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  The Political Economy of Neoliberal Resilience: Developmental Regimes in Latin America and Eastern Europe

Madariaga, A. (2015). The Political Economy of Neoliberal Resilience: Developmental Regimes in Latin America and Eastern Europe. PhD Thesis, University of Cologne, Cologne.

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Madariaga, Aldo1, Author           
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1International Max Planck Research School on the Social and Political Constitution of the Economy, MPI for the Study of Societies, Max Planck Society, ou_1214550              

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Free keywords: Development; Neoliberalism; Latin America; Eastern Europe
 Abstract: In the last decades of the twentieth century, Latin American and Eastern European countries experienced thorough processes of economic liberalization and became the hallmark of the neoliberal development model. After severe economic crises, increased social inequality and the associated political turmoil, many countries experienced reform backlashes or built alternative development models. A handful of countries, however, retained their neoliberal development models over time. What explains the resilience of neoliberalism in these countries? I provide a twofold answer: first, specific actors formed coalitions that pursued and defended neoliberal policy alternatives over time; second, specific institutional mechanisms allowed these actors to remain powerful in order to veto changes. To arrive to this answer I conducted a small-n research, focusing on four countries with substantive market reform experiences, two representing resilience (Chile and Estonia) and two representing discontinuity (Argentina and Poland). I combined within-case methods (process tracing) and comparative methods to determine causal links between the explanatory factors (coalitions and institutions) and the outcome to explain (neoliberal resilience). To assess neoliberal resilience, I analyzed the trajectory of two policy domains: exchange rate regimes and industrial policy. The study covers the period from the introduction of market reforms (ca. 1970-1990) until the 2007-8 crisis. Theoretically, I combined insights from the literature on the political economy of policy reforms, international political economy theories of policy preferences, and institutional change theories from political science. In the first part, I analyzed the formation of coalitions supporting and opposing neoliberalism. I focused on three actors: capital, divided into four sectors (financial, public utilities, competitive and non-competitive); political parties, divided on the right-left spectrum; and labor unions. I assessed their strength using quantitative data (sectorial national accounts, electoral data, unionization and collective bargaining levels), traced their preferences for exchange rate regimes and industrial policy using interviews and newspaper articles, and compared the dynamics of coalition formation and support across cases. In the second part I analyzed the political and institutional mechanisms that allowed neoliberal actor constellations to remain powerful over time and veto changes to established policies. I used specialized literature, interviews and newspaper articles to identify and test the relevant mechanisms. The main findings of my dissertation are: 1) neoliberal development projects have been pursued and defended by coalitions between the financial and competitive economic sectors, and right-wing parties; 2) non-competitive economic sectors, labor unions and left-wing parties have opposed neoliberalism (successfully in the cases of discontinuity, unsuccessfully in the cases of resilience); 3) neoliberal coalitions used three mechanisms to maintain their power resources over time: creating business supporters through privatization, blocking opposition using restrictive electoral rules and labor market institutions, and institutionalizing central bank independence and fiscal spending rules. These mechanisms have been used in different combinations in Chile and Estonia to empower actors defending neoliberalism, weaken actors opposing neoliberalism, and prevent significant changes in exchange rate regimes and industrial policy. Conversely, these mechanisms have been either absent or worked in opposite directions in Argentina and Poland.

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Language(s): eng - English
 Dates: 2015-06-292015
 Publication Status: Issued
 Pages: XV, 368
 Publishing info: Cologne : University of Cologne
 Table of Contents: List of tables  vi
List of figures  ix
Acronyms and abbreviations  xii
Acknowledgements  xiv
INTRODUCTION  1
I.  Background  2
a)  Empirical puzzle  2
b)  State of the art  5
c)  Theoretical foundations and scope  9
II.  Aims, research questions and contributions  12
III.  Methodology  16
a)  Research design  16
b)  Research methods  17
c)  Case selection  19
d)  Operationalization: indicators, measurement and data management  21
IV.  Outline  25
CHAPTER 1  27
INTERESTS, INSTITUTIONS, AND THE STUDY OF NEOLIBERAL RESILIENCE  27
I.  Developmental regimes and dominant social blocs  28
a)  Actors  32
b)  Policies  35
c)  Preferences  39
d)  Context  43
II.  Turning points  44
a)  Economic turning points: the effects of markets on politics  45
b)  Political turning points: the effects of politics on markets  47
III.  Institutions  49
List of tables  vi
List of figures  ix
Acronyms and abbreviations  xii
Acknowledgements  xiv
INTRODUCTION  1
I.  Background  2
a)  Empirical puzzle  2
b)  State of the art  5
c)  Theoretical foundations and scope  9
II.  Aims, research questions and contributions  12
III.  Methodology  16
a)  Research design  16
b)  Research methods  17
c)  Case selection  19
d)  Operationalization: indicators, measurement and data management  21
IV.  Outline  25
CHAPTER 1  27
INTERESTS, INSTITUTIONS, AND THE STUDY OF NEOLIBERAL RESILIENCE  27
I.  Developmental regimes and dominant social blocs  28
a)  Actors  32
b)  Policies  35
c)  Preferences  39
d)  Context  43
II.  Turning points  44
a)  Economic turning points: the effects of markets on politics  45
b)  Political turning points: the effects of politics on markets  47
III.  Institutions  49
a)  Political institutions and policy formation  49
b)  Policies as resilient institutions  50
c)  Mechanisms of institutional resilience  53
IV.  Summary  59
SECTION I NEOLIBERAL DEVELOPMENTAL REGIMES AND DOMINANT SOCIAL BLOCS  62
CHAPTER 2 NEOLIBERALISM IN THE SOUTH, ACT 1: AUTHORITARIANISM  64
I.  Reform: The marriage of markets and guns  65
a)  The ascendance of the neoliberals  69
b)  Diverse societal support for neoliberalism  72
II.  Aftermath: Financial collapse, debt crisis and the “lost decade”  77
a)  Neoliberal power blocs during the debt crisis  79
b)  Old wine in new bottles? the faith of the first neoliberal experiment  81
III.  Conclusions  87
CHAPTER 3 NEOLIBERALISM IN THE SOUTH, ACT 2: DEMOCRATIZATION/ DEMOCRACY  89
I.  Consolidation: the neoliberal tide at both side of the Andes  91
a)  Chile: center-left governments without a business base  94
b)  Argentina 1: a renewed neoliberal experiment  100
c)  Argentina 2: sustaining neoliberalism through rough waters  107
II.  Legacies: the “turn to the left” and the future of neoliberalism in Latin America  111
a)  Argentina: the dramatic downfall of a neoliberal poster child  113
b)  Chile: the perils of lacking a business base  117
III.  Conclusions  120
CHAPTER 4 NEOLIBERALISM IN THE EAST, ACT 1: TRANSITION  123
I.  Reform: The dissolution of communism through shock therapy  125
a)  “No time for a third way”… the ascendance of the neoliberals  126
b)  Neoliberal policy regimes in Eastern Europe  128
II.  Aftermath: unfolding the umbrella over neoliberal reforms?  130
a)  Extraordinary politics in Poland: the gradual unfolding of the umbrella  131
b)  Extraordinary politics in Estonia: connecting neoliberalism and nationalism  136
List of tables  vi
List of figures  ix
Acronyms and abbreviations  xii
Acknowledgements  xiv
INTRODUCTION  1
I.  Background  2
a)  Empirical puzzle  2
b)  State of the art  5
c)  Theoretical foundations and scope  9
II.  Aims, research questions and contributions  12
III.  Methodology  16
a)  Research design  16
b)  Research methods  17
c)  Case selection  19
d)  Operationalization: indicators, measurement and data management  21
IV.  Outline  25
CHAPTER 1  27
INTERESTS, INSTITUTIONS, AND THE STUDY OF NEOLIBERAL RESILIENCE  27
I.  Developmental regimes and dominant social blocs  28
a)  Actors  32
b)  Policies  35
c)  Preferences  39
d)  Context  43
II.  Turning points  44
a)  Economic turning points: the effects of markets on politics  45
b)  Political turning points: the effects of politics on markets  47
III.  Institutions  49
a)  Political institutions and policy formation  49
b)  Policies as resilient institutions  50
c)  Mechanisms of institutional resilience  53
IV.  Summary  59
SECTION I NEOLIBERAL DEVELOPMENTAL REGIMES AND DOMINANT SOCIAL BLOCS  62
CHAPTER 2 NEOLIBERALISM IN THE SOUTH, ACT 1: AUTHORITARIANISM  64
I.  Reform: The marriage of markets and guns  65
a)  The ascendance of the neoliberals  69
b)  Diverse societal support for neoliberalism  72
II.  Aftermath: Financial collapse, debt crisis and the “lost decade”  77
a)  Neoliberal power blocs during the debt crisis  79
b)  Old wine in new bottles? the faith of the first neoliberal experiment  81
III.  Conclusions  87
CHAPTER 3 NEOLIBERALISM IN THE SOUTH, ACT 2: DEMOCRATIZATION/ DEMOCRACY  89
I.  Consolidation: the neoliberal tide at both side of the Andes  91
a)  Chile: center-left governments without a business base  94
b)  Argentina 1: a renewed neoliberal experiment  100
c)  Argentina 2: sustaining neoliberalism through rough waters  107
II.  Legacies: the “turn to the left” and the future of neoliberalism in Latin America  111
a)  Argentina: the dramatic downfall of a neoliberal poster child  113
b)  Chile: the perils of lacking a business base  117
III.  Conclusions  120
CHAPTER 4 NEOLIBERALISM IN THE EAST, ACT 1: TRANSITION  123
I.  Reform: The dissolution of communism through shock therapy  125
a)  “No time for a third way”… the ascendance of the neoliberals  126
b)  Neoliberal policy regimes in Eastern Europe  128
II.  Aftermath: unfolding the umbrella over neoliberal reforms?  130
a)  Extraordinary politics in Poland: the gradual unfolding of the umbrella  131
b)  Extraordinary politics in Estonia: connecting neoliberalism and nationalism  136
c)  Normal politics in Estonia: strengthening neoliberalism  139
d)  Normal politics in Poland: seeking alternatives  146
III.  Conclusions  155
CHAPTER 5 NEOLIBERALISM IN THE EAST, ACT 2: EUROPEANIZATION  157
I.  Consolidation: Europeanization and transnationalization  158
a)  Estonia: Consolidating neoliberalism  160
b)  Poland: in the search for a dominant social bloc …  167
II.  Legacies: Crisis in the center and the future of neoliberalism in the East  177
III.  Conclusions  182
SECTION II MECHANISMS OF NEOLIBERAL RESILIENCE  185
CHAPTER 6 CREATION OF SUPPORTERS  187
I.  With a little help of my friends… creating supporters for neoliberalism  189
a)  Chile: stabilizing a pragmatic coalition  189
b)  Estonia: the building blocks of neoliberal capitalism  200
II.  When love is not enough…  210
a)  Argentina: between state retrenchment and coalition building  210
b)  Poland: sustaining state-ownership in the era of transnationalization  218
III.  Conclusions  225
CHAPTER 7 OPPOSITION BLOCKADE  229
I.  Chile and Estonia: restricting participation in the polity and the workplace  230
a)  Chile 1: Shrinking the left  230
b)  Estonia 1: Disenfranchising ethnic minorities  236
c)  Chile 2: Farewell to the labor movement  245
d)  Estonia 2: Labor, the actor that never was…  248
II.  Argentina and Poland: the perils of incorporation under democratic rule  250
a)  Argentina: opposition blockade through delegative democracy?  250
b)  Poland: attempting a delegative democracy in the East  257
c)  Argentina: Between curtailing and restoring labor power  262
d)  Poland: the vestiges of workers' solidarity...  266
III.  Conclusions  271
List of tables  vi
List of figures  ix
Acronyms and abbreviations  xii
Acknowledgements  xiv
INTRODUCTION  1
I.  Background  2
a)  Empirical puzzle  2
b)  State of the art  5
c)  Theoretical foundations and scope  9
II.  Aims, research questions and contributions  12
III.  Methodology  16
a)  Research design  16
b)  Research methods  17
c)  Case selection  19
d)  Operationalization: indicators, measurement and data management  21
IV.  Outline  25
CHAPTER 1  27
INTERESTS, INSTITUTIONS, AND THE STUDY OF NEOLIBERAL RESILIENCE  27
I.  Developmental regimes and dominant social blocs  
a)  Actors
b)  Policies
c)  Preferences
d)  Context
II.  Turning points
a)  Economic turning points: the effects of markets on politics
b)  Political turning points: the effects of politics on markets
III.  Institutions  
a)  Political institutions and policy formation
b)  Policies as resilient institutions
c)  Mechanisms of institutional resilience
IV.  Summary
SECTION I NEOLIBERAL DEVELOPMENTAL REGIMES AND DOMINANT SOCIAL BLOCS
CHAPTER 2 NEOLIBERALISM IN THE SOUTH, ACT 1: AUTHORITARIANISM
I.  Reform: The marriage of markets and guns
a)  The ascendance of the neoliberals
b)  Diverse societal support for neoliberalism
II.  Aftermath: Financial collapse, debt crisis and the “lost decade”
a)  Neoliberal power blocs during the debt crisis
b)  Old wine in new bottles? the faith of the first neoliberal experiment
III.  Conclusions
CHAPTER 3 NEOLIBERALISM IN THE SOUTH, ACT 2: DEMOCRATIZATION/ DEMOCRACY
I.  Consolidation: the neoliberal tide at both side of the Andes
a)  Chile: center-left governments without a business base
b)  Argentina 1: a renewed neoliberal experiment
c)  Argentina 2: sustaining neoliberalism through rough waters
II.  Legacies: the “turn to the left” and the future of neoliberalism in Latin America
a)  Argentina: the dramatic downfall of a neoliberal poster child
b)  Chile: the perils of lacking a business base
III.  Conclusions
CHAPTER 4 NEOLIBERALISM IN THE EAST, ACT 1: TRANSITION
I.  Reform: The dissolution of communism through shock therapy
a)  “No time for a third way”… the ascendance of the neoliberals
b)  Neoliberal policy regimes in Eastern Europe
II.  Aftermath: unfolding the umbrella over neoliberal reforms?
a)  Extraordinary politics in Poland: the gradual unfolding of the umbrella
b)  Extraordinary politics in Estonia: connecting neoliberalism and nationalism
c)  Normal politics in Estonia: strengthening neoliberalism
d)  Normal politics in Poland: seeking alternatives
III.  Conclusions
CHAPTER 5 NEOLIBERALISM IN THE EAST, ACT 2: EUROPEANIZATION
I.  Consolidation: Europeanization and transnationalization
a)  Estonia: Consolidating neoliberalism
b)  Poland: in the search for a dominant social bloc …
II.  Legacies: Crisis in the center and the future of neoliberalism in the East
III.  Conclusions
SECTION II MECHANISMS OF NEOLIBERAL RESILIENCE  
CHAPTER 6 CREATION OF SUPPORTERS
I.  With a little help of my friends… creating supporters for neoliberalism
a)  Chile: stabilizing a pragmatic coalition
b)  Estonia: the building blocks of neoliberal capitalism
II.  When love is not enough…
a)  Argentina: between state retrenchment and coalition building
b)  Poland: sustaining state-ownership in the era of transnationalization
III.  Conclusions
CHAPTER 7 OPPOSITION BLOCKADE
I.  Chile and Estonia: restricting participation in the polity and the workplace
a)  Chile 1: Shrinking the left
b)  Estonia 1: Disenfranchising ethnic minorities
c)  Chile 2: Farewell to the labor movement
d)  Estonia 2: Labor, the actor that never was…
II.  Argentina and Poland: the perils of incorporation under democratic rule
a)  Argentina: opposition blockade through delegative democracy?
b)  Poland: attempting a delegative democracy in the East
c)  Argentina: Between curtailing and restoring labor power
d)  Poland: the vestiges of workers' solidarity...
III.  Conclusions
CHAPTER 8 CONSTITUTIONALIZED MONETARISM
I.  The discreet charm of tying the other’s hands…
a)  Chile: between restraint and commitment
b)  Estonia: the "virtuous circle" of neoliberal institutions
II.  The perils of institutionalization: on rooms of maneuver and power relations
a)  Argentina: do the ties really bind?
b)  Poland: neoliberal institutions under permanent assault
III.  Conclusion
CONCLUSIONS
I.  On the political economy of neoliberal resilience
a)  Dominant social blocs and neoliberal developmental regimes
b)  Mechanisms of neoliberal resilience: what and how they work  
c)  Institutional continuity and change in neoliberal political economies
II.  Neoliberal resilience, commonalities of neoliberalism and varieties of contestation
III.  Neoliberal resilience and the future of democratic capitalism
BIBLIOGRAPHY
ANNEX 1 Data
ANNEX 2 Analysis of Revealed Comparative Advantages (RCA)
ANNEX 3 Interviews
 Rev. Type: -
 Identifiers: URI: http://kups.ub.uni-koeln.de/id/eprint/6364
URN: urn:nbn:de:hbz:38-63649
 Degree: PhD

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