Leftist governments, distributive strategies, and the politics of balance of payments-constrained growth in Chile and Uruguay

Abstract

Leftist governments in peripheral economies have usually faced problems fulfilling their distributive mandate. Because of their inability to earn foreign exchange to pay for imports or service their debt, these governments often ended in epic balance of payments crises and renounced their electoral programs while embracing stabilization and fiscal austerity. This reflects the fact that economic growth and distribution in peripheral economies are fundamentally balance-of-payments-constrained. How can we understand variation in the form of distributive strategies advanced by left parties in government if they are subject to balance of payments constraints? And how can we understand the emergence of different growth models within those constraints? This article contributes to understanding the politics of peripheral growth models by studying the variation in left government distributive and growth strategies in the context of balance-of-payments (BoP) constrained growth. While the BoP constraints are real and challenging and the push for monetary and fiscal responsibility has been blunt, we argue that the extent to which governing left parties build linkages with grassroots and subordinated groups, and extant institutional architectures, allow spaces for political agency that leftist governments can use to pursue distinct distributive and growth strategies. In turn, these strategies allow for diverse ways of managing the macroeconomic implications of the BoP constraints.