The Expansion of Neoliberal Economic Reforms in Latin America
glen biglaiser2004, International Studies Quarterly
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Abstract
This article seeks to explain why most Latin American countries have expanded market-oriented reforms since the 1980s despite their generally disappointing economic results. To explain deepening liberal economic reform, we test panel data for 15 Latin American countries from 1980 to 1995, using Beck and Katz' panel-corrected standard errors regression. Controlling for several competing explanations, we find that, except under fragmented party systems, high inflation promotes the expansion of economic reforms. We then show how our results are consistent with Weyland's (1996) use of prospect theory as well as work on the distributional effects of high inflation. Since the late 1980s nearly all Latin American countries have adopted marketoriented, neoliberal reforms. 1 Economic hardship caused, in part, by the previous initiation of import-substituting industrialization (ISI) policies, convinced these governments to reduce the role and size of the state in the economy. However, after more than 15 years of market-oriented reforms in the region, strong economic recovery is more the exception than the rule. Despite some disappointing economic results, Latin American governments continue to liberalize and, in fact, expand their reform programs . Many would have thought this impossible, especially when these countries operate under democratic rule, and are subject to popular protests and electoral pressures (cf. Bates and Krueger, 1993;. What accounts for the deepening of neoliberal reforms in the face of growing economic despair? The literature on economic reform provides many plausible institutional accounts on the initiation of policies that stress state-centric factors. Based initially on the insular capacity of authoritarian regimes , recent studies show the benefits of an autonomous democratic state that can shield itself from interest groups opposed, at least in the short term, to economic liberalization Mainwaring and Shugart, 1997). Despite the wealth of studies on the initiation of policies, the expansion of neoliberal reforms has received less attention. Moreover, some studies discuss the dif-1 We gratefully acknowledge the assistance of Scott Gartner, Barbara Geddes, Carlos Gervasoni, Uk Heo, Susan Stokes, and the anonymous referees at ISQ.
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