- The Electoral Consequences of the Washington Consensus
No country in Latin America escaped the dictums of the Washington Consensus. From Brazil under left-leaning Fernando Henrique Cardoso to Mexico under ultra-orthodox economist Ernesto Zedillo and Peru under Alberto Fujimori's yoke, macroeconomic imbalances were brought under control, barriers to international trade were lifted, and state-owned enterprises were privatized. Whether this one-size-fits-all prescription was imposed from outside or adopted at will by the governments elected on the promise of improving the lot of their peoples may be a matter of debate. But all sides seem to agree on one point: the results did not meet the expectations created both by outsiders and by those in power.
Up to the mid-1980s only two countries in Latin America had adopted a package of policies similar to what became to be known as the Washington Consensus at the turn of the decade. Those two were undemocratic Chile and impoverished Bolivia, by then among the most politically and economically unstable countries, if not in the world, then certainly in Latin America. Extreme cases, extreme policies: that was a common interpretation of the two experiences. Less common was the expectation that those policies were about to be adopted by virtually every Latin American country in the next few years, both those in which democracy had been the rule [End Page 1] for decades, like Colombia, Costa Rica, and Venezuela, and those where the third wave of democratization was just arriving, such as Argentina, Brazil, and Uruguay.
The years of high expectations, both about democratization and about Washington Consensus-type policies, are over. Latin Americans are still convinced democrats, but enthusiasm has waned. Three out of every four Latin Americans see democracy as the best form of government—or rather, as the least bad, since 68 percent think that democracy is not functioning well in their countries. Latin Americans are even more sceptical about the benefits of promarket economic policies. Only one out of four Latin Americans considers privatization to have been beneficial for his or her country and barely 16 percent think that the market economy is doing a good job.1
Malaise is getting the upper hand in a number of places. Electricity and water privatizations were blocked in Arequipa (Peru) and Cochabamba (Bolivia), following violent clashes between vociferous opponents and the police. An ambitious project to attract foreign direct investment to Bolivia's gas sector was derailed by the Indian communities. While these events may be dismissed as isolated expressions of popular feeling, a new crop of presidents from Néstor Kirchner in Argentina to Lucio Gutiérrez in Ecuador and Tabaré Vásquez in Uruguay has won clear majorities in popular elections after campaigning against the excesses of market-oriented policies.
In an attempt to establish whether this malaise is justified or not, economists have devoted substantial effort to assessing the economic and social consequences of the Washington Consensus policies. The dominant view seems to be that they have had positive effects on economic growth and income levels, though there is intense debate over the size of those effects, over whether they are transient or permanent, and over the importance of each of the components of the Washington Consensus. The dominant view also holds that the effects have been muted by lack of regulatory and institutional support for the liberalization efforts, though the specific forms of regulation and institutions necessary for that purpose are far from clear. Even more intense is the debate over the social and distributional effects of fiscal stabilization and promarket reforms, which are the two main pillars of the Washington Consensus.2 [End Page 2]
However, the future of these policies will depend not so much on their efficacy but on whether they receive the support of the electorate. On this, the state of knowledge is much more scant and fragmentary, as will be seen below. This paper attempts to help fill that vacuum by evaluating through econometric methods the electoral consequences of the Washington Consensus. Although our approach is backward looking, it sheds considerable light on the future. Our study shows that the electorate cares not only...