Defusing Democracy
Defusing Democracy Central Bank Autonomy and the Transition from Authoritarian Rule Delia M. Boylan Ann Arbor
Copyright by the University of Michigan 2001 All rights reserved Published in the United States of America by The University of Michigan Press Manufactured in the United States of America c Printed on acid-free paper 2004 2003 2002 2001 4 3 2 1 No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, or otherwise, without the written permission of the publisher. A CIP catalog record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Boylan, Delia M. Defusing democracy : central bank autonomy and the transition from authoritarian rule / Delia M. Boylan. p. cm. Includes bibliographical references and index. ISBN 0-472-11214-7 1. Banks and banking, Central Political aspects. 2. Democratization. 3. Banks and banking, Central Political aspects Chile. 4. Democratization Chile. 5. Banks and banking, Central Political aspects Mexico. 6. Democratization Mexico. I. Title. HG1811.B69 2001 306.2 dc21 2001000386
For Lloyd
Contents List of Tables and Figures Acknowledgments ix xi 1. Introduction: The Challenge of Democratic Consolidation 1 Part 1. Theory 2. Central Bank Autonomy: A Redistributive Perspective 23 3. Preemptive Strike: Central Bank Autonomy in the Transition from Authoritarian Rule 41 Part 2. Empirics 4. Authoritarians under Siege: Chile s Democratic Rebirth 75 5. Imminent Threat, Ironclad Response: The 1989 Chilean Central Bank Reform 108 6. Technocracy under Threat: Mexico s Democratic Awakening 139 7. Ambiguous Threat, Ambivalent Response: The 1993 Mexican Central Bank Reform 169 8. Central Bank Reform in Comparative Perspective 222 Part 3. Conclusions 9. Democratic Consolidation and Institutional Theory: Broadening the Debate 241 References 257 Index 289
Tables and Figures Table 2.1. Alternative Measures of Central Bank Independence, 1980 89 38 Table 4.1. Selected Domestic Macroeconomic Indicators for Chile, 1971 89 77 Table 4.2. Chile: Sectoral Economic Trends, 1974 82 80 Table 4.3. Chile: Selected International Economic Indicators, 1970 89 86 Table 5.1. Chile: Selected Domestic Macroeconomic Indicators, 1990 94 127 Table 5.2. Chile: Volume and Composition of Medium- and Long-Term Private Capital Flows, 1980 94 136 Table 6.1. Mexico: Selected Domestic Macroeconomic Indicators, 1980 93 141 Table 6.2. Mexico: Selected International Economic Indicators, 1980 93 143 Table 6.3. Typology of Mexico s Manufacturing Sector 147 Table 6.4. Mexico: Indicators for the Ten Largest Private National Groups and Their Links with the Large Firms, 1992 150 Table 7.1. Mexico: Electoral Competition in National Elections, 1964 94 191 Table 7.2. Mexico: Federal Deputy Election Results by State, 1991 97 195 Table 9.1. Chile versus Mexico 242 Fig. 3.1. The degree of threat 47
x Defusing Democracy Fig. 4.1. Chile: Industrial restructuring by sector (% of GNP) 81 Fig. 4.2. Chile: Industrial restructuring (% change with respect to production potential) 84 Fig. 4.3. Chile: Industrial restructuring (% of GNP) 85 Fig. 6.1. Mexico: Support for the ruling party s presidential candidate, 1946 94 163 Fig. A7.1. Mexico: Nonperforming loans, 1989 94 213 Fig. A7.2. Mexico: Quarterly growth of GDP, 1992 94 215
Acknowledgments Among the people whose thoughts have stimulated my own are several professors, colleagues, and friends whose contribution to my work is hard to measure. I am rst and foremost very grateful to my dissertation committee, who supervised this project when it rst came into being: Terry Karl (chair), Geoffrey Garrett, Terry Moe, and Philippe Schmitter. This group of individuals brought a rich and diverse set of talents to the table and represents I believe the very best of what Stanford University s Department of Political Science had to offer in the 1990s. I thank them for having the con dence in me to back what was at the time an unusual path for a student of comparative politics at Stanford. By throwing their support behind this project, they helped me and others to see that some of our discipline s seemingly greatest divides are not so insurmountable after all. In particular, I thank Terry Karl for her careful and considered knowledge of Latin America and for reminding me, in both her comments and her example, that what we do should always have some bearing on the real world. I am also eternally grateful for her unwavering support through years of grant proposals and job applications, support that re ects her deeply committed and proactive approach to graduate student advising. I thank Terry Moe for those early conversations in which we shaped the broad contours of the argument and for pushing me always to see the project in its biggest light. I am grateful for Philippe s extensive and penetrating comments on draft after draft of dissertation chapters and for his letting me know early on that he believed in what I was doing. Finally, I am especially indebted to Geoff Garrett, who did all of the above and then some. Without Geoff, I am quite sure that the entire endeavor would never have gotten off the ground. Along the way, I also bene ted greatly from discussions with various individuals who read or commented on different portions of this project. In particular, I would like to acknowledge the advice and suggestions of Robert Bates, Jorge Buendía, Don Coursey, Alberto Díaz, Jorge Domínguez, Sven Feldmann, Jeffry Frieden, Robert Franzese, Brian Gaines, Charles Glaser, Lloyd Gruber, Stephan Haggard, Jeanne Kinney-Giraldo (several times!), Joseph Klesner, Stephen Krasner, Beatriz Magaloni, Kenneth Oye, Carlos Perez-Verdúa, Peter Smith, Duncan Snidal, Susan Stokes, and Barry Weingast. The argument is all the stronger for their input. I am also deeply indebted to my ne research assistants at both MIT and the University of
xii Acknowledgments Chicago, including Ayhan Akman, Bela Prasad, Jayne Stancavage, Cesar Velásquez, and especially Douglas Bell. I received material assistance during the course of working on this project from the Social Science Research Council, the Institute for the Study of World Politics, the Institute for International Studies of Stanford University, and the North America Forum at Stanford University. I also thank Stanford University s Center for Latin American Studies for providing me with of ce space and a congenial work environment during a crucial portion of my initial write-up period, as well as the Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago for similar generosity. Finally, I thank the Department of Political Science at MIT for providing me with the space and time to nish the rst draft of this book free of other obligations. During my year at MIT, I bene ted greatly from the rich and vibrant academic community that de nes Cambridge. I am especially grateful to those at MIT Steve Ansolabehere, Ricky Locke, Ken Oye, and Jim Snyder who made a major effort to smooth my way into my rst year of professional teaching and research, as well as to those at Harvard University who involved me in their seminars and gave me a chance to present my work. Since I have come to Chicago, my work has continued to pro t enormously from the unique intellectual experience that is the University of Chicago. In this regard, I would like to recognize rst and foremost my colleagues at the Irving B. Harris Graduate School of Public Policy Studies, who have taught me again and again the value of interdisciplinary exchange, while not allowing me to get away with any hand waving in my arguments. I have also bene ted tremendously from the workshops around campus that form the core of the intellectual enterprise at the University of Chicago and that have sharpened my own analytical skills considerably. Here I would like to single out the Workshop on Comparative Politics, which has exposed me on a weekly basis to some of nest talent in our sub eld among both faculty and graduate students alike. As is often the case in a project of this sort, some of the most helpful comments I have received have come in the wake of various conferences, seminars, and presentations along the way. While I cannot hope to thank everyone who has in uenced my work in this regard, I am grateful to those who sparked my thinking in the wake of various APSA and LASA panels, as well as to participants at seminars I have given at the Harvard-MIT Research Training Group and the David Rockefeller Center for Latin American Studies at Harvard University, the Kellogg Institute at Notre Dame University, various venues at the University of Chicago, the Department of Political Science at the University of Illinois at Champagne-Urbana, the Department of Political Science at the University of Michigan, and the Department of Political
Acknowledgments xiii Science at the University of Rochester. They, too, have had an impact on the nal product. While in the eld, I bene ted from the help of a number of institutions and individuals. I am particularly grateful to the Center for Latin American Monetary Studies (CEMLA) in Mexico for offering me of ce space and extensive institutional support with which to carry out my research, as well as to the Autonomous Technological Institute of Mexico (ITAM) for lending me access to its library and e-mail facilities. Special personal thanks go to Luis Alberto Giorgio (CEMLA) as well as to Federico Estevez (ITAM) for facilitating these exchanges. I would like to express my gratitude to the United Nations Economic Commission on Latin America (CEPAL) in Chile for providing me with of ce space and institutional support and to Ricardo Ffrench- Davis for making this af liation possible. One of the most rewarding aspects of eldwork is those contacts one meets inadvertently along the way who subsequently blossom into lifelong friends and colleagues. In this regard, I would also like to acknowledge the help and friendship of Celso Garrido and Marco Riveros Keller. In closing, I would like to recognize the most important contributor to my personal and professional well-being lo these many years, my husband and colleague, Lloyd Gruber, who has been both my best friend and most ardent supporter from the very earliest stages of this project. Without him, I am convinced that I would never have made it through any of this, and I thank him for bearing with me and for providing me through his own example a model of scholarly and personal integrity.