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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 12: The neo-liberal experiment in Latin America: an evaluation

Albert Fishlow


Albert Fishlow INTRODUCTION Over the last 15 years Latin America has changed decisively. It is not only the economics, but the politics that has altered as well. Today, after primary elections in Mexico, a close presidential election in Chile, and a change of the ruling party in Argentina, democracy seems more deeply embedded than it ever has been. But the ultimate persistence of that pattern depends very substantially on whether the new capitalist model – termed by some the neo-liberal experiment – can, and will, survive. This new style of economic development is far different from that of the past. Latin America had gained prominence previously by its application of an import substitution model in the post-war period that promised rapid and efficient industrialization. It failed to deliver that objective – Brazil and Mexico were the prominent regional exceptions – and along with that attempt came fundamental disequilibria in foreign trade and domestic expenditure that only in the 1990s are finally being resolved. Some see in the new model a strong line of foreign influence. But although some of the changes required in the 1980s were first termed the ‘Washington Consensus’ by John Williamson, it is important to appreciate their strong local emphasis. Inflation was brought under control everywhere by limiting the expansion of money, but the particulars of that process varied substantially. In Argentina, it was a fixed exchange rate; in Brazil, first the anchor was the exchange rate, but that was successfully switched in 1999 to monetary and fiscal policy; in Chile,...

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