Societal Consequences of Market Reform in Peru, The

Latin American Politics and Society, Spring 2006 by Arce, Moisés

ABSTRACT

This article analyzes how market reform policies already in place affect social interests, and the feedback effects of those interests on reform processes. The variety of societal responses includes the creation of new societal organizations, reflecting the variable content and asymmetrical distribution of costs and benefits of the policies implemented. Because of this variety even in Peru, where the disorganizing effects of neoliberal reform appear to be strongest, it would seem that the societal impact of economic reform elsewhere in Latin America would also warrant more careful examination.

Since the mid-1980s, Latin American countries have increasingly turned from the state to the market to achieve sustainable economic growth. Much of the literature on the politics of market-oriented or neoliberal reform has emphasized the origins of this change, exploring why countries adopt market policies and what political and social conditions help or hinder their implementation (Haggard and Kaufman 1992, 1995; Nelson 1990). The study of market transitions also has been predominantly state-centered, focusing on the role of political leaders and technocratic elites during economic restructuring (Dominguez 1996; Teichman 2001). State actors are widely perceived as market vanguards, Grafting reforms in a highly autonomous and insulated policymaking environment with limited input or interaction with social forces.

Although the bulk of the research on the politics of economic reform has centered on the causes of reform, the literature has advanced two sets of important, albeit contradictory, propositions about reform's political and social consequences.1 Originally, scholars emphasized the disorganizing or weakening effects of neoliberal policy change on societal groups. The fundamental tenet of this proposition emerged from the characterization of market policies as entailing concentrated and immediate costs for specific groups, and dispersed and long-term benefits for the rest of society (Haggard and Kaufman 1995). Viewed from this perspective, the politics of economic reform was read simply as "the politics of neutralizing the losers" (Schamis 1999, 237); in particular, organized labor and parties with ties to labor organizations.

This dominant perspective, however, came under scrutiny on the basis of additional evidence. Various scholars began to suggest that economic reforms, rather than imposing concentrated costs on powerful interest groups or diffused benefits on the rest of society, have created concentrated gains or rents to particular groups (Hellman 1998). The empowerment of traditional elites, the strengthening of business groups (Teichman 2001), and even the formation of "distributional coalitions" (Schamis 1999) are some of the notions that have come to dominate the current debate about the consequences of neoliberal reform.

This winner-loser tradeoff characterization of neoliberal reforms, however, disguises a richer causal story that cannot be captured by reducing the effects of marketization to a single policy reform, a specific economic sector or social interest, or, as Remmer aptly notes, "a simple collective action dilemma whose resolution depends upon state actors" (1998, 8). While market reforms undeniably may have empowered some groups at the expense of others, marketization is all of these things and more. These current propositions tend to overlook the complexity of market policies and the variable impact of different reforms on interactions between state and civil society. In a sense, prevailing views regarding the impact of market reforms ignore how capitalism, borrowing Schumpeter's term, represents a force of "creative destruction" (1975, 82-85).2 Neoliberal reform policies can create new bases for democratic politics by strengthening or even triggering new patterns of societal organization; but they can also destroy or undermine the capacity of other societal groups through outright political exclusion or clientelism.

As market economics increasingly dominates the developing world, it becomes imperative to assess the political and societal consequences of neoliberal reform. How do market reforms affect social interests? Which societal groups are strengthened and which are weakened by neoliberal policy change? Are new sets of actors emerging? If so, what are their feedback effects on reform processes?

This article probes these questions for the case of Peru, which has been often held out as a prime example both of the draconian imposition of neoliberal reform and of the widespread disintegration of representative institutions and other societal groups (Cameron 1994; Cotler 1994; Panfichi 1997). Peru experienced one of the deepest economic crises in the region during the 1980s, coupled with far-reaching social turmoil resulting from prolonged guerrilla warfare. In the wake of this crisis, Peruvians rejected the entire traditional political party system and elected to the presidency Alberto Fujimori, who, in 1990, was an independent candidate, or political outsider. Fujimori initially proposed a gradual program of economic adjustment but, once elected, turned to a classic program of neoliberal orthodoxy in accordance with the so-called Washington Consensus (Williamson 1990). In early 1992, the president took a radical step by staging a self-administered coup. The autogolpe enabled Fujimori to implement major market reforms via numerous presidential decrees. Certainly, the Peruvian state-especially in the early Fujimori years-demonstrated a far greater capacity for relatively autonomous decisionmaking than did other states in Latin America, even with respect to business (Manzetti 1999, 250).