The Challenges of Consolidation

Abstract

As the recent wave of democratization crested in the 1980s, skeptics questioned the capacity of new democratic governments to manage the daunting political challenges of economic reform. It was thought that either reform would undermine democracy by placing undue strains on fragile polities, or democratic politics would undermine the coherence of policy, generating a downward economic spiral. Concerns about democratic breakdown and policy stalemate remain salient in many parts of the world, particularly the new republics of the former Soviet Union. By the 1990s, however, newly established democratic regimes in many developing countries had initiated deep and wide-ranging economic reforms. The early democratizers of Southern Europe are now firmly ensconced in the European Union, having undertaken important economic adjustments required for their admission. In Latin America, longstanding development strategies have been reversed by fundamental shifts in economic policy: deep fiscal and exchange-rate adjustments, reduction of trade barriers, and privatization of state-owned enterprises. The trade-oriented countries of East and Southeast Asia did not experience crises of the same magnitude, but in the Philippines, Korea, Taiwan, and Thailand, the trend toward political liberalization has also coincided with the initiation of a new round of economic policy changes. And, of course, most of the postcommunist democracies of Central Europe have inaugurated massive--and wrenching--market-oriented reforms. The changes in all these regions and countries have been