Insulated economic policymaking and democratic governance: the paradox of second generation reforms in Argentina and Brazil

Insulated economic policymaking and democratic governance: the paradox of second generation reforms in Argentina and Brazil

Challenges posed by the simultaneous consolidation of economic and political reform in Argentina and Brazil

What tensions exist between the consolidation of democratic governance and the deepening of market reform for emerging market economies in Latin America? Second-generation reforms aim to strengthen the institutions of governance, reform the state and enhance the rule of law, strengthening the institutional foundations of democratic governance that were undermined by first-generation market reforms. So can they be launched using the same political strategies as first-generation reforms?

This paper argues that the central dilemma of democratic governance in emergent market economies is how to retain the advantages of strong executive authority for market reform while at the same time providing the institutional checks and balances that guarantee accountability. The paper:

  • investigates the challenges of the simultaneous consolidation of democracy and the market economy
  • concentrates on the tensions between democratic governance and the insulation of economic policy-making
  • contrasts the experiences of Argentina and Brazil, focusing on the politics of institutional reform in two critical areas of good governance, the modernisation of the state and the reform of the judiciary
The paper concludes that:
  • as emerging market economies and consolidating democracies gradually move from first towards second-generation reforms, the institutions and mechanisms of governance have proved extremely resistant to change
  • inertia is particularly difficult to overcome, vested and entrenched interests tend to resist change being in a better position to do so than reformers
  • the quality of governance can only be improved by undertaking profound political reforms
  • the reform of the political party system and executive-legislative relations constitutes the crux of the challenge of consolidation, however these are the most difficult to reform as the persons who are most affected by any change are the same ones who control the power to change or not
  • Latin America’s core governance problem is in combining presidential systems, with an increasing concentration of power in the presidency, and parliamentary electoral systems based on proportional representation, generating a highly fragmented and volatile party system
  • the key challenge for emerging market democracies is to organise political conflict in ways that allow successive administrations to organize relatively stable coalitions of support and sustain a relatively stable consensus on economic fundamentals, avoiding sharp policy discontinuities and the consequent erosion of policy credibility
  • governance reform entails a re-equilibration of executive-legislative relations, a reform of the political party system and electoral laws, as well as the recasting of the judiciary in the institutional framework of democratic governance
  • sustaining democratic governance and economic reform requires reforming the way in which politics are conducted, reforming executive-legislative relations and the political party system that underpins them therefore constitutes the new frontier of reform
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