After the Washington Consensus: Restoring Growth and Reform in Latin America
By Pedro-Pablo Kuczynski, John Williamson
Institute for International Economics, 2003, 325 pp.
Post-stabilization Politics in Latin America: Competition, Transition, Collapse
By Carol Wise, Riordan Roett
Brookings Institution Press, 2003, 306 pp.
With an impeccable sense of timing and relevance, the Institute for International Economics has brought together a galaxy of practitioners and theorists, all deeply involved in conceptualizing and in some cases implementing the so-called Washington Consensus -- the economic reform agenda that motivated policymakers in Latin America during the 1990s. Williamson is seen as the progenitor of the package of measures that was intended to stimulate growth in the region through market-oriented reforms; his co-editor, Kuczynski, served as minister of economy and finance in his native Peru between 2001 and 2002. The subtitle of the book, however, is an indication of the disappointing results of these policies, and the need to rethink them. Not surprisingly, perhaps, the authors do not see their previous policy prescriptions as responsible for the region's dismal performance. They lamely attribute the catastrophic fall of Argentina, once the poster boy for the successes of Washington maxims, to "a conjunction of unfortunate developments." And as for the Washington Consensus in general, they argue that results did not match hopes because the reforms were "incomplete." Although they do concede that questions of equity were neglected, their new set of recommendations restate much fairly obvious conventional wisdom: that budget surpluses should be accumulated in times of prosperity; that tough fiscal constraints should be imposed on local and provincial governments; that reserves should be built up and a stabilization fund established when exports are strong; that exchange rates should be flexible; and that the use of dollars should be discouraged in domestic savings and borrowing -- all easier said than done. The major weakness of these arguments, as before, is that the cart is put before the horse -- liberalization and stabilization of the economy before institutional reform. And as Patricio Navia and Andres Velasco point out in one of the best chapters in this collection, politics does matter. Much of the first wave of reform was imposed by emergency decree, but real change in the judicial and regulatory systems requires prolonged negotiations with powerful, entrenched interests. It is telling that the two finance ministers represented here -- Kuczynski of Peru and Ricardo López Murphy of Argentina -- left office after short stints, having received little of the political support they deemed essential. A more interesting testimony would have been that of the remarkable, resilient, and ultradiscrete Pedro Malan, who was finance minister of Brazil for all eight years of Fernando Henrique Cardoso's presidency.
In a fascinating counterpoint to the Institute for International Economics volume, Wise and Roett bring together a group of leading scholars to take a hard look at precisely this intersection of economic policymaking and politics. In this excellent volume, which examines the cases of Brazil, Argentina, Chile, Mexico, Peru, and Venezuela, they argue that the ultimate viability of market reform lies in the construction of a more credible structure of democratic governance. In fact, they attribute many of the shortcomings of reform in the 1990s to the heavy reliance on authoritative management styles, which alienated the reform teams from their own constituencies. Taken together, these two timely volumes nicely complement one another: Kuczynski and Williamson provide the economic fireworks, while Wise and Roett provide the nitty-gritty of everyday politics.