Economic reforms and cycles of state intervention

Abstract

This paper views recent programs of ''state-shrinking'' within a long-term cyclical perspective. It argues that the recent ''crisis of the state'' in Latin America and Eastern Europe is a product of the excessive and distorted pattern of state growth during the expansionary phase of the cycle. The current phase is one of necessary reform and privatization, but there will be no final ''minimal'' state as theorized by the neoliberals. On the contrary, the cyclical pattern will produce a reorganized state, ready to intervene and grow again. The paper discusses both the economic and the political forces at work in these cycles, invoking not only Kondratieff but also Hirschman. Unless the present generation of reformers learn to recognize the cyclical context within which they are operating, and to accept that a strong (reformed) state is required for the resumption of growth and the consolidation of democracy, they risk promoting measures which may eventually prove harmful both to market-oriented reform and to political liberty.