international and domestic causes of economic policy reform
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Review ssay
I N T E R N T I O N L N D D O M E S T I C C U SE S
O F E C O N O M I C P O L IC Y R E F O R M
Linda ornett
Debt Development an d Democracy: M odern Pol i t ical Econ omy an d L atin Ameri ca 1965 -
1985.
By Jeffry A. Frieden. Princeton: Princeton University Press, 1991. xi + 280 pages.
Cloth $45.00, paper $I9.95.
Winners and Losers: How Sectors Shape
the Developm ental
Prospects of States.
By D.
Micha el Shafer . I thaca and London: Cornel l Universi ty Press , 1994. xiv + 270 pages. Clo th
37.50, pap er 14 95.
Govern in g Capi ta l I nternat ional F inance and M exi can
Politics.
By Sylv ia Maxf ie ld .
I thaca and London: Co rnel l Universi ty Press , 1990. vi i i + 198 pages. Cloth 29.95.
ntroduction
In years to come, observers may look back at the ten years between 1985 and
1995 as one of the most revolutionary periods of the twentieth century. Certainly
everyone will recall that the Soviet Union unraveled and then wrenched apart during
that time. The changes that emerged elsewhere proved barely less revolutionary for
taking place within established geographic boundaries. China survived its own trans-
formative impulses intact but forever changed by political decentralization and eco-
nomic opening. In Western industrialized states, economic policy makers in one
state after the other followed the lead of Great Britain and the United States. Extol-
ling the virtues of individual initiative and competitive marke ts . . . [they jointly]
Linda Cornett is a doctoral candidate in the Department of Political Science at the University of
Washington, Seattle, WA 98195.
Studies in Comparative International Development
Spring 1997, Vol. 32, No. 1,126-149.
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Com~ 127
s o u g h t t o r e d e f i n e th e r e s p o n s i b il i ty o f g o v e r n m e n t fo r e c o n o m i c a n d s o c i a l w e l -
f a r e ( G r i n d le a n d T h o m a s 1 9 9 1, 1 ). H o w e v e r c o m p e l l i n g e c o n o m i c c o n s t r a in t s
a p p e a r e d i n t h e e a r ly 1 9 80 s, t h e s e c h a n g e s w e r e u n e x p e c t e d in th e d e g r e e to w h i c h
t h e y w e r e d i r e c t e d a t u n d o i n g d e c a d e s o f p r io r p o l ic y , d u r i n g w h i c h t h e s t a te b u -
r e a u c r a c i e s h a d b e e n c o n s i s t e n t l y e n l a r g e d a n d w h e n e x t e n s i v e r e g u l a t i o n o f t h e
e c o n o m y ha d b e e n t ak e n o n as a n o rm a l f u n c t io n o f g o v e r n m e n t ( G r in d l e a n d
Th o mas , 1 9 9 1 , 1 ) .
M o r e u n e x p e c t e d y e t, m a n y d e v e l o p i n g - c o u n t r y l e a d e rs u n d e r t o o k r a d i c a l li b e ra l
e c o n o m i c - p o l i c y r e f o r m s a f te r d e c a d e s o f v i g o r o u s l y d e f e n d i n g s t a t e- l ed d e v e l o p -
men t s t r a t eg i e s . A l t h o u g h l i b e r a l i z a t i o n p r o g r ams v a r i ed s u b s t an t i a l l y ac r o s s ca s e s
i n t h e i r s p ec i f i c s , al l c l a i m ed t w o o v e r r i d i n g o b j ec t i v e s : to s h a r p l y r ed u ce t h e s t a t e ' s
r o l e in t h e e c o n o m y w h i l e d e v o l v i n g p r im a r y a l l o c a t iv e f u n c t i o n s to m a r k e t s . C o n -
s e q u e n t l y , p o l i c y m a k e r s w e r e f o r c e d t o u n d e r t a k e c o n t e n t i o u s i n s t i t u t i o n a l a n d
a d m i n i s tr a t iv e r e f o r m s t o a c c o m p a n y a n d s e c u r e t h is r e o r i e n ta t i o n f r o m a s t a t e - le d
t o a m a r k e t - o r i e n t e d d e v e l o p m e n t s t ra t eg y . B o t h g o a l s a p p e a r t o w e a k e n t h e s t a t e ' s
d i s c r e ti o n a r y a u t h o r it y o v e r e c o n o m i c p r i v il e g e s a n d t h e r e b y j e o p a r d i z e i ts m o s t
r e li a b le i n s t ru m e n t s o f p o li ti c a l a s w e l l as e c o n o m i c c o n t ro l . T h e i m p l e m e n t a t i o n o f
l ib e r a l st ru c t ur a l r e f o r m s p r o g r a m s t h u s r e p r e s e n t e d n o t h i n g l e ss t h a n f u n d a m e n t a l
ch a n g e s i n n a t i o n a l d ev e l o p m en t s t ra t eg i e s , in t h e h i s to r i ca l r o l e o f t h e s t a t e , i n
p u b l i c i d e o lo g i e s a b o u t h o w d e v e l o p m e n t i s b e s t a c h i e v e d , a n d i n t h e i n t e n d e d
b en e f i c i a r i e s o f p u b l i c p o l i c i e s ( G r i n d l e an d Th o m as 1 9 9 1 , 2 ).
A s p u z z l i n g a s t h e p e r v a s i v e n e s s , d i re c t io n , a n d d e p t h o f t h e s e r e f o r m m o v e m e n t s
a r e th e i r s o u r ce s . A l t h o u g h t h e t w e n t i e t h cen t u r y h as s een i t s s h a r e o f r ev o l u t i o n a r y
c h a n g e s t h e y h a v e n o r m a l l y e m e r g e d a m o n g t h e a ft er s h o c k s o f e c o n o m i c d e p r e s-
s i o n a n d w a r : W o r l d W a r i n E u r o p e a n d N o r t h A m e r i c a , c i vi l w a r in L a t i n A m e r i c a
an d A s i a , an d w ar s o f i n d e p en d en ce in A f r i ca . I n fac t , s o m e i n f l u en t i a l t h eo r i s t s ,
i n c l u d i n g M a n c u r O l s o n ( 1 9 82 ) , d o u b t e d t h a t a n y f o r c e s s h o r t o f w a r c o u l d o v e r -
c o m e t h e o p p o s i t i o n o f v e s t e d i n te r e s ts t o r a d i c a l r e f o r m .
B y t h e la te 1 98 0 s, h o w e v e r , r ad ic a l e c o n o m i c - p o l ic y r e f o r m m o v e m e n t s e m e r g e d
c o n c u r r e n t l y in a ll c o m e r s o f t h e g lo b e a n d u n d e r t h e m o s t u n l ik e l y c i r c u m s t a n c e s .
T h e g r o w i n g d i s c r e p a n c y b e t w e e n t h e e m p i r i c a l r e c o r d a n d o u r t h e o re t ic a l g r a s p o f
t h e s e e v e n t s s t i m u l a t e d r e n e w e d i n t e r e s t i n o l d q u e s t i o n s c o n c e r n i n g t h e p r i m a r y
s o u r c e s o f e c o n o m i c p o l i c y a n d n e w o n e s a b o u t t h e p r e c o n d i t i o n s o f r e f o r m . T h e
s i m u l t a n e o u s o n s e t o f [ e c o n o m i c ] c r is is i n m o r e t h a n f o r t y d e v e l o p i n g c o u n t r i e s
( S ach s 1 9 8 5 , 5 2 6 ) s u g g es t s t h a t p o w er f u l g l o b a l f o r ce s b ea r s o me r e s p o n s i b i l i t y .
H o w e v e r , v a r i a ti o n i n t h e d ir e c ti o n , s c o p e , a n d d e p t h o f s t a te s ' p o l i c y r e s p o n s e s t o
c r is i s c o n d i t i o n s a tt e st s to t h e c o n t i n u i n g im p o r t a n c e o f d o m e s t i c - l e v e l a c to r s a n d
i n s t i t u t i o n s w h i ch o p e r a t e a t t h e i n t e r f ace b e t w een i n t e r n a t i o n a l f o r ce s an d p o l i cy
o u t c o m e s .
D e v e l o p i n g c o u n t r i e s p r o v i d e d a p a r t i c u l a r l y r i c h a n d p r o v o c a t i v e s e l e c t i o n o f
c a s e s f o r s t u d e n t s o f I n t e r n a t i o n a l a n d C o m p a r a t i v e P o l i t i c a l E c o n o m y s e e k i n g t o
e x p l a i n a n o m a l o u s p a t t e r n s o f e c o n o m i c p o l i c y a n d r e f o r m . S o m e o f t h e m o s t
p r o m i s i n g e x p l a n a t i o n s o f p o li c y r e f o r m a t t e m p t t o d i s c o v e r w h e n a n d h o w i n t e rn a -
t io n a l f o r c e s a lt e r th e s t ru c t u re o f c o n s t r a in t f a c i n g p o l i c y m a k e r s a n d e n h a n c e t h e
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128 Stttdies in Com parative International Deve lopme nt I Spring
997
p o w e r o f w o u l d - b e l i b e r a l r e f o r m e r s t o i m p l e m e n t t h e i r p o l i c y p r e f e r e n c e s . T h i s
e s s ay c r i t ic a l l y r ev i ew s t h e t h eo re t i ca l an d em p i r i ca l co n t r i b u t i o n s o f t h ree p a r t i cu -
l a r ly p ro m i s i n g an d ea g e r l y - r ece i v ed b o o k s b y J e f f ry F r i ed en (1 9 9 1 ), D . M i c h ae l
Sh a fe r (1 9 9 4 ) , an d S y l v i a M ax f i e l d (1 9 90 ) . Th i s r e v i ew co n c e rn s i t s e l f ex c l u s i v e l y
wi th the theore t ica l impor t o f these con t r ibu t ions and leaves i t to a rea spec ia l i s t s to
ev a l u a t e t h e em p i r i ca l co n t en t o f t h e ca s e s t u d i e s fo r t h em s e l v es . Th e e s s ay co n -
c l u d es w i t h s o m e g en e ra l p ro p o s a ls fo r fu t u re t h eo r i z i n g o n t h i s c r i ti c a l to p i c .
A
S p e c i fi c F a c t o rM o d e l
of Economic Policy
In Debt Development and Democracy (1 9 9 1 ) J e f f ry F r i ed en o f f e r s o n e o f t h e
m os t am bi t ious and f reque n t ly c i ted e f fo r t s to exp la in no th ing less than the po l i t i ca l ,
a s we l l a s eco n o m i c , t r an s fo rm a t i o n s t h a t s wep t La t i n Am er i ca d u r i n g t h e 1 9 8 0 s .
Un d au n t ed b y t h e b read th an d co m p l ex i t y o f t h e t a sk h e s e t s fo r h im s e l f , F r i ed en
takes pa ins to p resen t h i s sub jec t and h i s theore t ica l a rgument wi th a l l poss ib le
p a r s i m o n y , a s k i n g s i m p l y : W h a t d e t e rm i n es eco n o m i c p o l i cy ? [an d ] W h a t d e t e r -
m i n es p o l i ti c a l ch an g e? (7) . H i s an s w er to b o th q u es t i o n s is d ecep t i v e l y s i m p l e a s
we l l : t h e ch a rac t e r o f s o c i o eco n o m i c i n t e re s t g ro u p s an d t h e i r p a t te rn s o f co h es i o n
an d co n f l i c t d e t e rm i n e t h e o u t co m e o f eco n o m i c p o l i cy co n f l ic t s (7) . I n th e r e -
m a i n d e r o f t h e b o o k , F r i ed en p u rp o r t s t o ex p l a i n t h e t i m i n g an d co n t en t o f r ecen t
eco n o m i c p o l i cy p a t t e rn s i n Arg en t i n a , B raz i l , C h i l e , M ex i co , an d Ven ezu e l a b y
an a l y z i n g t h e ch a ra c t e r o f th e i n t e r e st g ro u p s t h a t v i e fo r g o v e rn m en t p r i v i leg es .
As s u m i n g t h a t a c t o r s a r e r a ti o n a l, s e l f -i n te r e s ted , an d i n co m e-m ax i m i z i n g , F r i ed en
b eg i n s h i s r e s ea rch b y i d en t i fy in g t h e eco n o m i c fo rce s t h a t le ad i n d i v i d u a l s an d
the i r o rgan ized soc ia l g roups to t ake the po l i t i ca l pos i t ions they do , bo th toward
s p ec i f i c [eco n o m i c ] p o l i c i e s an d t o ward i n s ti t u ti o n a l fo rm a t i o n an d ch an g e (6 ). I n
h i s es t imat ion , sec to ra l charac te r i s t i cs normal ly de te rmine the p r imary in te res t s ,
c l e a v a g e s a n d t h e r o u g h b a l a n c e o f p o w e r b e t w e e n c o m p e t i n g p r i v a t e -s e c t o r c la i m -
an t s t o g o v e rn m en t r e s o u rces . Th e i n cen t i v e an d cap ac i t y t o s u cces s fu l l y l o b b y
g o v e rn m en t fo r p re fe r r ed eco n o m i c p o l i c i e s d ep en d o n s ec t o r s ' a s s e t - s p ec if i c i ty an d
co h es i o n , r e s p ec t i v e l y . F r i ed en ex p l a i n s t h a t t h e p o l i cy p re fe ren ce s o f a s s e t h o l d e r s
fo l l o w d i r ec t l y f ro m t h e ch a rac t e r o f t h e a s s et s t h em s e l v es :
F i r s t, a n a c t o r s p o l i c y p r e f e r e n c e s a r e a f u n c t i o n o f t h e s u s c e p t i b il i t y o f t h e a c t o r s
a s s e t s t o p o l i c y . T h e l e s s p o l i c y c a n c h a n g e t h e r e t u r n o n t h e a s s e t - - - c h a n g e t h e
r e l e v a n t p r i c e s - - t h e l e s s i n c e n t i v e t h e a s se t s o w n e r h a s t o t ry t o a f f e c t
p o l i c y 1 . . . S e c o n d , a n a c t o r s p o l i c y p r e f e r e n c e s a r e a f u n c t i o n o f t h e d e g r e e t o
w h i c h h i s a s s e t h a s a n a v a i l a b l e a l t e r n a te u s e i n w h i c h i t e a rn s a s i m i l a r r o l e o f
r e t u rn . T h e h a rd e r i t i s t o m o v e an a s s e t f ro m u s e t o u s e [ i . e ., th e m o re a s s e t - s p ec i f i c ] ,
t h e m o r e c l o s e l y i t s o w n e r i s w e d d e d t o i t s c u r r e n t a c t i v i t y a n d t h e g r e a t e r t h e
i n c e n t i v e t o o b t a i n p o l i c i e s t o f a v o r t h i s a c ti v i ty . ( F r i e d e n 1 9 9 1, 1 9 - 2 0 )
C o n s eq u en t l y , a s s e t - s p ec i f i c s ec t o r s p re fe r s t a t e i n t e rv en t i o n i n t h e eco n o m y t o
p ro t ec t t h e i r i n co m e s h a re f ro m m ark e t f l u c t u a t i o n s . P r i ce m o v em en t s o n i n t e rn a -
t i o n a l m ark e t s g en e ra t e i r re s i st i b le d em an d s fo r r e fo rm w h en t h ey t h rea t en t o a l t e r
r e l a t i v e p r i ce s o n d o m es t i c m ark e t s t o t h e d e t r i m en t o f p o wer fu l a s s e t - s p ec i f i c
sec to rs . In o ther words , as se t -spec i f i c sec to rs lobby in tense ly fo r po l ic ies tha t p ro -
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Cornett 29
t e c t t h e i r i n c o m e s i n t h e w a k e o f p r ic e h i k e s f o r t h e i r i n p u ts a n d / o r f a l l i n g p r i ce s f o r
t h e i r p r o d u c t s .
H o w e v e r , w h e t h e r o r n o t t h e i r e c o n o m i c p o l i c y p r e f e r e n c e s a r e m e t d e p e n d s
a d d i t i o n a ll y o n s e c t o r s ' c a p a c i t y f o r c o l l e c t i v e a c t io n . I n o t h e r w o r d s , a s s e t s p e c i -
f i c i ty , i n F r i e d e n ' s t e r m i n o l o g y , e x p l a i n s a c t o r s ' v a r i a b l e in c e n t i v e t o p u r s u e p r o -
t e c t i o n , b u t h e a p p e a l s t o a s e c o n d s e c t o r a l v a r i a b l e t o e x p l a i n a c t o r s ' r e l a t i v e
c a p a c i t y t o i n f l u e n c e p o li c y : n a m e l y , i n d u s t ri a l c o n c e n t r a t i o n . D r a w i n g o n c o l l e c -
t i v e a c t i o n t h e o r y , F r i e d e n p r e d i c t s t h a t a s e c t o r ' s a b i l i t y t o e l i c i t f a v o r a b l e t r e a t -
m e n t f r o m t h e s ta t e w i ll i n c r e a s e as t h e n u m b e r o f c o n s t it u e n t f i r m s d e c r e a s e s . I f
s e c t o r s a r e h i g h l y c o n c e n t r a t e d , p o l i c y m a k e r s w i l l r e w a r d t h e i r l o b b y i n g e f f o r t s
w i t h f a v o r a b l e e c o n o m i c p o li c ie s .
I n s u m , t h e c h a r a c t e r a n d o r g a n i z a t io n o f e c o n o m i c a ss e t s t h e m s e l v e s d e t e r m i n e
h o w , a n d h o w s t r o n g l y , v a r i o u s s e c t o r s r e s p o n d t o e x o g e n o u s p r i c e s h i f t s w i t h
d e m a n d s f o r p o l i c y p r o t e c ti o n . T o t h e e x t e n t t h at a s se t s a r e l i m i t e d t o c u r r e n t u s e s ,
a s s e t o w n e r s w i ll s e e k t o d e f e n d t h e i r i n c o m e s b y l o b b y i n g t h e s t at e f o r p r o t ec t i o n .
P o l i cy m a k e r s a r e a s s u m e d t o a c c o m m o d a t e i n t er e st g ro u p s i n p r o p o rt i o n t o t h e
i n te n s it y a n d c o h e s i o n o f t h ei r c o ll e c ti v e cl a i m s o n g o v e r n m e n t r e s o u r c e s a n d / o r f o r
p r o t e ct i o n . T h e e n s u i n g p o l i c y p a t t e r n s i m p l y r e f l e c ts th e s u m o f t h e s e p r i v a t e -
s e c t o r d e m a n d s . T h e re s u l t, d e s c r i b e d b y o n e r e v i e w e r , i s a d i s t ri b u t i o n a l s t r u g g l e
a m o n g e c o n o m i c i n te r e st g r o u p s . . . . to p r e s e r v e o r r e s t o r e a p a t t e rn o f r e l a t i v e
p r i c e s i n o r d e r t o d e f e n d t h e i r i n c o m e s (B a t e s 1 9 9 2 , 2 8 1 ) . T h e m o s t v o c a l a n d
c o n c e n t r a t e d s e c t o r s p r e v a il .
F r i e d e n a t t r i b u t e s L a t i n A m e r i c a ' s h e a v y b o r r o w i n g b e t w e e n t h e l a t e 1 9 6 0 s a n d
e a r l y 1 9 8 0s a s a c o n s e q u e n c e o f st a t es ' e f f o r t s t o a c c o m m o d a t e t h e in t e r e s ts o f
a s s e t- s p e c i fi c , c o n c e n t r a t e d e c o n o m i c s e c to r s in B r a z il , M e x i c o , a n d V e n e z u e l a .
A l t h o u g h s e c t o r a l a n a l y s i s p r o v i d e s t h e f o c a l p o i n t f o r F r i e d e n ' s t h e o r y , h e s u b s e -
q u e n t l y i n t r o d u c e s t h e p o t e n t i a l ly c r o s s - c u t t in g f o r c e o f c l a s s c o n f l i c t i n to t h e p o l i c y
m i x t o e x p l a i n A r g e n t i n a ' s a n d C h i l e ' s d e p a r t u r e f r o m t h i s p a t t e r n d e s p i t e s i m i l a r
i n t e r n a ti o n a l o p p o r t u n i ti e s a n d c o n s t ra i n t s d u r i n g t h e 1 9 7 0 s a n d 1 9 8 0 s. F r i e d e n
e x p l a i n s t h a t
Although sectoral pressures are the norm , other political divisions may cu t across
them. Forem ost amon g these, at least in the L atin Am erican context, are class
divisions . . . . W here class conflict was prevalent, sectoral pressures were muted,
and governm ents stood bac k from sector-specific intervention in favor o f more
general policies typically aimed at protecting or reconstructing he general invest-
me nt clima te. (8)
B o r r o w i n g i m p u l s e s a n d p r o t e c t i o n i s t p o l i c i e s i n A r g e n t i n a a n d C h i l e w e r e w e a k -
e n e d , h e a r g u e s , f o r p r e c i s e ly t h is r e a s o n : c l a ss t e n s i o n s e c l i p s e d s e c t o r al d e m a n d s .
F r i e d e n u l t i m a t e l y h o p e s t o u s e s e c t o r a l a n d c l as s a n a l y s i s t o s u p p o r t m u c h s t r o n -
g e r c l a im s a b o u t t h e e c o n o m i c s o u r c e s o f po l it ic a l a s w e l l a s e c o n o m i c p o l i c y
r e f o r m . S p e c i f i c a l l y , h e a r g u e s t h a t t h e u n m e t d e m a n d s o f t h e s a m e c o h e s i v e ,
a s s e t - s p e c i f i c s e c t o r s t h a t b e n e f i t e d f r o m g o v e r n m e n t l a r g e s s e d u r i n g t h e 1 9 7 0 s
c o n t r i b u t e d t o r e g i m e c h a n g e i n t h e 1 9 8 0 s, w h e n i n c a p a c i t a t in g f i n a n c i a l c o n s t r a i n t s
s h a r p l y r e s t r i c t e d g o v e r n m e n t s ' c a p a c i t y t o m e e t s e c t o r a l d e m a n d s . A s a c o n s e -
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130 Studies in Com parative Intes~atlonal
evdopmeat
Spring 1997
q u en c e , g o v e rn m en t i n st it u ti o n s an d t h e ru l e s g o v e rn i n g s t a t e - so c i e t y r e l a ti o n s t h em -
s e l v es b ecam e t h e o b j ec t o f p o l i t i c a l s t ru g g l e . In B raz i l an d Arg en t i n a m i l i t a ry
reg i m es co l l ap s ed u n d e r t h e p re s su re . F r i ed en a l s o a t tr i b u te s t h e g ro w t h o f p o l i t i c a l
o p p o s i t i o n g ro u p s an d d em an d s fo r p o li t ic a l r e fo rm in M ex i co an d V en e zu e l a t o t h e
m o u n t i n g d i s co n t en t o f t h e s am e co n cen t r a t ed , a s s e t -s p ec i fi c s ec to r s . H o w ev e r , [ a ] s
b e fo re , i n s o c i e t i e s wh e re c l a s s c l eav ag es a r e p a ram o u n t t h ey m u t e s u ch s ec t o ra l
d em an d s . . . . I n C h i l e , c l a s s co n f l i c t d am p en e d s ec t o ra l co n s t r a in t s , a l l o wi n g t h e
m i l i t a ry d i c t a to r s h i p to s tay i n p o w er t h ro u g h o u t th e eco n o m i c c r i s i s (3 8 ).
F r i ed en ' s e f fo r t s t o s a t i s fy h i s am b i t i o u s ex p l an a t o ry g o a l s , co v e r i n g b o t h eco -
n o m i c p o l i cy an d p o l i t i c a l r e fo rm , i s i n s t ru c t i v e i n i t s s h o r t co m i n g s a s we l l a s i t s
co n s i d e rab l e s t r en g t h s . Am o n g t h e l a t t e r I co u n t ch i e f l y h i s c l a r i t y o f p u rp o s e an d
m e t h o d . F r i e d e n m e t h o d ic a l l y b u il d s a m o d e l c o m p r i s e d o f f o u r c o m p o n e n t p ar ts :
d e f i n i n g t h e ac t o r s an d t h e i r g o a ls , s p ec i fy i n g ac t o r s' p o l i cy p re fe ren ces , d e t e rm i n -
i n g h o w t h ey g ro u p t h em s e l v es , an d fo l l o wi n g t h e i r i n t e r ac t i o n s w i t h o t h e r s o c i a l
ins t i tu t io ns (Frie den 1991, 16).
F r i e d en ' s s ec t o ra l an a ly s i s is m o s t t h eo re t i ca ll y d ev e l o p e d , m o s t p ro v o ca t i v e , an d
m o s t co m p e l l i n g wh en d e f i n i n g t h e i n te r e s ts an d p o l i cy p re fe ren ces o f s ec t o r s u n d e r
c h a n g i n g m a c r o e c o n o m i c c o n d it io n s . T h e o p a c it y o f e c o n o m i c p o l i c y - m a k i n g m a k e s
t h is t a s k p a r t i cu l a r ly i m p o r t an t. F r i ed en ex p l a i n s t h a t , i n t h e b e s t o f c i r cu m s t an ces ,
r e s ea rch e r s can n o t d ir ec t l y o b s e rv e , m u c h l e s s r e li ab l y m eas u re fo rce s t h a t i m p i n g e
o n t h e e c o n o m i c p o li c y p ro c e ss . P r e v a i li n g c o n d it io n s i n L a t in A m e r i c a m u l t i p ly
t h e p ro b l em s o f s ca rce an d u n re l i ab l e em p i r i ca l d a ta . Es p e c i a l l y u n d e r m i l i t a ry
d ic ta to rsh ips , there i s o f ten
o
d i r ec t ly o b s e rv ab l e i n fo rm a t i o n ab o u t t h e co n n ec t i o n
betw een in te res t g roups , po l i t i ca l p ressu re , po l icy m akers , and po l ic ie s (10) . Fur-
t h e r , e co n o m i c m eas u re s f r eq u en t l y a r e co l l ec t ed an d p re s en t ed fo r s t ra t eg i c r ea s o n s
tha t hav e li t tl e to do wi th po l i t i ca l -eco nom y ana lys i s (Fr iede n 1991 , 10) .
Ec o n o m i c p o l i cy -m ak i n g p ro ces s e s h av e s ca rce ly b eco m e l e s s o p aq u e u n d e r d em o -
c ra t ic r eg i m es . F r i ed en m a i n t a i n s , h o wev e r , th a t w h i l e r e s ea rch e r s
c a n n o t d i r e c t l y o b s e r v e t h e p r o c e s s [ i n L a t i n A m e r i c a ] b y w h i c h p o l i t i c a l p r e s s u r e
i s e x e r t e d a n d p o l ic i e s ar e m a d e . . . . w e c a n d e d u c e w h a t f a c t or s w o u l d l e a d e c o -
n o m i c i n t e r e s t g r o u p s t o e x e r t m o r e o r l e s s p r e s s u r e . . , a n d w e c a n o b s e r v e t h e
p o l i c y o u t c o m e s . W h e r e w e s e e p o l i c y f a v o r i n g i n te r e s t g r o u p s t h a t lo g i c a n d
t h e o r y t e l l u s a r e m o s t l i k e l y t o b r i n g p r e s s u r e t o b e a r o n p o l i c y - m a k e r s , i t i s
ap p ro p r i a t e t o i n f e r , a t l e a s t p ro v i s i o n a l l y , t h a t t h e re i s a l i n e o f c au s e an d e f f ec t
t h a t r e l a t e s l o b b y i n g p re s s u re t o p o l i cy . 1 1 )
W i t h o u t a t h eo ry o f p o wer an d i n t e r e s t , r e s ea rch e r s ru n t h e r i s k o f l ap s i n g i n t o
tau to log ica l reason ing , in which the in te res t s and re la t ive s t reng th o f oppos ing p res -
s u r e g r o up s a r e i m p u t e d f r o m k n o w l e d g e o f p o l ic y o u t c o m e s .
Ev en ap a r t f ro m i t s em p i r i ca l an d m e t h o d o l o g i ca l i m p o r t , F r i e d en ' s s ec t o ra l t h eo ry
p ro m i s e s s ev e ra l s u b s t an t i v e ad v an t ag es . No t o n l y can h e p red i c t t h e g en e ra l co n -
f i g u ra t io n o f d o m es t i c c l eav ag es w i t h r eg a rd t o eco n o m i c p o l icy , h e a l s o i d en t i f ie s
t h e m ech an i s m b y wh i ch i n t e rn a t i o n a l fo rce s i m p i n g e u p o n an d r e s h ap e p a t t e rn s o f
eco n o m i c an d p o l i t i c a l c l eav ag es o v e r t i m e . In p a r t i cu l a r , h e p u rp o r t s t o d em o n -
s t r a t e t h a t i n t e rn a t i o n a l p r i ce m o v em en t s s y s t em a t i ca l l y a f f ec t d o m es t i c i n co m e
g ro u p s wh i ch , in t urn , d em an d p o l i cy r e fo rm f ro m p o l i cy m ak e r s . A f fec t ed s ec t o r s '
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Cornett 3
as s e t s p ec i f i c i ty ro u g h l y d e t e rm i n es t h e d i rec t i o n an d i n ten s i t y o f i n t e re s t g ro u p
d em an d s fo r g o v e rn m en t p ro t ec t i o n an d / o r p r i v i l eg e . Us i n g o n l y t h e s e t wo v a r i -
ab l e s , F r i ed en d e l i n ea t e s t h e p r i m ary eco n o m i c an d p o l i t i c a l c l eav ag es b e t ween
co m p e t i n g c l a i m an t s to s ta t e r e s o u rces . In t h e in t e r e st o f an a l y t i ca l an d ex p o s i t o ry
s i m p l i c i t y (2 7 ) F r i ed en ' s t h eo ry fo cu s es o n t h e a tt r ib u t e s o f in t e r e s t g ro u p s t h em -
s e l v es to i d en t i fy n o t o n l y ac t o r s ' e co n o m i c i n te r e s ts an d p o l i t ic a l co n f i g u ra t i o n , b u t
a l so to p red ic t the i r po l icy impact . Sec to ra l o r indus tr i a l cohe s ion serves as Fr ied en ' s
s e l ec t io n m ech an i s m , d e t e rm i n i n g wh i ch d em an d s e l i c i t s u p p o r ti v e p o l i cy r e s p o n s es .
W h i l e F r i ed en ' s s ec t o ra l t h eo ry p ro v i d es an au s p i c i o u s p o i n t o f d ep a r t u re fo r
r e s ea rch , i t c an n o t s u s t a i n t h e ex p l an a t o ry we i g h t h e a s s i g n s i t . Th e v a r i ab l e s o f
a s s e t s p ec i f i c i t y an d co h es i o n p ro v e m u ch l e s s d i s c r i m i n a t i n g i n t h e ca s e s t u d i e s
t h an t h e t h eo re t i ca l p re s en t a t i o n s u g g es t s , u l t i m a t e l y en co m p as s i n g s ec t o r s wh o s e
p o l i cy i n t e re s t s co n f l i c t u n d e r co n d i t i o n s o f f i n an c i a l s ca rc it y . Fo r i n s t an ce , F r i ed en
a rg u es i n h is f ir s t c a s e st u d y th a t t h e g en e ra l f ea t u re s o f [B raz i l ' s ] e co n o m i c an d
p o l i t i c a l d ev e l o p m en t can b e ex p l a i n ed b y t h e p o l i t i c a l i n f l u en ce o f co h es i v e an d
co n cen t r a t ed sec t o rs o f t h e eco n o m y . . . [Sp ec i f ica l l y ] , t h e i n te r e s ts o f m o d e rn i n -
d u s t ry , f i n an ce , an d ag r i b us i n es s we re m a j o r d e t e rm i n an t s o f eco n o m i c p o l i cy i n t h e
f i n an c i a l ex p an s i o n (95 ). F r i ed en p e r s u as i v e l y a rg u es e l s ewh e re , h o w ev e r , th a t th e
i n te re s ts o f i n d u s t ry , f in an ce , an d ag r i b u s in es s a r e u n l i k e l y t o co i n c i d e s i n ce cap i t a l
cons t ra in t s d i f fe ren t ly a f fec t bor rowers and lenders , impor te rs and expor te rs , as wel l
a s i m m o b i l e an d m o b i l e cap it a l (F r i ed en 1 98 9, 2 5 ). F r i ed e n ' s s t u d i ed av o i d an ce o f
s u p p l y - s i d e ( i. e ., g o v e rn m en t a l ) fo rce s i n t h e p ro ces s o f eco n o m i c p o l i cy -m ak i n g
l e a ve s h i m w i t h n o m e c h a n i s m f o r s e l e c ti n g b e t w e e n p o w e r f u l r i v al c l a i m a n t s t o
g o v e rn m en t re s o u rces .
Sev e ra l em p i r i ca l s tu d i e s q u es t i o n t h e s u f f i c ien cy o f p u re l y d em an d -s i d e ex p l an a -
t i on s o f eco n o m i c p o l i cy . Fu r t h e rm o re , m an y c r i ti c s o f d em an d -s i d e ex p l an a t i o n s o f
e c o n o m i c p o li c y h av e r a is e d d o u b ts a b o u t w h e t h e r t h e d e v e l o p m e n t p o l i c ie s o f
m o s t La t i n Am er i can st at e s . . . i n t h e p o s t war p e r i o d . . . [ co u ld ] v e ry we l l b e ex -
p la ined as responses to ex tan t ec ono m ic e l i t es (A nde rson 1969 , 51) . S ta tes ' in i t i a l
tu rn to impor t subs t i tu t ion s t ra teg ies , in par t i cu la r , can hard ly be exp la ined by
r e f e r e n c e t o t h e p o w e r a n d i n f l u e n c e o f th e n a s c e n t c o n s u m e r a n d c a p it a l g o o d s
s ec t o r s t h a t u l t i m a t e l y b en e f i t ed f ro m t h i s p o l i cy . M o re r ecen t em p i r i ca l wo rk r e -
vea l s tha t a l though the owne rs o f l a rge quas i -ren t s a re ac t ive lobby is t s , .. [ they] a re
of ten inef fec t ive . Po l i t i c ians a re o f ten ab le to dom ina te l a rge ind us t r i a l in te res ts an d
t o ex t r ac t r en t s f ro m t h em . R a t h e r t h an d e fen d i n g t h e ir i n t e re s t s an d s ecu r i n g t h e i r
p ro f i t ab i l i ty , l a rge in te res t s ins tead p rov ide l a rge t a rge t s and run up la rge deb ts .
T hey m ay s t rugg le v igorous ly , bu t they o f ten fa i l (Bates 1992 , 282) . 2
Th es e em p i r i ca l d i s c rep an c i e s ap p ea r r e l a t ed t o F r i ed en ' s ab b rev i a t ed co n cep t i o n
o f t h e eco n o m i c p o l icy -m ak i n g p ro ces s . U l t i m a t e l y , s ec to ra l m o d e l s , l i k e t h e f ac t o ra l
o n e ad v an ced b y R o n a l d R o g o ws k i , c an p red i c t g en e ra l p a t t e rn s o f
cleavages,
n o t . . , o u t co m es (R o g o w s k i , em p h as i s i n o r i g in a l , 1 98 9, 2 0 ). R o g o w s k i ex p l a i n s
tha t a l though
those who gain fro m fluctuations in trade w ill be strengthened and emboldened
politically; nothingguarantees hat they w ill win. Victoryor defeat de pe nd s.., both
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3 2 S t u d i e s i n C o m p a r a t iv e I n t er n a t io n a l D e v e l o p m e n t / Spring 1997
on t he r e l a t i ve s i z e o f t he va r i ous g rou ps a nd on t ho se i n s t i t u t iona l a nd c u l t u ra l
f a c t o r s t ha t [h is a nd F r i e de n s ] pe r spe c t i ve [ s ] so r e so l u t e l y i gno re s . (R ogo wsk i
1989, 20)
C o n s e q u e n t l y , F r i e d e n ' s s e c t o r a l t h e o r y c a n n o t s a t i s f y t h e f i n a l t w o t h e f o u r r e -
s ea r ch g o a l s h e i n i t ia l ly s p e c i f ie s f o r h i m s e l f w i t h o u t r e i n t r o d u c i n g t h e s t a t e i n b o t h
i ts d e m a n d a n d s u p p l y - s i d e c a p a c it ie s .
M o r e o v e r , F r i e d e n ' s i n d e p e n d e n t a n d d e p e n d e n t v a ri ab le s m a y b e h o p e l e s s ly e n -
t an g l ed i f s ec t o r s ' co n cen t r a t i o n i s i t s e l f a p r o d u c t o f t h e l ev e l an d p r o t ec t i o n
p r o v i d e d b y t h e g o v e r n m e n t ( B a t e s 1 9 9 2, 2 8 2) . T a i w a n p r o v i d e s a n in t r i g u i n g c a s e
o f a s t a t e ' s s e l f - c o n s c i o u s u s e o f e c o n o m i c p o l ic y t o p r e v e n t t h e c o n c e n t r a t i o n o f
p o l i t i c a l p o w er i n t h e p r i v a t e s ec t o r b y i n h i b i t i n g t h e co n cen t r a t i o n o f p r i v a t e cap i t a l
( C h e n g , 1 9 9 3) . T u n j e n C h e n g a s se r ts th a t t h e T a i w a n e s e s ta t e f a v o r e d o r t h o d o x
ec o n o m i c p o l ic i e s in t h e 1 9 7 0 s a s t h e m o s t e f f i c ien t m ean s t o it s o v e r r i d i n g p o l i t ic a l
g o a l o f r e s tr a in [ in g ] t h e e m e r g e n c e o f b i g c a p it a l th a t c o u l d c h a l l e n g e t h e ru l i n g
p a r t y ' s p o li ti c a l m o n o p o l y ( H a g g a r d a n d L e e o n C h e n g 1 9 9 3, 1 7). T h e i m p a c t o f
e c o n o m i c p o l ic y o n t h e c o n c e n t r a t i o n o f p o li ti c a l as w e l l a s e c o n o m i c r e s o u r c e s i n
o t h e r c a s e s m a y p r o v e n o l e ss c o n s e q u e n t i a l f o r b e i n g u n d e s i g n e d .
S t a t e i n s t i t u t i o n s emb o d y r u l e s g o v e r n i n g t h e i n t e r ac t i o n an d p o s s i b i l i t i e s f o r
b u i l d i n g p o l ic y c o a l i ti o n s b e t w e e n a n d a m o n g p r i v a t e i n t e re s t g r o u p s a n d t h e s t a t e 's
e c o n o m i c p o l i c y m a k i n g b o d i e s. A t t h e v e r y l e as t t h e s e i n s ti tu t io n s d e l i m i t t h e p o s s i -
b i l it ie s an d t o o l s o f a c t io n , a s w e l l a s p r o v i d e t h e me an s o f en f o r c i n g o u t co m es . I n
a l l l ik e l i h o o d , s t a te ag en c i e s p l ay a m o r e a c t i v e r o le . A l t h o u g h s t a te i n s t i t u t i o n s a r e
r e p r e s e n t e d m o r e c o m m o n l y i n t e r m s o f t h e ir g a t e k e e p e r f u n c t i o n s - - t h a t i s, f o r
d e f i n in g a nd d e f e n d i n g a v e n u e s o f ac c e ss t o th e p o l ic y - m a k i n g a r e n a - - t h e y a l so
ac t a s ag en t s i n t h e i r o w n r i g h t , w i t h mo r e o r l e s s s t ab l e i n t e r e s t s an d cap ab i l i t i e s
( G o o d man 1 9 9 2 , 3 ) .
C l a i m s o n g o v e r n m e n t r e so u r c e s a re u b i q u it o u s. I f a nd h o w g o v e r n m e n t s r e s p o n d
t o t h e s e p e t i t i o n s , d e p e n d s n o t o n l y o n t h e o r g a n i z a t i o n a n d s t r e n g t h o f p r i v a t e
s e c t o r d e m a n d s , b u t o n t w o o t h e r f a c t o r s a s w e l l : t h e g o v e r n m e n t ' s o w n e c o n o m i c
an d p o l i t i c a l i n t e r e s t s an d p o w er an d o n t h e ab i l i t y o f e co n o mi c ac t o r s t o e s cap e o r
s u b v e r t p o l ic y . F r i e d e n f a il s to a p p r e c i a te t h e s e c o m p l i c a t i n g fa c t o r s b e c a u s e h e
c o n c e p t u a l i z e s p o l i c y a s s i m p l y t h e a g g r e g a t e o f o p p o s i n g p r i v a t e s e c t o r d e m a n d s
a n d h e i m p u t e s p o w e r t o s e c t o r s c o m m e n s u r a t e w i t h t h e s t r e n g t h o f t h e i r p o l i c y
in t e res t s .
A r e c e n t e d i t e d v o l u m e re s e a r c h i n g t h e p o li ti c s o f T h i r d W o r l d f i n a n c ia l p o l i c y
c o n c l u d e s t h a t b o t h i n te r n a t io n a l a n d s e c t o ra l a p p r o a c h e s m u s t b e c o u p l e d w i t h a
p o l i ti c a l a n a l y s is o f t h e p o l i c y - m a k i n g s tr u c tu r e ( H a g g a r d a n d M a x f i e l d 1 9 93 ,
2 9 4 ). T h e e c o n o m i c a c to r s t h at p o p u l a t e p o li ti c a l e c o n o m y m o d e l s a c t s t r a t e g ic a l ly
a s w e l l a s r a t io n a l l y . Th e i n s t i t u ti o n a l co n t e x t i n w h i ch co m p e t i n g co a l i t i o n s v i e f o r
i n f l u e n c e o v e r e c o n o m i c p o l i c y - m a k i n g p ro c e s s e s r e p r e s e n t s t h e c r it ic a l i n t e r v e n i n g
v a r i ab l e l i n k i n g i n t e r n a t i o n a l f o r ce s , d o mes t i c ac t o r s , an d p o l i cy . S o me ad d i t i o n a l
c o m p l i c a t i o n s t o F r i e d e n ' s a n a l ys i s w i l l b e c o m e a p p a r e n t w h e n c o n t r a s t e d t o a l te r -
n a t i v e th e o r i e s o f e c o n o m i c p o li c y a n d r e f o r m d i s c u s s e d b e l o w .
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Cornett 133
A S i n g le S e c to r M o d e l o f E c o n o m i c P o l i c y
T h e o r e t i c a l a n d e m p i r i c a l r e s e a r c h b y D . M i c h a e l S h a f e r ( 1 9 9 4 ) s e e m s t o o v e r -
c o m e s o m e o f t h e o b s t a c l e s t h a t f r u s t r a t e F r i e d e n ' s e x p l a n a t o r y a m b i t i o n s . I n p a r -
t ic u la r , h e a p p e a r s t o o b v i a t e th e n e e d f o r a s e l e c ti o n m e c h a n i s m c a p a b l e o f w e i g h i n g
t h e i m p o r t a n c e o f o p p o s i n g p o l i c y d e m a n d s by p r i v i le g i n g t h e s ta t es l e a d i n g s e c -
t o r i n th e e c o n o m i c p o l ic y m a k i n g p r o c e ss . S h a f e r id e n t if i e s t h e e x p l a n a t o r y p u r -
p o s e o f h i s i n v es t i g a t i o n an d t h e t h eo r e t i ca l t a s k t h a t i t en t a i l s . S u b s t an t i v e l y , h e
t a ck l es o n e o f C o m p a r a ti v e P o li ti c 's m o s t p e rp l e x in g p h e n o m e n a : u n e v e n e c o n o m i c
d e v e l o p m e n t ,
w i t h i n
t h e r a n k s o f th e d e v e l o p i n g w o r l d a s w e l l a s a c r o s s t h e
N o r t h - S o u t h d i v id e . T o f o c u s h is i n v e s ti g a ti o n , S h a f e r as k s: W h a t d e t e r m i n e s w h i c h
s ta te s , u n d e r w h a t c o n d i ti o n s , w i l l b e a b l e t o d o h o w m u c h t o f u r t h e r d e v e l o p a n d
i m p r o v e t h e i r s tan d i n g in t h e i n te r n a t i o n a l d i v i s i o n o f lab o r ? ( x i) . A n s w er i n g t h i s
q u es t i o n r eq u i r e s h i m , f i r s t , t o s p ec i f y t h e s t r u c t u r a l v a r i a t i o n ac r o s s ca s e s t h a t
a c t o r s c o n f r o n t a n d a c t t h r o u g h a t a g i v e n t i m e ( h o w c o n f i n i n g a r e t h e y ? w h a t
o p p o r t u n i t ie s d o th e y o f f e r? h o w f l e x ib l e a r e t h e y ? ) . S e c o n d , h e i d e n ti fi e s ] . . . t h e
ac t o r s an d s p ec i f ie s ] t h e n a t u r e an d i n t en s i ty o f th e i r in t e r e s t . . . . [ F i n a ll y , h e ] m u s t
s p e c i f y w h y , h o w , a n d h o w m u c h s t r u c t u r e s a n d a c t o r s a n d t h e i r i n t e r e s t s c h a n g e
o v e r t i me ( x i) .
L i k e F r i ed en , S h a f e r a s s i g n s ex t en s i v e cau s a l i mp o r t t o s ec t o r a l a t t r i b u t e s t o mee t
h i s f i r s t t w o ex p l an a t o r y g o a l s . B o t h d e f i n e t h e r e l ev an t ac t o r s , t h e i r i n t e r e s t s , an d
ev e n t h e i r c ap ac i t y t o i n f l u en ce eco n o m i c p o l i cy in t e r ms o f s ec t o r a l ch a r ac t e r i s t ic s .
U n l i k e F r i ed en , h o w ev e r , S h a f e r a s s i g n s cau s a l p r i o r i t y t o a s i n g l e s ec t o r . To t h e
e x t e n t th a t o n e s e c t o r d o m i n a t e s t h e s t a t e ' s e c o n o m i c l a n d s c a p e i ts i n te r e s ts w o u l d
s e e m t o c o m m a n d p r i v i le g e d s ta t us i n t h e e c o n o m i c p o l i c y - m a k i n g p r o c e s s. I n f a c t,
S h a f e r r e v e a ls , s i n g l e s e c t o r e c o n o m i e s a r e t h e n o r m i n t h e d e v e l o p i n g w o r l d .
O n l y 2 2 o f 9 9 d e v e l o p i n g e c o n o m i e s ' l i st e d in t h e a n n u a l I n t e r n a t i o n a l F i n a n c i a l
S t a t i s t i c s o f t h e In t e r n a ti o n a l M o n e t a r y F u n d ( I M F ) d e r i v e l e s s t h a n 2 5 p e r c e n t o f
t h e i r t o t a l ex p o r t e a r n i n g s f r o m a s i n g l e
c o m m o d i t y
E v e n m o r e s t r i k i n g l y , i n
o n l y e le v e n o f t h o s e e c o n o m i e s d o e s a s in g l e s e c t o r g e n e r a t e l e s s t h a n 2 5 p e r c e n t
o f to t a l ex p o r t e a r n i n g s ( em p h as i s i n o r i g in a l : 1 7 ). Th u s , in 8 8 o f 9 9 d ev e l o p i n g
co u n t r i e s a s i n g l e s ec t o r co n t r i b u t e s o v e r 2 5 p e r c en t o f th e s t a t e ' s ex p o r t e a r n i n g s .
A s a c o n s e q u e n c e o f th e ir o v e r w h e l m i n g e c o n o m i c i m p o r t a n ce , th e e c o n o m i c
p o l i cy i n t e r e s t s o f th e s t a te an d i t s l e ad i n g s ec t o r co i n c i d e , a cc o r d i n g t o S h a f e r . T h e
s u b s t a n c e o f t h e i r p r e f e r e n c e s a n d t h e i r c o l l e c t i v e a b i l i t y t o a c h i e v e t h e m v a r i e s
a c r o s s c a s e s, h o w e v e r , d e p e n d i n g o n th e l e a d i n g s e c t o r ' s a t t ri b u te s a n d t h e n a t u r e o f
i t s t i e s t o i n t e r n a t i o n a l m a r k e t s . T h e k i n d a n d i n t e n s i t y o f s e c t o r a l d e m a n d s o n
p o l i c y m a k e r s d e p e n d s u p o n t h e t y p e o f e c o n o m i c a c t i v i t y t h e l e a d i n g s e c t o r e n -
g ag es i n. S h a f e r d i s t in g u i s h es b e t w e en s ec t o r s o n t h e b a s i s o f f o u r v a r iab l e s .
[ E ] a c h s e c t o r s i n t er n a t io n a l m a r k e t s t r u c t u re i s d e f i n e d b y t h e s e c t o r s d i s t i n c t i v e
m i x o f c a p i t a l i n t en s i ty , e c o n o m i e s o f s c a le , a n d s e c t o r - s p e c if i c p r o d u c t io n a n d
produc t i on c ha ra c t e r i s t i c s . The se de t e rmi ne t he c ompe t i t i ve ne s s o f t he ma rke t , t he
n u m b e r a n d n a t u re o f t h e p l a y e r s in i t , an d o p p o r t u n i ti e s f o r g a i n a n d t h e d e g r e e o f
r i sk , the r e qu i re me n t s fo r suc c e s s , s t a t e s c a pa c i t y t o he l p f i rms m e e t t he m, a nd t he
m a i n o u t l in e s o f th e a d j u s tm e n t p r o b l e m s . . . ( S h a f er , 1 9 9 4 : 1 2 )
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134 Studies in Comp arative nternational Developm ent Spring 1997
T h e a d j u s t m e n t p r o b l e m s t o w h i c h S h a f e r r e fe r s c o n f r o n t f i rm s a n d g o v e r n m e n t s a s
a r e s u l t o f m a r k e t v o l a t i l i t y . T h e c h a r a c t e r o f e a c h c o u n t r y ' s l e a d i n g s e c t o r a l s o
p r o d u ces eq u a l l y d i s t i n c t i v e s t a t e s t r u c t u r e s an d cap ab i l i t i e s , ex t e r n a l an d i n t e r n a l
d i s t r i b u t i o n o f p o w er an d s e ts o f s o c i a l a c t o r s ( 1 0 ).
I n s u m, t h en , S h a f e r ma i n t a i n s t h a t t h e s t a t e ' s ab i l i t y t o ach i ev e i t s d ev e l o p men t a l
o b j ec t i v e s la r g e l y d ep en d s o n t h e a t t ri b u t e s o f t h e l e ad i n g s ec t o r t h r o u g h w h i ch i t
i s t ied to t h e i n t e r n a t io n a l e c o n o m y an d w h i ch d e l i m i t s i ts p o l i cy o p t i o n s an d t o o l s
(2). ntersectoral d i f fe r e n c e s a c c o u n t fo r p a t t e rn e d v a ri a ti o n i n st a te s ' d e v e l o p m e n t
t r a j ec to r i e s an d cap ac i t y f o r ad j u s t me n t ( 3 ). S h a f e r ch a r ac t e r i ze s l e ad i n g s ec t o r s b y
t h e i r d eg r e e o f p r o d u c t i o n an d a s s e t / f ac t o r fl ex i b il i ty t o p r ed i c t t h e s t a t e ' s s u cces s a t
a d a p t i n g t o i n t e r n a t i o n a l m a r k e t c h a n g e s . H e m e a s u r e s p r o d u c t i o n f l e x i b i l i t y i n
t e r ms o f t h e s ize o f f ix ed co s t s , s iz e o f f i r ms ' i n v e s t m en t in t h e i r w o r k f o r ce , an d
f i r ms ' s en s i t i v i t y t o w o r k s t o p p ag es . A s s e t / f ac t o r f l ex i b i l i t y r o u g h l y r e f l ec t s t h e
s e c t o r ' s d e g r e e o f c a p i ta l i n t e n s it y a n d e c o n o m i e s o f s c a le .
O n t h e b a s is o f t h e s e m e a s u r e s , S h a f e r a r r a n g e s le a d i n g s e c t o rs b e t w e e n t w o p o l a r
i d ea l t y p es t o h e l p d ev e l o p t h e t h eo r e t i ca l i mp l i ca t i o n s o f t h e s e d i s t i n c t i o n s an d t o
d r a w o u t t h e p r e d i c ti o n s th a t f o ll o w f r o m h is m o d e l . H i g h - h i g h s e c t o rs ( e . g ., m i n -
i n g , in d u s t r i a l c r o p p r o d u c t i o n ) a re ch a r ac t e r i zed b y h i g h p r o d u c t i o n an d h i g h a s s e t /
f ac t o r i n f lex i b i li t y . S t a t e s h o u s i n g h i g h - h i g h l ead i n g s ec t o r s , a cco r d i n g t o S h a f e r ' s
an a l y s i s , f a ce n ea r l y i n s u r m o u n t ab l e o b s t ac l e s t o r e s t r u c t u r i n g . 3 M ar k e t s h o c k s t o
h i g h - h i g h s ec t o r s r eq u i r e p a i n f u l ad j u s t me n t s r e s u l t in g f r o m h i g h b a r r i e r s to en t ry ,
o l i g o p o l i s t i c m a r k e t s p r o n e t o b o o m a n d b u s t , a n d s h a r p s h i f t s i n m a r k e t p o w e r
u p s t r e a m a n d d o w n s t r e a m ( 1 2) . F u rt h e r, g o v e r n m e n t s c a n d o l i tt le to a i d h ig h - h i g h
s ec t o r s ag a i n s t m ar k e t s s h o ck s s i n ce n o n e o f th e c r i ti c a l v a r i ab l e s i n f l u en c i n g s u c -
c e s s a r e a m e n a b l e to s t at e -l e v e l m a n i p u l a t io n . [ T ] h u s t h e y a n d t h e i r c o u n t r i e s
s u f f e r t h e f u ll v i o l en ce o f ma r k e t v o l a ti li ty . To e s cap e s t a t e s mu s t s h i f t t h e s e c t o r a l
b a s is o f th e e c o n o m y - - n o e a s y ta s k u n d e r th e b es t o f c i rc u m s t a n c e s , w h e n g o v e r n -
m e n t s a r e f l u s h w i t h f u n d s ( 13 ) . U n d e r l es s h o s p i ta b l e c o n d i t i o n s ( s a d ly , t h e m o r e
c o m m o n o f t h e tw o )
P r o d u c t i o n i n f l e x i b i l i t y m e a n s t h a t [ m a r k e t ] d o w n t u r n s h a v e i n s t a n t a n e o u s , ca t a -
s t r o p h i c c o n s e q u e n c e s f o r th e s t a te , r e v e n u e s a n d f o r e i g n e x c h a n g e e a r n i n g s p l u m -
m e t , a n d d e b t s o a rs . F a c i n g d i s a s t e r a n d u n a b l e t o s a v e t h e m s e l v e s , s e c t o r a l a c t o rs
t u r n t o t h e s t a t e . A n d w i t h o u t o t h e r s e c t o r s t o h e l p m e e t t h e s e d e m a n d s , t h e s t a t e
h a s o n l y n a s t y , z e r o - s u m a l l o c a t i v e c h o i c e s t h at i n v o l v e ta k i n g f r o m t h e w e a k t o
sus t a in t he s t r ong . 34 )
A n y a t t e m p t a t r e f o r m w o u l d r e q u i r e t h e s t a t e t o u n d e r t a k e t h e u n e n v i a b l e t a s k o f
b u i l d i n g a n e w e c o n o m i c a n d p o li ti c a l f o u n d a t i o n e x n i h i l o -- - a n d i n th e t e e t h o f
b i tt e r o p p o s i t i o n f r o m t h e le a d i n g s e c t o r ( 35 ) . A s a c o n s e q u e n c e o f b o t h t h e c o n -
cen t r a t ed p o w er o f t h e h i g h - h i g h s ec t o r s an d t h e i n ab il it y o f t h e s t a t e t o ac t au t o n o -
m o u s l y f r o m i t, e c o n o m i c r e f o r m - - h o w e v e r b ad l y n e e d e d - - r a r e l y m a t e ri a li z es .
Lo w - l o w l ead i n g s ec t o r s , b y co n t r a s t , b en e f i t f r o m g r ea t e r f l ex i b i l i t y . Th ey a r e
d e f i n e d b y l o w b a r ri e rs t o e n tr y a n d h i g h l y c o m p e t i t i v e m a r k e t s ( e .g . , l i g h t m a n u -
f a c tu r i n g , p e a s a n t c a s h c r o p s) . P r o f it m a r g i n s a r e t h in , b u t T h i r d W o r l d f i r m s c a n
c o m p e t e w i t h a n y p la y e r in th e m a r k e t a n d t h e ir g o v e r n m e n t s c a n a i d t h e m ( 13 ) .
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Cornett 35
Lo w b a r r ie r s t o en t ry an d ex i t p e rm i t f i rm s t o t ak e ev as i v e ac t i o n i n r e s p o n s e t o
m ark e t d o wn t u rn s . P ro d u c t i o n f l ex i b i l i t y an d a s s e t / f ac t o r f l ex i b i l i t y h e l p l i m i t t h e
d am ag e t h a t m ark e t f l u c tu a t i o n s p e r i o d i ca l ly i n f l ic t o n b o t h f i rm s an d t h e s ta t e (1 5 ) .
M o reo v e r , b ecau s e f i rm s i n l o w- l o w s ec t o r s a r e s m a l l , n u m ero u s , d i s p e r s ed , an d
ab l e t o ad j u s t q u i ck l y t o m ark e t s i g n a l s t h ey h av e n e i t h e r t h e i n cen t i v e n o r t h e
cap ac i t y t o p en e t r a t e t h e s t a te w i t h d em an d s fo r p ro t ec t io n o r p r i v i l eg e .
T h e d i f f e r e n c e b e t w e e n h i g h - h i g h a n d l o w - l o w l e a d i n g s e c t o r s d e t e r m i n e s t h e
s t a t e ' s r e l a t i o n s h ip t o b o th i n t e rn a t io n a l m ark e t s an d d o m es t i c eco n o m i c ac t o r s w i t h
p red i c t ab l e p o l i cy co n s eq u en ces . In g en e ra l , t h e h i g h e r t h e b a r r i e r s t o en t ry , ex i t ,
an d ad j u s t m en t t h a t a s ec t o r co n f ro n t s , t h e g rea t e r i t s d em an d s fo r s t a t e a i d an d
p ro t ec t i o n an d t h e b e t t e r p o s i t i o n ed i t i s t o i m p o s e i t s p re fe ren ces o n t h e r e s t o f
soc ie ty .
Sec t o ra l a t t r i b u t e s o f h i g h -h i g h l ead i n g s ec t o r s n o t o n l y d e t e rm i n e t h e n a t u re ,
n u m b er , i n t e re s t s an d t h e p o t en t ia l fo r co l l ec t i v e ac ti o n am o n g e co n o m i c s ec to r s i n
t h e p o l i cy -m ak i n g p ro ces s , b u t t h ey a l s o s h ap e t h e l ev e l o f au t o n o m y an d cap ac i t y
o f t h e s t a t e an d o f o t h e r s ec t o r s i n t h e eco n o m y . Sh a fe r ' s s ec t o ra l an a l y s i s t h u s
p u rp o r t s t o ex p l a i n h o w d i f f e r en t s ec t o r s a f f ec t t h e re l a t iv e au t o n o m y an d cap ac i t y
o f t h e s ta t e v i s -h -v is l e ad i n g s ec t o r ac t o r s, an d t h e s i ze an d we i g h t o f p o l i t i c a l a c t o r s
wi t h wh i ch t h e s ta t e can a l ly i t s e l f . . , a s i t s eek s t o r e s t ru c t u re (1 0 ). Eco n o m i c
po l icy pa t te rns re f lec t the [d ] i s t inc t pa t te rns o f s ta te ins t i tu t iona l capac i t i es , and o f
i n t e re s t g ro u p s w i t h s ec t o ra l l y d e t e rm i n ed i n t e r e s t s an d c o l l ec t i v e ac t i o n cap ab i l i -
t i e s a s s o c i at ed w i t h d i f f e r en t s ec t o r s a l o n g t h e h i g h - l o w co n t i n u u m (1 0 ). Th es e , i n
tu rn , u l t imate ly shape the deve lopment t ra jec to r ies s ta tes fo l low and the i r ab i l i ty to
ad ap t t o ch a n g i n g i n t e rn a t i o n a l e co n o m i c co n d i ti o n s .
Sh a re r u s e s fo u r ca se s (Zam b i a , S r i Lan k a , K o rea , an d C o s t a R i ca ) t o d em o n s t r a t e
t h e p o wer o f h i s t h eo ry t o ex p l a i n p e rp l ex i n g p a t t e rn s o f eco n o m i c p o l i cy an d
d ev e l o p m e n t . Des p i t e Z am b i a ' s n a t u ra l r e s o u rce w ea l t h , i ts h i g h -h i g h l ead i n g s ec t o r
( co p p e r m i n i n g ) h a s s h ack l ed t h e co u n t ry ' s e co n o m i c we l f a re t o p e ren n i a l l y u n -
s t ab l e i n t e rn a t i o n a l m ark e t s - - a p a i n fu l s i t u a t i o n t h a t t h e weak an d d ep en d en t Zam -
b i an s t a t e h a s p ro v en i n cap ab l e o f r ed re s s i n g . As a r e s u l t , Zam b i a ' s d ev e l o p m en t
p ro s p ec t s r em a i n i n ex t r i cab ly t i ed t o t h e p reca r io u s fo r t u n es o f i ts co p p e r i n d u s t ry
w h i c h c l a im s t h e b u l k o f t h e g o v e r n m e n t ' s e n e r g y a n d r e s o u r c e s. S h a f e r s e es c l e a r
an d s t r i k i n g p a ra l l e l s b e t ween S r i Lan k a an d Zam b i a , d e s p i t e d i f f e r en ces o n v i r t u -
a l l y ev e ry v a r i ab l e ex cep t t h e o n es h e i d en t i f i e s : p ro d u c t i o n an d a s s e t / f ac t o r f l ex -
i bi li ty . A l t h o u g h s u p e r fi c ia l ly v e ry d i f f e ren t f ro m Zam b i a , S r i L an k a ' s d ev e l o p m e n t a l
d i s ap p o i n tm en t s h av e t h e s am e o r ig i n s as Zam b i a ' s , a cc o rd i n g t o Sh a fer . S r i L an k a ' s
l ead i n g s ec to r , in d u s t r ia l p l an ta t io n c ro p p ro d u c t i o n , s h a re s e s s en t i a l co m m o n a l i t i e s
wi t h Zam b i a ' s m i n i n g s ec t o r d e s p i t e t h e i r o t h e r o b v i o u s d i f f e r en ces . In p a r t i cu l a r ,
b o t h i n d u s t r i a l p l an t a t i o n c ro p p ro d u c t i o n a l s o s u f f e r f ro m h i g h p ro d u c t i o n an d
as s e t /f ac t o r in f l ex ib i li t y . C o n s eq u en t l y , th e co u n t ry ' s e co n o m i c f a te co n fo rm s t o t h e
vagar ies o f vo la t i le in temat iona l marke t s fo r i ts l ead ing co m mo di ty expor t . A gain , s t a te
l e a d e rs l a c k t h e a u t o n o m y a n d t h e c a p a c i t y t o r e s tr u c tu r e i n t h e f a c e o f o v e r w h e l m -
i n g o p p o s i t i o n o f l e ad i n g - s ec t o r ad v o ca t e s . B y co n t r a s t , Ko rea ' s an d C o s t a R i ca ' s
l o w - l o w l e a d i n g s e c t o r s - - l i g h t m a n u f a c t u r i n g a n d p e a s a n t c a s h c r o p p r o d u c t i o n ,
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136 S t ud i e s i n C om par a t ive I n t e rna t i ona l Deve l opm ent S pr i ng 1997
r e s p e c t i v e l y - - h a v e e n d o w e d t h e i r s t a t e l e a d e r s w i t h s u b s t a n t i a l l y m o r e l a t i t u d e i n
ad j u s t i n g t o i n t e r n a t i o n a l mar k e t s i g n a l s w i t h mo r e b en e f i c i a l r e s u l t s . I n t h e co n -
c l u d i n g c h a p t e r , S h a f e r b r ie f ly i n t r o d u c e s s o m e a d d i t i o n a l c a s e s t o e x t e n d a n d b o l -
s t e r th e e m p i r i c a l w e i g h t o f h is a r g u m e n t .
O n s ev e r a l p o in t s , S h a f e r ' s an a l y s i s an d co n c l u s i o n s p a r a ll e l F r i ed en ' s . B o t h s ch o l -
a r s h i g h l i g h t t h e i m p o r t a n c e o f c o n c e n t r a te d , a s s e t - sp e c i f ic s e c t o rs i n t h e f o r m u l a -
t i o n a n d i m p l e m e n t a t i o n o f e c o n o m i c p o li c y . H o w e v e r , S h a f e r r e f in e s a n d e x t e n d s
F r i ed en ' s s ec t o r a l an a l y s i s , h o w ev e r , i n o t h e r r e s p ec t s . F i r s t , S h a f e r p r o v i d es a
co n v i n c i n g th eo r e t i ca l an d emp i r i ca l r a t i o n a l e f o r a s c r i b i n g cau s a l p r i o r i t y t o t h e
s t a t e 's l e a d i n g s e c to r in t h e e c o n o m i c p o l i c y m a k i n g p r o c e s s o f d e v e l o p i n g c o u n -
t ri e s. F o c u s i n g a t t e n ti o n o n a s i n g l e s e c t o r is n o t o n l y m o r e p a r s i m o n i o u s b u t a l s o
a p p e a r s , o n fi rs t a p p r o x i m a t i o n , t o o v e r c o m e t h e s e l e c t io n p r o b l e m t h a t e m e r g e s
w h e n p o w e r f u l r iv a l i n te r e s t g r o u p s s i m u l t a n e o u s l y p r e s s u r e g o v e r n m e n t f o r o p p o s -
i n g e c o n o m i c p o l ic i e s.
S e c o n d , b y f o c u s i n g o n l e a d i n g s e c t o r v a r i a t i o n a c r o s s c a s e s S h a f e r ' s s e c t o r a l
a n a l y s is c a n e n c o m p a s s e m p i r ic a l c a s e s t h a t il l- fi t F r i e d e n ' s t h e o r e ti c a l f r a m e w o r k .
I n g en e r a l , F r i ed en p r ed i c t s t h a t p o l i cy w i l l f av o r s p ec i f i c an d co n cen t r a t ed s ec t o r s .
W h e r e F r i e d e n f i n d s p a t t e r n s o f e c o n o m i c p o l i c y a t o d d s w i t h t h e p r e f e r e n c e s
a s c r ib e d t o c o n c e n t r a t e d a s s e t- s p e c if ic s e c t o r s, h e a d d s a c o n f o u n d i n g v a r i a b l e - -
c l a s s c o n f l ic t . T h e m o d i f i e d p r e d i c t i o n - - t h a t p o l i c i e s p r e f e r a s s e t -s p e c i fi c s e c to r s ,
unless c lass con f l ic t overshad ow s sec tora l com pet i t ion i s
b o t h t h eo r e t i ca l l y i n e l -
eg an t an d m u c h l e s s acces s i b l e t o emp i r i ca l t e s ti n g .
F r i ed en ' s c l a s s an a l y s i s may h e l p e s t ab l i s h a b e t t e r f i t b e t w een h i s t h eo r y an d t h e
e m p i r ic a l v a r ie t y h e s e e k s t o e x p l a in . H o w e v e r , h i s m e a s u r e s o f c l a s s c o n f l i c t w i l l
a p p e a r b o t h v a g u e a n d u n s a t i s fy i n g to e m p i r ic a l l y m i n d e d r e s e a r c h e r s a n d l o g i c a ll y
i n co n s i s t en t t o th eo r i s ts . I n p a rt icu l a r , F r i ed en ' s c l a s s an a l y s i s co n t r ad i c t s t h e m e t h -
o d o l o g i c a l a s s u m p t i o n s h e e m p l o y s t o g r o u n d h i s t h e o r y . W h e n s e c t o r a l c o n f l i c t s
p r ed o mi n a t e , F r i ed en d ep i c t s a c t o r s a s n a r r o w l y r a t i o n a l i n p u r s u i t o f t h e i r e co -
n o m i c i n t e r e s t s . W h e n u n t h e o r i z e d f o r c e s a l l o w c l a s s c o n f l i c t s t o e c l i p s e s e c t o r a l
co m p e t i t i o n , e co n o m i c ac to r s a r e s a i d t o r ep r e s s t h e i r p a r t icu l a r i s t ic i n t e r e s t s i n
f av o r o f g en e r a l c l a s s i n t e r e s t s . D u r i n g p e r i o d o f i n t en s e c l a s s co n f l i c t , s ec t o r a l
co m p e t i t i o n am o n g cap i ta l i s ts i s r ep r e s s ed o n b eh a l f o f t h e i r g en e r a l i n t e r e s ts i n
c r e a t in g t h e c o n d i t io n s a m e n a b l e t o l o n g - t e r m p r o fi ta b i li ty . I f o n e t a k e s F r i e d e n ' s
i n i t i a l a s s u mp t i o n s s e r i o u s l y , i t i s d i f f i cu l t t o b e l i ev e t h a t i n d i v i d u a l s w o u l d w i l l -
i n g l y s a c r if ic e t h e ir i m m e d i a t e e c o n o m i c i n t e re s ts f o r t h e g e n e r a l b e n e f i t o f f u t u r e
cap i t a l i s t s . I f n o t h i n g g u a r an t ee s t h a t c ap i t a l i s t A a t t i me 1 w i l l s u r v i v e t o b en e f i t
f r o m h e r s a c r i f i c e - - a n d i n p r o p o r t i o n t o h e r s h ar e o f t h e c u r r e n t s a c r i f i c e - - t h e n s h e
w o u l d b e n a r r o w l y i r r at io n a l i f s h e w e r e t o d e s i s t f r o m d e m a n d i n g p o l i c y p r e f e r -
e n c e s t h a t w o u l d p r o t e c t th e c u r r e n t v a lu e o f h e r a s se t s, e v e n a t t h e e x p e n s e o f t h e
l o n g - t e r m h e a l t h o f t h e e c o n o m y . S h a f e r ' s t h e o r y c a n e x p l a i n e c o n o m i c p o l i c y
v a r i a t i o n w i t h o u t r e t r ea t i n g t o f ami l i a r , ev en i n t u i t i v e l y p l au s i b l e , b u t t h eo r e t i ca l l y
i n co n s i s t en t c l a s s an a l y s e s . H e p r ed i c t s p o l i cy s i mi l a ri t y am o n g ca s e s t h a t s h a r e
l ead i n g s ec t o r a t tr i b u te s an d v a r i a t io n ac r o s s l e ad i n g s ec t o r mu l t i f o r m i t y .
F i n a l l y , S h a f e r i d en t i f i e s a s t r u c t u r a l mech an i s m w h i ch t r an s l a t e s l e ad i n g s ec t o r
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Comett 137
d e m a n d s i n to p u b l i c p o li c y. T h e i m p o r t a n c e o f th is r e f in e m e n t b e c o m e s m o r e c l e a r
a g a i n i n c o m p a r i s o n t o F r i e d e n ' s t r e a t m e n t o f t h e p o l i ti c a l re l a t io n s h i p b e t w e e n t h e
s t a te a n d p o w e r f u l s o c i a l f o r c e s in th e c r e a ti o n o f e c o n o m i c p o l i c y . F r ie d e n a s s u m e s
t h a t [ w ] h e r e w e s e e p o l i c y fa v o r i n g i n te r e s t g r o u p s t h a t lo g i c a n d t h e o r y t e ll u s a r e
m o s t l i k e l y t o b r i n g p r e s s u r e t o b e a r o n p o l i c y m a k e r s , i t i s a p p r o p r i a t e t o i n f e r , a t
l e a s t p r o v i s i o n a l l y , t h a t t h e r e i s a li n e o f c a u s e a n d e f f e c t t h a t re l a t e s l o b b y i n g
p r e s s u r e t o p o l i c y ( 1 1 ). I n e f f e c t, F r i e d e n i m p u t e s p o l i c y l e v e r a g e t o a s s e t - s p e c i f i c
s e c t o r s c o m m e n s u r a t e w i t h t h e ir i n c e n t i v e t o l o b b y f o r p r o t e c t io n .
A l t h o u g h i n t u i t i v e l y p l a u s i b l e , e m p i r i c a l r e s e a r c h r e v e a l s t h a t t h o s e e c o n o m i c
a c t o rs w h o h a v e t h e g r e a t e st i n c e n t i v e to l o b b y t h e s ta t e f o r p o l i c y p r e f e r e n c e d o n o t
n e c e s s a r i l y h a v e s u f f i c i e n t l e v e r a g e w i t h p o l i c y m a k e r s t o r e a l i z e t h e i r p r e f e r e n c e s .
F r i e d e n m a y i n a d v e r t e n t l y f u r n i s h s o m e i n s i g h t i n t o t h i s p u z z l e . T h e v e r y q u a l i t y
t h at F r i e d e n m a i n t a in s i s t h e s o u r c e o f s e c t o r s ' i n c e n t i v e t o l o b b y f o r p re f e r e n t i a l
t r e a t m e n t p e r v e r s e l y m a y w e a k e n t h e i r b a r g a i n i n g p o w e r i n t h e p o l i c y - m a k i n g p r o -
c e s s . A s s e t s p e c i fi c i ty i s s a id t o i n c r e a s e s e c to r s ' i n c e n t i v e fo r v o i c e b e c a u s e t h e
e x i t o p t i o n is t o o c o s t l y i n t h e sh o r t a n d m e d i u m t e rm . F o r p r e c is e l y t h e s a m e
r e a s o n , a s s e t - s p e c i fi c s e ct o r s p o s e l e s s t h re a t o f s u c c e s s f u l l y e x e c u t i n g a n i n v e s t -
m e n t s t r ik e t h an d o o w n e r s o f m o b i l e a s s et s . A t t h e s a m e t i m e , th e th r e a t o f a n
i n v e s t m e n t s t ri k e o n t h e p a rt o f m o b i l e c a p i t a l ( a n d t h u s t h e ir l e v e r a g e o v e r p o l i c y
m a k e r s ) g a i n s c r e d i b i l i t y w i t h i n t e r n a t i o n a l f i n a n c i a l i n t e g r a t i o n s i n c e s t r i k i n g c a p i -
t al n e e d n o t r e m a i n i d le b u t c a n m o r e e a s i l y a n d c o s t l e s s l y p u r s u e p r o f i t a b l e o u t l e t s
n o t a v a i l a b l e d o m e s t i c a ll y . 4 I n o t h e r w o r d s , t h e b a r g a i n i n g p o w e r o f m o b i l e c a p i t a l
m a y e x c e e d t h e a c t u a l v a l u e o f i t s t a n g i b l e a s s e t s i n t h e e c o n o m y t o t h e e x t e n t t h a t
s e c t o r s a r e u n e v e n l y p o s i t i o n e d t o av a i l t h e m s e l v e s o f m a r k e t s t o d e f e c t f r o m o r
s u b v e r t t h e s t a t e ' s e c o n o m i c p o l i c ie s . 5 T h e o p t i o n s o f a s s e t - s p e c i f i c s e c t o rs , b y
c o n t r a s t , r e m a i n m u c h m o r e r e s t r i c t e d .
S h a f e r s e e k s t o r e s o l v e th i s a m b i g u i t y b y e s t a b l i s h in g a n e c e s s a r y r a t h e r t h a n
m e r e l y c o n t i n g e n t i d e n t i t y o f i n t e r e s ts b e t w e e n t h e s ta t e a n d i ts a s s e t - s p e c i f i c l e a d -
i n g s e c t o r . T h e l e a d i n g s e c t o r ' s p r i v i l e g e d s t a t u s , b y S h a f e r ' s a c c o u n t , d e p e n d s
n e i t h e r o n t h e p o l i ti c a l g o o d w i l l n o r e c o n o m i c a c u i t y o f p o l i c y m a k e r s . I f f o l l o w s
d i r e c t l y f r o m t h e s t a t e ' s o w n e c o n o m i c a n d p o l i t i c a l i n t e r e s t s , w h i c h d e p e n d o n
s u s t a i n i n g t h e h e a l t h a n d p r o f i t a b i l i t y o f th e l e a d i n g s e c t o r . 6
State institutions are bu ilt around the leading sector and are as inflexible as it is.
Such states are also burdened by extensive state services and patronage systems
intended to d ull attacks on their autonomy and funded by the se sectors' easily
tapped resources. Defen ding state revenue s and export earnings--and conseq uently
the state's ability to fu nd itself, pay its deb ts, and serv ice constituents--thus de-
man ds tha t leaders defend the leading sector. Institutionally, th ey can do nothing
else and hav e no plac e else to turn. Even if th ey want to restructure, this requires
reviving the leading sector; it is the only source of the vast sum s needed . . . . In
short, leaders hav e independent state interests, but the y cannot be autonomous o f
sectoral interests. (45, emp hasis in original)
I n h i g h - h i g h l e a d i n g s e c t o r s a t l e a s t , t h e i n t e r e s t s , a u t o n o m y , a n d i n s t i t u t i o n a l c a -
p a c i t y o f t h e s t a t e d e r i v e s d i r e c t l y f r o m t h e l e a d i n g s e c t o r .
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38 Studies in Com para t ive In te rna tiona l Developm ent I Spr ing 997
I n s u m , S h a f e r ' s l e a d i n g s e c to r a p p r o a c h a l l o w s h i m t o m e e t h i s f i rs t tw o e x p l a n a -
t o r y o b j ec t i v e s . L i k e o t h e r s ec t o r a l ap p r o ach es , h e i d en t i fi e s t h e p e r t i n en t a c t o r s an d
p r ed i c t s t h e i r i n t e r e s t s an d r e l a t i v e p o w er o n t h e b a s i s o f t h e ch a r ac t e r o f t h e eco -
n o m i c a s s e t s a n d t h e i r l o c a t i o n i n t h e p o l i t i c a l e c o n o m y . S h a f e r ' s t h e o r y d e m o n -
s t ra t e s t h e ad d i t i o n a l b en e f i t o f f o cu s i n g an a l y t i ca l a t ten t i o n o n a s i n g l e p r e d o m i n a n t
s e c t o r i n t h e e c o n o m i c p o l i c y m a k i n g p r o c e s s. T h e r e s u lt is a p o w e r f u l a n d p a r s i m o -
n i o u s t h eo r y .
U n f o r t u n a t e l y , t h e s a m e f e a t u re s w h i c h h e l p S h a f e r a c h i e v e h i s f ir s t tw o e x p l a n a -
t o r y g o a l s m ay i n h i b i t h i s e ff o r ts to mee t h i s f i n a l an a l y t i c t a s k: ex p l a i n i n g w h y ,
h o w , an d h o w m u c h s tr u c t u r e s an d ac t o r s an d t h e i r i n te r e s t s ch a n g e o v e r t i me ( x i) .
A l t h o u g h S h a f e r a l l o w s t h e c h a r a c t e r a n d r e l a t i v e p o w e r o f t h e l e a d i n g s e c t o r t o
v a r y a c ro s s c a s e s - - i n d e e d t h e c ro s s - n a ti o n a l e x p l a n a t o r y p o w e r o f t h e t h e o r y d e -
p e n d s u p o n i t - - h e d o e s n o t c o n c e i v e o f c o n d i t io n s w h i c h m i g h t a l te r t h e r e la t iv e
p o w e r o f t h e l e a d i n g s e c to r s o v e r t im e i n re s p o n s e t o e x o g e n o u s s h o c k s .
W h e r e a s F r i e d e n v i e w s p o l i c y a s t h e s u m o f o p p o s i n g p r i v a t e s e c t o r d e m a n d s ,
S h a f e r d ep i c t s s t a t e i n s t i t u t i o n s a s mer e l y t h e w eak r e f l ec t i o n o f l e ad i n g s ec t o r
a t t r i b u t e s , c ap ab i l i t i e s , an d w eak n es s e s . S h a f e r ' s s p ec i f i c a t i o n o f t h e r e l a t i o n s h i p
b e t w een t h e l e ad i n g s ec t o r an d t h e s t a t e mak es p u b l i c i n t e r e s t s , i n s t i t u t i o n s , an d
cap ab i l i t i e s en t i r e l y d e r i v a t i v e o f t h e l e ad i n g s ec t o r . C o n s eq u en t l y , h e i s u n ab l e t o
r e c o g n i z e e i t h e r h o w e x o g e n o u s s h o c k s m i g h t c h a n g e t h e i n t e r e s t s o f e x e c u t i v e
p o l i cy m ak e r s , t h e r e l a t io n s h i p b e t w e en t h e s t a te an d t h e l e ad i n g s ec t o r in p o l i t i c a l ly
d e c i s i v e w a y s , a n d / o r h o w p o l it ic a l c o n s id e r a t io n s a p a r t fr o m e c o n o m i c o n e s m i g h t
i m p o r t a n t l y i n f lu e n c e p o l i c y o u t c o m e s i n i m p o r t a n t w a y s .
S e c o n d , t h e p r o b l e m o f i d e n ti f y in g a s e l e c t io n m e c h a n i s m r e e m e r g e s i f w e t a k e
S h a f e r s e r i o u s l y w h e n h e e m p h a s i z e s relative c a p a c i t y a n d a u t o n o m y . H e a l l o w s
t h a t [ s ] t a te s ' ab i li ty to ac t m u s t b e me as u r e d n o t o n l y ag a i n s t t h e ch a l l en g e s o f
r e s t r u c t u r i n g b u t ag a i n s t s ec to r a l a c to r s [ s ic ] c ap ac i t y t o re s i s t w h e n t h e s t a t e ' s a i m s
h u r t th e i r i n t e r e s ts ( 3 9 ). S h a f e r ' s s i n g u l a r f o cu s o n t h e l e ad i n g s ec t o r is h e l p f u l
b e c a u s e i t c a r e f u ll y a n d p e r s u a s i v e l y d r a w s o u t t h e p r i v i le g e d r o l e t h e l e a d i n g s e c t o r
p l a y s i n a n y e c o n o m i c p o l ic y d e b a t e a n d d e f i n e s t h e c o n s t r a in t s s ta t e s c o n f r o n t a s a
c o n s e q u e n c e o f l e a d in g s e c t o r d o m i n a n c e . H o w e v e r , e x c l u s i v e a t te n t i o n to t h e l e a d -
i n g s e c t o r l e a d s h i m t o n e g l e c t o t h e r s e c t o r s t h a t m a y a l s o h e a v i l y i n f l u e n c e e c o -
n o m i c p o l i c y - m a k i n g . C o n s e q u e n t l y , S h a f e r f a i l s t o r e c o g n i z e t h e p o t e n t i a l p o w e r
o f r iv a l s e c t o rs , m u c h l es s t h e o r iz e t h e c o n d i t i o n s u n d e r w h i c h o t h e r s e c t o r s m a y
e f f e c ti v e l y c h a l l e n g e l e a d i n g s e c t o r d o m i n a n c e .
I n f a c t , S h a f e r a p p e a r s t o p r e c l u d e e v e n t h e p o s s i b i l i t y o f r e f o r m i n h i g h - h i g h
s ec t o r s b y en d o g en i z i n g ac t o r s ' i n t e r e s ts , au t o n o m y , cap ab i l i t y , an d t h e b a l an c e o f
p o w e r a m o n g t h e m i n h is d e f i n it i o n o f le a d i n g s e c to r s . B y S h a f e r ' s a c c o u n t , sector
r e fe r s to a ty p e o f e c o n o m i c a c t i v i t y . . , t h a t c o n s t it u te s a n e n d u r i n g , c o h e r e n t w h o l e
d e f i n e d b y a d i s t i n c t i v e c o m b i n a t i o n o f f o u r v a r i a b l e s . . , t h a t p r o d u c e s e q u a l l y
d i s t i n c t i v e s t a t e s t r u c t u r e s an d cap ab i l i t i e s , ex t e r n a l an d i n t e r n a l d i s t r i b u t i o n s o f
p o w e r , a n d s e ts o f s o c ia l a c to r s ( 10 ). N o n e o f t h e p o t e n t ia l s o u r c e s o f r e f o r m i n
S h a f e r ' s an a l y s i s is a l l o w ed t o v a r y . I n e ff ec t , h e b u i l d s i n t o h i s d e f i n i t i o n p r ec i s e l y
w h a t h is r e s e a rc h p u r p o r t s to e m p i r i c a l ly e s t a b l i s h - - t h a t d o m i n a n t s e c t o r s s h a p e t h e
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ornet t 39
p o l i t i c a l a c t o r s an d i n s t i t u t i o n s t h a t , i n t u r n , d e t e r mi n e p a t t e r n s o f e co n o mi c p o l i cy
a n d r e f o r m .
B o t h F r i e d e n ' s a n d S h a f e r ' s s e c t o r a l a n a ly s e s m a y u n d e r e s t i m a t e t h e p o s s ib i li ti e s
o f e c o n o m i c r e f o r m b y u n i v e r s a l i z i n g t h e i n t e r e s t s a n d p o w e r o f a s s e t - s p e c i f i c
s e c to r s. E v e n o n p u r e l y e m p i r ic a l g r o u n d s , t h e o m i s s i o n o f b o th f i n a n c i a l a n d g o v -
e r n m e n t a c t or s f r o m a n a l y s e s o f t h e e c o n o m i c p o l i c y - m a k i n g a p p e a r s i ll c o n c e i v e d .
T h e r o l e o f s e rv i c e s a s a s o u r c e o f i n c o m e a n d e m p l o y m e n t h a s i n c r e a s e d s t e a d i ly
i n La t i n A m er i ca [ an d e l s ew h e r e ] f o r a s l o n g a s s t a t is t ic a l i n f o r m a t i o n is av a i l ab l e
( M a m a l a k i s 1 9 69 , 3 3 ). F i n a n c e a n d g o v e r n m e n t c o m p r i s e th e b u l k o f t h e i n c re a s e .
Coalitional Politics an d Econo mic Policy
A g r o w i n g b o d y o f r e s e ar c h c o n f i r m s t h e i m p o r t a n c e o f f i n a n c ia l a n d p u b l i c
s e c t o r a c to r s in t h e e c o n o m i c p o li c y a re n a , p r o m i n e n t l y a m o n g t h e m S y l v i a M a x f i e l d
( 1 9 9 0 ) . To i n t eg r a t e b o t h f i n an c i a l s ec t o r an d s t a t e i n s t i t u t i o n s i n t o h e r t h eo r e t i ca l
f r a m e w o r k a n d t o m a k e s e n s e o f t h e g r o w i n g n u m b e r a n d v a r i e t y o f a c t o r s t h a t
i m p i n g e o n e c o n o m i c p o l i c y , M a x f i e l d d e v e l o p s a p r o m i s i n g o r g a n i z a t i o n a l a n d
c o n c e p t u a l i n n o v a t i o n . M a x f i e l d p r e s e n t s e c o n o m i c p o l i c y a s t h e c o n s e q u e n c e o f
co n f l i c t b e t w een o p p o s i n g p o l i cy cu r r en t s f r o m t h e f i n an c i a l an d i n d u s t r ia l s ec -
t o rs . E a c h p o l i c y c u r r e n t e n c o m p a s s e s b o t h p u b l i c a n d p r i v a t e a c to r s w h o a r e j o i n e d
in t h e e c o n o m i c p o l ic y - m a k i n g p ro c e s s b y t h e ir c o m m o n e c o n o m i c a n d p o l ic y
i n t e r e s t s . S h e u s e s d ed u c t i v e l o g i c an d emp i r i ca l r e s ea r ch t o i d en t i f y t h e p o l i cy
p r e f e r en ces o f e ach a s w e l l a s t h e s o u r ce o f t h e i r co n f l i c t (M ax f i e l d 1 9 9 0 , 2 4 ) .
B u i l d i n g u p o n i n s ig h t s f r o m s o c i o lo g i ca l th eo r i e s o f b u s i n es s o r g an i za t i o n , M ax f i e l d
m a i n t a in s t h at t h e r e s o u r c e - p r o v i d i n g r o l e o f f in a n c i e r s s h o u l d p u t b a n k i n g i n te r -
e s t s a t t h e cen t e r o f s o c ia l an d p o l i ti c a l n e t w o r k s ( 2 3 , f 4 5 ) . I n te r m s o f ec o n o m i c
p o l i cy , f i n an c i a l c ap it a li s ts an d C en t r a l B an k e r s f av o r p o l i c i e s t h a t p r o t e c t t h e v a l u e
o f f in an c i a l a s se t s an d i n c r ea s e t h e i r o p t i o n s : s p ec if i c a l ly , t h ey p r e f e r t i g h t mo n -
e t a r y p o l i cy , f r ee f o r e i g n ex ch an g e o f cu r r en c i e s , an d l i t t l e f i n an c i a l r eg u l a t i o n
b e y o n d l e n d e r o f la s t r e s or t p r o t e c t i o n ( 24 ). S h e d e f i n e s th e o p p o s i n g p o l i c y c u r -
r en t in te r m s o f i ts p r e f e r en ce s f o r ch e ap c r ed i t. I t i n c l u d es in d u s t r i a l is t s , w o r k e r s ,
t h e n o n t r ad e ab l e s s ec to r , an d e l ec t ed o ff i c ia l s w h o co l l ec t iv e l y v a l u e ch e ap e r c r ed i t
a n d f a s t er g r o w t h o v e r lo w i n f l a ti o n a n d o p e n m a r k e t s ( 24 ) . P a t t e r n s o f p o l i c y
r o u g h l y c o r r e s p o n d to t h e b a la n c e o f P o w e r b e t w e e n t h e s e t w o c o a l i t io n s o v e r t i m e
an d s p ace .
T o e x p l a in r e c e n t p o l i c y s h if ts , M a x f i e ld u n d e r s c o r e s t h e p o l i ti c a l c o n s e q u e n c e s
o f s ecu l a r t r en d s t o w ar d i n c r ea s i n g i n t e r n a t i o n a l f i n an c i a l i n t eg r a t i o n . S p ec i f i c a l l y ,
s h e ma i n t a i n s t h a t i n c r ea s i n g i n t e r n a t i o n a l i n t eg r a t i o n o f f i n an c i a l mar k e t s i n d ep en -
d e n t l y a u g m e n t s t h e i n f l u e n c e o f f i n a n c i a l s e c t o r i n t e r e s t s o v e r p o l i c y m a k e r s '
c a l c u la t io n s . M a x f i e l d e x p l a i n s t h e c o n n e c t i o n b e t w e e n i n t e rn a t i o n a l f in a n c i a l i n te -
g r a t io n a n d d o m e s t i c e c o n o m i c p o li c y .
The international integration of financial ma rkets has altered the context of na-
tional industrialization all o ve r the wo rld. Cap ital is ev en m ore m obile than ev er
before. For national capitalists, short-term investmen ts n dom estic financial mar-
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140 Studies n Com parative nternation alDevelopment Spring 1997
k e t s o r f o r e i g n i n v e s t m e n t s o f t e n p r o v i d e h i g h e r , l o w e r - r i s k r et u r n s t h a t i n v e s t -
me n t s i n l ong t e rm i ndus t r i a l e xpa ns i on . Y e t i nduc i ng na t i ona l s to i nve s t i n l ong - t e rm
i n d u s t r ia l p r o j ec t s a t h o m e i s a m o n g t h e m o s t u r g e n t t a s k s f a c i n g n a t i o n a l g o v e r n -
me n t s . 2 )
C o n s e q u e n t l y , [ n ] a ti o n a l e c o n o m i c p o l i c y - m a k e r s m u s t a c t w i t h i n t h e c o n s t r a i n t o f
p o l i c y ' s i m p a c t o n c a p it a l i n f lo w s a n d o u t f l o w s o r s u f f e r t h e b a l a n c e o f p a y m e n t s
c o n s e q u e n c e s (7 ). T h e s t a te ' s d e p e n d e n c e o n t h e c o m p l i a n c e o f f i n a n c ia l
a s s e t -h o l d e r s is t h e s o u r c e o f f in a n c i a l c a p i t a l' s l e v e r a g e o v e r p o l i c y m a k e r s i n t h e
e c o n o m i c p o l i c y p r o c e s s . A n y c o n d i t i o n s w h i c h e n h a n c e t h e m o b i l i t y o f c a p i t a l
i n d e p e n d e n t l y e m p o w e r f in a n c i a l a s s e t h o ld e r s i n e c o n o m i c p o l ic y n e g o t i a ti o n s .
U n t i l re c e n t ly , o b s e r v e r s h a v e t e n d e d t o u n d e r e s t i m a t e t h e i n f l u e n c e o f t h e f i n a n -
c i a l s ec t o r f o r t w o r ea s o n s : f i r s t , t h e mo b i l e n a t u r e o f f i n an c i a l a s s e t s mak es t h em
h a r d e r t o tr a ce . M o r e i m p o r t a n tl y , p e r h a p s , p o p u l a r e c o n o m i s t i c m e t h o d s ( i n c l u d i n g
F r i e d e n ' s ) m e a s u r e p o w e r e x c l u s iv e l y i n te r m s o f t h e v a l u e o f ta n g i b l e e c o n o m i c
a s s e ts a n d t h e c o n d i t i o n s a ff e c t in g c o l le c t i v e a c ti o n a m o n g a s s e t h o ld e r s . T h e p o w e r
t o i n f l u e n c e p o l i c y m a y i n c r e a si n g l y h in g e o n a t h i rd s t ru c t u ra l r e l a t io n s h i p b e t w e e n
p r i v a te a s s e t h o l d e r s a n d e c o n o m i c p o l ic y m a k e r s o n l y c o i n c i d e n t a l l y r e l a te d t o t h e
f i r s t t w o : t h a t i s , t h e ab i l i t y t o d e f ec t f r o m o r s u b v e r t s t a t e p o l i cy t h r o u g h i n t e r n a -
t i o n a l o r i n f o r m a l m a r k e t s . T h e t e r m s u n d e r w h i c h a s s e t h o l d e r s s u b m i t t o , r a t h e r
t h a n e v a d e , g o v e r n m e n t a u t h o ri ty m o r e o r l es s c i r c u m s c r i b e s t h e p o l i c y o p t i o n s
s ta t es c o n s i d e r . I n o th e r w o r d s , t h e i n te n t i o n s o f t h e g o v e r n m e n t a re c o n d i t i o n e d
b y t h e c a p a c it y o f n o n - c o m p l i a n c e . . . [ e x h ib it ed ] b y a ll e c o n o m i c a c to r s ( A n d e r -
s o n 1 9 6 9, 5 2 ) . Ex ecu t i v e p o l i cy mak e r s m u s t s t r ik e b a r g a i n s w i t h [ s o c ia l a c t o r s ]
w h o s e a s s e t s t h ey s eek t o t ax ( B a t e s an d L i en 1 9 8 5 , 5 3 ) .
T h i s c o n c e p t i o n o f s t a t e- s o c ie t y r e la t io n s p o r t r a y s p o w e r a s a p r o d u c t o f c o n f l i c t
an d n eg o t i a t i o n r a t h e r t h an a g i v en a t t r i b u t e o f p a r t i cu l a r a c t o r s . M ax f i e l d t r i e s t o
c a p t u r e t h e n e g o t ia t e d , q u i n te s s e n t ia l ly p o l i ti c a l c h a r a c t e r o f e c o n o m i c p o l i c y a n d
s e e k s t o r ev e a l h o w c o m p e t i t i o n f o r i n c o m e - e n h a n c i n g p o l i c ie s b e t w e e n i n d u s tr i a l
a n d f i n a n c i a l s e c to r c o a li ti o n s s h a p e p a t te r n s o f e c o n o m i c p o l i c y a n d r e f o r m . S h e
d e v o t e s t h e b u l k o f h e r r e se a r c h t o f o l lo w i n g t h e f o r tu n e s o f M e x i c o ' s f i n a n c i a l a n d
i n d u s t r i a l s ec t o r s o v e r t i me an d t o p a i r i n g t h e r i s e an d f a l l o f t h e f i n an c i a l s ec t o r
w i t h e c o n o m i c p o l ic y r e f o rm s m o r e o r l e s s a g r e e a b l e t o b a n k i n g i n te r e st s . M a x f i e l d
co n c l u d e s t h a t, in g en e r a l , t h e m o r e v u l n e r ab l e M ex i c o w as t o i n t e r n a t i o n a l c ap i t a l
o u t f l o w s a n d , c o n v e r s e l y , t h e g r e a t e r t h e c o u n t r y ' s n e e d f o r f o r e i g n i n f l o w s , t h e
m o r e l e v e r a g e th e b a n k e r s ' a l l ia n c e h a d in d o m e s t i c p o l i c y d e b a t e s ( 1 65 ) .
T h e M e x i c a n b a n k e r s ' a l l i a n c e o c c u p i e d a p i v o t a l p o s i t i o n i n e c o n o m i c p o l i c y ,
b e g i n n i n g w i t h t h e r e c o n s t r u c ti o n o f t h e f i n a n c ia l s y s t e m a n d m o n e t a r y i n s t it u t io n s
a f te r t h e M e x i c a n r e v o l u ti o n . T h e p o l it ic a l i n f lu e n c e o f t h e b a n k i n g s e c t o r d e c l i n e d
s o m e w h a t in t h e 1 9 3 0 s a n d 1 9 4 0s w h e n M e x i c o , a l o n g w i th m o s t L a t in A m e r i c a n
c o u n t r ie s , f e ll in t o d e f a u l t a n d w a s i s o l a te d f r o m f i n a n c i a l m a r k e t s a n d t h e w o r l d
e c o n o m y i n g e n e r a l ( 93 ). W h e n t h e p o s t - W W l I in t e r n a ti o n a l b o o m f in a l ly re a c h e d
L a t i n A m e r i c a i n th e 1 9 50 s , it re t u r n e d t h e b a n k e r s t o p o s i t io n s o f p r o m i n e n c e a n d
p o w e r . G r o w i n g i n t e r n a t i o n a l f i n a n c i a l i n t e g r a t i o n d u r i n g t h e 1 9 7 0 s s t r e n g t h e n e d
t h e e c o n o m i c b a se o f t h e b a n k e r s a l l i a n c e b ut , i ro n i c a ll y , s o m e w h a t u n d e r c u t i ts
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Cornctt 4
pol i t ica l leverage . F lush wi th cheap in te rna t iona l c redi t s , or thodox pol ic ies were a
hard se l l . When in te rna t iona l capi ta l f lows quickly reversed themse lves a f te r the
onse t o f t he de b t c r is i s, ba nke r s s t e ppe d in onc e a ga in , f i rs t t o m a n a ge the im m ine n t
f inanc ia l c r i ses and la te r to rees tabl i sh Mexico ' s c redib i l i ty wi th i t s in te rna t iona l
c redi tors . Ma xf ie ld poin ts out, how ever , tha t [ i ]n te res t does not a lways t rans la te
in to ac t ion nor ac t ion in to preva i l ing inf luence- - ins t i tu t iona l and organiza t iona l
fac tors in te rven e (26) . To trace the pa th of econ om ic in teres ts through the pol icy
making process and a r r ive a t pol icy outcomes, she in t roduces ins t i tu t iona l va r iables
in to h er predic t ions :
Where institutional and organizational development has provided financiers with
allies both inside and outside the state who favo r their polic y preferences, the
predominantpolicy pattern is likely to [favor he banking allianceby] emphasiz[ing]
monetary stability over expansion of production, and development of financial
markets and capital mobility over financial regulation or exchange controls. If
financiers find themselves nstitutionally ied to actors with different interests or if
a strong opposing coalition is organized, economic policy is like ly to be more
heterodox. (26)
The debt c r i s i s te s ted the impor tance and res i l iency of the bankers ' ins t i tu t iona l
base in Mexico . O nly i ts f i rm ins t i tu t iona l founda t ions a l lowed the b ankers ' a l l iance
to wea ther a domest ic backlash aga ins t i t in the form of widespread bank na t iona l -
iza t ions and u l t imate ly to weaken gov ernm ent e f for ts to cont ro l the f inanc ia l sec tor .
In the f ina l chapte r , Maxf ie ld seeks to add a compara t ive perspec t ive to he r
ana lys is to emp hasize the c ross-na t iona l va r ia t ion in the La t in Am er ica n expe r i -
enc e wi th in te rna t iona l f inanc ial in tegra t ion in the 1970s as we l l as the obvio us
similar i t ies (165). Alth oug h [ i]n a l l cases [she] sees a r ise in sho rt- term f inanc ial
ac t iv i ty tha t prof i t [ed] f inanc ie r s and the i r indus t r ia l a ssoc ia tes a t the expense of
smal l and mediu m-s ized ent repreneurs and the na t ion ' s indust r ia l base (165) , she
mainta ins tha t the ins t itu t ional weakn ess of Braz i l ' s ban ker ' s a l l iance a l lowed Bra-
z i l to escape the de indust r ia l iza t ion tha t took p lace in Argent ina , Chi le , and Mexico
(166) .
M a x f i e ld ' s c om m i tm e n t to ide n t i f y ing the in s ti t ut iona l m e c ha n i sm s tha t t r a nsm i t
pr iva te sec tor in te rests in to e f fec t ive pol icy inf luence and tha t shape the cont ent and
force of those demands in the process i s a s we lcome as i t i s r a re in much of the
c om pa r a t ive po l i t ic a l e c onom y l i te r atu re . M or e ove r , M a xf i e ld ' s e xha us t ive e m pi r i -
ca l resea rch provides de ta i led ins ights in to the Mexican economic pol icy making
process tha t has few para l lels in the deve lo ping wor ld . Sh e uses th is we a l th of da ta
to good purpose when t rac ing the in te rac t ion of f inanc ia l and indust r ia l sec tor
c oa l it i ons in the e c onom ic po l i c y a r ena . Howe ve r , t he book som e t im e s e m p ha s iz e s
her sk i l l s a s an a rea spec ia l i s t to the neglec t of the work ' s theore t ica l deve lopment .
A l l t he e l e m e n t s o f a powe r f u l a nd c onv inc ing the o r y a r e p r e se n t bu t r e m a in loose ly
ar t icula ted . For example , Maxf ie ld takes pa ins to demonst ra te the empir ica l re la -
t ionsh ip be tw e e n ba nk ing se c to r dom ina nc e a nd the s t a t e s' de pe n de nc e on in t e rna -
t iona l f inanc ia l c redi t s but she presents he r causa l a rgument in weak te rms. In a
typica l s ta tement of he r theore t ica l a rgum ent , Maxf ie ld notes tha t pe r iods of [ fi -
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Cora~ 1~
m e n t s o f i ts i n d u s tr i a l a n d f i n a n c i a l c a p i t a l is t c l a s s i n c r e a s i n g l y c o n f l i c t . T o r e i t e r a t e
h e r p o i n t :
the international integration of financial m arkets has altered the co ntext of national
industrialization all over the world. Capital is m ore mobile than ever b efore. For
national capitalists, short-term investm ents in dom estic financial markets or for-
eign investments often provide higher, lower-risk returns than investments in
long-term industrial expansion . Yet inducing nationals to inv est in long -term in-
dustrial projects at ho me is among the m ost urgent tasks facing national govern-
ments. (M axfield 1990, 2)
O b v i o u s l y e x e c u t i v e o f f ic e r s m u s t c o n c e r n t h e m s e l v e s w i th t h e h e a lt h o f e c o n o m i c
a c t o rs , b u t t h e y n e e d n o t g i v e a ll o f t h e m e q u a l c o n s i d e r a t i o n . F u r t h e r , p a s t p o l i c y
s u p p o r t i s n o g u a r a n t e e o f c o n t i n u e d p r e f e r e n c e , b u t a p r o d u c t o f c o n t i n u o u s c o n -
f l i c t a n d n e g o t i a t i o n . A l t h o u g h t h e e x e c u t i v e ' s c a p a c i t y t o g o v e r n u l t i m a t e l y d e -
p e n d s u p o n r e ta in in g s o m e p a rt o f s o c i e t y ' s e c o n o m i c s u rp l us , i ts d e p e n d e n c e m a y
v a r y b y d e g r e e a n d b y s e c t o r o v e r ti m e .
M o r e o v e r , t h e e x e c u t i v e w i e ld s i ts o w n c o n s i d e r a b le a r ra y o f in d u c e m e n t s a n d
s a n c t i o n s i n t h e e c o n o m i c p o l i c y a r e n a . I n d e e d , e m p i r i c a l r e s e a r c h f r e q u e n t l y r e -
v e a l s t h a t s t a te a c to r s c a n b e a s a c t i v e in s h a p i n g p o l i t i c a l c o m p e t i t i o n a s [ t h e y ar e ]
i n m o l d i n g t h e m a r k e t p l a c e . T h e r e f o r e , t h e p o l i t i c a l o u t c o m e s w i t h i n e a c h s e c t o r
d e p e n d o n s ta t e p o l i c y a s m u c h a s t h e y sh a p e it ( Z y s m a n 1 9 8 3 , 9 0 ) . W h e r e a s t h e
s t a t e ' s a l l o c a t i v e i n t e r e s t s a n d f u n c t i o n s h a v e l o n g o c c u p i e d a c e n t r a l p o s i t i o n i n
e x p l a n a t i o n s o f s t a t e - l e d d e v e l o p m e n t m o d e l s , i t s h o u l d a l s o b e e v i d e n t b y n o w t h a t
m a r k e t - o r i e n t e d r e f o r m s m a y s e r v e t h e p o li ti c a l a s w e l l a s e c o n o m i c o b j e c t i v e o f th e
e x e c u t i v e n o l e s s t h a n p o p u l i s t o n e s d i d p r e v i o u s l y . T h e t h r e a t t o w i t h h o l d n e e d e d
s t a t e s u p p o r t i s a t l e a s t a s p o w e r f u l a m o t i v a t o r a s t h e p r o m i s e t o a l l o c a t e a i d i n t h e
f i r s t p l ace .
A t l e a s t s i n c e th e 1 9 6 0 s , p o l i t i c a l s c i e n t i st s h a v e f u l l y a p p r e c i a t e d t h e f a c t th a t i n
a n y e c o n o m y r e g u la t ed b y t h e g o v e r n m e n t . . . . t h e s u c c e s s o f a n y i n c o m e g r o u p i n
m a i n t a i n i n g i ts sh a r e o f n a t i o n a l i n c o m e w i l l d e p e n d o n i ts a b i li t y to i n f l u e n c e
g o v e r n m e n t p o l i c y ( M e r k x 1 9 6 9 , 10 9 ). P o l i c y - m a k e r s in t h e e x e c u t i v e b r a n c h o f
g o v e r n m e n t m u s t a r b it ra te b e t w e e n p e r v a s i v e c l a i m s f o r p o l i c y p r e fe r e n c e . T h e
e x e c u t i v e i s a n y t h i n g b u t n e u t r a l i n t h e p r o c e s s , h o w e v e r . O n e o b s e r v e r p r o v o c a -
t i v e l y r e p r e s e n ts th e s t a t e 's in t e re s t s in e c o n o m i c p o l i c y a s m e r c a n t i l i s t . . .
a d v a n t a g [ i n g ] o n e s e c t o r o v e r th e o t h e r f o r r e a s o n s o f st a te ( A n d e r s o n 1 9 6 9 , 5 1 ).
I n o t h e r w o r d s , e x e c u t i v e p o l i c y m a k e r s a c t i v e l y m a n e u v e r t o r e s t r u c t u r e e c o n o m i c
a d v a n t a g e s a n d b u r d e n s a m o n g c o n s t it u e n c ie s i n w a y s t h a t p r o m o t e t h e ir o w n e c o -
n o m i c i n t e r e s t s a n d p o l i t i c a l p o w e r . P o l i c y - m a k e r s c h o o s e b e t w e e n o p t i o n s a c c o r d -
i n g to t h e ir u n d e r s t a n d i n g o f t h e a l lo c a t i v e a s w e l l a s g r o w t h c o n s e q u e n c e s a t t e n d i n g
d i f f e re n t c o u r s e s o f a c ti o n . R e f o r m c a n b e c o m e fo r t h e st a te e x e c u t i v e b o t h a n
i n s t r u m e n t o f e c o n o m i c p o l i c y a n d a d e v i c e f o r c o n s t ru c t i n g s p e c i f i c p o l it i c a l a ll i-
a n c e s ( Z y s m a n 19 8 3, 8 1 - 8 2 ) .
T h e o r i e s w h i c h r e c o g n i z e t h e p o s s ib i l i ty o f a n i n d e p e n d e n t r o l e f o r e x e c u t i v e
p o l i c y m a k e r s in s o ci a l c o n f li c t a n d c o m p r o m i s e w o u l d s e e m t o p e r m i t a m o r e
a c c u r a t e r e a d i n g o f th e c o u r s e o f L a t i n A m e r i c a n d e v e l o p m e n t p o l i t i c s th a t th e
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144 Studies n Com parative nternationalD e ve lopme nt Spr ing 1997
p r e s u m p t i o n th a t t h e s t a te c h a r a c t e ri s ti c a ll y r e s p o n d s t o d e m a n d s f r o m e s t a b l is h e d
i n t e r e s ts w h en s e t ti n g eco n o m i c p o l i cy ( S ch aed e l 1 9 6 7 , 5 ). In an y ca s e , tr e a t i n g
l ib e r a l r e f o rm t r en d s a s t h e i n ev i tab l e p o l i cy co n s eq u en ces o f co m p e l l i n g d em an d - s i d e
c l a i m s t o p o l i c y r e l ie f o r p r e f e r e n c e o b s c u r e s t h e i m p o r t a n c e o f t h e s ta t e e x e c u t i v e ' s
o w n ec o n o m i c an d p o l it i c a l i n t e re s t s . P a r t i cu l a r ly i n d ev e l o p i n g co u n t r i e s , th e ex -
e c u t i v e e n j o y s c o n s i d e r a b l e d i sc r e t io n o v e r e c o n o m i c p o li c y . P r e l i m i n a r y e m p i r i c a l
r e s e a rc h c o n f i r m s t h a t e x e c u t iv e s u p p o r t c o n s i s t e n t ly r a n k s a m o n g t h e n e c e s s a r y , i f
n o t s u f f i c i en t , p r e r eq u i s i t e s o f r e f o r m ( W i l li am s o n 1 9 9 4 , 5 7 7 - 7 8 ) . 7
U l t i ma t e l y , M ax f i e l d ' s r e s ea r ch w o r k s b e s t a s a h eu r i s t ic c a s e s t u d y t h a t p e r m i t [ s ]
i n t e n s i v e . . . [ r a t he r th a n ] c o m m i t t h e r e se a r c h e rs t o a h i g h l y l i m i t e d s e t o f v a r i-
ab l es , and thus i ncreases t he p robab i l it y t ha t c r i ti ca l var i ab l es wi l l be fou nd (Eck s t e in
1 9 7 5 , 1 0 6 ) . Th i s t y p e o f s t u d y , an d M ax f i e l d ' s i n p a r t i cu l a r , c an p r o v e p a r t i cu l a r l y
v a l u ab l e w h en t h e r e s ea r ch e r id en t i f i e s ca s e s e s p ec i a l l y i n s t r u c t i v e f o r t h eo r y an d
s u b j ec t t o r i g o r o u s i n q u i r y ( Eck s t e i n 1 9 7 5, 1 0 7 ) . I n fa i r n e s s to M ax f i e l d , s h e
p r o b a b l y i n t e n d e d h e r r e se a r c h t o s e r v e p r e c i s e ly t h is p u r p o s e , g i v e n t h a t t h e b o o k
co n t a i n s n o ex p l i c i t l y t h eo r e t i ca l ch ap t e r b u t i n s t ead s k e t ch es h e r t h eo r e t i ca l ap -
p r o a c h in a t w e n t y - s i x p a g e p r e f a c e . T h e b u l k o f t h e b o o k s i m p l y t ra c e s th e
e m p i r i c a l i n t e r a c t i o n o f p o l i c y c o a l i t i o n s i n t h e e c o n o m i c p o l i c y m a k i n g p r o c e s s
w i t h s c a t t e re d h i n ts o f t he u n d e r l y i n g t h e o r y t o e x p l a i n p a t te r n s o f e c o n o m i c p o l i c y
an d r e f o r m. G i v en t h e p au c i ty o f an a ly t ica l re s ea r ch i n t o th e eco n o m i c p o l i cy - m ak i n g
p r o c e s s a n d a p p a r a t u s o f
eveloping
( in c o n t r a s t to d e v e l o p e d ) c o u n t r i e s , M a x f i e l d ' s
co n t r i b u t i o n i s n o s ma l l f e t e . F u r t h e r mo r e , mo s t r ead e r s w i l l b e eag e r t o p u r s u e t h e
t h eo r e t i ca l ch a l l en g es an d emp i r i ca l i n s i g h t s t h a t s h e i n f e r s f r o m t h e M ex i can ca s e .
I n d eed M ax f i e l d h e r s e l f t ak es u p t h e t h eo r e t i ca l i mp l i ca t i o n s o f h e r i n i t i a l f i n d i n g s
e l s ew h e r e . 8
C o n d u s i o n s
T h e p r e c e d i n g r e v i e w a n d c r i t i q u e w a s i n n o w a y i n t e n d e d t o d e t r a c t f r o m t h e
co n t r i b u t i o n s o f f ea t u r ed au t h o r s . Q u i t e t h e co n t r a r y , F r i ed en , S h a f e r , an d M ax f i e l d
w e r e s p o t l ig h t ed p r ec i s e l y b ecau s e o f t h e i r st a t u re i n t h e i r f i e l d s an d t h e p r o v o c a t i v e
q u a l it y o f t h e ir w o r k . R a t he r , t h is e s s a y w a s i n t e n d e d t o h i g h l i g h t t h e c o m p l e x i t y o f
b u i l d i n g t h e o re t ic a l e x p l a n a t io n s o f e c o n o m i c p o l i c y a n d r e f o r m t h a t s a t is f y e x a c t -
i n g d em an d s f o r b o t h r e l i ab il it y an d g en e r a l i zab i li t y . A t h eo r y ca p ab l e o f ex p l a i n i n g
b o t h p a t t e rn s o f e c o n o m i c p o l ic y a n d s tr u c tu r a l r e f o r m m u s t c o n f r o n t f o u r a n a l y ti c
t a sk s : f ir s t, i t m u s t i d en t i f y t h e p r ed o m i n an t ac t o r s i n f l u en c i n g eco n o m i c p o l i cy ;
s eco n d , s p ec i f y t h e i r in t e re s t s; t h ir d , d e t e r m i n e t h e i r r e l a t i o n s h i p in t h e p o l i cy - m ak i n g
p r o c e s s ; a n d f in a l ly , t o r e v e a l th e f o r c e s t h a t i n d u c e p o l i c y r e f o r m . T h e p r e c e d i n g
c o n f r o n t a t io n b e t w e e n t h e o r y a n d e v i d e n c e r e p r e s e n t s o n l y t h e f ir s t s te p t o w a r d t h is
g o a l , b u t i t i s a c r i ti c a l o n e t o t h e ex t en t t h a t it s u g g es t s r e f i n em en t s t h a t co u l d m ak e
t h e th e o r y o f e c o n o m i c p o li c y a n d r e f o r m m o r e c o n g r u e n t w i t h th e e m p i r i c a l re c o r d .
A l t h o u g h a b e w i l d e r i n g n u m b e r a n d v a r i e t y o f a c t o r s p o p u l a t e t h e e c o n o m i c
p o l i c y - m a k i n g p r o c e s s , a t le a s t a m o d i c u m o f c o n s e n s u s h a s e m e r g e d i n t h e l it e ra -
t u r e r e g a r d i n g t h e m o s t i n f l u e n t i a l p a r t i c i p a n t s . T h e i m p o r t a n c e o f c o n c e n t r a t e d ,
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146 Studies n Com parative nternation alDevelopment Spring 1997
i n g t o o l . I t m a y a i d r e s e a r c h e r s w h o s e e k t o e m p h a s i z e t h e p o w e r o f p u b l i c a n d / o r
p r i v a t e a c t o r s w h o s e i n t e r e s t s d e p a r t f r o m a h y p o t h e t i c a l s o c i a l w e l f a r e f u n c t i o n .
H o w e v e r , i f m i s t a k e n f o r fa c t, t h is t o o l m a y o b s c u r e t h e i n t e r p l a y o f p o l i ti c a l f o r c e s
t h a t d e t e r m i n e p a t t e rn s o f e c o n o m i c p o l ic y a n d t h e o p p o r t u n i t ie s f o r a n d s t ab i li ty o f
r e f o rm . A r r o w 1 9 5 1 ) p e rs u a s i v e l y d e m o n s t r a t e d l o n g a g o th a t s o c ie t ie s d o n o t
e n j o y t h e b e n e f i t o f a s i n g le u n i f ie d s o c i a l w e l f a re f u n c t i o n . O f c o u r s e , o n e o f t h e
p r i n c ip a l s e l ec t iv e ) f u n c t io n s o f g o v e r n m e n t is to c o n s t r u c t
po l i c i e s t ha t c ons t i t u t e a n o rde r i ng o f c ho i c e s fo r t he i r soc i e t i e s . The se po l i c i e s ,
h o w e v e r , d o n o t r e p r e s e n t th e p r e f e r e n c e s o f s o m e s i n g l e a c to r . T h e y r e p r e s e n t t h e
o u t c o m e o f p o l i t i c a l s t ru g g l e , in w h i c h c o m p e t i n g i n t e re s t s w i th r i v a l v i s i o n s o f t h e
s o c i a l g o a l s e e k t h e p o w e r t o i m p o s e p o l i c i e s th a t a r e c o n s o n a n t w i t h t h e i r p r e f e r-
e n c e s u p o n t h e c o l l e c ti v i t y . T o a c c o u n t f o r g o v e r n m e n t p o l i c y c h o i c e s , th e n , w e
m u s t s t u d y h o w c o m p e t i ti o n am o n g t h e s e p r e fe r e n c e s is s t r u c tu r e d a n d t h e r e b y
l e a d s t o c h o i ce s b y g o v e r n m e n t s . B a t e s 1 9 9 1 , 2 6 5 ) 9
T h e o m i s s i o n o f p o l i t i c s f r o m p o l i c y a n a l y s i s i s n o t p r i m a r i l y a n e m p i r i c a l d e f i -
c i e n c y a n d c a n n o t b e c o r r e c t e d b y a d d i n g a c t o r s t o t h e a c c o u n t . I n s t e a d , w e m u s t
t h e o r e ti c a ll y e s ta b l is h w h i c h a c t o rs p r e d o m i n a t e in t h e e c o n o m i c p o l i c y a r e n a a n d
h o w t h ey r e la t e to o n e a n o t h e r i n p o l i cy n eg o t i a t i o n s .
F i n a ll y , to e x p l a i n p o l i c y r e f o r m t h e o r i e s m u s t i d e n ti f y m e c h a n i s m s t h a t t ra n s m i t
t r a n s f o r m a t i v e i m p u l s e s i n t o p o l i c y r e f o r m m o v e m e n t s . O n e f r e q u e n t l y h e a r s , f o r
i n s t an ce , th a t i n t e r n a t io n a l co m p e t i t i o n o r eco n o m i c c ri s e s h av e f o r ce d s t a t e s to
p u r s u e d i f f e re n t m a c r o e c o n o m i c p o l ic i e s , b u t t h e c a u s a l p a t h b e t w e e n a m o r p h o u s
i n te r n a ti o n a l f o r c e s a n d p o l i c y o u t c o m e t o o c o m m o n l y r e m a i n s u n t h e o r i z e d . C l e a r ly ,
b o t h - - n o t e i th e r / o r- - in t e r n a ti o n a l a n d d o m e s t ic f o rc e s s h a p e p a t t e rn s o f e c o n o m i c
o p p o r t u n i t y a n d c o n s t r a in t . M o r e a m b i t io u s e x p l a n a t i o n s m u s t t h e o r e t i c a ll y s p e c i f y
an d t r ace t h e e f f ec t s o f t h e s e f o r ce s o n t h e i n t e r e s t s , d i s t r i b u t i o n o f p o w er , an d / o r
s t r u c t u r a l r e l a t i o n s h i p a m o n g t h e p r e d o m i n a n t a c t o r s i n e c o n o m i c p o l i c y m a k i n g
p r o c e s s e s . S h a f e r a n d M a x f i e l d h i n t a t th e i m p o r t a n c e o f i n t e r n a t io n a l m a r k e t s i n
t h e r e ) d is t ri b u ti o n o f w e a l th a n d p o w e r a m o n g d o m e s t i c ac t or s. F r i e d e n s p e c if i -
c a l l y i d e n t i f i e s p r i c e m o v e m e n t s a s t h e m e c h a n i s m w h i c h e f f e c t s t h e s e e c o n o m i c
a n d p o l i ti c a l tr a n s f o r m a t i o n s b y a l t e ri n g t h e i n c e n t i v e s o f a s s e t o w n e r s w h o s e e k t o
p r o t ec t t h e v a l u e o f t h e i r p r o p e r t y .
T o t e a s e o u t b o t h t h e s t r e n g t h s a n d w e a k n e s s e s o f e x i s t i n g e x p l a n a t i o n s , t h i s
r e v ie w c o n t ra p o s e d s o m e o f t h e m o s t p r o m i s i n g t h e o ri e s o f e c o n o m i c p o l i c y r e-
f o r m a g a i n s t o n e a n o t h e r a n d a g a i n s t th e p r e l i m i n a r y e v i d e n c e . I f t h e a n a l y s is r a is e s
v e x i n g t h e o r e t i c a l a n d e m p i r i c a l c h a l l e n g e s t o p r e v i o u s e x p l a n a t i o n s o f e c o n o m i c
p o l i cy r e f o r m, i t n o n e t h e l e s s o f f e r s n o a l t e r n a t i v e t h eo r y . A n d c r i t i q u e , a f t e r a l l , i s
n o s u b s t i t u t e f o r t h eo r y . I t r ema i n s i n cu mb en t o n t h e c r i t i c t o p r o v i d e mo r e s a t i s f y -
i n g m o d e l s .
T h e t a sk h a s m o r e t h a n s i m p l y a c a d e m i c i m p o r t . A s s e s s m e n t o f t h e d u r a b i li t y o f
t h e e c o n o m i c a n d p o l it ic a l r e f o r m s th a t a c c o m p a n i e d o n e a n o t h e r in m a n y a r e a s o f
t h e d ev e l o p i n g w o r l d d u r i n g t h e 1 9 8 0 s an d 1 9 9 0 s d ep en d s c r i t ic a l l y o n a s ce r t a i n i n g
t h e p r i m a r y m o t i v a t i o n s f o r r e f o r m . O n e w o u l d e x p e c t s o c i a l l e a r n i n g t o p r o d u c e
m o r e d u r ab l e r e f o r ms t h an t h e o p p o r t u n i s t ic in t e r p l ay o f r iv a l i n t e r e s t g r o u p s . F r i ed en
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C o m ~ 1 4 7
a d d r e s s e s t h i s is s u e s p e c i f i c a l l y . H e a r g u e s t h at a v a ri e ty o f L a t in A m e r i c a n c o u n -
t ri es e x p e r i e n c e d r e g i m e c h a n g e , a l o n g w i t h e c o n o m i c p o l i c y r e fo r m , w h e n g o v e r n -
m e n t s w e r e u n a b l e o r u n w i l l in g t o r e s p o n d t o s e c to r a l d e m a n d s f o r p o l it ic a l i n f l u e n c e
a n d / o r e c o n o m i c p r i v i l e g e . H i s r e a s o n i n g l e a v e s r e a d e r s w i t h l i tt le j u s t i f i c a t i o n f o r
h o p i n g t h a t i n t e r e s t g r o u p s w i l l b e a n y l e s s a p t t o a b a n d o n d e m o c r a t i c r e g i m e s
s h o u l d th e y t o o p ro v e u n f o r t h c o m i n g w i t h m a t e ri a l b e n e f i ts . I n d e ed , e c o n o m i c l ib -
e r a l iz a t i o n i s d e s i g n e d t o l i m i t g o v e r n m e n t s ' a b i l it y t o s e l e c t i v e l y d i s t r ib u t e e c o -
n o m i c p r i v i le g e s a n d p u n i s h m e n t s . T h e o b v i o u s i m p l i c a t io n s f o r d e m o c r a c y a s w e l l
a s f o r d e v e l o p m e n t i n L a t in A m e r i c a a n d e l s e w h e r e a re w o r r i s o m e . C e r t a in l y , t h e
u n e v e n a n d a n e m i c g r o w t h m a n y c o u n t r i e s h a v e e x p e r i e n c e d sin e t h e r e f o r m p e -
r io d m a y s e r v e a s a te s t o f w h e t h e r r ef o r m i st c o u n t r ie s c a n o v e r c o m e t h e i n t e n s e
d i s t r i b u t i o n a l c o n f l i c t t h a t s o o f t e n r a v a g e a l r e a d y d e s t i t u t e p e o p l e s a n d w e a k g o v -
e r n i n g c o a l i ti o n s . G i v e n a d i s tu r b i n g t e n d e n c y to s o l v e i n tr a n s ig e n t e c o n o m i c
c o n f l i c t s m i li t a r il y , r e s ea r c h in t o t h e s o u r c e s o f e c o n o m i c p o l i c y r e f o r m a p p e a r s
p a r t i c u l a r l y u r g e n t t o t h e g o a l o f s u s t a i n i n g d e m o c r a t i c r e f o r m . I t s h o u l d a l s o h i g h -
l i g h t t h e d i s t r i b u t i o n a l c o n s e q u e n c e s t h a t m a k e s t r u c t u r a l r e f o r m s b o t h h o t l y c o n -
t e s te d a n d p a i n f u l w h e r e v e r t h e y o c c u r .
Notes
1. T h i s m e a n s , s p e c i f i c a ll y , t h a t s ec t o r s w h i c h i n v o l v e s u b s t a n t i a l b a r r i e rs t o e n t r y h a v e g r e a t e r i n c e n t i v e t o
l o b b y f o r g o v e r n m e n t p r i v i l e g e s s in c e f e w e s t a b l i s h e d f i r m s s t a n d t o g a i n m o s t o f t h e b e n e f i t s f o r t h e i r
e f fo r t s (Fr i ede n 1991 , 19 -20) .
2 J o h n W a t e r b u r y ( 1 9 9 3 ) o f f e r s o n e e x p l a n a t i o n f o r t h i s c o u n t e r - i n t u i t i v e r e l a t io n s h i p . A c r o s s a v a r i e t y o f
d e v e l o p i n g c o u n t r ie s , p o l i c y e n t i t l e m e n t s w e r e o r i g i n a l ly b e s t o w e d a n d n o t w o n . H e n c e t h e e m e r g i n g
i n t e r e s t s d i d n o t d e v e l o p t h e o r g a n i z a t i o n a l s i n e w s a n d h i s t o r y o f s t r u g g l e a n d c o o p e r a t i o n t h a t w o u l d
h a v e a f f o r d e d t h e m a c o h e r e n t d e f e n s e o f th e i r in t e r e s t s ( 3 ).
3 . S h a f e r d e f i n e s r e s t r u c tu r i n g a s d e l i b e r a te , s t a te - l e d e ff o r t s to r e a l lo c a t e r e s o u r c e s a n d r e o r i e n t e c o n o m i c
a c t i v i t y b y a l t e r i n g t h e s e c t o r a l c o m p o s i t i o n o f t h e e c o n o m y t o r e d u c e a c o u n t r y ' s v u l n e r a b i l i t y t o t h e
r i s k s a s s o c i a t e d w i t h i ts c u r r e n t l e a d i n g e x p o r t s e c t o r , o r t o s e i z e g r e a t e r o r s a f e r o p p o r t u n i t i e s p r e s e n t e d
i n o t h e r s e c t o r s , o r b o t h .
4 . T h e g r o w t h o f i n f o r m a l o r u n d e r g r o u n d m a r k e t s m a y s e r v e t h e s a m e p u r p o s e e v e n f o r l e s s m o b i l e a s s e t
h o l d e r s .
5 . R o b e r t B a t e s a n d D a - H s i a n g D o n a l d L i e n ( 1 9 8 5 ) p r e s e n t a n i n t r i g u i n g h i s t o r i c a l a c c o u n t r e l a t i n g t h e
e m e r g e n c e o f r e p r e s e n t a t i v e g o v e r n m e n t a n d t h e s t a t e ' s u n r e l i e v e d e f fo r t s to g a i n a c c e s s t o t h e p r o d u c t
o f p r iva t e a sse t ho lde r s .
6 . B l o c k ( 1 9 7 7 ) , L i n d b l o m ( 1 9 7 8 ) a n d o t h e r s h a v e o f f e r e d s im i l a r e x p l i c a t i o n s o f t h e s t r u c t u r a l p o w e r o f
capi ta l .
7 . J o h n W a t e r b u r y ( 1 9 9 3 ) s u g g e s t s t h a t t h e s t a t e ' s c a p a c i t y t o i m p o s e u n p o p u l a r p o l i c i e s o n t h e p r i v a t e
s e c t o r m a y p r o v e p a r t i c u l a r l y r o b u s t i n m a n y d e v e l o p i n g c o u n t r i e s b e c a u s e o f t h e h i s t o r i c a l p a r t i c u l a r i -
t i e s o f th e i r i n d u s t r ia l i z a ti o n . B e c a u s e e n t i t l e m e n t w e r e o r i g i n a l l y b e s t o w e d a n d n o t w o n , h e e x p l a i n s ,
e m e r g i n g i n t e r e s t s d i d n o t d e v e l o p t h e h i s t o r i c a l s i n e w s a n d h i s t o r y o f s t r u g g l e a n d c o o p e r a t i o n t h a t
w o u l d h a v e a f f o r d e d t h e m a c o h e r e n t d e f e n s e o f th e i r i n t e r e s t s ( 3 ) .
8 . See a l so Maxf i e ld 1996 , 1993 , 1991 .
9 . S ee M oe (1 990) fo r a r e l a t ed c r it i que .
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1 4 8 S t u d i e s i n C o m p a r a t iv e I n t e rn a t io n a l D e v e l o p m e n t S p r i n g 1 9 9 7
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