1 - Challenging the state: a decade of crisis

Summary

The 1980s and 1990s posed great challenges to governments in Latin America and Africa. Deep economic crisis and significantly heightened pressure for political reform severely taxed their capacity to manage economic and political tasks. In fact, the era was a critical moment in which existing state–economy and state–society relations were challenged and, at times, redefined. This book is about the significance of these challenges and redefinitions for the capacities – institutional, technical, administrative, and political – that states in Latin America and Africa require if they are to encourage economic development and provide effective governance for their societies. It explores the roles that political leaders and institutions played in a decade-long drama of crisis and change.

There is little question that this period will be remembered as an era of crisis for countries in Latin America and Africa. An economic crisis, often rooted in development policies adopted in prior decades and greatly increased prices for oil in the 1970s, was precipitated in the early 1980s by a series of external shocks, principal among which were a sharp rise in real interest rates, a rapid decline in the availability of international credit, and a sharp fall in international commodity prices. As a consequence, external terms of trade became highly unfavorable for many developing countries, budget deficits escalated, and foreign debt burdens became unmanageable. International conditions as well as domestic policies explain these problems.

The impact of such conditions on developing country economies was extensive and often extreme.