Mexico's dramatic shift from state-led development to neoliberalism in the 1980s and subsequent transition to democracy in the 1990s has been the subject of extensive scholarly research. These two well-researched and empirically rich books further our understanding of these important processes by providing in-depth analyses of privatization and the decline of small industry. They represent a new generation of scholarship that presents a long-term perspective on Mexico's political economy, beginning with the emergence of state-led development and corporatism in the early twentieth century through to the contemporary era of neoliberalism and multiparty democracy.

The central argument of Kenneth Shadlen's Democratization Without Representation is that small industry was more effectively represented under the authoritarian corporatist system, and that democratization has weakened the voice of small industry in government. Thus, Shadlen challenges the common wisdom that democratization improves representation, and in fact argues that democratization can actually diminish representation. He highlights the ways in which representation is particularly difficult for small industry. Because of their lack of resources and relatively weak position in the economy, small firms are especially dependent on formal organizations to represent their interests, but for these same reasons, collective action dilemmas make it difficult for large numbers of small firms to form effective associations. Although many small firms belong to peak business organizations, these groups tend to be controlled by larger companies with greater capacity to manage them. Moreover, small and large industries often have different interests; small firms, for example, tend to oppose foreign direct investment and free trade because they have fewer connections to multinational corporations and they depend more on domestic sales than do larger businesses. This distinction brings small business organizations much closer in line with civil society organizations; however, disagreements over labor and regulatory policies often prevent effective coalitions between these two interests. Small firms are typically marginalized in political parties as well. Unlike big business, they do not have the capital to finance parties. Unlike labor, they cannot deliver large numbers of votes. Given these obstacles to effective representation, Shadlen argues, small industry fared better under Mexico's authoritarian corporatism than under democracy.

The first empirical chapter explains the structure of business representation in the Mexican corporatist system and describes the formation and strategies of the National Chamber of Manufacturing Industry (CANACINTRA), the main corporatist institution to represent small industry. The organization depended on laws requiring all firms to be members and pay dues to the chamber. It pursued a strategy of accommodation with the state, never publicly criticizing government policies, and hoping in return for favors from contacts inside the state. Leaders were co-opted and often went on to political careers within the ruling party. Shadlen contends that small industry benefited substantially from this relationship during authoritarian rule.

Chapter 3 analyzes the conflicts within CANACINTRA that developed during the early 1980s in the midst of economic crisis and the economic reforms that hurt many small industries. The author argues that democratization facilitated a split in the organization because it allowed the dissidents to pursue new forms of protest and new alliance partners, thus weakening small industry representation. The evidence he presents, however, seems to suggest that the split was the result of the authoritarianism of both CANACINTRA and the state. The chapter describes how the accomodationist leaders turned to the authoritarian state to disenfranchise and harass their challengers. Shadlen suggests that the state's interference was an example of its commitment to small industry, but it seems more likely that the state intervened to keep dissidents from within CANACINTRA from gaining control of the organization. He is somewhat uncritical in his implicit assumption that the authoritarian leaders of CANACINTRA were faithfully representing the interests of its members.

The last two empirical chapters examine the representation of small industry in the later stages of democratization. Shadlen shows how small industry was squeezed between big business, which was trying to reconfigure corporatism to better represent its interests, and National Association of Manufacturing Industrialists (ANIT) (the dissident movement that split from CANACINTRA), which was trying to overturn the law calling for compulsory membership in corporatist business confederations. Small industry found little reprieve in the increasing electoral competition of the late 1990s. The Chambers Law providing for compulsory membership was abolished, and the membership and resources of CANACINTRA plummeted. Small industry did not find reliable representation in civil society organizations or in political parties.

The book represents a thorough and comprehensive study of small industry politics in Mexico, drawing from more than 100 interviews and extensive archival research. Nevertheless, I remain skeptical of the author's central claim that the problems of small industry in the 1980s and 1990s were primarily a consequence of democratization. Rather, it seems that CANACINTRA's declining influence was the result of the state's decision to abandon small industry and embrace big business as part of a new development model. CANACINTRA's weakness comes from its dependence on the state. The state raised the profile of big business and marginalized CANACINTRA because it could; CANACINTRA had no real influence over the policymaking of the authoritarian state. In the postwar period, small industry's interests happened to coincide with those of the developmentalist state. But once the interests of the state changed, it abandoned small industry. Shadlen does a good job of demonstrating that small industry was better off under an authoritarian developmentalist state than under a democratic neoliberal state, and this is an important critique of neoliberalism. But it does not necessarily follow that small industry would have been better off under continued authoritarian rule and neoliberalism. Moreover, if the government had been more democratic during the early 1980s, and CANACINTRA had been more democratic internally, CANACINTRA might have more forcefully articulated the interests of its members, and small industry might have had a greater voice in the reform process.

Downsizing the State by Dag MacLeod is an ambitious book about privatization in Mexico. MacLeod's main objective is to reformulate the way scholars think about the relationship between markets and governance. He focuses on the concepts of property rights, hard budget constraints, market failure, and transaction costs, arguing that states create free markets by enforcing property rights and hard budget constraints, but the problems of market failure and transaction costs demonstrate that not all resources are best allocated by the market. Moreover, actors struggle to create markets for some exchanges while simultaneously seeking to avoid market allocation in others. The author argues that paradoxically, during the 1980s the state enforced harder budget constraints on the public sector than on many large private companies. While the public sector as a whole mostly lived within its means from 1965 to 1982, when newly privatized firms went bankrupt in 1995, the government absorbed their debt through the Bank Fund for Savings Protection.

One important strand in MacLeod's argument is a critique of the prevailing wisdom that privatization requires a strong state that is insulated from social pressures. The case studies demonstrate how the state used its control over labor to suppress labor demands and restructure labor relations more favorable to capital. While the state exhibited growing independence from labor, it simultaneously developed greater dependence on capital. The author also shows that state capacity was not necessary for economic reform because the complex tasks of privatization were turned over to international consulting firms, thus “privatizing privatization.”

The empirical chapters are based on 78 interviews with 58 key informants. They examine the rise of the parastate sector in Mexico from 1930 to 1982 and the privatization since 1982. Chapters 4 through 6 provide in-depth case studies of the privatization of the airlines, telecommunications, and the railroads. MacLeod argues that the nationalizations were driven by a desire to appease capital, control labor, and defend sovereignty. State ownership was often motivated by labor struggles and allowed the state to rein in labor. Parastate firms primarily benefited private firms with subsidized transportation and inputs, while the profits from parastate firms allowed for low taxes on private firms. The state was most proactive in sectors dominated by foreign capital, and so confrontation with domestic capital was rare. The state had trouble controlling the parastate sector. Often the parastate directors were more powerful than the ministers they supposedly answered to, and there was also a tension between the use of parastate firms for patronage and their contribution to national development. Privatization was a response to these problems of control, but also a result of the debt crisis, pressure from international financial institutions, and capital flight. The key components of the privatizations were organizational restructuring, confrontation with labor unions, and foreign investment. MacLeod argues that the telecommunications privatization was relatively successful compared to the others because the state gave Telmex monopoly control over the local phone market and there was huge potential for growth in the telecom industry.

Both books are empirically rich, rely on rigorous field research, and provide important new insights into Mexico's economic reform. Shadlen's book has a crisp and parsimonious theoretical model and clearly demonstrates that democratization hurt the corporatist CANACINTRA, but if CANACINTRA was not effectively representing small industry, it may not matter. He is less convincing in demonstrating that given the context of neoliberal reform, democratization further weakened small industry. Nevertheless, the book draws attention to the importance of small industry as a political actor that must be analyzed apart from larger businesses, political parties, and civil society organizations. MacLeod's book lacks theoretical focus and a clear research question. The empirical chapters are impressive in their depth and detail, but the comparative value of the case studies is not fully exploited. The author could have set up the comparisons more effectively to better address important questions about the causes and consequences of privatization. Nevertheless, the case studies provide many new insights into privatization in Mexico. Both books make an important contribution to the study of Mexican political economy and will be of great interest to scholars of that discipline.