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9 of 9 people found the following review helpful
3.0 out of 5 stars "Modern Political Economy" in Latin America, June 4, 2001
This review is from: Debt, Development, and Democracy (Paperback)
Frieden's "Debt, Development and Democracy" is a rational-choice analysis of economic group interests (the "demand side" of political economy) in Latin America that seeks to explain widely differing political and economic outcomes in five countries who faced nearly identical external economic conditions. By holding the external financial environment (foreign lending) constant across the five cases, Frieden can explain two kinds of divergent outcomes (economic policy and political change) through his independent variable: the political interaction of economic interest groups acting rationally vis-a-vis the state to maximize their interests.
Frieden's argument rests on the assumption that foreign loans were liked a pie to be divided. When the pie was large, during the lending spree of 1965-1982, economic interest groups in each of the five countries determined the distribution of the pie based on their political competition for capital. Since these groups were acting to maximize their economic interests, Frieden analyzes these interests in order to explain their impact on the first dependent variable: economic policy during the borrowing period. He finds that the most significant factor determining interests was the nature of national labor-capital relations. In the three cases where labor-capital relations were calm (Mexico, Venezuela and Brazil) various "sectors" of the economy squabbled over the pie, resulting in interventionist economic policy and political cleavages that cut across the labor-capital divide. The winners in this battle for government largesse were the economic sectors that were strongest in two key areas: asset specificity and concentrated organization. But in the two cases where labor-capital relations were contentious, (Argentina and Chile) Frieden shows that capitalists across all sectors recognized their common interest and refrained from sectoral squabbling by forcing the state to eschew interventionism and protect the business climate by liberalizing markets.
After 1982, when the pie began to shrink, it was the nature of these established interest group/state relationships that determined Frieden's second dependent variable: each country's political response to the financial crisis. In the 3 sectoral countries, plus Argentina (where class conflict had subsided and sectoral cleavages therefore rose to prominence), the politically powerful sectors realized their common interest by joining forces to overthrow the regime or government (or the "policy orientation" in the case of one-party Mexico) that could no longer protect their economic interests. But in Chile, where class conflict still seethed, Frieden argues that the entire business community made a rational choice to maintain its pro-regime stance, feeling that they had more to fear from a resurgence of the left than they did from the government's inability to meet their economic demands. This explains the fact that Chile is the book's only case where authoritarianism survived the debt crisis.
Frieden offers two kinds of evidence to test his theory: quantitative and qualitative. The qualitative evidence, showing the behavior of interest groups vis-a-vis the state, is made up of interviews with key players in each of the five countries, plus numerous citations from other studies, both historical and contemporary, that ostensibly use qualitative data. The quantitative data is primarily made up of statistics on Frieden's key antecedent condition, foreign lending (to illustrate the similar nature of debt conditions across the five cases) and also his economic dependent variable: well-organized and asset-specific sectors pushing for state intervention in the economy (to illustrate the fact that sectoral economies spent their foreign loans in statist ways, while the two other cases spent their money in more "liberal" ways). Fewer statistics are needed for Frieden's political dependent variable, political change after the debt crisis, since most observers would agree that Chile changed much less than the other cases (although some would say that Frieden's "policy orientation" variable in Mexico is meaningless, since the PRI never lost its grip on power. But if Frieden were to admit that Mexico did not experience political change after the debt crisis, then his argument would be falsified).
Frieden makes it easy to assess the logical completeness of his rational choice argument by himself bringing up possible alternative theoretical interpretations of his data. While this is an admirable attempt at fair and open social science, it also gives us easy access to the deficiencies of his approach. Frieden himself admits that the behavior of interest groups cannot account for all changes in political economy, but then goes on to assert that "trends toward or away from democracy are largely a function of political actors' evaluation of which institutional arrangement will best serve their interests, not of structural characteristics of developing societies" (137). While this is a bold statement, it robs all other variables (international economic conditions, institutions, the state, ideology, strategic interaction, etc.) of too much of their explanatory power. To argue that economic interest groups alone can determine the nature of economic policy and the extent of political change is an overstatement of their individual capabilities, and Frieden probably knows it. Rational choice assumes too much omnipotence on the part of particular groups and individuals, and too much power to act in their collective interests. Nonetheless, Frieden's explanation is parsimonious, and sheds much light on heretofore ignored factors in the development/democracy relationship.
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Debt, Development, and Democracy
Debt, Development, and Democracy by Jeffry A. Frieden (Paperback - June 3, 1992)
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