Economic stabilization Latin America: Political dimensions - editor's introduction

Abstract

The Latin American region has a long-established reputation for economic instability. Partly this can be attributed to the character of Latin America’s insertion in international markets, through which cyclical fluctuations originating from outside may be magnified when their impact is felt in the region. Such magnifying effects, have, at various times, been traced through the international commodity markets (which still account for much of the region’s export revenue); through the private financial markets (since external financing has long contributed significantly to regional capital formation); and through the various phases that have characterized the international monetary system, in each of which, it may be argued, there have been asymmetries which concentrate instability in the peripheral economies. It remains in dispute, however, whether this international context provides the most important explanation for regional economic instability, or whether locally generated policy deficiencies are more responsible. In the latter case, does the main explanation rest in the prevalence of mistaken or inadequate economic theories, or in administrative incapacity, or in some broader socio-political constraints which impede the prompt and constant implementation of stabilization policies? Each of the possible domestic factors will occur in differing forms in different Latin American countries. It is therefore important to examine variations in the degree of economic instability within Latin America, as well as the more general contrast between the Latin American region as a whole and other parts of the world. One consideration applying to all these economies, in varying degrees, is the relentless pressure (derived from the pace of population growth, and of urbanization, and the scale of inequalities) for accelerated development. Latin America is not a region that can readily pursue economic stability as the overriding aim of policy the urgency of development needs is too pressing. Clearly, these various external and internal factors do not provide mutually exclusive explanations, and are likely to occur in different proportions in different instances. They must also be expected to interact with one another. For example, a peripheral economy exposed to destabilizing influences from the international system may find that experience influencing the type of economic analysis to which it is attracted. Similarly, the socio-political constraints shaping stabilizing strategies will differ in the case of an economy that can generate the capital it requires for development, intemally, from the case of an economy heavily reliant on unpredictable or politically conditional sources of external financing. Thus, to explain the sources of economic instability in Latin America, or the constraints on stabilization, it is necessary to consider a wide range of factors and various possible strands of interpretation. For this reason the approach adopted in this special issue has been that of the comparative case study. The cases chosen were all recent instances of substantial macroeconomic disequilibrium that gave rise to major new initiatives aimed, at least ostensibly, at the restoration of economic stability. Each author was asked to consider to what extent it has been possible for the country in question to correct these major economic imbalances within a reasonable period of time, while minimizing the damage done to its social and political