The Challenges of Consolidation

As the recent wave of democratization crested in the 1980s, skeptics questioned the capacity of new democratic governments to manage the daunting political challenges of economic reform. It was thought that either reform would undermine democracy by placing undue strains on fragile polities, or democratic politics would undermine the coherence of policy, generating a downward economic spiral.

Concerns about democratic breakdown and policy stalemate remain salient in many parts of the world, particularly the new republics of the former Soviet Union. By the 1990s, however, newly established democratic regimes in many developing countries had initiated deep and wide-ranging economic reforms. The early democratizers of Southern Europe are now firmly ensconced in the European Union, having undertaken important economic adjustments required for their admission. In Latin America, longstanding development strategies have been reversed by fundamental shifts in economic policy: deep fiscal and exchange-rate adjustments, reduction of trade barriers, and privatization of state-owned enterprises. The trade-oriented countries of East and Southeast Asia did not experience crises of the same magnitude, but in the Philippines, Korea, Taiwan, and Thailand, the trend toward political liberalization has also coincided with the initiation of a new round of economic policy changes. And, of course, most of the postcommunist democracies of Central Europe have inaugurated massive—and wrenching—market-oriented reforms.

The changes in all these regions and countries have been accompanied by substantial controversy; nevertheless, for good or for ill, they are now a fait accompli. The next phase of adjustment raises questions somewhat different from those faced during the 1980s: not whether democracies can initiate reforms, but how they will meet the new challenges likely to arise as economies are stabilized. Will they be able to consolidate existing reforms, or correct course as social and economic conditions change? More important, will they manage to consolidate democratic institutions themselves?

Three key issues have emerged more clearly as earlier crises have been brought under control. The first concerns the role of the state in achieving sustainable growth. The second involves the distributional consequences of reform and their implications for political conflict. The third, which points to a particularly difficult challenge, pertains to the accountability of the reform process. The heads of government who implemented the initial reforms generally wielded substantial discretionary power vis-h-vis economic interests and representative institutions. How can economic decision making become less discretionary and more institutionalized?

We begin with the assumption that economic instability and recession pose serious threats to democratic consolidation. In this essay, "consolidation" is used to refer to processes through which acceptance of a given set of constitutional rules becomes increasingly widespread, valued, and routinized. It is important to make a clear distinction between the survival of democracies and their consolidation. During the 1980s, many new democracies survived severe economic shocks, but their durability was often attributable to factors that did not necessarily imply increasing legitimacy and acceptance of the "rules of the game."

New democratic regimes benefited in the first place from the decline and collapse of the Soviet Union and the end of Cold War politics. As perceptions of the Soviet threat diminished, the United States and European governments were less willing to back dictatorial clients against opposition challenges, and more inclined to punish groups seeking to overthrow their constitutional successors. Even where authoritarian reversals occurred, international pressures played a significant role in preventing the consolidation of authoritarian rule (for example, in Peru), or in forcing a relatively rapid return to electoral politics (as seen in Thailand and Guatemala).

The early survival of many new democracies was also attributable to aspects of domestic politics that were not necessarily permanent. Economic difficulties could, for a time, be blamed on the outgoing authoritarian regime or the incumbent government, rather than on the democratic system itself.

Even where democratic regimes are held in place by these international and domestic political contingencies, however, weak economic performance can undermine attitudes and behaviors that are important for democratic consolidation. In Brazil and Peru, for example, inflation and economic deterioration have had a corrosive effect on political institutions and have been closely...