Marcus J. Kurtz

Growth and Governance: Models, Measures, and Mechanisms

The regnant scholarly consensus linking good governance—the quality of public administration—to economic development has undergone surprisingly little empirical scrutiny. We examine the relationship by asking two questions: How confident are we in our cross-national measures of good governance? How solid are the empirical foundations of the growth-governance causal linkage? Our results suggest that the dominant measures of governance are problematic, suffering from perceptual biases, adverse selection in sampling, and conceptual conflation with economic policy choices. Within the limits of somewhat problematic measures, the evidence suggests that there is far more reason to believe that growth and development spur improvements in governance than vice versa. The policy implications are profound, for international organizations and governments are beginning to condition developmental aid on problematic measures of administrative performance.

The Dilemmas of Democracy in the Open Economy: Lessons from Latin America

Scholars have usually understood the problem of democratic consolidation in terms of the creation of mechanisms that make possible the avoidance of populist excesses, polarized conflicts, or authoritarian corporatist inclusion that undermined free politics in much of postwar Latin America. This article makes the case that, under contemporary liberal economic conditions, the nature of the challenge for democratization has changed in important ways. Earlier problems of polarization had their roots in the long-present statist patterns of economic organization. By contrast, under free-market conditions, democratic consolidation faces a largely distinct set of challenges: the underarticulation of societal interests, pervasive social atomization, and socially uneven political quiescence founded in collective action problems. These can combine to undermine the efficacy of democratic representation and, consequently, regime legitimacy. The article utilizes data from the Latin American region since the 1970s on development, economic reform, and individual and collective political participation to show the effects of a changing state-economy relationship on the consolidation of democratic politics.

Growth and Governance: A Defense

It is clear we have disagreements from our esteemed colleagues on this important issue. The Kaufmann, Kraay, and Mastruzzi [hereafter KKM] response raises a number of insightful points that advance this debate. We thank them for that and for taking the time to engage our article. As we have reflected on our original essay and KKM’s critique of it, we were struck by the fact that we may actually be talking past each other and that differences in approach between political science and economics may foster this miscommunication. We are not arguing that political science offers a superior approach. To the contrary, our intellectual debt to economics is enormous. Our bibliography offers testimony to that very fact. We nevertheless believe that political scientists have as much to offer economists as vice versa, including not only a venerable literature on state formation and governance but a no less important tradition of self-conscious concept formation that has been less central to most economists. While political scientists have traditionally been producers of political data, and have therefore treated the process of concept formation as a necessary prelude to both measurement and modeling (Collier and Mahon 1993; Gerring 1999; Sartori 1970), economists have until recently been consumers of political data and have, therefore, subordinated the need for self-conscious concept formation to the understandable urge to measure and model. We ultimately hope to demonstrate that conceptual issues—and corresponding measurement problems—are at the core of the debate over growth and governance and that progress will be less than ideal until they are addressed. A meeting of minds may be too much to ask for at the present time, but a meeting of method would almost certainly constitute a step in the right direction. We, therefore, offer this rebuttal as not just a response to the thoughtful critique of KKM, but as an effort to bridge these gaps and develop even better ways to make real advances in understanding the relationship between growth and governance.

Credit Where Credit Is Due: Open Economy Industrial Policy and Export Diversification in Latin America and the Caribbean:

Do activist trade and industrial policies offer developing countries a viable alternative to either neoliberal or mercantilist development regimes? We hope to answer the question by, first, distinguishing the “open economy industrial policies” in vogue today from either their “closed economy” predecessors—i.e., import-substituting industrialization—or more orthodox approaches to development policy making; second, tracing the growth of nontraditional exports from Latin America and the Caribbean to the diffusion of more active approaches in the 1990s; and, third, accounting for activism’s apparent success in an otherwise inauspicious spatial and temporal context by identifying three distinct limits to rent-seeking in the open economy: infant exporter maturation; the costs of government support; and the reactions of foreign rivals.

Conditioning the “Resource Curse”: Globalization, Human Capital, and Growth in Oil-Rich Nations

Since the 1990s it has become conventional wisdom that an abundance of natural resources, most notably oil, is very likely to become a developmental “curse.” Recent scholarship, however, has begun to call into question this apparent consensus, drawing attention to the situations in which quite the opposite result appears to hold, namely, where resources become a developmental “blessing.” Research in this vein focuses predominantly on the domestic political and economic institutions that condition the growth effects of natural resource wealth. Less attention, however, has been paid to whether or how the context of economic integration has conditioned the domestic political economy of natural resource development. This article specifically addresses this theoretical disjuncture by arguing first that the developmental consequences of oil wealth are strongly conditioned by domestic human capital resources, which, where sizeable, make possible the management of resources in ways that encourage the absorption of technology and development of valuable new economic sectors. In the absence of robust human capital formation, however, the archetypal “resource curse” is likely to result. The authors argue moreover that international economic integration further amplifies the divergence between these outcomes by simultaneously raising the growth-enhancing effects of large stocks of human capital and by directly facilitating economic growth. Analysis of global data on growth and oil abundance (1979-2007) supports their main hypotheses that natural resource wealth can be either a “curse” or a “blessing” and that the distinction is conditioned by domestic and international factors, both amenable to change through public policy, namely, human capital formation and economic openness.

The Political Foundations of Post-communist Regimes Marketization, Agrarian Legacies, or International Influences

This article explores the causes of differing post-communist regime transitions in Eastern Europe and the former Soviet Union, emphasizing the increasingly prominent thesis that economic liberalization promotes political democratization. We explore this argument in light of findings from other regions that have emphasized modernization, agrarian class structure, and international influences. Our results are based on a multilevel design strategy, first analyzing data on 26 post-communist countries over a 7-to 9-year period using time-series/cross-sectional methods and then turning to a comparative analysis of four purposively selected cases to explore the causal mechanisms implied but not tested in the quantitative analysis. Our results suggest that faith in economic liberalization as a cause of democratization may be misplaced. However, there is support for the notion that large agrarian sectors are unfavorable to democratic development, whereas positive democratic conditionality from outside agents can play an important role in transition dynamics.

The Social Foundations of Institutional Order: Reconsidering War and the “Resource Curse” in Third World State Building

This manuscript departs strongly from conventional accounts that ascribe a central role to war and the threat of war in Third World state building. Similarly, it challenges the conventional wisdom that abundant exportable natural resource wealth is likely to provoke institutional atrophy. Instead, it argues that a set of logically prior conditions—the social relations that govern the principal economic sectors and the pattern or intraelite conflict or compromise—launch path-dependent processes that help determine when, and if, either strategic conflict or resource wealth contribute to, or impede, institutional development. The argument is tested in the comparative analysis of the state-building process in two Andean neighbors (Chile and Peru), both of which are situated in similar strategic and natural resource environments but which produced qualitatively different outcomes in terms of state capacity or “strength.”

Paths to Financial Policy Diffusion: Statist Legacies in Latin America's Globalization

The dominant approaches to the study of capital account liberalization have highlighted institutional barriers to reform and have also demonstrated an important role for interdependence, or the diffusion of a policy innovation from one country to another, as a causal force. Our approach contrasts with the institutional approach and seeks to clarify the political mechanisms of international policy diffusion. Specifically, we develop and test hypotheses that posit that structural economic legacies of the pre–reform era both condition the way in which international diffusion operates, and create the societal and economic interests that help produce varying capital account policy outcomes in the domestic political sphere. Analysis of capital account liberalization strategies in post–debt-crisis Latin America (1983–2007) reveals that capital account opening and the channels through which this innovation diffuses are conditioned by the legacy of a countrys pre–debt crisis economic development model. Specifically, the degree to which advanced import-substituting industrialization was pursued prior to the reform era affects capital account policy by shaping both the relevant international peer groups through which policy models diffuse, and the sorts of domestic interests that are likely to influence the liberalization process. International diffusion also varies in its impact depending on domestic political and economic conditions.

Free Markets and Democratic Consolidation in Chile: The National Politics of Rural Transformation

Military rule in Chile (1973-1989) produced a profound neoliberal reorganization of the national developmental trajectory and was followed by a peaceful return to democracy. However, the surface confluence of economic liberalization and democratization in Chile belies a more complex interrelationship. On the one hand, neoliberalism has been a key factor facilitating democratic transition and consolidation through the rural political base it has provided for conservative elites, thereby increasing their commitment to the national regime. On the other, it has done so in part by limiting vigorous democratic competition to urban areas. In the countryside, neoliberalism has produced levels of atomization, organizational decay, and economic vulnerability so severe as to inhibit autonomous political participation. The lesson here is that democratization and economic liberalization are sectorally differential processes and that these sectoral differences are essential to understanding the relationship between them. Put simply, free markets and democracy are mutually reinforcing at the national level in Chile in part because of the tensions between them in the countryside.

Oil and Democracy: Endogenous Natural Resources and the Political “Resource Curse”

By the end of the twentieth century, a scholarly consensus emerged around the idea that oil fuels authoritarianism and slow growth. The natural abundance once thought to be a blessing was unconditionally, and then later only conditionally, a curse for political and economic development. We re-examine the relationship between oil wealth and political regimes, challenging the conventional wisdom that such natural resource rents lead to authoritarian outcomes. We contend that most efforts to examine the causal linkages between natural resource abundance and political regime have been complicated by the likelihood that both democracy and oil revenue are endogenous to the industrialization processes itself, particularly in its developmentalist form. Our quantitative results, based on an analysis of global data from 1970 to 2006, show that both resource endogeneity and several mechanisms of intraregional regime diffusion are powerful determinants of democratic outcomes. Qualitative evidence from the history of industrialization in Latin America yields support for our proposed causal claim. Oil wealth is not necessarily a curse and may even be a blessing with respect to democratic development.