Strength and Commitment of the State: It Takes Two to Tango – A Case Study of Economic Reforms in Argentina in the 1990s

Abstract

This paper tries to answer the question why radical institutional reforms became reality in Argentina, a country devastated by economic and political catastrophies hardly a decade ago. It uses a framework of both strength and commitment of the state as crucial determinants of the quality of economic institutions such as property and contract rights. In particular the personality and credibility of Carlos Menem as Argentine president due to his capabilities as political organizer while political opposition was weak, to the institutional dominance of the presidency over legislature and judiciary in Argentina’s political system, and to a fundamental restoration of the state, are all seen to be responsible for strengthening the central government in Argentina and thus allowed a radical top-down and quasi-authoritarian reform policy. The commitment of the state not to abide the institutions itself has been enhanced by the elimination of discretion over monetary policy (by way of establishing a currency board), by privatization as well as by improving transparency and information policy. However, the actual lack of commitment with regard to democratic control mechanisms represents a permanent threat of the economic reforms already realized so far.