The extensive scholarship on ' varieties of capitalism ' offers some conceptual and theoretical innovations that can be fruitfully employed to analyse the distinctive institutional foundations of capitalism in Latin America, or what could be called hierarchical market economies (HMEs). This perspective helps identify four core features of HMEs in Latin America that structure business access to essential inputs of capital, technology and labour : diversified business groups, multinational corporations (MNCs), low-skilled labour, and atomistic labour relations. Overall non-market, hierarchical relations in business groups and MNCs are central in organising capital and technology in Latin America, and are also pervasive in labour market regulation, union representation and employment relations. Important complementarities exist among these features, especially between MNCs and diversified business groups, as well as mutually reinforcing tendencies between these dominant corporate forms and general under-investment in skills and in well-mediated employment relations. These four features of HMEs, their common reliance on hierarchy, and the particular interactions among them add up to a distinct variety of capitalism, different from those identified in developed countries and other developing regions.

Most current theoretical treatments view business associations as rent-seeking, special interest groups. Yet, empirical research in a wide range of developing countries reveals a broad range of functions and activities undertaken by business associations, many of which promote efficiency. These positive functions address crucial development issues (emphasized in the New Institutional Economics) such as strengthening property rights, facilitating vertical and horizontal coordination, reducing information costs, and upgrading worker training. The associations that engage in these developmental activities tend to be well organized and staffed. This institutional strength depends in turn on high member density, valuable selective benefits (often delegated by governments), and effective internal mediation of member interests. In addition external factors, especially competitive markets and government pressure, encourage associations to use their institutional strength for productive ends.

This is the first systematically comparative and historical analysis of the incorporation of business into politics in Latin America, examining business organizing and political activity over the last century in five of the largest, most developed countries of the region. Why did business end up better organized in Chile, Colombia, and Mexico than in Argentina and Brazil? The explanation for the surprising cross-national variations lays neither in economic characteristics of business nor broader political parameters, but in the cumulative effect of actions of state actors. The book also considers the consequences of these differences in organization and finds that stronger encompassing associations offer government officials opportunities for concerted policy making with business that can enhance policy implementation. The strong hand of the state in organizing business has important implications not only for theories of collective action, but also for our understanding of civil society and its potential to promote democratization.

This book argues that Latin America has a distinctive, enduring form of hierarchical capitalism characterized by multinational corporations, diversified business groups, low skills and segmented labor markets. Over time, institutional complementarities knit features of corporate governance and labor markets together and thus contribute to institutional resiliency. Political systems generally favored elites and insiders who further reinforced existing institutions and complementarities. Hierarchical capitalism has not promoted rising productivity, good jobs or equitable development, and the efficacy of development strategies to promote these outcomes depends on tackling negative institutional complementarities. This book is intended to open a new debate on the nature of capitalism in Latin America and link that discussion to related research on comparative capitalism in other parts of the world.

Economists have identified the existence of a middle-income (MI) trap but have yet to analyze the politics of this trap. The authors argue that countries in theMItrap face two major institutional and political challenges. First, the policies necessary to upgrade productivity—as in human capital and innovation—require enormous investment in institutional capacity. Second, these institutional challenges come at a time when political capacity for building these institutions is weak, due primarily to the fragmentation of potential support coalitions. Politics are stalled in particular by fractured social groups, especially business and labor, and more generally by inequality. These conditions result in large measure from previous trajectories of growth. The empirical analysis concentrates on nine of the largerMIcountries.