Ben Ross Schneider

Business Associations and Economic Development: Why Some Associations Contribute More Than Others

Most current theoretical treatments view business associations as rent-seeking, special interest groups. Yet, empirical research in a wide range of developing countries reveals a broad range of functions and activities undertaken by business associations, many of which promote efficiency. These positive functions address crucial development issues (emphasized in the New Institutional Economics) such as strengthening property rights, facilitating vertical and horizontal coordination, reducing information costs, and upgrading worker training. The associations that engage in these developmental activities tend to be well organized and staffed. This institutional strength depends in turn on high member density, valuable selective benefits (often delegated by governments), and effective internal mediation of member interests. In addition external factors, especially competitive markets and government pressure, encourage associations to use their institutional strength for productive ends.

Hierarchical Market Economies and Varieties of Capitalism in Latin America

The extensive scholarship on ‘varieties of capitalism’ offers some conceptual and theoretical innovations that can be fruitfully employed to analyse the distinctive institutional foundations of capitalism in Latin America, or what could be called hierarchical market economies (HMEs). This perspective helps identify four core features of HMEs in Latin America that structure business access to essential inputs of capital, technology and labour: diversified business groups, multinational corporations (MNCs), low-skilled labour, and atomistic labour relations. Overall non-market, hierarchical relations in business groups and MNCs are central in organising capital and technology in Latin America, and are also pervasive in labour market regulation, union representation and employment relations. Important complementarities exist among these features, especially between MNCs and diversified business groups, as well as mutually reinforcing tendencies between these dominant corporate forms and general under-investment in skills and in well-mediated employment relations. These four features of HMEs, their common reliance on hierarchy, and the particular interactions among them add up to a distinct variety of capitalism, different from those identified in developed countries and other developing regions.

A comparative political economy of diversified business groups, or how states organize big business

ABSTRACT Diversified business groups are present in nearly all economies and dominate the private sector in most developing countries. This article seeks to add to existing theories, primarily economic and sociological, by analyzing the policies and state actions that promote and sustain business groups, and contribute to significant cross-national variations among them along dimensions of size, range of diversification, and reactions to globalization. The political economy explanation presented here emphasizes the role of politics and policy – especially regulatory policies and overall development strategies – in setting the external parameters of variation among groups, and also incorporates additional internal economic logics (economies of scope and risk reduction). This political economic approach helps distinguish the core logics of three main kinds of business groups – organic, portfolio, and policy-induced – that have reacted differently to recent trends in market reform and globalization.

Organizing Interests and Coalitions in the Politics of Market Reform in Latin America

A recent wave of deep empirical research provides a solid basis for a comparative reassessment of the role of coalitions in the politics of market reform in Latin America in the 1990s. This research confirms earlier findings that interest groups and distributional coalitions were not major protagonists in either antireform or proreform coalitions. The new research goes further empirically into analyzing the origins of interests, especially business interests, and finds them to be much more ambiguous and dynamic than assumed in earlier studies. Consequently, other factors, especially organizations and the evolving macroeconomic context, were stronger influences on preferences regarding reform. Given the relative weakness of interest group coalitions, the article provides a typology and preliminary analysis of other kinds of coalitions—electoral, legislative, and policy—that have become more central to reform politics. These other types of coalitions still require further theoretical elaboration and empirical investigation in order to determine how they can best be deployed to illuminate reform politics.

The Middle-Income Trap: More Politics than Economics

Economists have identified the existence of a middle-income (mi) trap but have yet to analyze the politics of this trap. The authors argue that countries in the mi trap face two major institutional and political challenges. First, the policies necessary to upgrade productivity—as in human capital and innovation—require enormous investment in institutional capacity. Second, these institutional challenges come at a time when political capacity for building these institutions is weak, due primarily to the fragmentation of potential support coalitions. Politics are stalled in particular by fractured social groups, especially business and labor, and more generally by inequality. These conditions result in large measure from previous trajectories of growth. The empirical analysis concentrates on nine of the larger mi countries.

The fiscal impact of privatisation in Latin America

The goal of achieving fiscal balance through privatisation is misplaced because the revenues generated are rarely large or timely enough to bring the budget deficit under control. In Mexico, Argentina, Brazil, and Chile fiscal crisis preceded and encouraged the decision to privatise, but only in Argentina did the revenues from privatisation contribute significantly to fiscal adjustment. The article develops a model, incorporating time preferences and longer term fiscal impacts, which shows that major fiscal benefits can be expected only under rare circumstances. Politicians continue to tout the fiscal benefits of privatisation perhaps to gain support or to signal their commitment to economic reform.

Organized Business Politics in Democratic Brazil

n May 1996 Brazils National Confederation of Industry (CNI) convened a meeting of industrialists in Brasilia for a mass show of unity and focused lobbying in favor of constitutional reform. Industrialists large and small heeded the call. Nearly three thousand of them from all over Brazil chartered planes and packed shuttles. Fortified by a morning of speeches demanding constitutional reforms, the industrialists fanned out over Brasilia in the afternoon to argue their case to members of the national congress. As if to demonstrate that it could not be intimidated, however, Congress chose that very afternoon to vote down a reform proposal backed by business. By the end of that year, it was clear that business had made little progress in pushing several amendments it supported.

La burguesía desarticulada de Brasil

Business in Brazil appears to have strong business associations, but in fact many formally imposing organizations do not represent business effectively in large part because of corporatist framework imposed on them in the 1940s. In the 1980s several groups of industrialists recognized these deficiencies and formed new associations. These have enhanced the representation of some segments of business but overall further disarticulated business in Brazil. State intervention in both the economy and in corporatist organizations is the primary cause of this enduring disarticulation, which inhibits concertation and negotiation that enhanced stabilizations and redistribution in Mexico and Chile respectively

Easy and Hard Redistribution: The Political Economy of Welfare States in Latin America

Comparative research on Latin American welfare states recently has focused on the extension of non-contributory benefits to those outside the formal labor market. This extension of benefits constitutes a major break from past exclusionary welfare regimes. Yet there also are substantial areas of continuity, especially in the contributory social-insurance system that absorbs most of welfare budgets. We develop here a framework for studying changes in Latin American welfare states that reconciles these trends. We argue that Latin American governments enjoyed an “easy” stage of welfare expansions in the 2000s, characterized by distinct political coalitions. Bottom-targeted benefits could be layered on top of existing programs and provided to wide segments of the population. But many Latin American governments are nearing the exhaustion of this social-policy model. We explore policy and coalitional challenges that hinder moves to “hard” redistribution with case studies of unemployment insurance in Chile and housing in Colombia.

GATEKEEPER OF INFLUENCE: THE MEXICAN STATE AND AGRO-INDUSTRY IN THE NAFTA NEGOTIATIONS

Abstract In Mexico, state actors controlled the channels for business-government relations during the NAFTA negotiations. However, state actors depended on the private sector for information, political support and adaptation to free trade. They incorporated business representatives into the negotiations through COECE, a business association. Our analysis of five agro-industrial sectors shows that sectors with large homogeneous firms, strong associations and perceived export potential enjoyed better access to government negotiators—our dependent variable—than did sectors with numerous producers of different sizes, weaker associations and weak export potential. We suggest that purely statist or societal theories of trade politics are insufficient. Trade policy analysis should pay attention to both state strength and business leverage and should not neglect the importance of future expectations in shaping business preferences.