Economic elites and development with equity in Bolivia and Ecuador

Over the last few decades, Latin American economic elites have held strong preferences in favor of laissez-faire macroeconomic models with minimum state intervention. However, after the elections of left-wing parties in government in the 2000s, they acquiesced to more heterodox, state-led development models. What explains this change of stance? Under what conditions do economic elites of small economies on the periphery of the world capitalist system swing their support from neoclassical market economics to more mixed-economy approaches to development? In this chapter, we argue that critical changes in the balance of power between economic elites and left-wing governments explain variations in the former’s willingness to accept mixed-economy development models. To support the argument, we trace the changing distribution of power resources in three interrelated but analytically separate fields - economic, political, and social - and the international economic factors that tilt the balance in favor of or against capital owners. We look at the cases of Bolivia and Ecuador and find that when economic elites are at a disadvantage vis-à-vis left-wing governments in terms of power resources, they are more likely to accommodate state-led development models. In particular, we find that the commodity boom, the crisis of pro-market parties, and the fragmentation within the pro-business associational space caused a decline in the economic, political, and social resources possessed by economic elites. The end of the commodity boom and changing socio-political conditions caused economic elites to once again aggressively turn away from heterodox development models.