Hierarchical Market Economies and Varieties of Capitalism in Latin America

Abstract

The extensive scholarship on ‘varieties of capitalism’ offers some conceptual and theoretical innovations that can be fruitfully employed to analyze 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 labor: 1) diversified business groups, 2) multinational corporations (MNCs), 3) low-skilled labor, and 4) atomistic labor relations. Overall non-market, hierarchical relations in business groups and MNCs are central in organizing capital and technology, and are also pervasive in labor 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 forms of corporate governance 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.