Effects of Economic Liberalization
This week’s readings focus on the economic liberalization that came along with transition from autocracy to democracy in the form of neoliberal reforms, and the implication that these reforms caused. Smith compares and contrast various aspects of both democratic and autocratic policies in Latin America and their success in performing well economically and overall. We get a look at wealth distribution, economic growth, social impacts, and poverty.
Each of these were affected in different ways in light of new reforms, but Smith argues that the results as a whole are inconclusive of whether countries were improved by the the effects that reforms had in these areas.
One of the points brought up by Smith in this chapter that I found thought provoking was his comparison of social programs in each regime. It was stated that overall, democracies devoted more resources to education, health, and other social benefits than autocracies. The suggested reasoning was that government officials in democracies have to consider voter support, and that voters tend to be more inclined to support those who’ve made efforts in improving social issues, while dictators can make such policy decisions without the threat of loosing reelection. The evidence in this chapter supports the statement that the overall wellbeing of citizens in health and education is better in democracies, but the chapter doesn’t further explore the implications that these short term solutions to social issues may have on social policy in terms of its efficiency as a whole and its sustainability in the future. Could there be better long term solutions to social inequality that haven’t been explored on account of conflicting motivations of politicians? Furthermore, I’m lead to wonder what other political factors are being affected most directly by voter pressures along with social factors.
Contrastingly, wealth distribution was negatively correlated with the implementation of neoliberal reforms. Latin America was already a significantly unequal society before these reforms, and was experiencing this effect even more so during the 80’s right before the policy change. It’s might be feasible to consider this correlation a side effect of transition, as we are able to see later that inequality starts to come down in the early 2000’s. CTT ‘s are held partially accountable for this decline as well.
A similar theme seen in the Smith chapter and the Holzner article is the relationship between poverty and the transitions to democracy and neoliberal policies. Each mentions that there is only a small difference between levels of poverty with democracies and dictatorships, and recognizes Latin America’s historical struggle with poverty as one of the main issues facing the region. Holzner gives examples of how the poor were further marginalized under neoliberal policies with cutbacks on funding to economic growth and poverty initiatives, as well as institutional groups that provided support to poor citizens. These changes were not only impacting the lives of the poor, but they greatly decreased political involvement of the sector. As their expenses grew, wages decreased, making travel and organizing difficult. All of this prevented citizens petitioning, protesting, and voting. These changes all contributed to a change in relationship between the poor sector and the government, with the poor becoming frustrated with new reforms and the challenges brought with them. Smith talks about the incentives that politicians have to give effort to remobilizing the poor sector, mainly as a source of voters but also a moral obligation. As mentioned earlier, the CTTs program has had some impact on reversing the effects that economic policies had on the political involvement of the lower class and their living conditions, and were in turn implemented in different countries throughout the region as a result. Still, poverty and lack of political involvement of the poor became side effects of neoliberal reforms that have yet to be dealt with directly or effectively, while politicians have reasonable incentives to do so, though means may conflict with new economic practices.
Great overview of the negative effects of economic liberalization. Huber and Solt make distinctions between countries that liberalized quickly versus countries that liberalized more gradually. They discuss that radical liberalization exacerbated already existing inequalities and the countries that carried out these reforms were unable to put safety nets in place to prevent the growth of poverty. This accounts for the higher volatility and higher economic inequality of countries that made quicker and more drastic neoliberal reforms. The questions is how can countries be engaged with the global market while still retaining enough control over their own affairs and economies to put the proper safety nets in place? This would almost absolutely necessitate curtailing several of the policies included in the Washington Consensus. It seems that there is no one-size-fits-all solution to addressing internal economic issues. Drastically increased economic inequality is an unintended consequence of imposing specific standards on all Latin American countries in the decades after the 1980s economic crisis. More gradual and customized policies and reforms may have prevented the volatility and inequality that drastic and quickly imposed reforms caused.
I agree with the writer that democratic countries offer better governance than those that are autocratic. This is particularly true since the leaders feel the pressure to improve the lifestyle of their subjects or they will not be reelected. In fact, most of the democracies have mechanisms to remove the leaders from their respective offices if they do not deliver. On the other hand, autocratic governments do not fear to lose the election or being ousted based on their scorecard. As a result, these leaders do not offer better social amenities that democratic ones. The writer also makes an interesting point that I fully agree with that democratic government may overspend the countries resources in providing social amenities that may lead to sustainability problems.
Moreover, I agree with the writer that the enhancement of democracy in Latin America has led to improvement in wealth distribution. I also concur that the implementation of neoliberal policies is the main factor that has contributed to better wealth distribution in the region. Finally, I affirm that CCTs have been instrumental in promoting economic equality.
However, I disagree with the writer that democracy does little to influence the economic welfare of the citizen. While it might be true that the implementation of the neoliberal economic reforms has had no significant influence on reducing poverty in the area, the writer fails to take into account other factors that might be at play. For example, poverty in the area may be caused by lack of ample employment opportunities or development projects. Finally, I agree with the author that poverty reduces the political activities of the poor.