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The Sage Handbook of Neoliberalism - I2002 PDF
The Sage Handbook of Neoliberalism - I2002 PDF
The Sage Handbook of Neoliberalism - I2002 PDF
Introduction
Neoliberal economic reform arrived in Latin America earlier than in any other region in the world – a tech-
nocratic revolution in Chile, led by a group of professional economists trained at the University of Chicago –
the ‘Chicago Boys'. The playful moniker contrasted with the brutality of the military regime that launched the
reform process. General Augusto Pinochet's coup led to thousands of Chilean citizens dead, tortured, dis-
appeared, and dealing with devastating economic consequences flowing from the rapid economic changes.
There is little argument that the coup and the economic reforms produced terrible traumas. Even the Chilean
military has conceded that it systematically violated human rights. Yet, conflicting interpretations remain over
the causes of the coup, the economic and political issues facing the country, and the consequences of the ne-
oliberal reform program. For observers on the left, the coup (and the accompanying US economic pressure)
violated a democratic choice to promote a workable and socially just transformation of the structure of eco-
nomic power and social relations. For observers on the right, Salvador Allende's ‘macroeconomic populism’
is a perfect example of Latin American leftists’ dismissiveness of the reality of resource constraints. Today,
very few Chileans would defend the human rights violations of the dictatorship (although even that is relatively
recent), but the controversy over the economic programs of Allende and Pinochet has persisted unabated.
The bitter disagreements over the Chilean story are a microcosm of the arguments over neoliberalism's his-
tory in the region as a whole. Margaret Thatcher's phrase ‘there is no alternative’ seemed axiomatic in Latin
America in the 1980s and into the 1990s as one by one Latin American countries introduced neoliberal re-
forms. Even nationalist heroes, like Carlos Andrés Pérez in Venezuela, or Victor Paz Estenssoro in Bolivia,
or nationalist/workers’ parties like the Partido Justicialista (Peronist) in Argentina, succumbed to the force of
the neoliberal wave and became instead agents of the reform agenda. In other instances, candidates cam-
paigning on deceptive or ambiguous platforms delivered ‘neoliberalism by surprise’ (Stokes, 2001), as with
Fernando Collor in Brazil or Alberto Fujimori in Peru. By the mid-1990s, neoliberal reforms had swept through
the region with Cuba the lone holdout.
Yet, by the end of the 1990s, disenchantment with weak economic performance produced a new swing to
the left, beginning with the election of Hugo Chávez in Venezuela in 1999. Within a few years, leftist parties
governed roughly half the countries in the region. Over the 2000s, inequality and poverty declined, fueled by
a mix of increased social spending, solid economic growth, and a strong macroeconomic environment. But,
the good times came to an end as the ‘Good Times Index’ – a measure of the external economic constraints
on developing country governments (Campello, 2016) – shifted downwards. A decade and a half into the so-
called Pink Tide, the prospects for the left appeared greatly weakened and neoliberal economic prescriptions
had regained prominence, particularly in Argentina and Brazil where right-wing presidents moved quickly to
reverse the spending policies and priorities of their leftist predecessors.
This rapid shift from nationalist and state-led policies in most of the region to neoliberal hegemony to the Pink
Tide and back to neoliberalism presents a difficult analytical challenge: how should we understand this dra-
matic and relatively rapid sequence of reforms and counter reforms? In one respect, the answer is straight-
forward. This is simply a continuation of the century-long battle in Latin America over how to overcome the
region's long history of economic, social and political exclusion. But, the controversies over why these prob-
lems persist and how to overcome them have been intense, bitter, and sometimes violent.
Reviewing alternative explanations for this long pattern generally and neoliberalism specifically poses several
problems. For one, the topic is vast, spanning multiple disciplines, countless topic areas and a range of com-
peting theoretical approaches. Moreover, analyses of neoliberalism's performance in the region reflect deep
underlying differences in ontology, epistemology and ideology for which there is no mediating test – for ex-
ample, neoliberals and Marxists both offer cohesive and plausible, but completely incompatible narratives
that cannot be resolved with empirical evidence. Indeed, these fundamental disagreements are so deep, they
make the very term contentious. For that reason, some scholars have adopted ‘market oriented’ reforms in
favor of ‘neoliberalism’ to avoid entanglement in normative or philosophical disputes.
I have chosen to narrow this vast subject in two ways. First, the chapter focuses on major points of interpre-
tation and contention among scholars looking only at the subjects of the economic problem of the role of the
state and the political problem of explaining support/opposition to neoliberalism. Second, scholars working
on these topics draw on a variety of theoretical approaches, but to simplify the discussion this chapter dis-
tinguishes between arguments by the ‘thickness’ of the conception of neoliberalism. ‘Thick’ approaches view
neoliberalism as an inseparable whole – a cohesive political, social and economic project that alters the very
nature of social relations. Neoliberals and ‘radical’ critics (for want of a better term) profoundly disagree on
virtually everything, but share a reliance on a ‘thick’ conception. On the other side, philosophically, stand a
wide array of scholars in economics and political science who use a ‘thinner’ conception of neoliberalism –
one that sees a diverse set of problems with economic, political and social implications. But, each of these el-
ements can and do vary independently with meaningful consequences. In this conception, neoliberal policies
are not all inherently bad or good, and governments can be more or less democratic, independent of neolib-
eral policies. Scholars drawing on thin conceptions may share normative viewpoints with ‘thick’ scholars on
either side of the ideological divide, but rely on theories and empirical tests that don't accept the validity of
thick conceptions.
The central argument of this chapter is that all three traditions, neoliberal, radical and ‘thin’ social science,
have produced impressive scholarship with powerful and persuasive analyses. Yet, scholars are struggling
with the same set of issues and the same theoretical problems that have driven debate for decades. Latin
America in the new millennium remains a region characterized by low to moderate growth at best, rising risks
of inflation and macroeconomic imbalances, high levels of inequality, and dangerously fraught politics. For
neoliberals, the failings of the left offer proof of the inability of the state to drive economic development and
the dangers of politicians unable to make disciplined economic choices. For radical critics, the re-emerging
tensions give proof of the need for deep structural reforms that break with global capitalism and fundamental-
ly alter the structure of property and production. For the diverse group of ‘thin’ analysts, the end of the ‘golden
years’ of the Pink Tide reveal the limits of our ability to answer key questions about how to produce economic
growth with democratic politics and social justice. In short, empirically, we know a great deal more about Latin
America and its politics and economics, but our theories have not brought us closer to answers to the central
questions of development in the region.
dustry and could not tax economic elites, financing came from commodity exports. The tariff and foreign ex-
change policies used to promote industry damaged commodity producers/exporters while declining terms of
trade made the model untenable over the long term. At the same time, ISI governments sheltered uncom-
petitive business and their relatively highly paid workers (compared to Asia, for example (Mahon, 2012). Ulti-
mately, this proved an unstable path as it exposed Latin American economies to balance of payment crises,
spiraling inflation, and violent political conflicts.
That was the context in which neoliberal reforms first appeared in the region. By the 1960s, Latin America had
reached what Albert Hirschman (1968) referred to as the ‘exhaustion of the easy phase’ of ISI, with arguably
only Brazil (due the size of its internal market) postponing the crisis. By the 1980s, the conditions facing most
Latin American countries were dramatically worse: escalating debt, high and in many cases hyperinflation,
stalled growth/recession, collapsed commodity prices, and the crippling consequences of both the first (1973)
and second (1979) OPEC oil shocks. For neoliberal advocates, all these problems stemmed directly from ex-
cessive state involvement in the economy.
Perhaps the most important statement on neoliberalism in Latin America comes from John Williamson and
the ‘Washington Consensus’ (Williamson, 1990). The Washington Consensus was the minimally acceptable
policy plan that scholars and policy makers centered in Washington think-tanks, government departments,
and international financial organizations could all agree on. At the heart of the problem, as they saw it, was
the corrosive role of the state in distorting prices through both direct and indirect forms of intervention in the
economy, including: governments conceding wage increases in excess of productivity, inefficient and often
unnecessary infrastructure spending, simultaneously excessive and regressive welfare state spending, mas-
sive indebtedness driven by state-owned enterprises’ borrowing, tariff protection generally but especially for
politically favored sectors or firms (without any prospect of eventual lowering of tariffs), subsidized or politi-
cally directed loans to favored firms or sectors (sometimes even at negative interest rates), and controls on
capital movement. Neoliberals could point to the dismal economic record leading up into the 1980s as proof
that the state's presence in the economy was the problem. The result was the ten-point platform of policies
dubbed the Washington Consensus, including the key pillars of privatization, deregulation, trade liberalization,
and controlling deficit spending (even at the expense of painful cuts in social welfare).
By the 2000s, neoliberal policies confronted the reality of at best a spotty record of performance that lent
credence to criticisms from scholars and policy makers. For Latin America, the strongest neoliberal response
came in John Williamson and Pedro Pablo Kuczynski's follow-up volume, After the Washington Consensus.
Writing in 2003, Williamson and Kuczynski acknowledged that neoliberalism's advocates had oversold the
promise of reforms, but they argued that the record over the 1980s and 1990s did not justify a rejection of
market reforms as a solution to the region's growth challenges. Instead, the pair made three key arguments.
First, they argued that neoliberalism's record in the region was much better than its critics averred. Inflation,
for example, had been a scourge of Latin American economies since the earliest wave of industrialization at
the turn of the twentieth century and increasingly so through the century. By the end of the century, inflation,
debt and government deficits had all fallen dramatically. Chile, the model neoliberal case in the region, was
also one of the best performers on virtually every indicator and therefore good proof of the neoliberal model's
value. A second argument was that the problem in Latin America was not that the neoliberal program had
gone too far, but that it had not gone far enough (Walton, 2004, also makes this point forcefully). No Latin
American government – even Chile – fully liberalized their economies. In particular, labor markets remained
largely unreformed despite the neoliberal view that labor market rigidities were a critical cause of high levels
of informality and therefore a leading contributor to poverty and inequality (Saavedra, 2003). A third argument
offered by Kuczynski and Williamson was that many neoliberal reforms depended on strong, effective insti-
tutions that supported market oriented policies, but those supporting institutions were often missing or weak.
For example, banking reforms depend on prudential regulation, or privatization depends on regulatory insti-
tutions, and both depended on effective judiciaries which were largely lacking in the region. The limitations of
neoliberal reforms, therefore, were due to deficiencies in the politics of specific countries, not in the program
itself. How a government creates the required institutions is beyond the scope of neoliberal theory and there-
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The problem for neoliberalism, however, is that the historical record offers little support for the argument that
markets undergirded by a lean state lead to widely shared growth in the region either. In the end, the neolib-
eral blueprint rests on a thicker model of political economy with important ontological and normative bases.
In particular, this view assumes that the state cannot make good policy choices, that ‘getting prices right’ is
sufficient to renew economic growth, and that efficient use of resources can solve long-standing social injus-
tices. If any of these assumptions prove wrong, then neoliberalism's policy prescriptions are questionable. In
addition, neoliberalism's silence on the institutional requirements for effective policies constitutes a fatal flaw.
If neoliberalism requires Western ‘Weberian’ bureaucratic institutions to achieve the intended results, then
dropping the institutional setting from the diagnosis and the prescribed solutions is ahistorical and wishful
thinking. Neoliberalism also assumes that a minimal state with well elaborated property rights and a support-
ing rule of law protects fair social outcomes. But, if instead it allows economic elites to use their position to
undermine democratic politics and subvert social justice, then the blueprint is also fatally flawed. For scholars
drawing on both radical and thin critiques, the empirical record shows that the basic underlying assumptions
of neoliberalism are untenable.
Scholars operating with thin conceptions do not accept either of these limiting parameters and have chal-
lenged both neoliberal and the radical views on theoretical and empirical grounds. Many of these arguments
accept the neoliberal diagnosis that the state's role in the economy was an important cause of the problems
in the 1960s and 1970s (e.g., Castañeda, 1994). Thin critiques accept capitalism as a legitimate means of
organizing the economy, but focus on the ways that the neoliberal program or specific elements of the pro-
gram fail to promote growth, to regulate market elites, or to ensure a ‘human face’ – i.e., socially equitable
outcomes.
where the country had no comparative advantage and therefore a ‘re-commodification’ or ‘premature industri-
alization’ was not a problem as long as output was growing. For critical economists, this missed the vital role
of manufacturing in driving economic development and the danger of simply exporting commodities (Rodrik,
2015).
Economic critics argued that policies need to consider the specific context and history (Banuri, 1991) and
should be tailored to address the ‘binding constraints’ on each individual country's development (Rodrik,
2012). The ‘one size fits all’ neoliberal prescription misunderstands the Latin American experience, treats the
region as a single undifferentiated unit, and selectively focuses on the failings of ISI while ignoring its suc-
cesses (Fishlow, 1991). The state played an important role in supporting development in all late developing
countries (and almost all developed ones as well (Chang, 2002). Indeed, Albert Hirschman made the case
that the thirty years of postwar ISI were comparable to ‘les trentes glorieuses’ in France – a period of sus-
tained growth and dramatic social gains (Hirschman, 1987). Dismantling the state's capacity to support devel-
opment risked sacrificing ‘the ability to get policies right in the interest of getting prices right’ (Fishlow, 1991).
The proof lies in the region's experience over the 1990s. The rush to implement trade liberalization, privatiza-
tion, deregulation, financial liberalization, and reducing budget deficits helped eliminate inflation and improved
macroeconomic performance. But, on virtually all other economic indicators, the region suffered from both
weak performance and extreme volatility. Growth during the 1990s was modest, but volatile, while poverty and
inequality rose or remained the same, unemployment increased, and domestic manufacturing declined. The
dismantling of the institutions of industrial promotion led to a ‘re-commodification’ of Latin America, with labor
shifting into lower value-added and lower productivity activities. Alongside the rise in commodity production
and exports, the region also witnessed large increases in finance and related sectors (such as insurance and
real estate) – sectors shielded from international competition and generating little in increased productivity
and widely shared welfare gains (Paus, 2013, 2014). The weakness of neoliberalism's economic performance
over the period played a considerable role in the emergence of the Pink Tide. Perhaps the biggest culprit,
however, was the effect of repeated currency crises on the region.
The need to maintain a liberalized capital account exposed Latin American economies to rapid and brutal
capital outflows. From the Peso Crisis of 1994 (and the ensuing ‘Tequila Effect’ that rocked the region in its
wake), to the Brazil ‘Real’ crisis of 1999, to the collapse of the Argentine Peso in 2001, Latin Americans lived
with extraordinary volatility. While neoliberals tend to blame governments for policy errors, Latin American
governments certainly bore no responsibility for the contagion effects of otherwise isolated crises (such as the
1995 ‘Tequila Effect’ that swept across Latin America after the 1994 Mexican Peso Crisis, or the 1997 Asian
Flu). Fears of capital outflows led governments to pursue pro-cyclical policies, regardless of the effects on the
domestic economy and society. Even officials at the Inter-American Development Bank and the World Bank
worried about this dynamic (Hausmann et al., 1999; Gutiérrez and Revilla, 2010). Deepening recession as
a way to preserve capital inflows undermined the capacity to grow the economy and generate the revenues
needed to manage both domestic social and political concerns as well as foreign currency obligations.
Argentina's ‘dollarization’ system highlights the dilemma perfectly. Recognizing that the government had lost
all credibility, both with citizens and foreign investors, President Carlos Menem and his Finance Minister
Domingo Cavallo offered the ‘Convertibility Plan’ as a way to establish a credible and stable currency. The
plan effectively dollarized the economy, guaranteeing the convertibility of the peso at a one to one rate, elim-
inating the role of the Central Bank by creating a currency board with a strict mandate to release or withdraw
one peso for every dollar in reserves. In effect, the government sacrificed the ability to use monetary policy in
exchange for the promise of stability and to encourage foreign investment. The plan was an immediate suc-
cess in curbing inflation, renewing inflows, and restoring growth. But, over time, an increasingly overvalued
currency began to undermine the competitiveness of the economy and to decrease government revenues.
Within a few years, it became clear that the government would have to end convertibility and devalue the
currency. The danger was that holders of the Argentine peso (especially domestic ones) were waiting for it to
happen and looking to get their money out beforehand. At the point where it became clear that the govern-
ment could no longer maintain convertibility, billions held by Argentines fled the country within days, triggering
a second round of outflows from foreigners holding pesos. The collapse of the peso led to one of the worst
political crises in Argentine history (Starr, 1997). The economic consequences were even worse (Manzetti,
2003).
Bolivia's ambitious and innovative privatization program under Gonzalo Sánchez de Lozada offers a sampling
of a range of possible perverse outcomes – ones that manifested repeatedly throughout Latin America.
Sánchez de Lozada's Plan de Todos (Plan for All) envisioned a capitalization scheme of SOEs in six key sec-
tors. The idea was that the winning bidder would pay the sale price to the firm itself so that the proceeds ef-
fectively capitalize the newly private firm and allow it to invest in competitive improvements. The government
retained 50% of the shares with the intention of distributing the shares to the whole population creating, in
effect, a universal, national non-contributory pension (Bonosol). The plan thereby attempted to solve several
problems at the same time: (a) privatization and capitalization to promote efficiency and investment; and (b)
popular participation to address both political opposition and the very low level of pension coverage in Bolivia
at the time. To make sure the plan met its larger goals, the various privatizations built in performance targets
related to accessibility and quality of service and made ownership contingent on meeting targets. The Plan
de Todos was arguably Latin America's most creative privatization scheme – a unique solution for a country
with serious economic and social challenges and desperately short of financial resources.
Yet, the weakness of the country's regulatory, monitoring and enforcement institutions resulted in sub-optimal
outcomes at best and outright failures at worst (Kohl, 2004). Sale of the airline, Lloyd Aéreo Boliviano, to
Brazil's private airline, VASP, led to its rapid demise primarily through asset stripping and reduction of routes
and employment. Within roughly a decade, Bolivia's national airline closed its operations. Similarly, the sale
of Bolivia's national rail service led to aggressive asset stripping and the end of rail service for the country.
In both cases, the purchaser did not come close to its investment targets and in the absence of any enforce-
ment mechanism enriched itself at the cost of substantial social welfare costs, including employment losses.
The privatization of the oil and gas sector helped bring greatly needed new investment into the respective
sectors. But, the government's weak bargaining leverage led it to offer extremely favorable terms to the new
private operators, leaving little for itself in shared revenue or taxes and leading to new conflicts as the bad
bargain became contentious. The sale of the telecommunications company, ENTEL, also showed the risks
of privatizing from a weak bargaining position as the new owner, the Italian state-owned STET, demanded
an extended exclusivity period during which it retained a monopoly on service. Institutional weaknesses also
meant that regulators had difficulties monitoring compliance with the terms of the contract (particularly on uni-
versalizing access to service, and on investment requirements). Bolivia's most famous privatization conflict,
the 2003 Water War of Cochabamba, was not part of Sánchez de Lozada's program, but illustrates another
risk of privatization. Poor communication, non-transparent decision making, in addition to rapid price increas-
es and fears about access to services rapidly escalated into a violent conflict with the government of Hugo
Banzer (Kohl and Farthing, 2006). Eventually, the government backed down and the new private owner, a
consortium led by Bechtel, left the country, but only after a state of siege had been declared and one citizen
had been killed and seventy injured in the process. Bolivia's troubled experience has numerous parallels all
across the region, where privatization has engendered more organized opposition than any other neoliberal
reform (Kingstone, Young and Aubrey, 2013).
Note that for thin critics of neoliberalism, privatization is not inherently wrong. Privatizations conducted under
transparent rules, with strategic aims (as opposed to corrupt purposes or simply out of desperation), and gov-
erned by clear rules embedded in effective institutions, can lead to positive outcomes. Ensuring competition
is especially important (Megginson and Netter, 2001). The problem is that in too many cases, privatizations
occurred under inauspicious circumstances, with the wrong motivation, and ineffective oversight and regula-
tory capacity – ‘Privatization South American style', as Luigi Manzetti dubbed it (Manzetti, 1999). The risks of
corruption in the privatization process helped make it the most visible and least supported plank of the ne-
oliberal reform process (Lora and Panizza, 2003; Baker, 2010). Yet, even when done well, privatization also
contributed to another key corrosive consequence of neoliberal reforms: loss of formal employment (Chong
and López de Silanes, 2003).
not be made up by employment elsewhere. By the late 1990s, even committed neoliberals had to concede
that the expected gains to labor – an abundant factor that should have gained from increasing trade openness
– had not materialized. Instead, the gains went to skilled labor – a scarce resource. Indeed, increasing returns
to education, along with slowly rising rates of education, were the major drivers of social mobility gains from
the 1990s into the 2000s (López-Calva and Lustig, 2010). Unemployment did not increase dramatically, but
that was because employment shifted into low-paying service jobs and workers were absorbed by the grow-
ing informal sector of the economy (Saavedra, 2003). As Nancy Birdsall and Miguel Székely have argued,
employment is the most powerful mechanism for lifting people out of poverty (Birdsall and Székely, 2003).
In Latin America, formal employment is particularly critical as most welfare schemes are linked to the formal
sector. For example, most Latin Americans had little to no pension coverage with very limited non-contributory
social assistance in the 1980s and 1990s to make up the gap. The movement of workers from higher paying
jobs with access to the formal welfare systems such as pensions, unemployment insurance or healthcare to
low-paying or informal jobs deepened poverty and increased the exposure to risk for the poor and the indi-
gent throughout the 1990s. By 1999, unemployment was up over 50% for the region from the early 1990s and
worries about employment helped make neoliberal reforms increasingly unpopular and discredited and were
an important element in the wave of electoral victories for a re-energized Left.
Neoliberalism's conception of politics beyond that is remarkably thin. As a program, it assumes that applica-
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tion of the correct policies will renew growth and in turn gain political support. Taken on its own terms, it is
not inherently an authoritarian project. Once voters take their medicine, painful as it is, public welfare will im-
prove and the politicians responsible for implementation of the program will benefit. Yet, even if its adherents
are not authoritarian intentionally, it lends itself to an authoritarian interpretation. Neoliberal accounts of pol-
itics associate the normal give and take of democratic politics with irresponsibility. Their elevation (and even
veneration) of a particular version of ‘technical’ knowledge as both axiomatic and somehow apolitical, along
with a patronizing attitude towards democratically elected leaders and voters both contribute to a sense that
neoliberalism is incompatible with democracy as only centralized, insulated and technical policy making can
assure good outcomes. Neither radical nor ‘thin’ critiques accept these assumptions.
There is no shortage of evidence to support this narrative of neoliberalism and scholarship from a variety of
traditions have helped develop it. International financial institutions explicitly coerced indebted Latin American
governments to implement neoliberal reforms. In myriad cases, legislative debate over policy was non-exis-
tent and mobilized opposition ignored or suppressed. For example, Mexico's turn to neoliberalism – one of
the earliest in Latin America – began with the country's default on its external debt in 1982. The party had
historically managed tensions between liberal and nationalist wings, moving in a pendulum from presidency
to presidency as a strategy for managing social conflict. The 1982 debt crisis allowed the technocratic, liberal
wing to gain permanent control and begin privatization as well and trade and financial liberalization. This sto-
ry of external forces pressing the onset of reform (with or without domestic allies) repeated itself again and
again. In Bolivia, Victor Paz Estenssoro, the father of the 1952 Revolution, turned economic policy over to
the IMF in a context of over 15,000% inflation. In Argentina, Carlos Menem, the winner of the 1989 presiden-
tial election as the candidate of Juan and Evita Perón's party, obtained blanket authority to make economic
policy through executive decrees and initiated a neoliberal reform in direct violation of his electoral promis-
es. In Chile, the newly democratic regime of the Concertación government entered into office constrained
on economic policy by institutional reforms imposed by the outgoing General Pinochet and the implicit un-
derlying threat from business elites (Silva, 1996). In Brazil and Peru, Fernando Collor and Alberto Fujimori
campaigned on vague, populist and generally uninformative platforms before launching neoliberal reforms on
election (Cameron, 1994; Kingstone, 1999).
Neoliberal reformers sought to eliminate political opposition and to break the bases of organized resistance
(Veltmeyer et al., 1997). For example, in both Argentina and Mexico, unions had formal institutionalized lead-
ership roles in the parties that introduced neoliberal reforms, the Partido Justicialista (Peronist) and the Par-
tido Revolucionario Institucional (PRI). In Argentina, President Carlos Menem displaced unions from the for-
mal leadership structure of the party (Levistky, 2003) and crafted new clientelist modes of organizing urban
poor as their voting base (Auyero, 2000). In Mexico, the PRI targeted key unions and union leaders for crim-
inal investigation and prosecution as a way to destroy independent bases of opposition to the neoliberal di-
rection (Teichman, 1996). All across the region, union membership declined (Murillo and Schrank, 2010) and
strikes and protests dwindled dramatically (Kurtz, 2004). The unraveling of the existing corporatist system
meant that the state withdrew resources that were critical for solving the collective action costs of organizing
(Collier and Handlin, 2009). Corporatism in Latin America was not a democratic form of state–society rela-
tions, but it did ensure access for less powerful groups by offering resources in exchange for political support.
In the context of diminishing state resources and withdrawal of formalized access, even previously privileged
middle-upper class groups such as small business lost the ability to represent their interests (Nylen, 1992;
Shadlen, 2002).
This withdrawal of the state led to a generalized weakening of the capacity of civil society to organize. As
Marcus Kurtz observed, democratization opened new potential channels of participation, but in the face of
harsh material conditions, fewer and fewer citizens used them (Kurtz, 2004: 255). Philip Oxhorn called this
new form of social organization ‘neopluralism’ (Oxhorn, 1998) and argued it was an explicit attempt by the
state to fragment social interests. Others portrayed the new emphasis on individuals and individual rights as
an explicit effort to undermine collective claims and convert citizens into ‘subjects’ unable to resist authoritar-
ian means of governing them (discussed in Vilas, 1997; Alvarez et al., 1998; Fernandes, 2012). Forrest Col-
burn described a region that had come to the ‘end of politics’ (Colburn, 2002). Globalization and the demise
of the left meant that there were no political forces focusing attention on poverty and inequality exactly at the
time that economic openness undermined labor's bargaining power. The result was consumerism gone wild
as Latin Americans turned their attention to the lures of consumption while ignoring the damage. Alejandro
Foxley's analysis of ‘neoconservative’ economics in Latin America reached the same conclusions about the
damage neoliberal reforms inflicted on society (Foxley, 1982). For example, the ‘seven modernizations’ in
Chile – including profound privatizing reforms of social security, health, and education – embraced a highly
individualized notion of citizen rights that attacked principles of solidarity across classes as well as genera-
tions embedded in the existing systems. In sum, radical critics painted a picture wholly incompatible with the
neoliberal view. This narrative rests on a solid foundation of observations of deep and unsettling changes that
showed neoliberalism as a destructive force, politically, socially and economically.
But, the defining feature of thin conceptions is that they allow for considerable variation on these themes.
Just as neoliberals were wrong to condemn ISI with broad strokes, so neoliberalism's performance on both
economic and political grounds varied and those variations matter. Analyses within this broad set of studies
are open to the possibility that domestic policy makers saw neoliberal reforms as an appropriate response
to the cluster of very specific challenges confronting their countries, and voters backed neoliberal candidates
because they preferred the policies and programs offered to them. In some cases, presidents imposed policy
reforms with little or no concessions, but in other cases the implementation of reforms happened with legisla-
tive debate and concessions, responsiveness to public sentiment, and engagement with organized interests.
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Finally, neoliberalism's effect on policy and society is not so clear-cut, with considerable policy efforts to ad-
dress poverty and inequality beginning in the midst of neoliberal economic reforms and new groups mobilizing
to fill the space once occupied by labor and other groups privileged in the corporatist system. In effect, the
central lessons from this thinner perspective are that the experiences in the region vary widely and that ne-
oliberalism is not inherently undemocratic.
The ultimate test of neoliberal reformers’ appeal was their ability to win elections explicitly on neoliberal pro-
grams, or alternatively to win re-election after introducing them. Although the reform process began without
electoral mandates arguably in every country in the region, neoliberal reformers won re-election repeatedly
throughout the 1990s. There are at least three alternative ways of thinking about how and why this happened.
In the conventional neoliberal model of reform, governments introduce neoliberal reforms rapidly, pay high so-
cial and economic costs immediately, but then win support as the benefits begin to kick in (Przeworski, 1991).
In another similar, but subtler, conception, voters lack information about the benefits of neoliberal reforms.
Presidential candidates campaign on false promises of security-oriented policies because they know that vot-
ers will reject neoliberalism even though it is the ‘correct’ set of policy responses (or alternatively, candidates
discover upon election that the situation is much more dire than they had anticipated and neoliberal policies
are necessary). In this case, candidates are still representing voters sincerely, but with reference to more and
better information. As with the conventional model, economic improvements lead voters to re-elect the ne-
oliberal reformer (Stokes, 2001). Finally, a third approach draws on prospect theory and makes the case that
risk-accepting voters, fearful of the prospect of deeper losses, support candidates promising painful reforms
in the hope of preventing even more pain (Weyland, 2004). Voters continue to support painful reforms only
while in this ‘domain of losses’ as improvements in their material condition returns to risk-averse preferences.
All three of these models offer explanations of why voters would back politicians who explicitly promise painful
policies, or violate electoral promises and inflict painful policies. As Stokes (2001) notes, this is not an ideal
mode of representation, but it is still a meaningful form of representation and all three present robust tests of
vertical accountability.
Latin America's weak parties, limited programmatic identification, and diffuse class voting make it hard to
evaluate democratic support for neoliberalism (Carlin et al., 2015). But the evidence of the underlying democ-
ratic qualities of neoliberal reform don't depend solely on elections. Other scholars conducting public opinion
research argued that neoliberal reforms were not universally unpopular or that Latin American voters had
an express preference for the state over the market. In particular, Andy Baker's work on public attitudes to-
wards neoliberal policy argued that voters supported free trade explicitly because of its effect on the prices of
consumer goods (Baker, 2010). In contrast to Colburn's lament, consumption is not simply a hollow form of
materialism in which Latin Americans go shopping while neoliberalism wreaks havoc. High barriers to trade
protected a very small minority of formally organized labor (as well as businesses), but imposed high costs
on all other consumers. Latin American citizens discriminated among elements of neoliberal reforms based
on how it affected them as consumers, not simply as workers or producers. Indeed, consumers’ rights and
the effects of policy on consumers became an important mode of social mobilization and an additional source
of vertical accountability in response to less popular areas, such as privatization (Rhodes, 2006). Other work
argued that Latin Americans were, in fact, much more centrist on economic matters than radical critics be-
lieved (Morales, 2008; Baker and Greene, 2011). Surveys across the region showed that voters were mildly
pro-market during the 1990s and only moved leftwards (but did not become leftist) in the face of neoliberal-
ism's policy failures over the decade.
Another factor that tempered claims of neoliberalism's undemocratic nature is that reformist governments
moderated and/or modified neoliberal reforms repeatedly throughout the reform period. The timing, pace and
depth of reform varied dramatically because of these concessions, but critical details of reform policies varied
as well in order to accommodate concerns both inside and outside the government. For example, Sebastian
Etchemendy argued that reformist governments pursued alternative models of reform based on differences in
compensation for ‘losers’ such as organized labor, informal poor, and domestic industrialists. Compensation
included subsidies, targeted programs, and market shares, but in all cases served the purpose of cementing
support for reform even at the expense of policy integrity or efficiency (Etchemendy, 2011). Similarly, Maria
Victoria Murillo charts the ways partisan identity shaped the privatization and regulation process to better re-
flect the governing party ideology and the preferences of its base constituencies (Murillo, 2009). Kingstone,
Young and Aubrey (2013) argued that resistance to privatization proved effective in stopping, delaying or
modifying plans when labor was able to forge cross-class alliances rather than simply acting alone in defense
of their own narrower self-interest. More importantly, in countries with stronger democratic institutions, such
as in Costa Rica or Uruguay, opposition parties allied with protestors and converted social protests into mean-
ingful and successful resistance within the legislature (Kingstone et al., 2013).
Other scholars focused on the quality of democratic institutions and the relation between reformist presidents
and their own parties and legislatures to help understand why reforms happened under more or less demo-
cratic circumstances. For example, the Inter-American Development Bank's Politics of Policies project cap-
tured the wide disparities in the region in the capacity of legislatures and bureaucracies to design and imple-
ment economic and social welfare oriented policies. The quality of policy turned on these elements of state
capacity and the incentive for political parties to focus on national and programmatic appeals as opposed
to narrow, particularistic and clientelist benefits (Inter-American Development Bank, 2006). Gustavo Flores
Macías, focusing on reforms under leftist governments, argued more generally that well institutionalized party
systems and their related properties (continuity of parties across time, routinized internal procedures, strong
roots in society, and legitimacy of parties as representative institutions) produced gradual, incremental and ul-
timately more stable policy reforms (Flores Macías, 2012). What these, and a wide array of studies of patterns
of reform, suggest is that the variations in the details of neoliberal policy reforms, the extent of reform, the
number of concessions and modifications, and the speed with which reforms passed all reflect the capacity
of democratic institutions to manage and modify the reform process. Presidents who ignored voter concerns
routinely found their bases of support – even from their own parties – dangerously eroded, with several be-
ing impeached or fleeing their own countries (for example, Carlos Andrés Pérez of Venezuela or Gonzalo
Sánchez de Lozada of Bolivia). Even presidents who appeared to govern in the strongest examples of ‘del-
egative’ democracy, such as Carlos Menem or Alberto Fujimori of Peru stopped pursuing reforms once they
lost support for deepening the reform process ( Manzetti, 1999; Corrales, 2002).
Social Mobilization
Finally, scholars drawing on thin conceptions of neoliberalism also saw substantial evidence of new forms
of social organization. On one level, a lot of this new mobilization favored middle-class groups (Collier and
Handlin, 2009). Yet over the course of the 1990s, even disadvantaged groups showed renewed abilities to
mobilize, capitalizing on the breakdown of corporatist discourse and mechanisms (Silva, 2009). Indigenous
groups, in particular, emerged as a political force in countries like Bolivia or Ecuador (Yashar, 2005; Lucero,
2008). Afro Latin American mobilization emerged more visibly and effectively than at any point in history
(Johnson, 2012). Kathryn Hochstetler and Mimi Keck trace the emergence of environmental activism, particu-
larly in the wake of democratization in the 1980s (Hochstetler and Keck, 2007). In the same period, women's
groups were able to mobilize in support of stronger claims for rights and opportunities (Htun, 2016). Begin-
ning in Brazil and then spreading elsewhere, new modes of governance, such as ‘popular budgeting', opened
governments to citizens’ input (Nylen, 2003; Wampler and Avritzer, 2004; Goldfrank, 2011). In short, radical
claims that neoliberalism was inherently undemocratic, hollowed out civil society, and was unresponsive to
the needs and concerns of citizens ran into a counter-narrative of a region in which the reform process varied
extensively across cases and time and in which a mix of both positive and negative outcomes and processes
played out.
Venezuela. For scholars drawing on thin conceptions of neoliberalism, the triumph of the left was proof of two
things: contrary to radical critiques, democratic politics was deepening in Latin America as voters freely chose
to replace neoliberal parties and presidents; second, the Washington Consensus was over and a new ‘post-
liberalism’ had taken hold in the region. This post-liberalism included a restored role for the state in the econ-
omy and, even more importantly, a commitment to addressing equity issues. What followed was roughly ten
years of nearly unprecedented social gains along with renewed growth, low inflation, dramatically improved
external accounts, new-found budgetary room for social policy spending, and an overall greatly increased
commitment to equity (Birdsall et al., 2012). It appeared as if events had offered proof that both radical critics
and neoliberals had been wrong.
By the early 2010s, however, the good times had come to a halt. Commodity prices, soaring substantially
due to Chinese growth and its consumption of agriculture, minerals and metals (Gallagher and Porzecanski,
2010), returned to normal terms of trade. With the notable exception of Chile, Latin American governments
had not prepared for the end of the good times and the problems began emerging almost immediately as
pressure to cut spending increased. The sense that democracy had been deepening and new patterns of so-
cial inclusion spreading showed signs of slowing and even reversing in many countries in the region. The end
of easy money exposed or deepened already existing faultlines that threatened constitutional rule. All across
the region, leftist governments were losing power, as in Argentina, were removed from power, as in Brazil,
or were holding onto power through increasingly questionable means, as in Bolivia, Ecuador, Nicaragua and,
most dramatically, Venezuela. Once again, the dramatic shift in orientation raises key questions of interpreta-
tion.
For neoliberals, the failure of the left reflects the disregard for resource constraints and over confidence in
the power of the state to promote development. Brazil's situation exemplified the neoliberal critique. Over the
1990s and into the first term of Luiz Inácio Lula da Silva (Workers’ Party – PT), the ‘Brasília Consensus’ ap-
peared to be a combination of innovative social policy, commitment to macroeconomic stability, and a role for
the state in a market-supporting role. As the country's finances strengthened, and especially after the discov-
ery of the vast ‘pre-salt’ oil reserves, the PT moved towards a stronger state-led role. Petrobras, the jewel in
the Brasília SOE crown – became the leading edge of the state's involvement in the economy. Yet, the idea of
a more effective state role appeared much more dubious as the risks of political intervention became clearer.
In addition to its highly visible and extremely damaging starring role in the country's largest corruption scandal
ever (the lava jato scandal), industrial policy decisions had forced Petrobras to purchase local content. Local
content rules helped spur a revival of sectors like ship building despite its lack of global competitiveness – a
return to the errors of import substitution industrialization. The result was losses for Petrobras and the need to
protect a sector that cannot compete globally. In addition, the PT government controlled gas prices as a way
to keep inflation down, also at the expense of Petrobras’ profitability. For neoliberals, the use of Petrobras
illustrated the risks of a return to ISI and populist practices of intervening in the economy for a mix of political
goals and with an exaggerated belief in the ability of state officials to direct economic growth.
For radicals, the lesson was the exact opposite. The Pink Tide produced both more radical regimes and more
moderate or ‘pragmatic’ ones, leading scholars to refer to the ‘two lefts’ in the region. Scholars drawing on
thin conceptions of neoliberalism tended to be more critical of the radical version, as exemplified by Bolivia,
Ecuador or Venezuela. Radical critics, however, observed that the ‘moderate’ or ‘pragmatic’ left had compro-
mised its ability to make lasting changes by insisting on working within a set of economic and political rules
that primarily profited the very wealthy (see the review by Anderson, 2011). Looking again at Brazil, class
compromises limited the ability of the PT to effect meaningful change. While the government under Lula and
Dilma had done more for the poor than any government in Brazilian history, the biggest beneficiaries were
the same super rich (particularly of the financial sector), who also spearheaded the ‘coup’ that put the poor
back in their place and brought a brutal return to austerity and neoliberal policy making under Michel Temer.
Ultimately, even the more radical experiments had been undermined by their unwillingness and/or inability to
fundamentally challenge dominant economic interests (including the United States). Just as neoliberals saw
the end of the Pink Tide as a vindication of their view that the state needed to be reined in, radicals saw in it
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support for the view that a more aggressive state that could break private power was needed.
For scholars drawing on thin conceptions, the question is what happened? Once again, Brazil is the exem-
plary case. Brazil's political and economic performance in the 1980s and into the 1990s generated a vast
literature on its dysfunction. The country's performance shifted so dramatically in the 2000s, that a counter-
literature emerged extolling the country's virtues (Brainard and Martinez Diaz, 2009; Fishlow, 2011; Montero,
2014). Within a short period, Brazil went from an emerging global power to one rocked by angry protests (the
‘Vinegar Revolution’ of 2013), a vast corruption scandal, and an impeachment process that bitterly divided the
nation (Kingstone and Power, 2017). To what extent were the gains of the 2000s built on a solid foundation
and to what extent were they a function of unusually good economic times? To what extent had the quality of
democratic representation, accountability and policy making improved? To what extent was it an illusion made
possible by the remarkable economic circumstances of the 2000s? These questions are particularly apt for
Brazil, but pertain to the whole region.
Over forty years have passed since the onset of neoliberal reforms in Latin America and the critical debates
over the same questions continue. Scholars have produced a vast literature across different traditions, yet
we are no closer to understanding how and why an inclusive, democratic path to growth develops. Radical
and neoliberal paradigms are at their best as critical reflections on the political economy of the region. Ne-
oliberal mistrust of the state and politicians finds support again and again. The economic failures on the left,
including inefficient and ineffective use of state resources and unsustainable commitments on spending are
old and recurring problems. The radical vision depends on leftist politicians to break the hold of capitalists on
the reins of political and economic power. Yet the turn to authoritarian practices in order to hold onto pow-
er in places like Bolivia, Ecuador, Nicaragua and Venezuela highlight the danger that once in power, radical
reformers may simply become (or prove to be) corruptible and self-interested rather than revolutionary. By
contrast, neoliberals’ excessive trust that a diminished state will not become a captive of dominant economic
interests runs up against the reality of basic issues like the inability of Latin American states to tax the wealthy
(Fairfield, 2015). Similarly, the constraints of the global economy pose monumental challenges to growth that
neoliberal views simply gloss over. In the end, both ‘thick’ conceptions are limited by their own connection to
idealized teleologies that limit challenging their own assumptions.
For ‘thin’ scholars, the challenges lie in their inability to generate theories that address fundamental, underly-
ing questions about representation, the origins of effective institutions, state capacity, and inclusive economic
growth. Separating out elements of politics and economics for study – what Ira Katznelson called ‘variable
driven explanations’ (1997) – allows for ever more technically sophisticated examinations of the diverse ele-
ments of political economy. Such studies lend themselves to in-depth understandings of specific actors, insti-
tutions or processes. But there is no guiding theory that connects the state and social actors in a ‘configura-
tive’ way and that allows for exploration of the linked, integrative processes that produce social transforma-
tion. The result is a wealth of studies of the pieces, but limited ability to understand the whole. In this sense,
the ‘thick’ conceptions offer the benefit of a cohesive narrative that makes sense of the long process, even as
they wrestle with empirical evidence that sits poorly with their worldviews. In the final analysis, both ‘thick’ and
‘thin’ paradigms are in need of self-critical reflection. The consequence of not engaging in such critiques is the
apparently never-ending cycle of confronting the same set of real-world problems and theoretical questions.
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