Historical Historical Development of Development of

Political Economy in Political Economy in Southern Cone and Southern Cone and

larger Latin larger Latin American StatesAmerican States

PoliticsPolitics is about creatingcreating

alliancesalliances and maintaining goodmaintaining good

relations with key constituentsrelations with key constituents

in order to stay in power and accomplish political objectives.

As issues and context change,

alliances may break downalliances 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, 1880-1930sEco Strategy: Export-led growth

Target Market: Western Europe, United States

Needs: 1. Transport and communication networks2. Labor

How to meet needs? Alliance between local elites and foreign capitalists

Export-led Growth: Economic Side

Economic ProcessEconomic 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 Political Challenges to Export Strategy and Oligarchic Strategy and Oligarchic

Democracy, 1910sDemocracy, 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 govt and urban capitalists, military, and urban workers

ISI: The Economic SideInvestment capital tends to be domestic

– either private or public (state

development banks)

Ownership: Domestic private ownership and State-owned industries

ISI: The Political SidePopulism: 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 Political Representation Under Populism, 1940s-Under Populism, 1940s-

1950s1950s

Characteristics of 1940s-50s Populism

Ideology:nationalistic, anti-imperialistic, anti-communist, 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 Crisis of ISI as an Economic StrategyStrategy

Exhaustion of ISI in late-1950s and early-1960s. Why?1. Return of foreign competition2. Inability to compete abroad3. Industrial growth too dependent on imports of capital goods, resulting in b of p deficit and debt4. Decline in traditional export earnings

Collapse of Populist AllianceWhen 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: The Choice: Growth vs. Development, Growth vs. Development, Dictatorship vs. Electoral Dictatorship vs. Electoral

Socialism Socialism

The Answer: Bureaucratic-Authoritarian 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 Dependent Development: Development:

The Economic SideThe Economic SideTech 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:Theory: put $ in hands of those who can purchase durable consumer goods

Ex. – Brazil, Argentina

Neo-liberal free-market-led growth

•Cuts in social spending•Lower tariffs and cut subsidies to businesses

•Privatization of state-owned industry

Theory: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 RuleBrazil – 1964-86; succession of Presidents

from armed forcesChile – 1973-90; Augusto PinochetArgentina – 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 Recession2. 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 RuleEco 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