Liberalization and its Consequences

Liberalization and its Consequences

A Comparative Perspective on Latin America and Eastern Europe

Edited by Werner Baer and Joseph L. Love

The essays in this volume describe, analyse and compare the achievements and the failures of societies that adopted market-based economies within a democratic polity after a long period of communist rule (Russia and Eastern Europe) or military authoritarianism (Latin America). Together, they also trace the rocky course of liberal economic policies over the whole twentieth century.

Chapter 1: Introduction

Joseph L. Love and Werner Baer


Joseph L. Love and Werner Baer During the last decade of the 20th century profound winds of change have swept through Eastern Europe and Latin America. The dramatic political and economic reforms instituted in these regions, including multi-party elections, privatization, dismantling of protective barriers, and openness to foreign capital and ideas, have been transforming everyday life. Democracies have replaced authoritarian regimes, and market-driven open economies have replaced closed and state-dominated ones. The failures of communism in the former Soviet bloc as an economic and political system, and the economic failures of both authoritarian military and populist regimes in Latin America, combined with pressures from Western governments, banks and international lending agencies, prompted deep structural reforms of a political and economic nature. In Eastern Europe (including Russia), the adoption of market-oriented policies, privatization, democracy, and the de-emphasis on social safety nets has created new societies with widely varying degrees of success in producing growth and efficiency, while simultaneously introducing striking new inequalities. In Latin America, the limits of import-substitution industrialization, an exaggerated presence of the state in the economy, and the failure of macropopulism, were accompanied by a fiscal impasse resulting from a dissensus about who would pay for the massive investments in infrastructure needed to cope with rapid industrialization and urbanization. These intersecting problems resulted in inefficiency, waste, and in many cases runaway inflation. In both Eastern Europe and Latin America, one of the goals of the new market-oriented policies in the 1990s was to reduce inefficiency and thereby spur...