Economic Reforms in New Democracies

In this book the authors assess the experiences of transition in Southern Europe, Latin America and Eastern Europe in order to determine what the conditions for successful transitions are. They argue against the "big bang" approach, espoused by many advisors to reforming countries, on the grounds that this approach bypasses the newly formed institutions of democracy that ultimately may undermine the necessary consensus to support painful economic reforms. The most successful reforms, they argue, have been those agreed upon through a process of democratic negotiation. A new democracy must offer politically important groups incentives to process their demands within the democratic institutional framework; otherwise, their support will be tenuous and the system may collapse under the strains incurred by painful economic reforms.

Transitions to democracy from authoritarian political systems have often occurred at times of economic crisis. The reforms required to transform the economic systems often cause sever material hardships for vast sectors of the population. Hence, new democracies forming under such circumstances confront a formidable challenge: to consolidate the nascent political institutions under conditions of economic hardship.