The Political Economy of Macroeconomic Policy Reform in Latin America

The Political Economy of Macroeconomic Policy Reform in Latin America

The Distributive and Institutional Context

Eduardo Wiesner

Eduardo Wiesner’s book makes an important contribution to the understanding of development by blending together the interdependent issues of (i) macroeconomic performance and volatility, (ii) equity and distributive justice, (iii) fiscal deficits and the redistributive effectiveness of social public expenditures, and (iv) the demand for the ‘right’ institutions and for policy reform in Latin America. It does this by examining recent macroeconomic crises from a political economy perspective, and finds that information is the critical algorithm that links together the demand for macroeconomic stability, macroeconomic performance and, ultimately, distributive justice.

Chapter 5: Chile: The Right Mix of Policies and Institutions

Eduardo Wiesner

Subjects: development studies, development economics, economics and finance, development economics, political economy, politics and public policy, political economy


Chile has been able to grow faster than other Latin American countries since the mid 80’s mainly thanks to its better institutions. Corbo et al. (2005, p. 3) Chile’s country narrative needs a special preface to explain its particular conceptual architecture. There are two distinct characteristics which separate this country’s narrative from the others. First, the traditional question of what explains long term development takes a special meaning in the case of Chile. This results from the association that often links Chile’s success with its undemocratic regime from 1973 to 1990. For this reason, the country narrative begins with a discussion of the relationship between public policies and the modality of political governance structures, in particular democracy. Secondly, although some aspects of the economic success of Chile may serve as a guideline to other developing countries, it would do so largely through the fundamentals of development policy and not necessarily through the specifics of each one of its policies. In other words, the ‘endogeneity condition’, that is each country’s development, is somewhat unique, restricting the full replicability of Chile’s particular case. On the other hand, Chile continues to face difficult problems which also challenge other Latin American countries. In this case, the cross country comparisons of experiences and approaches has enormous learning potential for all. I. THE SEARCH FOR AN EXPLANATION FOR SUCCESS Why and how has Chile been able to evolve so successfully along such distinct economic and institutional trajectories in contrast with other Latin American and...

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