Business Politics and the State in Twentieth-Century Latin America (review)

As the title of this book suggests, its focus is the political behavior of business associations in Latin America; more precisely, in Argentina, Brazil, Chile, Colombia, and Mexico. The book aims to explain two interrelated questions: why business associations in these countries have evolved widely different organizational strengths and bargaining power versus government, and what the consequences of such variations have been. These are very important questions that, in the past, have been analyzed at the country-specific level but have usually received little comparative attention.

In chapter 1, Ben Ross Schneider lays out his thesis, postulating that the strengths or weaknesses displayed by business organizations over time were determined primarily by government intervention. This, he asserts, was particularly true in times of severe socioeconomic crisis, when governments felt vulnerable and granted business organizations selective incentives (participation in policy design, monopolistic representation over specific business matters, special access to government funds) in return for political support. Conversely, when existing business associations could be a menace to the interests of a given administration, government officials engaged in divide-and-conquer strategies that atomized and debilitated business organizations in the long run. State "vulnerability," for Schneider, is driven mostly by exogenous factors, such as the consequences of the Great Depression and World War II, but occasionally also can be endogenous, such as the capital flight from Mexico when the local authority in 1987 gave businesses incentives to keep their money at home.

In chapter 2, Schneider compares the strength of his argument and its contribution to the existing literature. His theoretical argument challenges a large amount of the literature based on Olson's thesis, according to which the state is prey to the interests of distributional coalitions, which manage to accrue political and economic power at the expense of society at large. Similarly, Schneider praises Putnam and other social capital scholars for emphasizing the positive role that business associations may have in building democratic institutions. At the same time, he finds social capital theories inadequate when it comes to explaining short-term variations in business associations, and he criticizes their overall negative assessment of the state role. Likewise, Schneider acknowledges the contribution of Schmitter's societal corporatism model to understanding the state role in shaping business associations; but he contends that societal corporatism is based too much on the experience of Northern Europe and is too static in nature, which makes it ill-suited to explaining the political realities of Latin America.

In general terms, Schneider's thesis belongs to the school of thought that focuses on state capacity as the crucial independent variable shaping socioeconomic transformations. Yet his analysis incorporates elements of Olson's and Schmitter's pioneering works, such as incentives leading to the organization and interest articulation of business associations and government strategies in creating peak associations. In assessing the strength of his thesis, Schneider uses a traditional approach, walking the reader through the historical developments in each country by painstakingly analyzing state strategies in shaping the nature of business associations. In so doing, Schneider makes ample use of personal interviews, historical records, existing literature, and available statistics.

In the second part of the book, each country is analyzed individually, using the same approach. In the third and last part, the author assesses his theory in comparative perspective. This is one of the most important sections. Schneider finds, as he postulated earlier in the book, that the strongest encompassing business associations came to life during times of intense economic crisis. Equally important, such associations were created through government sponsorship, which emphasized selective incentives and policy involvement over a long period of time. Conversely, those associations that spontaneously emerged as a means to protect business from state encroachment were usually weaker, narrower in scope, and often more transitory than those encompassing associations that enjoyed government sponsorship.

Among the cases surveyed, Mexico most of all, and Colombia and Chile to a lesser degree...