Historical Development of Political
Economy in Southern Cone and larger
Latin American States
Politics is about creating alliances and
maintaining good relations with key
constituents in order to stay in power and
accomplish political objectives.
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.
Economic and Politic Development, Periphery I, 1880-
1930s
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;
manufactured goods
imported from industrialized
states to Latin America
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 native 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
Economic and Politic Development in Periphery I, 1940s-
1960s
Economic 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 government 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 (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 few goods
pushes inflation into triple digits
Government 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 Latin Americans countries eventually
experienced some form of B-A rule and attempts to
“deepen” industrialization through dependent
development.
Dependent Development, 1960s -70s
Economic 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
technicians
Role of State in Dependent Development
Neo-liberal free-market-
State-led growth led growth
• Cut resources for poor • Cuts in social spending
• Increase state spending • Lower tariffs and cut
on technology and subsidies to businesses
investment in business • Privatization of state-
Theory: put money in owned industry
hands of those who can Theory: Rationalize the
purchase durable economy and eliminate
consumer goods inefficient firms
Ex. – Brazil, Argentina 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 – 1964-86; succession of Presidents from
armed forces
Chile – 1973-90; Augusto Pinochet
Argentina – 1966-73, 1976-83; succession of
meetings
Uruguay – 1973-84; civilian presidents with military
administrators
Peru – 1968-80; established “Revolutionary
Government of the Armed Forces”
Mexico – 1960s (when government 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 (because 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
Economic Strategy: Economic liberalization and
market integration with
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