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Creative Destruction?

Economic Crises and Democracy in Latin America

Francisco E. González

Publication Year: 2012

Throughout the twentieth century, financial shocks toppled democratic and authoritarian regimes across Latin America. But things began to change in the 1980s. This volume explains why this was the case in Argentina, Chile, and Uruguay. Taking a comparative historical approach, Francisco E. González looks at how the Great Depression, Latin America’s 1980s debt crisis, and the emerging markets' meltdowns of the late 1990s and early 2000s affected the governments of these three Southern Cone states. He finds that democratic or not, each nation’s governing regime gained stability in the 1980s from a combination of changes in the structure and functioning of national and international institutions, material interests, political ideologies, and economic paradigms and policies. Underlying these changes was a growing ease in the exchange of ideas. As the world’s balance of power transitioned from trilateral to bipolar to unipolar, international institutions such as the World Bank and the International Monetary Fund increased crisis interventions that backstopped economic freefalls and strengthened incumbents. Urban-based populations with relatively high per capita income grew and exercised their preference for the stability and prosperity they found as a class under democratic rule. These and other factors combined to substantially increase the cost of military takeovers, leading to fewer coups and an atmosphere friendlier toward domestic and foreign capital investment. González argues that this confluence created a pro-democracy bias—which was present even in Augusto Pinochet’s Chile—that not only aided the states’ ability to manage economic and political crises but also lessened the political, social, and monetary barriers to maintaining or even establishing democratic governance. With a concluding chapter on the impact of the Great Recession in other Latin American states, Eastern Europe, and East Asia, Creative Destruction? lends insight into the survival of democratic and authoritarian regimes during times of extreme financial instability. Scholars and students of Latin America, political economy, and democratization studies will find González's arguments engaging and the framework he built for this study especially useful in their own work.

Published by: The Johns Hopkins University Press

Cover, Title Page, Copyright

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pp. vii-viii

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pp. ix-x

I have incurred many debts and am grateful to many individuals and institutions for their support in helping me bring this work to completion. Heartfelt thanks for a good everyday working spirit to Riordan Roett and my other colleagues in the Latin American Studies Program...

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INTRODUCTION: Institutions, Interests, and Ideas in Explaining Regime Change

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pp. 1-13

The “creative destruction”1 brought about by financial shocks and economic crises, although a means through which capitalism reinvigorates itself periodically, is both unsettling and challenging politically.2 This is true regardless of the type of political regime in place when a country finds itself in the throes of...

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1. Financial Shocks, Economic Crises, and Democracy: Theory and Practice

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pp. 14-44

Financial shocks and economic crises can be studied from different scholarly perspectives and the choice of methodology helps to define the types of questions and the level of detail contained in any analysis. I deploy a comparative historical analysis based on middle- range generalizations, which are anchored...

PART I: Great Depression, 1929–34

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pp. 45-116

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2. Economic Crisis and Democracy during the Great Depression

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pp. 47-54

While the earth- shattering events of the Great Depression form the basis for my examination of the effects of financial shocks and economic crises on democracy in the Southern Cone countries, it’s useful to take a brief look at what was happening before then...

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3. Institutions: Polarized Domestic Conflicts and Weak International Capacity

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pp. 55-77

When the 1929 financial crisis struck, Chile was ruled by an authoritarian regime under Colonel/General Carlos Ibáñez (1927– 31),1 while Argentina and Uruguay were ruled by democratic regimes since 1916 and 1918, respectively. The inability of these governments to cope with the severity of the...

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4. Interests: Foreign Capital and Domestic Coalitions against Democracy

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pp. 78-94

The second factor to examine is the way international and domestic interests raised or lowered the likelihood that actors organized and exercised pressures in favor of and against democracy during the Great Depression in the Southern Cone countries. My comparative historical...

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5. Ideas: Extreme Ideological Conflict and Rise of the State in the Economy

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pp. 95-116

Let us now turn to the third of my three pillars— political ideologies and economic ideas and policy— to ascertain how they affected the costs of organizing and exercising pressures for and against democracy in the Southern Cone countries during the Great...

PART II: Economic Crises and Democracy in the Late Twentieth Century

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6. 1982 Debt Crisis and 1997–2002 Emerging Markets Crises

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pp. 119-133

The Bretton Woods system delivered relative international financial stability between the aftermath of the Second World War and 1971. The system’s anchor was pegging member countries’ currencies to the US dollar, which was credible, given the free convertibility of dollars...

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7. Institutions: Demise of Military-as-Government and Higher Costs for Action

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pp. 134-164

The Great Depression led to the breakdown of the existing regimes in the three Southern Cone countries. What was different about the situation in and effects of the 1982 and 1997– 2002 crises that allowed democracy to eventually...

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8. Interests: Capital Flight, Pressures from Below, and Democracy

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pp. 165-190

In analyzing the relative costs of pressures in favor of and against democracy, a key change in international and domestic interests in the Southern Cone countries led to mixed outcomes, particularly given the different fate of pressures from below in Chile during the external debt...

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9. Ideas: Cold War Endgame, Unipolar Moment, and Neoliberalism

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pp. 191-210

Just as the rise in liquid- based wealth since the 1970s– 80s has helped to lower the pressure against democracy by foreign and domestic capitalists, changes in the realm of ideas— political ideologies, and economic ideas and policy— since the Cold War ended have reduced the stakes...

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Conclusion: Implications for Democracy after the 2008–9 Financial Meltdown

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pp. 211-239

The proliferation of analyses, speeches, and news reports using the Great Depression as a point of reference in understanding the magnitude and potential destruction that the financial global busts of 2008– 9 (the Great Recession) might have led to should not surprise anyone...


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pp. 241-259


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pp. 261-272


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pp. 273-281

E-ISBN-13: 9781421406039
E-ISBN-10: 1421406039
Print-ISBN-13: 9781421405421
Print-ISBN-10: 1421405423

Page Count: 288
Illustrations: 2 line drawings, 4 graphs
Publication Year: 2012

OCLC Number: 799989256
MUSE Marc Record: Download for Creative Destruction?

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Subject Headings

  • Financial crises -- Latin America -- History.
  • Latin America -- Politics and government.
  • Latin America -- Economic conditions.
  • Democracy -- Latin America.
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