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By Manuel Pastor and Carol Wise

From the Introduction

Arguments in favor of neoliberal reform have long held that an economic strategy based on liberalization, privatization and deregulation is the surest recipe for triggering higher levels of growth, productivity, and income equality. However, despite the ambitious programs of economic adjustment and market restructuring undertaken in Latin America since the mid-to-late 1980s, annual growth rates averaged just 3.6% during the 1991-1994 period--well below the estimated 6% that would be required for a significant improvement in employment and social equity. Indeed, only a handful of countries have seen an increase in per-capita gross national product (GDP) since 1991, and while total factor productivity has improved during the 1990s, Latin America has still not caught up to where it stood on this indicator in 1980.

In this article, we explore this gap between the expected gains from neoliberal reform and the lackluster results that have thus far been registered. Focusing on the case of Mexico--a country that first liberalized in 1985 and ranks second only to Chile in terms of the length of time that the reforms have been in place--we argue that these disappointing returns are more than just a longer-than-expected adjustment lag; rather, as policymakers have disproportionately harnessed their neoliberal reform program to the tasks of macroeconomic stabilization, the tendency has been to both over-emphasize.

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