Neoliberalism and Democratic Erosion in Latin America and Eastern Europe

• In Event: Interests Representation and Distribution in Latin America & Non-Western Europe

Abstract

Latin America and Eastern Europe simultaneously liberalized their economies and polities during the 1980s and 1990s following the ascent of the Washington Consensus and neoliberalism. A cornerstone of the transition strategies was to shield the necessary economic reforms from the influence of the losers of reform -or what is the same, empowering those who would win from reforms (O’Donnell and Schmitter 1986; Przeworski 1991; Haggard and Kaufman 1995; Greskovits 1998). These efforts translated into rapid privatization to empower private business, labor market flexibilization to weaken labor, and a diverse array of political institutions designed to limit democratic representation and insulate public policy from popular demands. What effect did these efforts have on the long-term survival of neoliberal economic policy regimes? How did they affect the trajectory of democratic consolidation?
In this paper I comparatively analyze how the empowerment of business and right-wing parties and the weakening of labor the left affected the continuity of neoliberalism in four countries, Argentina, Chile, Estonia and Poland, between 1975 and 2010. I put a special attention to industrial policy to illustrate this. Data comes from an intensive analysis of secondary sources, interviews in the four countries with key actors, and a selective analysis of press articles. The paper highlights two findings. First, those countries that designed their privatization, labor market flexibilization and new democratic institutions to increase the power resources of supporters of neoliberalism, and decrease those of political challengers, were successful in increasing the survival chances of their neoliberal economic regimes. In this context, the exact design of these strategies was crucial for their effectiveness. Second, these efforts and the political trajectory underpinning them, generated diverse patterns of erosion of the underlying democratic systems. While in countries defending neoliberalism (Chile and Estonia), the reduction of representation of political alternatives led to a “post-democracy” type of situation, in countries were neoliberalism failed to take root (Argentina and Poland), outsider politicians and populist movements challenged not only neoliberalism but the very bases of democratic regimes. I conclude by reflecting on the paradoxes of these results for understanding current challenges to democratic capitalism from (right and left) populisms.

Author

• Aldo Madariaga, Universidad Mayor