The Political Economy of Reform in Latin America: Politics, Institutions, Ideas, and Context

Abstract

The Political Economy of Reform in Latin AmericaPolitics, Institutions, Ideas, and Context Pamela K. Starr (bio) The Politics of Labor Reform in Latin America: Between Flexibility and Rights. By Maria Lorena Cook. University Park: Pennsylvania State University Press, 2007. Pp. xv + 231. $45.00 cloth. Good Intentions, Bad Outcomes: Social Policy, Informality, and Economic Growth in Mexico. By Santiago Levy. Washington, D.C.: Brookings Institution Press, 2007. Pp. xiii + 357. $27.95 paper. The State of State Reform in Latin America. Edited by Eduardo Lora. Palo Alto, CA: Stanford University Press; Washington, D.C.: Inter-American Development Bank, 2007. Pp. xxi + 446. $29.95 paper. Democracies in Development: Politics and Reform in Latin America. Revised edition. Edited by J. Mark Payne, Daniel Zovatto G., and Mercedes Mateo Diaz. Washington, D.C.: Inter-American Development Bank; David Rockefeller Center for Latin American Studies, Harvard University, 2007. Pp. xvi + 332. $27.95 paper. Bounded Rationality and Policy Diffusion: Social Sector Reform in Latin America. By Kurt Weyland. Princeton, NJ: Princeton University Press, 2007. Pp. xii + 297. $24.95 paper. Research on the political economy of economic reform in Latin America has progressed quite tangibly in the past quarter century. The 1980s emphasized the relative success or failure of macroeconomic stabilization and market liberalization, a rather unsurprising fact given the economic crisis that enveloped the region at the time. These early studies emphasized the broad concepts of timing, sequencing, and political will to explain intraregional differences. Researchers were just beginning to think about the interplay between political and economic reform, and how this might affect policy outcomes, motivated in part by loudly expressed concerns about the compatibility between economic reform and the parallel rise of democratic governance. Analysis of the role played by democratic institutions in molding governance in Latin America’s new democracies [End Page 224] and their consequent capacity to implement needed reforms remained formative. Policy recommendations, meanwhile, were dominated by universal proposals—initially as emergency measures and later as accepted wisdom—for dealing with common challenges, despite obviously diverse policy environments. Yet the clear hypotheses driving many of these studies and the expanding body of evidence they created about Latin America’s varied experiences with reform established the foundation for what quickly became a rich field of study. As understanding of the reform process progressed, research almost naturally incorporated narrower questions about the nature and operation of specific political and/or economic drivers of reform, as well as more complex questions about the interaction among them. Analysis employed deeply detailed single-case studies, well-structured comparative case studies that looked at a small number of regional cases and compared Latin American with non–Latin American cases, and quantitative analyses of a broader universe of Latin American cases. As Latin America gradually surmounted the immediate crisis, reestablished market-based economies, and managed to sustain new democracies, analytic attention shifted away from stabilization, liberalization, and privatization to the longer-term ability of market economies and democratic governments to enhance the well-being of their citizens. Absent the enormous economic distortions created by hyperinflation, excessive protection, and overregulation, other sorts of equally pernicious but previously less obvious market and government failures became more evident, more problematic for growth and development, and more visible in studies on reform. Analysis turned to questions about property rights, information asymmetries, resource mobility, human and capital infrastructure, and the quality and consistency of economic policy, their market impact, and their ability to either promote or retard sustainable and equitable development. Research took on the roles played by social assistance, education, labor systems, regulatory structures, monopolies, and oligopolies, and by energy, finance, transport, and telecommunications infrastructure in building efficient markets. And it began aggressively to consider the factors—such as political decentralization, judicial reform, public administration, civil society, and institutional structures of government—that determine the quality and effectiveness of democratic governance, and Latin America’s consequent ability to implement needed policy reforms. This second wave of research on political economy also evinces a developing consensus about the sets of factors that matter most in explaining reform. Put simply: politics matter, institutions matter, and context matters. Although this may seem exceedingly broad and less than earth shattering now...