Populism and the Welfare State: Why Some Latin American Countries Produce Cycles Instead of Stability

  • Achim Kemmerling
Part of the Jahrbuch für Handlungs- und Entscheidungstheorie book series (JAHAEN)


Populist politics and demand for nationalization are a recurrent phenomenon in many Latin American countries. Compared to the ‘European’ (welfare) state with its moderate tax-based redistribution, many Latin American countries have cycled between right-wing governments pursuing radical privatization and left-wing governments pursuing nationalization of many sectors. Why do we see these cycles with seemingly little middle ground? This paper argues that the root of this phenomenon lies in a political conflict between the Left and the Right in the absence of a credible commitment device: The Left can only develop welfare-state policies of redistribution with a minimum degree of state capacity such as an effective tax administration; the Right would only help establishing such an administration if they do not fear radical redistribution. With trust lacking between both sides, many Latin American countries end up in a political impasse where the Right shifts to a neoliberal, small state, whereas the Left shifts to a populist nationalization state. To bolster this argument, I construct a simple model of (in-)complete information with two ideal-type political parties. Its key result is that if the (moderate) Right is unsure about the Left’s motives it will deviate from its first preference, a strong state. As a consequence, the (moderate) Left also deviates from its preferred tax-based redistribution and the state ends up in an antagonistic equilibrium: the privatization vs. nationalization cycle. Anecdotal historical evidence shows some examples of Latin American countries that became trapped in such an antagonistic constellation which led to cycles instead of stability.


Policy instability Populism Latin America Privatization Nationalization 



I would like to thank Graciela Bensusan, Ilan Bizberg and several of his colleagues at the Colegio de Mexico Santiago Cariboni, Luicy Pedroza, the members of a panel at MPSA 2011 in Chicago as well as the members of the Political Economy Research group. Most importantly, I would like to thank two anonymous reviewers and Eric Linhart for their meticulous and extremely helpful reviews.


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© Springer Fachmedien Wiesbaden GmbH 2017

Authors and Affiliations

  1. 1.School of Public PolicyCentral European University BudapestBudapestUngarn

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