Context Matters: Assessing the Success of Neoliberal Policy
This week’s readings dealt with the impacts of neoliberalism on Latin American growth, development, and stability. Clearly, the pivot towards more open economic policy was an important turning point in the economic and political identity of Latin America. However, there is some scholarly debate regarding the extent of this change, and whether it has been positive or negative for Latin America.
Walton argues, “Only with a combination of market-policies, equalizing expansion of assets and influence, and political and social institutional development will Latin American countries get onto robust paths of rapid and equalizing social and economic advance.” In other words, neoliberal policies such as trade liberalization, privatization, and property rights can lead to sufficient economic growth; but they must occur in the proper social and political context.
Though it is somewhat difficult to fully assess the success of neoliberal policies in Latin American countries due to the relative recency of the introduction of these policies, I believe this is a strikingly accurate depiction of the political and economic state of many Latin American countries. Furthermore, it provides an accurate analysis of what is holding many of these countries back from being stable, economically functioning regimes.
A perfect example of this is Brazil. Though many of its economic policies have taken a neoliberal turn, its government continues to be plagued by corruption and instability. Brazil has many contextual shortcomings that hamper the success of neoliberal policy. The first of these stems from the economic ripple effects of the import substitution policies Brazil undertook in an attempt to rapidly develop its economy. The crash in Brazil’s foreign exchange rate as well as its large foreign debt that resulted from import substitution made it difficult for Brazil to liberalize. The timing of Brazil’s liberalization created an economic context that made it more difficult for these liberal policies to be successful.
Another obvious contextual problem that can hurt the legacy of economic liberalization is an adverse political environment. An example of a country with such an adverse environment that has received much attention recently is Colombia. The political, economic, and social state of Colombia is defined by its civil war that has been ongoing for over 60 years. Though the FARC is ideologically aligned against liberalism, it is unfair to blame neoliberal policies for the rise of the FARC. Rather, the terrorist tactics of the FARC create a unique political situation shared by no other country. Regardless of the success of any economic policy, the existence of such a prevalent, militaristic ideological movement creates a situation that constantly threatens the stability of the country.
Context is essential to the success of any economic policy. Therefore, when assessing the success of neoliberal policies, it is essential to take political, social, and historical contexts into account. In an ideal world, one could run an experiment and control for these factors when assessing the success of different policies. However, since it is impossible to run experiments on the development of entire nations and regions, close analysis on countries who pursue different policies in different contexts is essential to determining the best policies for different nations.