Historical Development of Political Economy in Southern Cone and larger Latin American States

Politicscreatingalliances maintaining good relations with key constituents Politics is about creating alliances and maintaining good relations with key constituents in order to stay in power and accomplish political objectives. alliances may break down 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, s 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 govt 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, 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 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: 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 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: 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 Rule Brazil – ; succession of Presidents from armed forces Chile – ; Augusto Pinochet Argentina – , ; succession of juntas Uruguay – ; civilian presidents with military administrators Peru – ; 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