 |
| Pages: | 264 |
| Product dimensions: | 5.98(w) x 9.02(h) x 0.75(d) |
Read an Excerpt
Cambridge University Press
052182737X - Free Market Democracy and the Chilean and Mexican Countryside - by Marcus J. Kurtz
Excerpt
PART I
THE FRAMEWORK AND
THEORETICAL ARGUMENT
I
Posing the Right Questions
This book begins with an odd contrast: while the recent emergence of many "free market democracies" in Latin America and much of the rest of the underdeveloped world is not in doubt, this outcome stands in marked conflict with almost two decades of scholarship that suggested that the process of free market democratization should at best be difficult and conflictual and at worst be impossible. However stable an equilibrium liberal capitalist democracy might be in both political and economic terms, the costs of transition, particularly among the historically statist and inward-oriented late developers, ought be very high. Economically, the abandonment of import substitution policies induces unemployment, uncertainty, mass bankruptcies, and increases in inequality and poverty. Politically, processes of economic reform typically entail attacks on a broad swath of powerful vested interests, including protected industrialists, organized labor, peasants, and even the state bureaucracy. Yet despite these challenges - huge economic costs and politically powerful opponents - free market democracy has sometimes emerged in the unlikeliest of settings, often with a minimum of instability and upheaval.
Chile, long one of the most statist political economies and stable democracies on the South American continent, had by 1970 elected a Marxist president and launched a peaceful transition to socialism. Three years later the military seized power in the context of hyper-mobilization and paralyzed politics (Valenzuela 1978), eventually setting the stage for radical economic transformation. In an uneven and piecemeal fashion, the subsequent military government of General Augusto Pinochet (1973-89) imposed a wide-ranging and coherent neoliberal developmental model (Silva 1996; Kurtz 1999a). This free market transformation inserted Chile into the international economy and eventually, after two severe economic crises, produced high rates of growth. But it also dramatically widened income inequality, more than doubled the rate of poverty, and reduced large segments of the labor force to informality (Vergara 1994). From 1983-6, in the midst of a severe economic downturn, protests rocked the country and threatened the very survival of the authoritarian regime - though they were harshly repressed and in the end unable to force a transition. Instead, defeat in a plebiscite in 1988 over the continuation of General Pinochet's military government ushered in a democratic transition. What emerged was a rapidly consolidated free market democracy. Political freedom and opposition victory did not, however, bring a rollback of neoliberal reforms or a return to the polarized redistributive politics of the early 1970s. Instead, three successive elected governments dominated by Christian Democratic and Socialist opponents of military rule have, if anything, extended the free market development model. Nor has democratization been accompanied by the political turmoil and/or blocked reform efforts that have characterized posttransition Argentina, Peru, Ecuador, and of late, Venezuela.
This has led some to argue that what is needed is a firm hand in the implementation of market-oriented economic reforms until such time as their economic merits can be demonstrated, after which democratization can be accomplished in a comparatively unproblematic fashion.1 While such an explanation is consistent with the sequence of reform and political opening that took place in Chile, it cannot be sustained on other grounds - a clear majority of the population at the time of democratization continued to suffer materially from neoliberalism. Moreover, some of the most reliable supporters of conservative, free market political parties came from those peasant population segments most adversely affected by economic opening. Whatever the causes of support for neoliberal parties, for this segment it is not economic self-interest.
A comparative perspective casts further doubt on sequencing explanations. First, free market reforms do not always produce sustained growth over the medium to long term (e.g., Argentina and Mexico). Second, they are often implemented coterminously with or subsequent to democratization itself (e.g., at roughly the same time in Mexico, and after democratization in Brazil). In Mexico, the dual process of economic and political liberalization culminated in the consolidation of open economic policies with the North American Free Trade Agreement (NAFTA) of 1993 and the establishment of national-level democracy with the first opposition legislative victory in 1997 and a presidential victory in 2000. Both marketization and democratization occurred alongside each other without sustained or widespread political upheaval, serious efforts to turn back reform, or the interruption of secular progress toward greater political and market openness. This was despite the two catastrophic economic downturns in the 1980s and 1990s.
So how is stable free market democracy brought about? The empirical task this book sets itself is to provide a socially grounded political account of the construction of free market democracy in both countries. It is an account that will avoid the tautological assertion that the institutional foundations of the market economy are intrinsic to the definition of democracy, as well as the claim made on the political right that free market reforms are in themselves inherently democratizing - there are far too many free market authoritarianisms for this to be the case. Equally, however, it rejects the assumption prevalent on the left that market economics and meaningful democracy are incompatible. Rather, this book focuses the discussion on when, why, and how free market economics and democratic politics come together in a stable political equilibrium.
Before the question can be adequately answered, however, it must be correctly posed. This chapter will be focused around two questions that frame the theoretical emphasis presented in Chapter 2 and the empirical analysis that comprises the remainder of the book. First, what is it about the process of economic liberalization that poses challenges for democracy's establishment, and how have these barriers been overcome? Second, moving beyond the question of consolidation, we must ask what is the relationship between consolidated free market democracy and the prospects for the deepening of democratic social relations? This is an issue that is a matter of ongoing debate among the "first wave" democratizers and it represents a set of new challenges in the underdeveloped world. Finally, I consider the relationship between these two processes, arguing that efforts to extend and deepen democracy introduce trade-offs with its consolidation. It is this, usually unacknowledged and unhappy dilemma that stands at the center of the relationship between markets and democracy.
OVERCOMING THE ANTINOMIES OF FREE MARKET REFORM AND DEMOCRATIZATION
The point here is to understand how states overcome the challenges that face them in attempting to render free markets and democratic politics compatible in the underdeveloped world. Not all scholars, however, accept that the twin phenomena are anything but mutually reinforcing. Prominent proponents of economic liberalism have long held that it is essential to human freedom (Hayek 1944; Friedman 1962), while arguing that statism (and particularly state socialism) are inherently corrosive of democracy (Friedrich and Brzezinski 1956; Fainsod 1957). More recently scholars have promoted a more nuanced argument that rejects a deterministic linkage, but suggests that liberal economies foster the conditions that are propitious for the survival of democratic politics (Fukuyama 1989, 8). Others, like Huntington (1984, 24) suggest that key features of the market economy - private property rights and the dispersion of political power they are said to entail - are at least necessary conditions for the maintenance of democratic politics.
The vast majority of scholars, however, have argued that the dual transition (away from statism and authoritarianism) is inherently difficult in the short term. The crux of the problem is that the economic reforms essential to economic liberalization - inter alia privatization, deregulation, trade opening, fiscal austerity, and tax reform - produce harmful material consequences for the vast majority of citizens (Przeworski et al. 1995, 68). In the context of democratic politics, this provides fertile ground for the emergence of "nationalist" or "populist" politicians seeking office based on promises to reverse the reforms (Nelson 1989). Rodrick (1996, 10) has captured the crux of this problem: "Good economics does often turn out to be good politics, but only eventually. . . . Conversely, bad economics can be popular, if only temporarily."
From this perspective one would expect opposition to liberal economic reform from powerful vested industrial and commercial interests with a stake in continued statism (Krueger 1974). On the other hand, the beneficiaries of economic liberalization tend to be at their weakest politically at the time at which reforms are initiated. Indeed, many of the economic sectors that stand to benefit from reform may not even have a meaningful presence at the time of opening, and thus they cannot be its political author. The key to reconciling democracy and the market thus involves the construction of a political coalition capable of sustaining reforms in a politically open context. The paradox is that if voters, firms, unions, and peasants act on their interests defined in material terms, no such coalition can be assembled. Implicitly, either democracy will consume the market, or marketization must take place in the absence of democracy. Should politicians endeavor to launch economic liberalization, they would still face the orthodox paradox: entrenched bureaucrats unwilling to engage in the retrenchment of the state, but who would nonetheless be responsible for implementing liberalization (Kahler 1989, 55).
Understanding free market democracy, then, involves understanding how these twin paradoxes can be solved. Empirical reality - in stark contrast to theory - suggests that they can, even in unfavorable circumstances (Remmer 1990). In Chile, the very same polity that had in 1970 produced the world's first elected Marxist government had by 1989 generated a political system in which nearly all political actors supported open, market-based economic organization (Roberts 1995). In Argentina, a democratic government was able to push through and consolidate a package of economic liberalizations far more ambitious than those even a previous savage bureaucratic authoritarian government was unable to impose, and more extensive than those undertaken in the East Asian newly industrializing countries over the course of decades (Rodrik 1993, 356). In Mexico, a long-standing dominant party founded on revolutionary nationalist economic policies was able to open the economy, induce catastrophic declines in living standards for the broad majority of citizens, open up political competition to an unprecedented degree, remain in power throughout the transition, and eventually pass the presidency to an opposition party equally committed to free market policies.
Four perspectives dominate the efforts to explain this apparent paradox. The first emphasizes the sequencing of reforms, such that marketization precedes democratization and can become a fait accompli by the time political opening is achieved. A second perspective suggests that a sufficiently gradualist approach to economic liberalization - despite potential efficiency costs - can help to make reform politically palatable (and thus durable). A third suggests that the galvanizing force of economic crisis can make otherwise unpalatable reforms politically feasible. Finally, some have pointed to a new form of "populist" politics that combines free market economic positions with a charismatic and antioligarchic political style and/or targeted side payments (social welfare programs) that can be used to mitigate opposition to neoliberal reforms.
Arguments about sequencing have been most prominent in the literature on transitions in the formerly communist countries (Williamson 1994). And they mirror the conventional understanding of the Chilean case, a stylized scenario in which an ideologically committed military government imposed sudden and harsh neoliberal reforms on the economy, which after a severe downturn eventually produced a sustained high-growth outcome (Edwards and Edwards 1987). In addition to inducing adjustment and efficiency, the neoliberal reforms were also consciously designed to disarticulate remaining supporters of statism (Piñera 1991). By the time of democratic transition in 1988, the benefits of liberalization were said to have been manifest, leading to the commitment even of most of the opposition parties to the free market model (Puryear 1994, 112; Roberts 1995).
There are three principal problems with the sequencing argument, however. First, in most empirical cases the return to growth has either not materialized (as in much of the formerly communist world) or has not been sustained (e.g., Argentina, Brazil, Peru, and Mexico). Moreover, even in Chile where rapid growth was maintained, this did not imply material improvements for the vast majority of the population. Near the time of transition, free market policies had raised rates of poverty and indigence to nearly triple and quadruple their 1970 levels, with over 42 percent of the urban and over 53 percent of the rural population impoverished (León 1994, 11). While there is debate as to the merits of neoliberalism as a growth strategy, few argue that in the medium term it produces anything but regressive distributional outcomes that are hardly conducive to constructing a mass following. Thus the second problem is political - arguments about the long-term benefits of growth only make sense if politicians can construct coalitions based in the winners from neoliberalism. But in Chile the free market political forces on the right have as a large portion of their political base peasants who were among the greatest victims of the neoliberal transformation. This is despite the reduction in poverty achieved during the post-transition reformist administrations. That is, the neoliberals have constructed a viable political coalition, but it is not the one predicted by sequencing approaches. Finally, arguments about sequencing would expect that the more simultaneous the reforms the more severe the resistance (as losers from the reform process have greater ability to resist in more democratic settings). But in Mexico a much more contemporaneous process of political and economic reform - despite catastrophic economic results in the mid-1980s and again in the mid-1990s - produced far less open resistance than experienced in Chile during the 1980s in a decidedly more authoritarian setting.
Others scholars, also operating under the assumption that painful reforms will provoke serious societal resistance, have argued that politicians should take a gradualist and more democratic approach to economic reform. In the process, political coalitions supporting reform can be constructed (Bresser Pereira et al. 1994, 182). Nelson (1992, 259-60) contends that failure to do so may require either a reversion to authoritarian practices or the abandonment of reform, but she does suggest ways in which even fiscally constrained states might construct reform coalitions.2 Buttressing this perspective are arguments by Rodrik that suggest that economic reforms are not as painful in the short run as commonly assumed (1996, 29), and Bunce's (2000, 719) observation that neoliberal reforms have the political side "benefit" of disarticulating reform opponents. Finally, and most compellingly, Schamis (1999) points out how the process of neoliberal reform can create rents for potential reform beneficiaries, and thereby help construct a viable proreform coalition.
While there is some merit in this second general perspective, it ignores several crucial points. Rodrik's claim that economic reform is not as painful as is usually argued makes sense only in comparison to a counterfactual - the potential consequences of failure to reform. But it is not likely that the vast majority of citizens will make that comparison in place of a judgment of relative change in material well-being since the onset of reform. By the latter yardstick, short-run costs have been enormous almost everywhere. Gradual approaches to economic reforms also raise the strong possibility that opposition majorities can be mobilized to slow, block, or roll back liberalization (e.g., crucial pension reforms in Brazil). Certainly liberalization's rents can create allies among powerful interests (e.g., privatized firms, the finance sector), but it is difficult to see how mass electoral support could thusly be generated. Indeed, these rents can sometimes cause the reform process to stall in unfavorable partial reform equilibria (Hellman 1998). And surprisingly frequently specific economic reforms are taken in a rapid way, while accompanying social welfare programs designed to mitigate dissent and build overall support for politicians implementing the model are typically inadequate to the task, if they are present at all.3
© Cambridge University Press