Wibbels and Roberts 2010

Wibbels, Erik, and Kenneth Roberts. 2010. "The Politics of Economic Crisis in Latin America". Studies in Comparative International Development. 45 (4): 383-409.

• Introduction
• Most quantitative models show that strong unions and powerful left parties are associated with severe economic crises (383)
• BUT some evidence that the combination of left parties and strong unions can actually alleviate inflationary crises
• crisis differ in depth, duration, and frequency (384)
• but crises also need to be analytically separated from neoliberal economic reforms (previous scholarship tends to conflate these things)
• authors examine three types of crises (385)
• inflationary
• growth
• fiscal
• Political conditions tested:
• are new democracies more vulnerable to crises?
• what effects do sub-regime variables have, including executive powers, party systems, and electoral competition?
• how organized/powerful is labor and the left?
• Early reporting of results:
• different types of crises are independent and have distinct political correlates
• neither powerful executives nor high levels of democracy are correlated with crisis events or duration
• strength of electoral left and labor are correlated to more frequent crises...
• BUT left in power + strong unions can facilitate early exits from crises
• Methodological considerations
• drawbacks to current literature
• economic crises are often conflated with economic performance (386)
• crises differ in depth and duration
• any attempt to relate crises to political factors needs to include factors that explain variation in severity and duration
• Crises vary in type
• are some type of governments more prone to certain types of crises?
• finally, really need to disentangle crises from neoliberal turn (387)
• explanation of their variables (387-388)
• The Political Determinants of Economic Crisis
• most of these hypotheses built off existing literature
• regime level of analysis:
• literature supports two hypotheses regard new democracies, combined to form this one hypothesis: (388-389)
• H1: Economic crises will be more severe and prolonged in new democracies (389)
• sub-regime level
• party system fragmentation is an impediment to economic efficiency (Haggard and Kaufman 1995; Mainwaring 1999) -- mans executive can easily get legislative majority and push reforms/policies
• BUT also: fragmented party systems could make it less likely the executive will have legislative majority, and just add more veto players (Tsebelis 1995) -- meaning parties will have short-time horizons and not want to enact unfavorable policies
• but more veot players may result in gridlock, a sort of backdoor to stability, which will improve investors' outlook
• H2: the severity and duration of crises will have a U-shaped relationship with the number of effective political parties (390)
• close electoral compeititon could result in both parties uniting behind reforms, realizing that their future ability to govern may be constrained iuf current crisis isn't dealt with
• H3: economic crises will be more severe and prolonged in less competitive electoral environments
• presidents with a ton of power can push reforms
• H3: economic crises will be longer and more severe when the chief executive is weaker (391)
• Labor and the Left (392)
• H5a: economic crises will be longer and more severe when labor mobilizing or populist parties are strong
• H5b: economic crises will be longer and more severe when organized labor movements are strong
• H5c: economic crises will be longer and more severe when combined strength of left and labor is high
• Finally, politics should have the greatest impact on financial crises, less impact on inflationary crises, and the least impact on growth crises (393)
• Research Design
• crises are measured as deviations from the regional mean performance for the entire period under study (394)
• 13% of country-years experienced GDP crises
• 11% of country-years experienced inflationary crises
• 11% of country-years experienced fiscal crises
• the correlations between these crises are quite low
• countries predisposed to one type of crisis are not necessarily predisposed to another (395)
• on average, GDP crises (1.5 years) are shorter than fiscal crises (3.4 year) which are shorter than inflationary crises (5 years)
• also, depth and duration are distinct
• Results and Discussion
• "politics play a much stronger role in producing crises than they do in year-to-year performance" (397)
• more significant effect on the probability of inflationary and fiscal crises than growth crises
• Strongest indicators: labor and the Left
• strong left significantly increases probability of inflationary crises (397)
• strong unions significantly increases probability of inflationary crises , even more than left parties(398)
• BUT!!!!  electoral strength of the left increases probability of inflationary crises ONLY WHEN UNIONS ARE WEAK (398-399)
• strong left and labor unions allows governments to negotiate pacts between labor and capital on wages, investment, and employments that can temper redistributive demands (399)
• Other important indicators
• new regimes are more likely to have inflationary and/or fiscal crises (400)
• political competition was not significant
• increasing the power to the chief executive increases the probability of a fiscal crisis (emphasis in original)
• party system fragmentation is weird...has an inverted u-shaped relationship with inflationary and fiscal crises (401)
• could be that fragemented party systems block adjustment, but do block risky policies that could result in crisis
• My take: that sounds unlikely...fitting the theory to the data, not finding an explanation
• global economic conditions are not associated with inflation or fiscal crises
• Outside of the variables on the left and labor unions, no other variable is consistent across all the models (401)
• Duration of crisis
• political variables provide less insight into this (402)
• left will increase inflationary crisis length when labor is weak (402-403)
• left + labor = shorter inflationary crises (by about 3 months) (403)
• crises are shorter as party system fractionalization increases (404) -- ?????
• Conclusions
• the most important factor seems to be the nature of party-society linkages (405)
• countries with conservative parties and weak labor unions were less susceptible to crises in general