Introduction

The original debates on the politics of market reforms in developing countries, spawned in the late 1980s by the debt crises and the acceleration of financial internationalization, posited a fundamental contradiction between the logic of economic adjustment and democratization. Indeed, in most of the neoclassical and institutionalist accounts of marketization, which dominated the field in the 1990s, liberalization was essentially seen as a process driven from above. Societal forces, in particular domestic business and labor, were regarded as antireform actors who should be marginalized by an executive that concentrates state power. While neoclassical economists asserted the need to avoid “rent-seekers,” institutionalists stressed the idea of state capacity and encapsulation as a crucial perquisite for market transformations. Two decades later, however, unfolding events and scholarly work have challenged these assumptions. First, almost every major developing country in Ibero-America and Eastern Europe has fundamentally reoriented its economy to global markets, more often than not under democratic and plural regimes. Second, a copious literature has highlighted how actors once considered “antireform,” such as populist parties, state enterprise managers, labor unions, provincial bosses, or protected business groups, played a fundamental role in the construction of market-oriented governing coalitions.

This chapter argues that, although this more recent scholarly work has illuminated crucial aspects of the relationship between politics and economics in contexts of dramatic market transformations in the Iberian world, it has been less successful in providing (1) a clear general map of the alternative modes or “paths” of neoliberal adjustment and (2) a systematic theory that can account for these different paths, and for the variation in the alternative sets of actors compensated or sidelined by market reform coalitions. Indeed, in I argue that these alternative modes of economic liberalization may be important to understanding the different types of market organization that eventually consolidate, and the way countries cope with post-neoliberal trends such as the return of state interventionism or popular sector activation.