Abstract
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.
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Notes
- 1.
According to IMF governance finance statistics (various years) the average for 18 Latin American countries hovers around 20% for the last 30 years, whereas the respective averages for countries like Germany or Sweden are much higher.
- 2.
- 3.
- 4.
In the words of Ralf Dahrendorf: “the one’s populism, is the other one’s democracy, and vice versa.” (quoted in Mudde 2004, p. 543).
- 5.
For example, German Social Democrats never got more than some 40 plus percent of the votes in any federal election since their foundation in 1869.
- 6.
Even Bismarck himself was very cautious not to introduce instruments such as a personal income tax that might get out of hands, once parliaments had their say on it (Kemmerling 2009, p. 103).
- 7.
I call this strategy O to keep it analytically distinct from the left’s moderate strategy T, even if both require tax revenues to finance their preferred policy outcomes. The idea is that both types need to invest in revenue collection and state capacity, even if the final aims differ: the left prefers a (redistributive) welfare state, the right an insurance state.
- 8.
‘Third Way’ may have a positive, normative interpretation, but I use the concept here mainly as an analytic category (Glyn and Wood 2001).
- 9.
A graph with w 2 < w 1 and v 1 < v 2 looks very similar to the lower panel of Fig. 2.
- 10.
As symbolized in García Márquez’ (1967) book title ‘One hundred years of solitude’.
- 11.
See, for instance, Bulmer Thomas (2003, p. 109) who argues that revenues from direct and indirect taxes were ‘pathetically’ low with the exception of the Southern Cone.
- 12.
According to Correlates-of-War data for the 19th century the ratio of civil wars to inter-state wars is roughly 9 to 1 in Latin America, as compared to 2 to 1 in Europe.
- 13.
E.g., Latinobarómetro data for 2005 shows that 70% of people said that privatizations were not beneficial for their countries.
- 14.
This is what, for instance, the literature on multilateral trade liberalization would argue (Mansfield and Milner 1997).
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Acknowledgements
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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Kemmerling, A. (2017). Populism and the Welfare State: Why Some Latin American Countries Produce Cycles Instead of Stability. In: Linhart, E., Debus, M., Kittel, B. (eds) Jahrbuch für Handlungs- und Entscheidungstheorie. Jahrbuch für Handlungs- und Entscheidungstheorie. Springer VS, Wiesbaden. https://doi.org/10.1007/978-3-658-16714-1_2
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