Government Spending During Hard Times in Latin America

Transcription

1 Government Spending During Hard Times in Latin America David Doyle Political Economy in Times of Crisis November 29, 2014

2 The Context - Nearly always hard times in Latin Amercia? The Dual Transition Debt crisis of the 1980s and end of Import Substitution Industrialization

3 The Context - Nearly always hard times in Latin Amercia? The Dual Transition Debt crisis of the 1980s and end of Import Substitution Industrialization Market reform exacerbates inequalty (South America), but also gives rise to uncertainty and risk

4 The Context - Nearly always hard times in Latin Amercia? The Dual Transition Debt crisis of the 1980s and end of Import Substitution Industrialization Market reform exacerbates inequalty (South America), but also gives rise to uncertainty and risk Social democratic faiulres of the 1990s and left turn (regressivity)

5 Increasing Social Spending in Latin America

6 Variation in Spending Across Countries

7 Social Spending and the Labor Market

8 Social Spending and Taxation

9 Spending and Crisis What to do in a downturn? Pressure to reduce the burden on mobile asset holders (or they exit) (see Genschel 2002; Rueda and Beremendi 2007)

10 Spending and Crisis What to do in a downturn? Pressure to reduce the burden on mobile asset holders (or they exit) (see Genschel 2002; Rueda and Beremendi 2007) Borrowing for governments in Latin America is increasingly difficult, particularly during downturns when counter-cyclical spending is most needed (e.g. Wibbels 2006)

11 Spending and Crisis What to do in a downturn? Pressure to reduce the burden on mobile asset holders (or they exit) (see Genschel 2002; Rueda and Beremendi 2007) Borrowing for governments in Latin America is increasingly difficult, particularly during downturns when counter-cyclical spending is most needed (e.g. Wibbels 2006) Exacerbated by declining consumption during downturns

12 Spending and Crisis How to deal with political pressure? Some have counter-cyclical funds to stimulate the economy, while others have commodities (and continue spending)

13 Spending and Crisis How to deal with political pressure? Some have counter-cyclical funds to stimulate the economy, while others have commodities (and continue spending) Some retrench (but pay a price)

14 Spending and Crisis How to deal with political pressure? Some have counter-cyclical funds to stimulate the economy, while others have commodities (and continue spending) Some retrench (but pay a price) But for others, pressue to spend does not seem to be as great during good times, and is muted during bad times...

15 An Escape Valve for Fiscally Strapped Latin American Countries?

16 The Mechanics of the Argument M (Attitudes towards welfare and taxation) N (Government action) T (Remittances) Y (Social security and welfare expenditure)

17 The Relationship Between Remittances and Social Spending at the National Level

18 Not Quite Counter-Cyclical...

19 Discussion Issues Dependence; efficiency of domestic investment

20 Discussion Issues Dependence; efficiency of domestic investment Reinforce and exaggerate existing divisions in welfare institutions

21 Discussion Issues Dependence; efficiency of domestic investment Reinforce and exaggerate existing divisions in welfare institutions Relationship with globalization

22 Discussion Issues Dependence; efficiency of domestic investment Reinforce and exaggerate existing divisions in welfare institutions Relationship with globalization Changing nature of political competition - altering policy space

23 Discussion Issues Dependence; efficiency of domestic investment Reinforce and exaggerate existing divisions in welfare institutions Relationship with globalization Changing nature of political competition - altering policy space

24 Thank you Questions and Comments