In the past decade, to varying degrees, the political economy of Latin American countries has demonstrated several notable features. These include reasonably strong economic growth rates largely due to high commodity prices, relatively balanced budgets, and low inflation rates; a small decrease in income inequality remarkable chiefly because it is the world region with the highest rates; and an unprecedented tendency for left-leaning presidential candidates to win democratic elections. Each book reviewed here combines these stylized facts in different ways. That of Evelyn Huber and John Stephens argues straightforwardly that democracy and left political strength—and especially left government—reduce inequality. Though in other ways compatible, Merike Blofield’s volume instead focuses primarily on the many causes of the persistence of inequality despite continued democracy and recent left victories. For the most part, both books ignore budget discipline and inflation while recognizing that the commodity boom allowed for inequality-reducing policies in some countries. Perhaps oddly for a book about austerity, Stephen Kaplan’s ignores inequality (and poverty) to focus precisely on fiscal discipline, particularly its salutary effects on inflation, its surprisingly frequent appearance in the electoral platforms and governments of the Left, and its unfortunate disappearance during commodity booms, especially in countries not previously victim to hyperinflation.

In Globalization and Austerity Politics in Latin America, Kaplan wants to explain in general what he calls “the rise of laissez-faire economic policies in developing countries” (p. 9) and, simultaneously, why governments still exhibit some variation in macroeconomic policy. Specifically, he examines why some presidents in Latin America increase government spending during election years while others decrease it; to do so, he combines cross-national statistical analysis of 16 countries in the region over nearly 50 years and comparative case studies principally of Argentina, Chile, and Venezuela, and secondarily of Brazil and Ecuador, during the past 20 years.

For Kaplan, there are essentially two major reasons why presidents increasingly have turned away from political business cycles (of high spending in election years leading to inflation). One is the experience of hyperinflation mostly in the 1980s and the other is the shift from bank-financed debt to bond-market financing in the following decade. Experiences of hyperinflation (annual inflation rates over 100%) were transformative, leaving lasting impressions that fundamentally changed the motivations of the policymaking elite. At the same time, bondholders can more credibly threaten governments and thus can better impose austerity, giving politicians less leeway even when they have motivation to spend. Only in countries with no history of hyperinflation and with access to revenues independent of bond markets are presidents likely to engage in expansionary monetary and fiscal policy in election years. The statistical chapter presents evidence that “both bond market financing and past inflationary crises have a dampening effect on election-year stimulus” (p. 102). It also shows that left-leaning governments are now as austere as rightist or centrist governments, and even more austere in inflation-scarred countries. The comparative case studies chapters test—and find wanting—competing hypotheses that International Monetary Fund conditionality, neoliberal policy diffusion, or new institutions like autonomous central banks and fiscal responsibility laws were stronger influences than bond markets and hyperinflationary pasts on fiscal and monetary policy choices.

Kaplan’s general arguments appear sound, yet some of the details are problematic. He defines austerity as “a commitment to budgetary discipline” (p. 7). He contrasts austerity both with populism (defined as overspending in election years) and with Keynesianism, which he repeatedly equates with increased government spending during recessions. This ignores the equally Keynesian notion that governments should reduce spending or raise taxes during economic booms. Keynesianism helps explain recent Chilean macroeconomic policy especially, which Kaplan notes toward the end of the book, where he also acknowledges that he controls for countercyclical policy in his regression analysis (but ignores that it is usually significant); he does not systematically examine countercyclical policymaking in the case chapters.

The author measures budgetary discipline differently throughout the book; sometimes it is the level (budget surplus as a percent of GDP) and at other times seems to be change, but this is never made explicit, leading to confusion. For example, Venezuela’s primary budget surplus dipping to 2 percent in 2006 is considered expansionary, while both Brazil’s 2 percent surplus that year and Chile’s adding 2.5 percentage points to its deficit in a prior election year are considered austere. He also offers several strange interpretations of the region’s politics: Rafael Caldera was apparently “one of Latin America’s most historic leftists” (p. 182); despite unemployment rates in the teens (buried in a footnote), Argentina had “strong economic fundamentals” in the late 1990s (p. 235); and, particularly curious, until the oil shocks of the 1970s, “inflation did not resonate as much of a political issue in the region” (p. 58). Inflation certainly resonated with Getúlio Vargas, who committed suicide in the midst of pressure from high inflation rates in 1954, and with João Goulart, who fell to the military ten years later as the inflation rate hit over 80 percent. In fact, Brazil, Argentina, and Chile all experienced politically problematic inflation rates well before 1973, and Latin America already had the world’s highest inflation rates in the 1950s and 1960s, when wage–price spirals undermined political stability in many countries.

In The Great Gap, Daniella Campello uses similar arguments to Kaplan’s in explaining why there has been so little reduction in Latin America’s high rates of income inequality after two decades of democracy. To wit, financial markets make increasing government social spending difficult; only when commodity prices are high does fiscal space open (p. 186). The crucial difference between the two is that while Kaplan suggests that even lower-class voters now prioritize fiscal discipline and low inflation just as investors and political elites do (p. 281), Campello and Blofield see voters as favoring redistribution and see presidents as forced to “deviate from their campaign promises and to implement policies closer to investors’ preferences” (p. 383). Thus, while Kaplan suggests that “market conditionality may improve developing country governance” (Globalization, p. 281), Blofield and her contributors view the same mechanisms as one among several ways that inequality is reproduced through democratic politics.

Blofield’s outstanding volume is a major contribution to our understanding of the relationship between inequality and politics. In addition to showing how inequality is reproduced, it persuasively demonstrates how pervasive inequality is in Latin America, how elites, the media, and the public perceive inequality, and how inequality affects taxation and social policies. Fernando Filgueira’s solo chapter uses cluster analysis to illustrate the region’s distinctive developmental path and income gap, which make the designing of redistributive social policy difficult: At each of three levels of human development, the Latin American cluster has the highest level of inequality, typically high levels of urbanization, and a high demographic burden, with the largest dependency ratios for children, the elderly, or both. An interesting chapter on inequality of opportunity similarly shows how strong it is in Latin America, with inherited items like race and parental education and occupation explaining a large share of income and consumption differences. Other contributors convincingly argue that the elite-controlled media support the continuation of social inequality, offering interesting data regarding the television market, including the preponderance of upper-class white males represented, the devotion of only 3 percent of news segments to poverty and social policy, and the fact that only one Latin American country has a television media sector diverse enough to pass the U.S. merger test as a competitive market. Blofield and Juan Pablo Luna make the claim that although voters increasingly demand redistribution—because public preferences remain so highly divided, such that one does not find a normal distribution—if politicians “choose to compete on the issue of inequality, significant political polarization and turmoil are likely to arise” (p. 175).

One of the volume’s strongest chapters (by Filgueira and multiple coauthors) argues that the recent rise of left parties is in reaction to a long period of “conservative modernization” during the Washington Consensus era. In that era, elites were “accepting and even pushing for electoral democracy and for market expansion and education expansion, but limiting the range of acceptable policies in such a way that inequality and the uneven distribution of opportunities remained a dominant feature of the region, if not a heightened one” thus creating a “second crisis of incorporation” in the 1990s (pp. 246, 247). This crisis involves fragile labor markets that fail to provide enough secure and well-remunerated jobs to allow workers to meet their rising consumption expectations in increasingly urbanized and educated countries, as well as unstable political systems with increasingly distrustful citizens.

Huber and Stephens’s approving citation of Filgueira and his colleagues’ explanation for the rise of the left is one of many ways in which their book overlaps with Blofield’s. Both books reject the notion that the Meltzer-Richard theory of redistribution—claiming that democracies with higher inequality rates will generate stronger welfare states because of median voter preferences—explains differences in social policy or inequality in Latin America. Both argue that privatizing social security reforms in the 1980s and 1990s worsened social exclusion; that domestic policy reforms such as those created interest groups that now constrain equity-enhancing reforms, even under left governments; that to address inequality, a broad sociopolitical coalition including at least part of the upper strata is needed to support higher levels of taxation and increased investment in human capital formation, particularly education; and that these reforms should be pursued incrementally rather than in a radical populist fashion.

The excellent Democracy and the Left offers compelling support for Huber and Stephens’s greater optimism about the long-run capacity of democracy and left governments to reduce inequality through redistributive social policy. Drawing from their own previously developed “power constellations theory” with its three clusters of power—“balance of domestic class power and party political power,” “structure of the state and state-society relations,” and “transnational structures of power” (p. 4) – the authors demonstrate how Latin America’s class structure and lack of consistent democracy historically meant a weak Left, how recently lack of state capacity hindered social policy development, and how in the 1980s transnational forces pressed for equality-reducing reforms. Each cluster thus helps explain the region’s distinctive and persistent degree of inequality. Nonetheless, through impressively executed historical comparisons of Latin American and European countries, regression analyses using all Latin American countries from 1970 to 2005, and examinations of five high social-welfare-effort countries (Argentina, Brazil, Chile, Costa Rica, and Uruguay) in the recent neoliberal era and in comparison to Portugal and Spain, Huber and Stephens consistently show how over time, democracy operates to reduce inequality through multiple pathways, especially by enabling left political strength and by promoting social spending. They also demonstrate the lesser but still relevant influence of international forces. They note, for example, the initially positive influence of the European Union on Iberian social policy, as well as the more recent importance of the World Bank’s turn away from promoting Chilean-style privatized social security and toward promoting conditional cash-transfer programs.

Both of the books on inequality deserve a wide audience, and not only among Latin Americanists. They offer much more than can be addressed adequately here. It is difficult to find fault with their analyses and policy prescriptions, yet one might wonder about the likelihood of the successful formation of a broad coalition that includes elites willing to pay higher taxes. As one of Blofield’s contributors, Elisa Reis, demonstrates in her chapter on Brazilian elites’ perception of poverty, inequality, and redistributive policies, most of the elite feel little or no responsibility for alleviating poverty and fault the state instead. While agreeing that human capital is crucial for democracy and prosperity, in Brazil “the elite unanimously reject the idea of paying more taxes to improve education” (p. 99). If such attitudes exist throughout the region, Latin Americans may continue waiting decades for an incremental project that can successfully incorporate the majority of its citizens.