Embedding Neoliberal Reform in Latin America

Abstract

Although research in the advanced industrial nations has identified a supportive link between an expanded public sector role and economic openness, studies of the developing world have been much less sanguine about the possibilities of broader state intervention in the context of economic liberalization. The authors investigate the possibility that governments in Latin America may “embed” economic openness in a broader public sector effort. They find that while several countries have moved toward an orthodox neoliberal model with minimal state interventions, other Latin American governments have maintained a broader public sector presence on the supply side of the economy while pursuing deep liberalization. They call the latter strategy “embeddedneoliberalism,” to distinguish it from the more egalitarian ambitions of postwar embedded liberalism. Cross-sectional time-series analysis reveals that embedded neoliberal strategies in Latin America have grown out of a legacy of advanced import-substitution industrialization and have been promoted by nonleft governments, except in cases where labor is very strong. The orthodox neoliberal model, by contrast, has emerged where postwar industrial development was attenuated and where labor unions were weakened considerably by the debt crisis.

The Arc of Neoliberalism

“…The centrality of politics belies the contention that neoliberalism was antistatist (Harvey 2005, Hay 2005, King & Sznajder 2006, Kurtz & Brooks 2008, Mann 2000, Mudge 2008, Murillo 2002, Ohmae 1996, Polillo & Guillén 2005, Rudra 2002, Wolf 2001. Although globalization was predicted to transform government completely, it did not lead to many key reforms to which neoliberals professed a dedication.…”

“…Its costs were socialized in ways that made organized opposition difficult (Dreher et al 2007, Hanson 2009, Storey 2008. Governments remained very powerful in the neoliberal era and maintained expansive, though different, roles in steering the economy (Kurtz & Brooks 2008). One clear trend was the shift of institutional power within the state toward the agencies managing relations with capital (central banks, finance ministries), as their policy perspectives and preferences came to dominate those of more welfare-oriented organizations.…”

How Multiple Imputation Makes a Difference

“…Naturally, this change is largest in cases of disappearance, averaging 552% for all coefficients and 2,201% for key coefficients. Note, however, that these averages are heavily influenced by two outliers in which both figures are more than two standard deviations above the mean (Accominotti and Flandreau 2008;Kurtz and Brooks 2008). Excluding these studies, the averages are 206% and 117%, respectively, similar to those in cases of strengthening (233% and 201%) and weakening (219% and 47%) but notably higher than those in cases of no change (135% and 74%).…”

Fighting Past Economic Wars: Crisis and Austerity in Latin America

“…Other scholars, however, find that neoliberal reforms have not been uniform. Rather, many countries with legacies of import substitution industrialization (ISI) have crafted political bargains (Frieden 1991) that preserved supply-side interventions, including industrial promotion, public employment (Kurtz and Brooks 2008), labor protection (Carnes 2014), and social insurance (Wibbels and Ahlquist 2011). In the realm of macroeconomic policy-making, I contend that this policy variation reflects the nature of a country's crisis history, with budget discipline tending to be more common in inflation-scarred countries.…”