The Political Economy of Market Reform: A Revival of Structuralism?

The surprising wave of market reforms that swept across Latin America during the 1980s and 1990s has profoundly affected the region's economic, social, and political development. For instance, drastic trade liberalization has exposed important branches of industry to serious competitive challenges while commodity exports have flourished; countries' patterns of international economic specialization have therefore changed. The resulting dislocations have exacerbated employment problems and further aggravated social inequality, a longstanding problem in the region. Economic crises and increasing social informality in turn have contributed to political convulsions such as the collapse of party systems and the rise of neopopulist leaders. On the other hand, however, high and higher inflation, a scourge for decades, has been brought under control; economic recovery has reduced poverty in the mid-1990s and the mid-2000s; and democracy, which looked shaky in the 1980s, has survived the tremendous socioeconomic and political troubles and travails of the last two decades.

How can scholars make sense of these mixed results? Do the benefits outweigh the costs of "neoliberalism" or is the net balance negative? Are the problems that Latin America's new market economies have faced inevitable byproducts of the reform model or the results of preventable mistakes during implementation that an additional round of reforms can remedy? And what theoretical conclusions can scholars draw from the actual performance of the new market model, which has been significantly weaker than promised by neoliberal experts, but not nearly as catastrophic in its economic, social, and political repercussions as predicted by hard-line critics?

In theoretical terms, advocates of market reform believed in the power of agency: they expected that "getting the prices right" and, more recently, "getting the institutions right" would restart Latin America's development, end persistent stagnation, and usher in a new era of prosperity. Thus, well-designed reforms enacted by bold political leadership would bring profound change for the better. This optimistic viewpoint assumes that economic, social, and political life is susceptible to voluntaristic manipulation. Since people are seen as responding in a rational, predictable way to incentives and constraints, change can be engineered through a deliberate transformation of the framework of rules and institutions. Neoliberal experts therefore pushed fairly uniform programs on a wide range of countries, believing they would work in these divergent settings.

This rationalistic, agency-oriented position diverges drastically from structuralist views that Latin America's development faces serious hindrances from largely immutable socioeconomic and political characteristics that limit the applicability of universalistic recipes. These obstacles arise from the region's asymmetrical insertion in...