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“Leverage, policy ideas, and economic policy change. Some notes about the Peruvian case of neoliberal economic reform.” |
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Abstract:
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Conventional wisdom - especially regarding the analysis of developing countries’ policies – establishes that international structures constrain and determine state behavior. Several studies and popular arguments have arrived to similar conclusions in their explanations about the causes of the wave of neoliberal reforms implemented in Latin America during the last decade. Various analysts believe that the United States backed by international financial institutions (IFIs) –notably the International Monetary Fund and the World Bank - taking advantage of Latin American countries’ economic crisis and their desperate need for funds, have forced these to undertake strict adjustment programs and to pursue market-oriented reforms. The purpose of this paper is to determine if this assumption corresponds to the Peruvian case of neoliberal economic reform. In this regard, it analyzes the context prior to and that surrounding the application of reforms in Peru during the early 1990s. Concretely, it pays attention to the linkage between domestic politics and the state’s policy towards foreign capital and international financial institutions.
Contrary to conventional wisdom, but without denying the role of international constraints in the Peruvian case of neoliberal economic reform I suggest based on my observations that this latter is not the direct result of leverage exercised by core states and international financial institutions. I emphasize the importance of domestic political conditions in determining economic policy change, as well as that of consensus and commonality of policy ideas instead of coercion.
Available evidence suggests that the various administrations that governed Peru since the mid- 1970s were surrounded by similar contexts characterized by economic crisis, need for financial support, and the signing of conditionality agreements in which the international financial institutions (IFIs) enforced policy-based lending. Nonetheless, despite Peru being one of the first countries affected by the external debt problem at the end of the 1970s, and the pressure exercised by the IFIs for almost fifteen years, consecutive Peruvian administrations rejected the possibility of applying the IFIs’ economic policy prescriptions. In contrast, in 1990 Peru initiated a dramatic economic reform whose pace and scope took even the multilateral institutions by surprise since it surpassed the requirements dictated by these.
Why the various administrations that governed Peru during 1975-1990 did not apply economic reforms in the line of the IFIs’ prescriptions and only in 1990 the Fujimori government applied a whole program that not only coincided with but also surpassed these prescriptions? In an attempt to answer to this question I analyze the context surrounding each of the Peruvian administrations as well as their respective reaction to the IFIs’ leverage during the period aforementioned. I operate a comparative analysis based on Mill’s “Method of difference" through which the researcher observes cases that although sharing the same characteristics, save one, their outcomes differ. The dissimilar characteristic is considered the cause of the variation in the cases' outcomes. Variation on the dependent variable (economic policy change) and on one of the independent variables (policy ideas) across time, while holding other potential causal variables constant (economic crisis and IFIs leverage), may help to see the plausible relationship between change in policy ideas and the implementation of market oriented reforms.
The first section refers to political economy literature that considers IFIs’ leverage associated to neoliberal reform. In the second section there is a brief historical account of the relationship between Peru and the IFIs during the period 1970 -1990. The third section explains why and how domestic political issues – especially the diffusion of market-oriented policy ideas by non- state actors and the support of state actors for these policy ideas - were crucial in determining economic policy change. |
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Association:
Name: International Studies Association
URL: http://www.isanet.org
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Citation:
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MLA Citation:
| Hesselroth, Alba. "“Leverage, policy ideas, and economic policy change. Some notes about the Peruvian case of neoliberal economic reform.”" Paper presented at the annual meeting of the International Studies Association, Hilton Hawaiian Village, Honolulu, Hawaii, Mar 05, 2005 <Not Available>. 2009-05-25 <http://www.allacademic.com/meta/p69281_index.html> |
APA Citation:
| Hesselroth, A. , 2005-03-05 "“Leverage, policy ideas, and economic policy change. Some notes about the Peruvian case of neoliberal economic reform.”" Paper presented at the annual meeting of the International Studies Association, Hilton Hawaiian Village, Honolulu, Hawaii <Not Available>. 2009-05-25 from http://www.allacademic.com/meta/p69281_index.html |
Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Conventional wisdom - especially regarding the analysis of developing countries’ policies – establishes that international structures constrain and determine state behavior. Several studies and popular arguments have arrived to similar conclusions in their explanations about the causes of the wave of neoliberal reforms implemented in Latin America during the last decade. Various analysts believe that the United States backed by international financial institutions (IFIs) –notably the International Monetary Fund and the World Bank - taking advantage of Latin American countries’ economic crisis and their desperate need for funds, have forced these to undertake strict adjustment programs and to pursue market-oriented reforms. The purpose of this paper is to determine if this assumption corresponds to the Peruvian case of neoliberal economic reform. In this regard, it analyzes the context prior to and that surrounding the application of reforms in Peru during the early 1990s. Concretely, it pays attention to the linkage between domestic politics and the state’s policy towards foreign capital and international financial institutions.
Contrary to conventional wisdom, but without denying the role of international constraints in the Peruvian case of neoliberal economic reform I suggest based on my observations that this latter is not the direct result of leverage exercised by core states and international financial institutions. I emphasize the importance of domestic political conditions in determining economic policy change, as well as that of consensus and commonality of policy ideas instead of coercion.
Available evidence suggests that the various administrations that governed Peru since the mid- 1970s were surrounded by similar contexts characterized by economic crisis, need for financial support, and the signing of conditionality agreements in which the international financial institutions (IFIs) enforced policy-based lending. Nonetheless, despite Peru being one of the first countries affected by the external debt problem at the end of the 1970s, and the pressure exercised by the IFIs for almost fifteen years, consecutive Peruvian administrations rejected the possibility of applying the IFIs’ economic policy prescriptions. In contrast, in 1990 Peru initiated a dramatic economic reform whose pace and scope took even the multilateral institutions by surprise since it surpassed the requirements dictated by these.
Why the various administrations that governed Peru during 1975-1990 did not apply economic reforms in the line of the IFIs’ prescriptions and only in 1990 the Fujimori government applied a whole program that not only coincided with but also surpassed these prescriptions? In an attempt to answer to this question I analyze the context surrounding each of the Peruvian administrations as well as their respective reaction to the IFIs’ leverage during the period aforementioned. I operate a comparative analysis based on Mill’s “Method of difference" through which the researcher observes cases that although sharing the same characteristics, save one, their outcomes differ. The dissimilar characteristic is considered the cause of the variation in the cases' outcomes. Variation on the dependent variable (economic policy change) and on one of the independent variables (policy ideas) across time, while holding other potential causal variables constant (economic crisis and IFIs leverage), may help to see the plausible relationship between change in policy ideas and the implementation of market oriented reforms.
The first section refers to political economy literature that considers IFIs’ leverage associated to neoliberal reform. In the second section there is a brief historical account of the relationship between Peru and the IFIs during the period 1970 -1990. The third section explains why and how domestic political issues – especially the diffusion of market-oriented policy ideas by non- state actors and the support of state actors for these policy ideas - were crucial in determining economic policy change. |
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