Understanding Latin American political economy: varieties of capitalism or fiscal sociology?

Abstract

Ben Schneider and David Soskice trace the origins and reproduction of Latin America's ‘hierarchical’ market economies to the perverse synergy of: 1) free-market economic reforms that systematically atomize (or demobilize) low-income constituencies; 2) majoritarian presidential elections that no less systematically ensure middle-class support for an upper-class agenda marked by labour market dualism, educational elitism, corporate conglomeration, and associational underdevelopment; and 3) proportionally-elected legislatures that are particularly susceptible to corporate influence. I worry that in their haste to incorporate Latin America into the varieties of capitalism framework, however, Schneider and Soskice: 1) overlook the Iberian roots of the region's principal economic institutions; 2) confuse symptoms like ignorance, informality, and corporate conglomeration with causes like inequality and fiscal underdevelopment; and 3) ignore not only the possibility but the likelihood of left-wing mobilization in the wake of democratization and international integration. And I therefore conclude with an alternative account that addresses not only the historical roots but the contemporary contradictions of the region's admittedly benighted political economies.

Acknowledgements

I would like to thank Ben Schneider and David Soskice for a stimulating debate, and Diego Sa′nchez and the editors of Economy and Society for their support.

Notes

1. See the notes to Figure 1 for country classifications. While Hall and Soskice assign France, Greece, Italy, Portugal, and Spain to an ‘ambiguous’ Mediterranean position ‘marked by a large agrarian sector and recent histories of extensive state intervention’ (2001, p. 21), they simultaneously portray their labour relations as ‘liberal’, and thereby ignore the historical basis and impact of employment protection legislation. Neither Hall and Soskice nor Schneider and Soskice classify the non-Hispanic Caribbean countries; they are included for the sake of completeness and appear to constitute a ‘high tariff/low EPI’ group of their own.

2. Ex post (or compensatory) safeguards would appear to trade off with ex ante (or protective) safeguards on a systematic basis and to have elective affinities with high-tax (i.e. CME and LME) and low-tax (HME) polities respectively. In fact, the bivariate correlation between the percentage of social expenditures in GDP (Pierson, 2003) and the trade and employment variables displayed in Figure 2 are -.7 (p<.001) and -.5 (p<.005) respectively. Complete analysis available from author on request.

3. Furthermore, Latin American employers may be more open to neo-corporatist overtures or class compromises than we know. After all, Barbara Stallings and Jürgen Weller (2001) conclude their recent study of Latin American labour markets by noting that South America's comparative advantage is not in low-cost labour and that skill upgrading is therefore a necessity in much of the region, and Celso Garrido and Wilson Peres (1998) maintain that Latin American business groups are responding to market opening by modernizing their plant and equipment, professionalizing their personnel and exporting their products more generally.

4. While Schneider and Soskice portray recent left victories as products of commodity export booms that leave median voters with ‘less to fear from leftist candidates’ (p. 46), their argument is difficult to credit. After all, Hugo Chávez won his first presidential election in 1998, when world oil prices were at historic lows, and left parties have gone on to win the presidencies of countries like Nicaragua, Paraguay and Uruguay that are difficult to classify as beneficiaries of commodity export booms.