Economic Structures, Popular Militancy, and Public Sector Size in Latin America

• In Event: Comparative Historical Perspectives on the State and Policy Reform

Abstract

Countries vary enormously in the extent to which they devote their limited resources to funding the public sector. The scholarship on the determinants of public sector size tends to highlight economic variables, including development level, trade openness, dependence on agriculture, and income inequality. These variables are said to shape public sector size through two mechanisms: preferences regarding public spending and the ease of collecting revenues. Building on insights from the literatures on industrial relations and the welfare state, this paper will argue that economic structures also shape public sector size by impacting the extent to which lower-class people organize to make demands on the state. Some economic activities favor the rise of labor militancy more than others. Moreover, when a dynamic labor movement emerges in a particular economic sector, its ideology and norms can spill over into other sectors and social settings, giving rise to a broader culture of popular militancy. In such cases, state authorities may come under great pressure to increase spending on social programs, consumption subsidies, public employment, and other economic benefits, which in turn generates pressure for increased revenues. This argument will be developed empirically by comparing three Latin American countries: Bolivia, Guatemala, and Paraguay. These countries are similar with regard to several characteristics often said to influence public sector size, but in actuality they differ greatly on this variable, with Guatemala and Paraguay having exceedingly small public sectors and Bolivia a large one. Through a combination of cross-case comparison and within-case process tracing, the paper will show that a) popular militancy has long been much greater in Bolivia; b) this difference is, at its root, a reflection of differing economic structures; and c) this difference has affected the variance in public sector size among these countries by influencing the amount of pressure felt by state authorities to increase spending and taxation. The paper will draw on combination of sources, including existing scholarship; datasets and reports published by governments and international agencies; and field interviews with current and former politicians, policymakers, interest group leaders and experts from NGOs and think tanks.

Author

• Gabriel Ondetti, Missouri State University