Retiring the State: The Politics of Pension Privatization in Latin America and Beyond, and: Health Care Reform in Central America: NGO-Government Collaboration in Guatemala and El Salvador (review)

One of the most important areas of research in Latin American political economy today is the scope and content of social policy reforms. The main point of contention in most countries is how extensively the responsibility for providing health and education services, as well as pensions, will be privatized. These changes have direct impact on peoples' everyday lives and serious implications for the conceptualization of welfare states and social citizenship rights. The two books reviewed here focus on the why and how of pension and health care reform, respectively.

Raúl Madrid's Retiring the State is thorough and methodologically sophisticated; clearly it is the book on pension reform in Latin America. Pension policy is a good place to start when studying social-sector reforms because it is important in terms both of the money involved and the number of people affected. It is also a good deal simpler than health or education policy, where the behavior of thousands of individual providers and the politics of large-scale organizations greatly complicate reform implementation and assessment.

Madrid sets out to explain the determinants of pension reform, defined as either full or partial privatization of a public system. He is careful to explain exactly what pension reform means and how it can be measured. The theoretical chapter identifies what can best be described as three groups of explanatory variables: macroeconomic considerations, ideational factors, and executive control of the legislature. Within these three areas are, by my count, seven independent variables. Although this may seem like too many independent variables for explaining decisions in a single sector, we should remember that national reforms of any significance are likely to be multicausal. Madrid also reduces confusion with attention to process, arguing that each of the three types of variables (economic, ideational, and political) dominates one of three stages of policymaking (agenda setting, policy choice, enactment. See table 2.3, p. 59).

These explanatory variables will not be new to anyone working in the field of political economy. But what Retiring the State lacks in novelty it makes up for in clarity and comprehension. Madrid does a particularly satisfying job of describing and then operationalizing ideational arguments. He painstakingly lays out the various ways in which policy ideas may be transmitted and, in so doing, familiarizes us with the literatures on regional diffusion, the influence of international financial institutions, and epistemic communities (pp. 36-52). The summary argument is that where pension privatization was chosen, policymakers were convinced of the merits of the paradigmatic Chilean model, usually because of some combination of advocacy by newly powerful neoliberal economists taking over social security ministries and World Bank technical assistance missions. The argument about the latter relies on persuasiveness, not arm twisting, and in this sense Madrid suggests that the IFIs are playing a subtler role in social sector reforms than they did in the macroeconomic adjustments of two decades ago. Whether this is so because social sector reforms are simply too complex for the World Bank to control directly or because some learning process is taking place in the bank is an interesting question that merits a book of its own.

This ideational account of policy choice is sandwiched between the questions of why Latin American leaders would feel that they had to do something about pension programs at all and whether the reforms were enacted after the executive branch decided on them. Madrid persuasively argues that instead of general economic crisis or hyperinflation, two specific issues, rising public pension spending and low domestic savings rates, drive policymakers to...