DEMOCRACY: The Economic Roots of Unstable Regimes

Latin America’s young democracies present an interesting puzzle: while their party systems display high levels of instability, their political regimes have proven to be much more stable than expected. Unlike in the past, social unrest has not led to military intervention. Despite the meltdown of their representative institutions, Latin American societies have dealt with their crises within the limits of democracy. In other words, the crisis of the party system has not translated into a crisis of the democratic regimes.

This puzzle can be illustrated with survey data from Latinobarómetro. In 2011, while 58 per-cent of Latin American citizens thought that democracies were preferable to dictatorships, only 22 percent of them trusted political parties. When asked about their partisan identity, only 44 percent of respondents felt attached to a specific party. Unsurprisingly, electoral volatility is very high in Latin America and has been increasing in recent years. Electoral volatility measures the difference in votes that parties gain in different elections. In other words, it evaluates the ability of political parties to retain social support over time. According to 2010 data from the Latin American Public Opinion Project, average electoral volatility in Latin America was 26.8 percent. However, this high overall score conceals important differences between countries. In fact, while some countries such as Honduras and Chile presented volatility indexes lower than 10 percent, other countries such as Bolivia, Venezuela, and Peru showed scores above 40 percent. Although the general picture in Latin America is one of partisan de-alignment and low institutionalization, two very different stories can be told depending on which countries we look at. One group — Argentina, Bolivia, Ecuador, and Venezuela — has seen its party systems collapse, with the popular vote switching massively to new outsider figures, while other countries (like Brazil, Chile, and Uruguay) have experienced party system consolidation. Looking at these cases raises the question: How can we explain this variation in the trajectories of Latin American democracies?

Perceptions of the government's economic responsibilities show a far larger role being supported in Latin America than in the United States. (Data from AmericasBarometer 2008.)Kenneth Roberts, a professor of Government at Cornell University, argues that the answer lies in Latin America’s period of market reforms. While all countries in Latin America adopted significant market reforms in the 1980s and 90s, the impact of those reforms on the political system varied greatly across countries. Inspired by the work of political scientists David and Ruth Collier and their conception of critical junctures, Roberts maintains that the process of market reforms was both an economic and a political watershed in the region.

The way in which this shift from a state-led to a market-led development model was implemented had long-term consequences for the region’s political systems. These consequences can be seen in: (a) the relative stability of the political system after the implementation of market reforms; (b) how political opposition to market liberalization was expressed; and (c) the nature of the shift to the left that followed the implementation of market reforms. The key factors shaping these different political outcomes were: (a) the partisan identities of those in charge of implementing market reforms; and (b) the existence of a leftist opposition to reform. In other words, the extent to which a country’s party system was aligned around the process of market liberalization explains the different paths that Latin American political systems took. The contrasting trajectories of Argentina and Brazil illustrate this argument well.

In Argentina, the party conducting the shift to market-led development — the Peronists, a labor-based party — had historically supported a strong state. Its conversion to neoliberalism had a de-aligning effect on Argentina’s political system. The Peronist Party took over the right of the ideological space, marginalizing existing conservative parties. On the other side of the cleavage, Argentina’s left had long been weak, and as a result, opposition to market reforms could not be channeled through partisan entities, at least during the period in which the reforms were being implemented. When the consequences of neoliberalism on the Argentine economy and labor market became evident, the political opposition to them was headed by the piqueteros, a very disruptive movement of the unemployed. Social mobilization against neoliberal adjustment increased hand-in-hand with economic hardships and ultimately led, in 2001 to the meltdown of the entire party system. Once again, it was a transformation within the Peronist party that put an end to the political crisis, inaugurating Argentina’s left turn. Responding to the social backlash against neoliberalism, Nestor and Cristina Kirchner’s governments adopted a series of heterodox economic polices leaning toward a state-led development model.

In Brazil, market reforms were implemented by a center-right alliance, led by the Partido da Social Democracia Brasileira (Brazilian Social Democratic Party, PSDB) and contested electorally by the leftist Partido dos Trabalhadores (Workers Party, PT). Therefore, in contrast to Argentina, opposition to market reforms had a partisan expression. Campaigning against neoliberalism, the PT’s leader, Luiz Inácio Lula da Silva, a former union leader, tried to channel social discontent with market reforms in his first four bids for the presidency. His win in 2002 began Brazil’s move to the left, which was less radical than that of Argentina. Although Lula adopted a more redistributive social policy than his predecessor Fernando Henrique Cardoso, he continued with Cardoso’s orthodox macro-economic policy.

In sum, the political effects of neoliberalism varied widely in Latin America depending on the political orientation of the government implementing the market reforms. Roberts identifies two main patterns. On the one hand, “bait-and-switch” reforms adopted by populist or leftist leaders created a legacy of electoral volatility that led to the demise of historic conservative parties and the outflanking of traditional populist parties by more radical outsiders. In the long run, the shift to the left in these countries was more radical, characterized by a dramatic turn towards a state-led economy. In contrast, market reforms that were adopted by conservative leaders and opposed by a major leftist rival led to stable patterns of electoral competition and reinforced existing party systems. In these countries, the left turn was milder, with leftist governments sticking to economic orthodoxy.

Roberts’ analysis invites us to evaluate the long-term effects of market reforms beyond the economic realm. The way in which the shift to a market economy was implemented was not only important for its effect on the economic development and social structure of Latin American countries but also for its impact on the political systems of these young democracies. Fifteen years after their implementation, market reforms still shape political life in Latin America.

Kenneth Roberts is a professor of Government at Cornell University. He spoke for CLAS on February 28, 2013.

Belén Fernández Milmanda is a graduate fellow of CONICET Argentina and a research assistant at UC Berkeley.

A woman sitting on steps and carrying a fake pig at a protest against neoliberalism. (Photo by Vicnaba.)