Transcript Historical Development of Political Economy in Southern Cone and

Historical Development of Political
Economy in Southern Cone and
larger Latin American States
Politics is about creating alliances and
maintaining good relations with key
constituents in order to stay in power and
accomplish political objectives.
As issues and context change, alliances
may break down, and new allies have to
be sought out. Likely result is a shift in
policy stance.
Eco and Pol Development, Periphery I,
1880-1930s
Eco Strategy:
Export-led growth
Target Market:
Western Europe, United States
Needs:
1. Transport and communication
networks
2. Labor
How to meet needs? Alliance between local elites
and foreign capitalists
Export-led Growth: Economic Side
Economic Process
Raw materials
exported to
industrialized states;
manuf. goods
imported from
industr. states to L.A.
Export-led Growth: The Political Side
Political Arrangement:
“Oligarchic Democracy”
Political
Representation: Limited
to rural and urban upper
classes
Political Challenges to Export Strategy
and Oligarchic Democracy, 1910s
• Rise of new classes
• Loss of communal
lands by indig.
groups (Mexico,
Peru)
• Emergence of new
parties to represent
new classes
Economic Challenges to Export
Strategy and Oligarchic
Democracy, 1930s
• Great Depression
brought sense of
betrayal towards
modernizing elites
and foreigners
• Rural-Urban
Migration
Eco and Pol Development in Periphery I,
1940s-1960s
Eco Strategy:
Import Substitution Industrialization
--ISI is a development strategy in which
the State turns inward and attempts to
develop from within, placing emphasis on
production for the domestic market.
Target Market: All Domestic Urban Classes (numbers
matter).
How to meet needs? Alliance between governmentt and
urban capitalists, military, and urban
workers.
ISI: The Economic Side
Investment capital tends to
be domestic – either
private or public (state
development banks)
Ownership: Domestic
private ownership and
State-owned industries
ISI: The Political Side
Populism: charismatic form of rule that offers great hope to
broad sectors of society; patriotic and nationalistic, but also
inclusive and sympathetic to plight of poor
Populist Alliance: entrepreneurs, organized labor, and
modernizing military officers
Political Representation Under
Populism, 1940s-1950s
Characteristics of 1940s-50s Populism
Ideology: nationalistic, anti-imperialistic, anticommunist, incorporating, supported state
intervention in economy
Leadership: dynamic, charismatic, use of mass rally,
charity, “benevolent dictators”
Promise of Growth + Development
Crisis of ISI as an Economic Strategy
Exhaustion of ISI in late-1950s and early-1960s.
Why?
1. Return of foreign competition
2. Inability to compete abroad
3. Industrial growth too dependent on imports of
capital goods, resulting in b of p deficit and debt
4. Decline in traditional export earnings
Collapse of Populist Alliance
When economy went downhill, coalition began to
unravel. Why?
1. Organized labor bargains with state to lock in
wage increases
2. Manufacturers demand continued subsidies,
protection from competition
3. Wage-push inflation -- too many dollars chasing too
few goods pushes inflation into triple digits
Govt must choose between Growth and Development
The Choice:
Growth vs. Development,
Dictatorship vs. Electoral Socialism
The Answer: BureaucraticAuthoritarian Rule
In late-1960s and 1970s, all Southern Cone and
larger L.Am. countries eventually experienced
some form of B-A rule and attempts to
“deepen” industrialization through dependent
development
Dependent Development, 1960s -70s
Eco. Strategy: “Deepening” of Industrialization -manufacture of durable and capital
goods
Target Market: Urban upper classes and foreign
markets
Needs:
Capital; labor-saving technology
Dependent Development: The
Economic Side
Tech and Firm Size: capital intensive, efficient and
competitive; large plants
Investment: Foreign investment through joint
ventures with multi-national corporations (MNCs)
How? 1. Create stable investment climate
2. Place economy in hands of técnicos
Role of State in Dependent Development
State-led growth
• Cut resources for poor
• Increase state spending
on technology and
investment in business
Theory: put $ in hands
of those who can
purchase durable
consumer goods
Ex. – Brazil, Argentina
Neo-liberal free-marketled growth
• Cuts in social spending
• Lower tariffs and cut
subsidies to businesses
• Privatization of stateowned industry
Theory: Rationalize the
economy and eliminate
inefficient firms
Ex. – Chile
Dependent Development: The
Political Side (B-A Rule)
Bureaucratic-Authoritarian regimes are
“excluding,” non-democratic forms of political rule
in which military officers and technocrats work in
close association with foreign capital to advance
industrialization
--elimination of electoral competition
--elimination of democratic institutions
--human rights abuses/repression
Examples of B-A Rule
Brazil – 1964-86; succession of Presidents from armed forces
Chile – 1973-90; Augusto Pinochet
Argentina – 1966-73, 1976-83; succession of juntas
Uruguay – 1973-84; civilian presidents with military
administrators
Peru – 1968-80; established “Revolutionary Government of
the Armed Forces”
Mexico – 1960s (when govt turns more repressive) – 2000;
questionable B-A rule (one-party dominant rule,
dictablanda)
Economic Challenges to B-A Rule, 1980s
1. International Recession
2. Foreign Debt (b/c of large capital outlays by State
at high interest rates and economic recession)
3. Rise in economic deprivation
--unemployment and underemployment
--widespread poverty
--shortage of housing and social services
Political Challenges to B-A Regimes
1. Mass social movements
2. International
condemnation of political
repression
3. Collapse of economy
reduces incentives to stay
in power
Political Economy of Periphery I,
post-B-A Rule
Eco Strategy: Economic liberalization and market
integration w/ stronger welfare state
Target Market: Urban domestic, foreign
Investment:
Foreign and domestic (predominantly
from MNCs)
Based on liberal economic theory -- global integration
creates jobs, makes industry more productive and
consumer goods available at cheaper prices
Politics of “New Democracies”
Characteristics
--Limited, procedural democracy
--During economic hard times or
political crises, temptation to
revert to non-constitutional
practices
--Although some countries have
made strides at strengthening
judicial system, others still have
corrupt, weak law enforcement
and legal system