Democracy, neoliberalism and growth with equity : lessons from India and Chile

This essay questions the still pervasive view that democratic regimes are ill‐suited to reconciling economic growth with distribution. Drawing on the experiences of post‐liberalization India (1991–1999) and post‐authoritarian Chile (1990–1999), it posits the question differently: what explains why Chile's new democracy (the Concertacion) has been able to judiciously combine market‐guided or neoliberal economic policies with reformist and distributive programs, while India, the developing world's largest democracy, has failed to combine its far‐reaching economic liberalization program ‘with a human face’. Moving beyond conventional arguments that stress the merits of authoritarian systems over democracies, the following comparative case study illustrates that it is the state's organizational and institutional capacities that really matter. For countries engaged in economic restructuring, the message is unambiguous: building and reinvigorating the state's administrative and institutional capacities are critical for promoting economic growth with redistribution.