Polarizing Mexico: The Impact of Liberalization Strategy by Enrique DusselPeters, Boulder, Colorado: Lynne Rienner Publishers, 2000, 249 pp., ISBN 1-55587-861-X (bound). Growth, Employment and Equity: The Impact of the Economic Reforms in Latin America and the Caribbean by Barbara Stallings and Wilson Peres, Washington, D.C.: Brookings Institution Press and United Nations Economic Commission for Latin America and the Caribbean, 2000, 252 pp., ISBN 0-8157-8087-7 (paper).

Since 1982 the economies of the poorer countries of the Americas have been profoundly restructured along the lines prescribed by the “Washington Consensus.” The standard list of prescribed policies includes: (a) radically reducing tariff and non-tariff barriers to trade; (b) eliminating foreign exchange and capital controls; (c) deregulating major industries, including finance; (d) selling most public corporations; (e) reducing union collective bargaining power and promoting labour market “flexibility”; (f) reducing central bank political accountability and narrowly focusing monetary policy on minimizing inflation; (g) cutting social expenditures to balance government budgets without regard to the business cycle; and (h) eliminating most government subsidies, including those targeted on the poor (e.g., food subsidies for the urban poor, cheap credit for small farmers). The new policies were generally introduced as “structural adjustment” conditions attached to World Bank, IMF, and government loans to refinance foreign debts. Proponents of this “neoliberal” (i.e., market liberalization) reform package argued it would have four sets of desirable effects. First, it would improve macroeconomic stability (i.e., end hyper-inflation, chronic trade deficits, and massive currency devaluations). Second, it would increase exports, hence foreign currency earnings, hence capacity to meet foreign debt payments. Third, it would increase foreign investment levels and allocate investment more efficiently, increasing labour productivity and economic growth rates, thereby boosting formal sector job creation and real wages. Finally, it would reduce income inequality as farmers were paid more for their products, and unskilled workers were paid more relative to skilled workers. The books under review ask which of the promises made by neoliberal reformers have been realized, and where they have not been, what went wrong. Enrique Dussel Peters, an economist at the National Autonomous University (UNAM) in Mexico City, offers the most detailed and penetrating analysis of the effects of the liberalization of Mexico’s economy that this reviewer has encountered in English. Stallings and Peres are researchers at the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC). They survey the main findings of a larger research effort conducted by individual country experts, in cooperation with ECLAC researchers, in the nine countries of the region with the longest experience of neoliberal reforms: Mexico, Brazil, Argentina, Chile, Costa Rica, Jamaica, Colombia, Bolivia and Peru. They stress the substantial differences among their cases: some countries were in much more severe crisis than others at the outset of the reforms; Chile started the reform process a full decade before the rest, under the auspices of Pinochet’s military dictatorship; Mexico began the reform process with a much more developed manufacturing sector; and so on. These and other differences notwithstanding, Stallings and Peres identify striking similarities across their cases that can be traced to the neoliberal policies that they all implemented. Both studies focus mainly on the experience of the 1990s. This is fair. The 1980s—known as “the lost decade” in Latin America—began with the crisis of the “import substitution industrialization” (ISI) strategy of economic development that had prevailed in the region since the 1930s. The decade ended with the inherently difficult transition to the radically different neoliberal model. If we wish to evaluate the functioning of the neoliberal model, we need to look at the years when it was fully in place. Our authors find that neoliberal policies were very successful in reducing inflation to single digits, and boosting foreign investment and export earnings. However, the reforms did not prevent uncontrolled currency devaluations in many countries, including the three largest. Worse, the reforms probably made such devaluations more likely and more destructive when they occurred. Contrary to expectations, average trade deficits were higher in the 1990s than that …