Luigi Manzetti - Neoliberalism, Accountability, and Reform Failures in Emerging Markets: Eastern Europe, Russia, Argentina, and Chile in Comparative Perspective

Neoliberalism, Accountability, and Reform Failures in Emerging Markets

Eastern Europe, Russia, Argentina, and Chile in Comparative Perspective

Luigi Manzetti

The Pennsylvania State University Press

University Park, Pennsylvania

Library of Congress
Cataloging-in-Publication Data

Manzetti, Luigi.

Neoliberalism, accountability, and reform failures in emerging markets: Eastern Europe, Russia, Argentina, and Chile in comparative perspective / Luigi Manzetti.

p. cm.

Includes bibliographical references and index.

Summary: An analysis of the failure of neoliberal market reforms in producing sustained growth in emerging markets. Focuses on problems with weak accountability institutions, and collusion between government and business, political patronage, and corruptionProvided by publisher.

ISBN 978-0-271-03574-1 (cloth : alk. paper)

1. Developing countriesEconomic policy.

2. NeoliberalismDeveloping countries.

3. Structural adjustment (Economic policy)Developing countries.

4. Government accountabilityDeveloping countries.

5. Europe, EasternEconomic policy1989

6. Russia (Federation)Economic policy1991

7. ArgentinaEconomic policy.

8. ChileEconomic policy.

I. Title. HC59.7.M2865 2009

338.9dc22 2009042714

Copyright 2009
The Pennsylvania State University

All rights reserved

Printed in the United States of America
Published by The Pennsylvania State University Press,
University Park, PA 16802-1003

The Pennsylvania State University Press
is a member of the
Association of American University Presses.

It is the policy of The Pennsylvania State University Press to use acid-free paper. Publications on uncoated stock satisfy the minimum requirements of American National Standard for Information SciencesPermanence of Paper for Printed Library Material, ANSI Z39.48-1992.

This book is printed on Natures Natural, which contains 50% post-consumer waste.

Figures and Tables
are grouped at the ends of .

My interest in the relationship between market reforms and accountability started in 1990, when I was working on a related project on privatization policy in South America. Having lived through two bouts of hyperinflation spirals and witnessed firsthand how it had destroyed peoples lives and savings, I came to the conclusion that market-oriented reforms were the only way out in that part of the world. However, as my field research progressed, I realized fairly quickly that theory was not meeting reality. Worse yet, reforms were steamrolled through undemocratic means, and in the process the political elites in charge were enriching themselves and those business groups willing to bankroll them. In 1993, while I was a researcher at the North-South Center of the University of Miami, I wrote a short paper pointing to these problems and their possible consequences. To the best of my knowledge, nothing in English had been published on that subject matter at the time. Later that year the Wilson Center invited me to give a presentation as part of a conference on market reforms in Latin America where I exposed my misgivings. I did not get many questions, but at the end of the talk a senior staffer of the World Bank came to me and said, So its you who is writing these things! You know, you should be careful. We are trying to help these countries and what you write can be used by those vested interests which are trying to stop the reform process. In 1995 a high-level officer of the U.S. State Department gave me the same warning. His line of thought was the following: Some presidents have engaged in corruption and crony capitalism, but they will change their ways, and if they do not, people will vote them out of office. However, three years later the tune had changed considerably. The same person approached me to give a talk co-sponsored by the U.S. State Department to discuss how corruption was detrimental to foreign investments. As U.S. companies were losing business in lucrative privatization bids, the Clinton administration began to change its earlier views. The sad thing is that the problem was not limited to Latin America. At the end of a presentation that I gave at a conference sponsored by the World Bank, an eastern European gentleman approached me and said, What you just described about crony market reforms in Latin America could have applied just as well to my own country. It was a sobering realization that things were going astray globally. In the aftermath of Argentinas collapse in 2002, I began to notice that what drove that country to disaster shared many similar patterns with early financial crises in East Asia and Russia. From that point on I became hooked. I first published the original theoretical argument of the book in World Politics in 2003, and by 2006 I completed most of the field research.

During the gestation of the project I received help and advice from many people and institutions in so many ways. Surely, this book could not have been written without the generous financial assistance of the North-South Center ( NSC ) at the University of Miami where I spent most of the 199295 period researching on the chapters dealing with Argentina and Chile. The NSC proved to be a once-in-a-lifetime opportunity for a project of this kind. This was due to the direct linkage that the NSC had with the U.S. State Department, which allowed me to travel to Latin America on many occasions and receive the full cooperation of U.S. Embassy staffs in setting up interviews with more than three hundred and fifty policy makers, economists, bankers, politicians, diplomats, and so forth, who would have been impossible to contact as a simple academician. To this end, I would like to personally thank the U.S. Information Agency personnel in Miami (Louis Falino), Argentina (Alexander Almasov), Brazil (Lane Cubstead), and Chile (Barbara Moore). Back in Miami, I took full advantage of the large number of scholars in residence who provided important suggestions and intellectual support. More specifically, I am indebted to my good friend Jeff Stark, whose good humor kept us all sane, and Robin Rosenberg, Ambler Moss, and Tony Maingot. My graduate assistants in Miami, Mara Eugenia Mujica and Mara Gloria Cano, did a great job in carrying out their research assignments and giving me plenty of suggestions.

In Argentina, Roberto de Michele not only spent considerable time helping with the field research but in the process became one of my most trusted friends, whose hospitality made Buenos Aires like a second home for me. Similarly, Mirta Detrizio at the U.S. Information System office turned out to be a one-person army as she did an incredible job in setting up interviews on my behalf and taught me a great deal about Argentina. Luis Moreno Ocampo, Kevin OReilly, Roberto Saba, and Ernesto Calvo were of invaluable help as well while I was in Buenos Aires. I am deeply indebted to my friends in St. Petersburg, Moscow, and Prague who helped out with my research trips in Russia and the Czech Republic. Moreover, I would like to thank Silvana Malle, the former Head of Division of Non-member Economies at the Economics Department at the Organization of Economic Cooperation and Development, and now at the University of Verona, for her comments and suggestions regarding the Eastern European and Russian cases.