THE POLITICAL ECONOMY OF NEOLIBERAL RESILIENCE Developmental regimes in Latin America and Eastern Europe Inauguraldissertation zur Erlangung des Doktorgrades der Wirtschafts- und Sozialwissenschaftlichen Fakultät der Universität zu Köln 2015 vorgelegt von M.A. Aldo Madariaga Espinoza aus Valparaíso (Chile) Referent: Prof. Dr. Dr. h. c. Wolfgang Streeck Korreferent 1: Prof. Dr. Jens Beckert Korreferent 2: Prof. Dr. Béla Greskovits Tag der Promotion: 29.06.2015 Table of Contents List of tables ..................................................................................................................... vi List of figures ................................................................................................................... ix Acronyms and abbreviations ......................................................................................... xii Acknowledgements ........................................................................................................ xiv INTRODUCTION ............................................................................................................ 1 I. Background ............................................................................................................ 2 a) Empirical puzzle .................................................................................................. 2 b) State of the art ...................................................................................................... 5 c) Theoretical foundations and scope ...................................................................... 9 II. Aims, research questions and contributions .................................................. 12 III. Methodology ..................................................................................................... 16 a) Research design ................................................................................................. 16 b) Research methods .............................................................................................. 17 c) Case selection .................................................................................................... 19 d) Operationalization: indicators, measurement and data management ................. 21 IV. Outline ............................................................................................................... 25 CHAPTER 1 .................................................................................................................... 27 INTERESTS, INSTITUTIONS, AND THE STUDY OF NEOLIBERAL RESILIENCE ................................................................................................................. 27 I. Developmental regimes and dominant social blocs .......................................... 28 a) Actors ................................................................................................................. 32 b) Policies ............................................................................................................... 35 c) Preferences ......................................................................................................... 39 d) Context ............................................................................................................... 43 II. Turning points .................................................................................................. 44 a) Economic turning points: the effects of markets on politics ............................. 45 b) Political turning points: the effects of politics on markets ................................ 47 III. Institutions ........................................................................................................ 49 ii a) Political institutions and policy formation ......................................................... 49 b) Policies as resilient institutions .......................................................................... 50 c) Mechanisms of institutional resilience............................................................... 53 IV. Summary ........................................................................................................... 59 SECTION I NEOLIBERAL DEVELOPMENTAL REGIMES AND DOMINANT SOCIAL BLOCS ............................................................................................................ 62 CHAPTER 2 NEOLIBERALISM IN THE SOUTH, ACT 1: AUTHORITARIANISM ................................................................................................ 64 I. Reform: The marriage of markets and guns .................................................... 65 a) The ascendance of the neoliberals ..................................................................... 69 b) Diverse societal support for neoliberalism ........................................................ 72 II. Aftermath: Financial collapse, debt crisis and the “lost decade” ................ 77 a) Neoliberal power blocs during the debt crisis ................................................... 79 b) Old wine in new bottles? the faith of the first neoliberal experiment ................ 81 III. Conclusions ....................................................................................................... 87 CHAPTER 3 NEOLIBERALISM IN THE SOUTH, ACT 2: DEMOCRATIZATION/ DEMOCRACY .................................................................... 89 I. Consolidation: the neoliberal tide at both side of the Andes ........................... 91 a) Chile: center-left governments without a business base .................................... 94 b) Argentina 1: a renewed neoliberal experiment ................................................ 100 c) Argentina 2: sustaining neoliberalism through rough waters .......................... 107 II. Legacies: the “turn to the left” and the future of neoliberalism in Latin America ...................................................................................................................... 111 a) Argentina: the dramatic downfall of a neoliberal poster child ........................ 113 b) Chile: the perils of lacking a business base ..................................................... 117 III. Conclusions ..................................................................................................... 120 CHAPTER 4 NEOLIBERALISM IN THE EAST, ACT 1: TRANSITION ........... 123 I. Reform: The dissolution of communism through shock therapy ................. 125 a) “No time for a third way”… the ascendance of the neoliberals ...................... 126 b) Neoliberal policy regimes in Eastern Europe .................................................. 128 II. Aftermath: unfolding the umbrella over neoliberal reforms? ................... 130 a) Extraordinary politics in Poland: the gradual unfolding of the umbrella ........ 131 b) Extraordinary politics in Estonia: connecting neoliberalism and nationalism. 136 iii c) Normal politics in Estonia: strengthening neoliberalism ................................. 139 d) Normal politics in Poland: seeking alternatives .............................................. 146 III. Conclusions ..................................................................................................... 155 CHAPTER 5 NEOLIBERALISM IN THE EAST, ACT 2: EUROPEANIZATION ........................................................................................................................................ 157 I. Consolidation: Europeanization and transnationalization ............................ 158 a) Estonia: Consolidating neoliberalism .............................................................. 160 b) Poland: in the search for a dominant social bloc … ........................................ 167 II. Legacies: Crisis in the center and the future of neoliberalism in the East 177 III. Conclusions ..................................................................................................... 182 SECTION II MECHANISMS OF NEOLIBERAL RESILIENCE ......................... 185 CHAPTER 6 CREATION OF SUPPORTERS ......................................................... 187 I. With a little help of my friends… creating supporters for neoliberalism .... 189 a) Chile: stabilizing a pragmatic coalition ........................................................... 189 b) Estonia: the building blocks of neoliberal capitalism ...................................... 200 II. When love is not enough… ............................................................................ 210 a) Argentina: between state retrenchment and coalition building........................ 210 b) Poland: sustaining state-ownership in the era of transnationalization ............. 218 III. Conclusions ..................................................................................................... 225 CHAPTER 7 OPPOSITION BLOCKADE ................................................................ 229 I. Chile and Estonia: restricting participation in the polity and the workplace 230 a) Chile 1: Shrinking the left ................................................................................ 230 b) Estonia 1: Disenfranchising ethnic minorities ................................................. 236 c) Chile 2: Farewell to the labor movement ......................................................... 245 d) Estonia 2: Labor, the actor that never was… ................................................... 248 II. Argentina and Poland: the perils of incorporation under democratic rule 250 a) Argentina: opposition blockade through delegative