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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.
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Chapter 11: Privatization and the public interest: partial theories, lopsided outcomes

Laurence Whitehead and Alexander Kozhemiakin


Laurence Whitehead I. INTRODUCTION Throughout the 20th century, if not before, Latin American governments have been searching for the right overall development strategy (one might even say philosophy of development) that would achieve accelerated economic growth, structural modernization, social integration, and a respected status among the advanced countries in the international community. This search has given rise to a number of at least partially successful experiences of modernization ‘from above, and without,’ but it has also encountered a succession of disappointments, with the result that successive initially popular development strategies have subsequently entered into discredit and then been vigorously repudiated. The international liberalism of the 1870–1914 period was increasingly rejected in the inter-war years, and displaced by inward-looking strategies that became prevalent by mid-century. In the 1960s and 1970s there was division over whether these no longer flourishing strategies should be ‘deepened’ (in an increasingly state-dominated and potentially socialist direction, although antiCommunist regimes such as the Brazilian military might also favor ‘deepening’ on nationalist grounds), or reversed. Following the 1982 debt crisis and the global discredit of central planning, the 1990s has witnessed the emergence of a strong and broad-based consensus around a liberal and outward-oriented development strategy, sometimes referred to (in short-hand) as ‘neo-liberalism’ or the ‘Washington Consensus.’ Within this new framework privatization (the divestiture of state assets) occupies a central role. It can perform a variety of strategic functions: creating new management incentives; enhancing competition: relieving fiscal burdens; eliminating subsidies and price distortions; attracting flight capital...

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