Democracy, neoliberalism and growth with equity: Lessons from India and Chile

Contemporary South Asia

Volumn 8, Issue 3, 1999, Pages 347-371

  Sharma, Shalendra D ^a  

^a UNIVERSITY OF SAN FRANCISCO   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DEMOCRACY; ECONOMIC PLANNING; INTERNATIONAL COMPARISON; NEOLIBERALISM; POLITICAL ECONOMY;

CHILE; INDIA;

EID: 0033378956     PISSN: 09584935     EISSN: None     Source Type: Journal    
DOI: 10.1080/09584939908719873     Document Type: Article

References (107)

1. The current account is the balance between exports and imports of goods and services. A strong capital inflow normally creates or deepens current-account deficits. It encourages imports and discourages exports by increasing the supply of foreign exchange and causing the currency to appreciate. India's current account deficit as a proportion of GDP stood at the unsustainable level of 3.7% in fiscal year 1990-1991.
2. In 1991, the wholesale price index increased by 13.3% of which food price increase was 20.1% and food grain price increase was approximately 30%. (See India: Five Years of Stabilization and Reform and the Challenges Ahead (Washington DC: World Bank, 1996)
3. See India: Five Years, ibid.; and India: Achievements and Challenges in Reducing Poverty (Washington DC: World Bank, 1997).
4. The Rao administration was the first minority government in India; that is, one without an assured majority in parliament.
5. Neoliberalism refers to an economic model that advocates a minimalist state, market allocation of goods and services and openness to international capital and markets. To neoliberals, economic development with distribution can best take place through the discipline of the market - via the liberalization of the domestic market and pursuit of more outward-oriented trade and exchange rate policies; reduction in government intervention in domestic markets for goods, capital and labor thereby allowing prices, interest rates and wages to find their natural equilibrium through market discipline (via the interaction of supply and demand); the deregulation of financial markets and the opening up of restricted sectors of the economy to private investment; the dismantling of restrictive legislation such as direct and indirect taxation; the privatization of state-owned enterprises (SOE) and the liquidation of unviable firms and SOEs; the complete dismantling of the industrial-licensing system and foreign-exchange controls. In general the conversion of statist or control-bound, inward-looking economy into a market-conforming, export-oriented or outward-looking economy. Such a market-conforming, outward-oriented strategy, will enable the economy to move towards an equilibrium growth path in which patterns of production, investment and capacity creation follow dynamic comparative advantage, thereby minimizing resource costs, increasing competition in domestic markets and eliminating potential channels of corruption.
6. A public statement by India's former Finance Minister Palaniappan Chidambaram to the Indian parliament is illustrative: In my lifetime, I want to see India grow at 8 to 8.5 percent per annum, year after year, and so eliminate the poverty that we have known for five thousand years. In my estimate, that requires a per capita income of US$1500. If we grow at eight percent per year, we can reach this target in 18 or 20 years. Look, I am not talking of $5000 or $10000. Just a per capita income of US$1,500, which will remove poverty from this country. (Cited in Business India, 19 May-1 June 1997, p 64)
7. See for example William Dick, 'Authoritarian versus non-authoritarian approaches to economic development', Journal of Political Economy, Vol 82, No 4, 1974, pp 817-827; Guillermo O'Donnell, Modernization and Bureaucratic Authoritarianism: Studies in South American Politics (Berkeley: University of California Press, 1973); John Sheahan, Patterns of Development in Latin America: Poverty, Repression and Economic Strategy (Princeton: Princeton University Press, 1987); and Thomas Skidmore, 'The politics of economic stabilization in postwar Latin America', in: James Malloy (ed), Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977).
8. See for example William Dick, 'Authoritarian versus non-authoritarian approaches to economic development', Journal of Political Economy, Vol 82, No 4, 1974, pp 817-827; Guillermo O'Donnell, Modernization and Bureaucratic Authoritarianism: Studies in South American Politics (Berkeley: University of California Press, 1973); John Sheahan, Patterns of Development in Latin America: Poverty, Repression and Economic Strategy (Princeton: Princeton University Press, 1987); and Thomas Skidmore, 'The politics of economic stabilization in postwar Latin America', in: James Malloy (ed), Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977).
9. See for example William Dick, 'Authoritarian versus non-authoritarian approaches to economic development', Journal of Political Economy, Vol 82, No 4, 1974, pp 817-827; Guillermo O'Donnell, Modernization and Bureaucratic Authoritarianism: Studies in South American Politics (Berkeley: University of California Press, 1973); John Sheahan, Patterns of Development in Latin America: Poverty, Repression and Economic Strategy (Princeton: Princeton University Press, 1987); and Thomas Skidmore, 'The politics of economic stabilization in postwar Latin America', in: James Malloy (ed), Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977).
10. See for example William Dick, 'Authoritarian versus non-authoritarian approaches to economic development', Journal of Political Economy, Vol 82, No 4, 1974, pp 817-827; Guillermo O'Donnell, Modernization and Bureaucratic Authoritarianism: Studies in South American Politics (Berkeley: University of California Press, 1973); John Sheahan, Patterns of Development in Latin America: Poverty, Repression and Economic Strategy (Princeton: Princeton University Press, 1987); and Thomas Skidmore, 'The politics of economic stabilization in postwar Latin America', in: James Malloy (ed), Authoritarianism and Corporatism in Latin America (Pittsburgh: University of Pittsburgh Press, 1977).
11. In fact, cross-national analyses conclude that authoritarian regimes have not done significantly better at sticking to either economic stabilization (Karen Remmer, 'New theoretical perspectives on democratization', Comparative Politics, Vol 27, October 1995 or structural adjustment programs (Stephan Haggard and Robert Kaufman, The Political Economy of Democratic Transitions (Princeton, NJ: Princeton University Press, 1995).
12. In fact, cross-national analyses conclude that authoritarian regimes have not done significantly better at sticking to either economic stabilization (Karen Remmer, 'New theoretical perspectives on democratization', Comparative Politics, Vol 27, October 1995 or structural adjustment programs (Stephan Haggard and Robert Kaufman, The Political Economy of Democratic Transitions (Princeton, NJ: Princeton University Press, 1995).
13. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
14. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
15. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
16. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
17. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
18. See, for instance, Karen Remmer, 'Democracy and economic crisis: the Latin American experience', World Politics, Vol 42, April 1990, pp 315-335; Karen Remmer, 'New theoretical perspectives on democratization', ibid; Adam Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); Adam Przeworski, 'What makes democracies endure', Journal of Democracy, Vol 7, No 1, 1996, pp 39-55; Haggard and Kaufman, op cit, Ref 8; and Robert Bates and Anne Krueger, Political and Economic Interactions in Economic Policy Reform (Oxford: Basil Blackwell, 1993).
19. Meaning evidence drawn from the developmental authoritarian regimes, without reference to the numerous neopatrimonial and predatory authoritarian systems in Africa, Latin America and Asia such as Nigeria, Philippines under Marcos or Nicaragua under Somoza.
20. Or western educated technocratic policy and decision-makers. To my knowledge, the term 'technopolis' was first used in Jorge Dominguez (ed), Technopolis: Free Politics and Markets in Latin America in the 1990s (University Park: Pennsylvania University Press, 1997).
21. For a concise expression of this view, see Luis Carlos Bresser Pereira, Jose Maria Maravall and Adam Przeworski, Economic Reforms in New Democracies: A Social-Democratic Approach (New York: Cambridge University Press, 1993).
22. According to O'Donnell, delegative democracies are elitist democracies where state executives make and implement policies (in particular, neoliberal policies) by cutting channels of participation, limiting debate and centralizing authority in the executive and favored 'technopols'. O'Donnell drew heavily from Argentina under Menen to illustrate such Caesarist presidential behavior. He notes that delegative democracies in the long run endanger the prospects for democratic consolidation. See (Guillermo O'Donnell, 'Delegative democracy', Journal of Democracy, Vol 5, January 1994, pp 55-69).
23. According to Evans who first coined the term, states with embedded autonomy are those with coherent internal organization and close links with society. See (Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton NJ: Princeton University Press, 1978)).
24. Frei's electoral mandate ends in the year 2000.
25. See India: Five Years, op cit, Ref 3.
26. While most goods are freely importable on payment of the specified customs duty without licensing requirements, a small number of goods fall in the Restrictive List of imports, the restrictions being principally in the area of consumer goods, and on the grounds of security, health and environmental protection, or because the goods are reserved for production in the small-scale sector, requiring low skills and employing a large number of people.
27. Under the WTO guidelines, the European Union (India's largest trading partner), along with the United States, Canada, Japan and Australia filed complaints against India's proposed 9 year phase-out of import restrictions on some 2700 items, mostly consumer goods. However, in late 1997, India agreed to a 6 year phase out of quantitative restrictions.
28. For example, on the basis of net profits after tax, the return on capital remained below 5% throughout the 1980s, declining to only 2.3% in 1990-1991. See (C.H. Hanumantha Rao and Hans Linnemann (eds), Economic Reforms and Poverty Alleviation (New Delhi: Sage, 1996).
29. See India: Five Years, op cit, Ref 3.
30. There is no duty on capital goods imports with a minimum value of Rs 50 million (approximately US $1.4 million in 1997 prices) for agriculture and allied sectors.
31. See India: Five Years, op cit, Ref 3.
32. The SEBI introduced a number of enforcement measures during 1996-1997, including requiring stock exchanges to implement uniform norms for imposition of circuit breakers and trading suspensions in cases where price manipulation is suspected. Further, all the exchanges are required to set up surveillance departments and have to supply to the SEBI daily settlement and pre-issue monitoring reports. A trading database has also been created with the SEBI for trades on the National and Mumbai stock exchanges.
33. India has one of the world's worst tax-collecting records. In 1995, only 12 million people (out of 960 million) paid personal income tax, and only 12,000 of them declared an income of more than one million rupees (approximately US $33,000). In 1997, the government introduced a 'no question asked' and no penalty Voluntary Disclosure of Income Tax (VDIS) Scheme. Its effectiveness remains to be seen.
34. The Finance Act 1996 introduced the concept of the MAT. Under this provision, a company whose taxable profits are less than 30 percent of its adjusted book profits (profits calculated under the Companies Act, 1956), will have to pay a minimum tax on 30 percent of the book profits at the tax rates in force. However, the provisions are not applicable for certain infrastructure projects.
35. According to Gulati and Sharma the fertilizer subsidy rose from around Rs 4 billion (US $500 million) in the early 1980s to Rs 46 billion (US $2.7 billion) in 1989-1990; the subsidy on electricity rose from Rs 3.6 billion (US $ 450 million) in 1980-1981 to Rs 34.7 billion (US $ 2 billion) in 1989-1990. The subsidy rate for electricity was a staggering 82 percent in 1989-1990. Similarly, they note that the average annual irrigation subsidy from 1974 to 1989 to have been Rs 100 billion (US $5.9 billion) at 1989 prices, and the average credit subsidy to have been Rs 12 billion (US $ 700 million) a year. See (A. Gulati and P. K. Sharma, 'Government intervention in agricultural markets: nature, impact and implications', Journal of the Indian School of Political Economy, Vol 3, No 2, 1991).
36. However, state governments have usually neutralized these cuts by picking up the slack. For example, when Digvijay Singh became Chief Minister of Madhya Pradesh in November 1993, he lost no time in announcing the waiver of electricity charges on irrigation pumps and threshers of up to 5 hp. The cost to the exchequer totaled Rs 375 crore annually. When Laloo Prasad Yadav came to power in Bihar in 1990, he announced a 32 point welfare scheme which, over the years, now numbers over 3000.
37. In 1991, the central government proposed a 40% hike in urea prices in the annual budget. However, under pressure from the farmers lobby, the government subsequently lowered it to 30%, with exemptions for small and marginal farmers. In 1992, the finance minister decontrolled the prices of potassic and phosphatic fertilizers, resulting in steep increases (some 80%) in the prices of these fertilizers. These policies had several implications. As urea prices were still controlled, many farmers started using urea exclusively, with serious long-term environmental implications. To stop such practices, the government announced a subsidy of Rs 1000 a tonne for potassic and phosphatic fertilizers adding another Rs 630 crores to the total bill in 1994.
38. In 1996-1997, India's share in the world trade in agricultural commodities stood at about 1%. Agricultural exports have received special attention from the government because it sees exports as key to raising farm incomes, reducing unemployment and earning foreign exchange.
39. For details see Economic Survey 1997 (Government of India, Ministry of Finance, 1997).
40. The fact that the Indian economy has not been plagued by the macroeconomic problems facing East Asia and the ASEAN nations illustrates the strong underlying differences between them. First, India's current account deficit in 1996-1997 is only 1% of GDP, while the current account deficit of Thailand is 8% and 6% of Malaysia. Second, India's pattern of external debt is much different in that the ratio of total external debt to GDP has been declining - from over 40% in 1991 to the current 26%. The pattern for Thailand, Malaysia and Indonesia is just the opposite. Third, the composition of external debt liability has been heavily weighted in favor of short-term liability in the ASEAN economies. Short-term debt can be very destabilizing given fluctuations in exchange rates. On the other hand, India's short-term liability is only 7% (US $6 billion) of a total external debt of US $90 billion. Finally, India has moved more cautiously on the path of full currency convertibility compared to her neighbors, thereby reducing the possibility of large-scale cross-border capital movements and currency speculation.
41. During his visit to India in January 1995, US Secretary of Commerce Ron Brown (who was accompanied by 25 CEOs of major American companies) announced that the Clinton Administration has designated India as one of the world's big emerging markets.
42. Center for Monitoring the Indian Economy, Monthly Review of the Indian Economy, April 1999.
43. For details, see S. Anklesaria-Aiyar (1999) 'India's economic prospects: the promise of services', CASI Occasional Paper No 9, University of Pennsylvania: Center for Advanced Study of India.
44. It is important to note that both foreign direct investment and foreign portfolio investment (in the Indian stockmarkets and through Global Depository Receipts issued in Europe have seen sustained growth.
45. Roughly 350 million people. For details, see S. P. Gupta, 'Recent economic reforms in India and their impact on the poor and vulnerable sections of society', in: Hanumantha Rao and Linnemann, op cit, Ref 19, p 130.
46. In other words, the number of poor increased by an average of 1.76 million a year in the most recent period for which there is comparable NSS data.
47. For details, see India Today, 15 February 1995, pp 45-48; and research by the Economic and Political Weekly Research Foundation in Economic and Political Weekly, 7 January 1995.
48. For details, see India Today, 15 February 1995, pp 45-48; and research by the Economic and Political Weekly Research Foundation in Economic and Political Weekly, 7 January 1995.
49. Gupta, op cit, Ref 36, pp 141-143.
50. Gurav Datt and Martin Ravallion, 'Why did poverty increase sharply after India's macroeconomic stabilization?', Poverty and Human Resources Working Paper No 1685, Washington DC, The World Bank.
51. There is a large body of literature that shows that when exchange rates depreciate, the prices of tradeable goods rise, food prices rise and the real wages of the working population falls.
52. Gupta op cit, Ref 36, p 132, notes that 'even in terms of physical units (per kg), the total per capita cereal consumption decreased both in rural and urban areas between 1990-1991 and 1992.
53. Rohini Nayyar, 'New initiatives for poverty alleviation in rural India', in: Hanumantha Rao and Linnemann, op cit, Ref 19, p 174.
54. Quote attributed to former Finance Minister, Manmohan Singh in Hanumantha Rao and Linnemann, op cit, Ref 19, p 49.
55. SAL has been in operation since 1980. The IMF set up SAF in 1986 to provide concessional financial support to low-income member countries. Programs supported by SAL and SAF, while tailored to the varied needs of individual member countries, nevertheless share basic neoliberal assumptions regarding development.
56. Indeed, the correlation between high growth rates and employment generation is problematic. The cases of China and India vividly illustrate that high growth rates do not ameliorate unemployment but, under some conditions, may actually exacerbate it. For details on jobless growth in India, see Smitu Kothari, 'Whose independence: the social impact of economic reform in India', Journal of International Affairs, Vol 51, No 1, 1997, pp 85-116, and Nayyar, op cit, Ref 43.
57. For a good overview, see Kothari, ibid and Nayyar, ibid.
58. Nayyar, ibid, p 175.
59. This is in part due to the fact that the PDS allocations to states bear little relationship to the extent of poverty in the state. According to Nayyar, ibid, p 176, 'it is estimated that during 1991-1993, 67% of the total off-take from PDS was allocated to seven States while they accounted for 44% of the total poor. In contrast, Bihar, Madhya Pradesh, Orissa and Uttar Pradesh accounted for 40% of the poor, but received only 15% of the off-take'.
60. It is well known that ration cards for the PDS are available to the whole population regardless of income. In fact, the PDS provides large subsidies to middle and high income households.
61. For details, see Kothari, op cit, Ref 46, and Madura Swaminathan, 'Structural adjustment, food security and systems of public distribution of food', Economic and Political Weekly, Vol 31, No 26, 1996.
62. The Asoka Mehta Committee (appointed in December 1977) carried out a comprehensive review of the Panchayati Raj system and made detailed recommendations for its reform, including periodic elections, adequate administrative staff and empowerment of the poor.
63. Raghav Gaiha, 'Participation or empowerment of the rural poor: the case of the panchayats in India', Occasional Paper No 4 (University of Pennsylvania: Center for Advanced Study of India, p 28).
64. While the rules mandates elections every five years, in the event of a dissolution earlier, it mandates elections within six months of the dissolution.
65. Gaiha, op cit, Ref 53, p 30.
66. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
67. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
68. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
69. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
70. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
71. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
72. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
73. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
74. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
75. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
76. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
77. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
78. My analysis of the Chilean experience since 1973 draws on a number of sources, including: Barry Bosworth, Rudiger Dornbusch and Raul Laban, The Chilean Economy: Policy Lessons and Challenges (Washington DC: Brookings Institution, 1994; David Collier and Ruth Berins Collier, Shaping the Political Arena (Princeton NJ: Princeton University Press, 1991); Sebastian Edwards, Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995); Carol Graham, Safety Nets, Politics and the Poor: Transitions to Market Economies (Washington DC: Brookings Institution, 1994); David Hojman, Chile: The Political Economy of Development and Democracy in the 1990s (Pittsburgh PA: University of Pittsburgh Press, 1993); Nora Lustig (ed), Coping with Austerity: Poverty and Inequality in Latin America (Washington DC: Brookings Institution, 1995); Samuel Morley, Poverty and Inequality in Latin America (Baltimore MD: John Hopkins University Press, 1995); Lois H. Oppenheim, Politics in Chile: Democracy, Authoritarianism and the Search for Development (Boulder CO: Westview Press, 1993); James Petras, Fernando Ignacio Leiva and Henry Veltmeyer, Democracy and Poverty in Chile (Boulder CO: Westview Press, 1994); Dagmar Raczynski, Strategies to Combat Poverty in Latin America (Santiago: CIEPLAN, 1995); John Sheahan, 'Effects of liberalization programs on poverty and inequality: Chile, Mexico and Peru', Latin American Research Review, Vol 32, No 3, 1997, pp 6-35; Juan Valdes, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge University Press, 1995); Kurt Weyland, 'Growth and equity in Chile's new democracy', Latin American Research Review, Vol 32, No 1, 1997.
79. Bosworth, op cit, Ref 56, p 5.
80. According to Graham, op cit, Ref 56, pp 25-26, 'per capita spending in these areas in 1986 was only 40 percent of the 1970 level'.
81. Sheahan, op cit, Ref 56, p 12.
82. Collins and Lear (Joseph Collins and John Lear, Chile's Free-Market Miracle: A Second Look (Oakland CA: Food First, 1995)) note that a section of the middle class have also borne the cost of immiserization. Also see Petras et al, op cit, Ref 56.
83. Sheahan, op cit, Ref 56, pp 12-13.
84. Eduardo Suva, 'Business elites, the state and economic change in Chile', in: Sylvia Maxfield and Ben Ross Schneider (eds), Business and the State in Developing Countries (Ithaca: Cornell University Press, 1997), p 165.
85. For a comprehensive overview, see Hojman, op cit, Ref 56; Sheahan, op cit, Ref 56; and Valdes, op cit, Ref 56.
86. Timothy Scully, 'Chile: the political underpinnings of economic liberalization', in: Jorge I. Dominguez and Abraham Lowenthal (eds), Constructing Democratic Governance: South America in the 1990s (Baltimore MD: The John Hopkins University Press, 1996).
87. Graham, op cit, Ref 56, p 26.
88. Weyland, op cit, Ref 56; Collins and Lear, op cit, Ref 61.
89. The Concertacion was led by the Partido Democrata Cristiano (PDC) in the Center, the Partido por la Democracia (PPD) on the center-left and the Partido Socialista (PS) on the left. Other parties included the Radical Party, the Social Democratic Party, the Radical Democratic-Socialists, the Humanist Party and the Party for Democracy.
90. Weyland, op cit. Ref 56.
91. Hojman, op cit, Ref 56, notes that the continuity between the Aylwin government's economic policies and those of its predecessor was the result of the convergence of economic thought that included the Christian Democrats and the right, as well as most prominent economists on the left.
92. Graham, op cit, Ref 56, p 41.
93. Genero Herrera and Carol Graham, 'Chile: sustaining adjustment during democratic transition', in Stephan Haggard and Steven Webb (eds), Voting for Reform: Democracy, Political Liberalization and Economic Adjustment (New York: Oxford University Press, 1994).
94. Graham, op cit, Ref 56, p 41.
95. Herrera and Graham, op cit, Ref 72, pp 278-279.
96. Ibid, pp 274-275.
97. Pilar Vergara, 'In pursuit of growth with equity: the limit of Chile's free-market social reforms', NACLA Report on the Americas, Vol 29, No 6, May/June 1996, pp 37-43.
98. Sheahan, op cit, Ref 56, pp 35-36.
99. Weyland, op cit, Ref 56, pp 64-65.
100. Scully, op cit, Ref 65, p 103, aptly notes that 'institutionalized parties are certainly not a sufficient condition for explaining successful economic policymaking in new democracies, but they may be necessary'.
101. Robert Putnam, Making Democracies Work: Civic Traditions in Modern Italy (Princeton NJ: Princeton University Press, 1993).
102. Social capital refers to the institutions, relationships and norms that shape and determine a society's social interactions.
103. There is a large body of literature on this subject. See, for example: Pranab Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984); Francine Frankel, India's Political Economy, 1947-1977: The Gradual Revolution (Princeton: Princeton University Press, 1978); Atul Kohli, Democracy and Discontent: India's Growing Crisis of Governability (New York: Cambridge University Press, 1990); Gunnar Myrdal, Asian Drama: An Inquiry into the Poverty of Nations, 3 Vols (New York: Pantheon, 1968).
104. There is a large body of literature on this subject. See, for example: Pranab Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984); Francine Frankel, India's Political Economy, 1947-1977: The Gradual Revolution (Princeton: Princeton University Press, 1978); Atul Kohli, Democracy and Discontent: India's Growing Crisis of Governability (New York: Cambridge University Press, 1990); Gunnar Myrdal, Asian Drama: An Inquiry into the Poverty of Nations, 3 Vols (New York: Pantheon, 1968).
105. There is a large body of literature on this subject. See, for example: Pranab Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984); Francine Frankel, India's Political Economy, 1947-1977: The Gradual Revolution (Princeton: Princeton University Press, 1978); Atul Kohli, Democracy and Discontent: India's Growing Crisis of Governability (New York: Cambridge University Press, 1990); Gunnar Myrdal, Asian Drama: An Inquiry into the Poverty of Nations, 3 Vols (New York: Pantheon, 1968).
106. There is a large body of literature on this subject. See, for example: Pranab Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984); Francine Frankel, India's Political Economy, 1947-1977: The Gradual Revolution (Princeton: Princeton University Press, 1978); Atul Kohli, Democracy and Discontent: India's Growing Crisis of Governability (New York: Cambridge University Press, 1990); Gunnar Myrdal, Asian Drama: An Inquiry into the Poverty of Nations, 3 Vols (New York: Pantheon, 1968).
107. In his important study, Bardhan, ibid, presents a devastating indictment of India's democracy, arguing that it conveniently serves the interests of the three dominant proprietary classes; the industrial capitalists, the rich farmers and professional bureaucrats. The industrial capitalists have been the beneficiaries of the government's import substitution policies, the industrial licensing system and restrictions on foreign investment. Rich farmers have benefitted from the governments high support programs for agricultural products and from subsidized inputs (eg electric power, irrigation, fertilizers, diesel fuel) and subsidized credit. The bureaucratic elite have gained in political power and income through their control over what has become an elaborate system of patronage and rent-seeking. Although these classes have some competing interests (the private sector, for example, resents many bureaucratic controls, and rural and urban groups clash over prices of agricultural produce), the dominant coalition is held together because none of the classes is powerful enough individually to impose its will upon India's polity and economy, and all three welcome state subsidies. According to Bardhan, this 'alliance of domination' has had an adverse effect on the country's overall development because, as the dominant classes are brought under a growing network of subsidies and patronage, the state's resources for economic development and social welfare have dwindled. This, he argues, has not only contributed to a deceleration in public revenue and capital formation, but has also severely eroded the state's capacity to meet even its most basic developmental and distributive goals. Thus, to Bardhan, India's elite-dominated democratic polity is the root of the problem. Beneath the veneer of constitutional government, democratic governance serves the functional needs of the political and economic elites by providing an arena for inter-elite accommodation which enables them to utilize the instruments of the state to entrench their power and privilege, and engage in self-aggrandizement. At best, while India's democratic regime has served as an arena for conflict resolution and provided a resilient mechanism for relatively stable governance, it has also found it difficult to muster the political autonomy necessary to pursue its reformist and distributive agenda.