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Weyland, Kurt. The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela. Princeton: Princeton University Press, 2002. Figures, tables, bibliography, index, 335 pp.; hardcover $39.50.
The politics of free market reform in Latin America continues to draw a lot of scholarly attention. A plethora of theoretical and empirical approaches exist-indeed, too many to be listed in this essay-and they discuss the institutional, economic, and ideological explanations of the reform process in Latin America. Nevertheless, in this new book, Kurt Weyland submits yet another contribution to this literature. Many Latin American scholars may ask at this point: What else is new? What else can be said about the politics of market reforms that we don't already know? Quite frankly, a lot: with eloquence and detailed case analysis, Weyland provides a seminal theoretical approach to understanding this subject, one that should be taken seriously by scholars of Latin America and anyone interested in understanding the politics of market reform in nascent democracies.
Weyland claims that the best way to understand the politics of market reforms in Latin America and in other developing nations is to specify the psychological, institutional, and economic conditions most conducive for chief executives (presidents) to initiate austere market reforms. Drawing from psychological theory-namely, prospect theory-Weyland explains that executives initiate costly market reforms when they and civil society consider themselves to be in the domain of losses; that is, when they experience acute economic crisis, such as hyperinflation. In brief, prospect theory argues that actors initiate seemingly irrational decisions in the domain of losses; that there is absolutely nothing to lose when undertaking risky, costly decisions in this setting. Thus, decisions that appear to contradict the actors' preferences do not impose costs. Quite the contrary: the domain of losses provides a new window of opportunity, inducing new actors-for example, political "outsiders" from opposition parties-to introduce bold reforms previously considered too politically costly. In the domain of losses, prospect theory contends, societal actors support experimental policy choices, even if they entail short-term costs.
Weyland argues that prospect theory breaks from the traditional rational choice (RC) approach to reform in two fundamental ways. First, executives in the domain of losses decide to take the risk and initiate costly reform programs, such as privatization...