The populist experience of the eighties

Abstract

In late 1982 Bolivia returned to democracy, after a long period of mostly military governments. The first democratic government, presided by Dr. Hernán Siles Suazo, inherited of the military governments a very deteriorated economy, marked by the external debt crisis. Also, during the military governments real wages had declined considerably and organized labor, which was the main political support of the democratic government, fought very forcefully for their recovery. Siles Zuazo found very difficult to reconcile macroeconomic adjustment with the demands of his electorate. The government’s defensive populism was unable to cope with the mounting social pressures that worsened the fiscal deficits: These deficits were financed printing money. The resulting inflation, which ended up in a hyperinflation, was moreover accompanied by food shortages and black markets. GDP fell substantially. The Central Confederation of Workers, disdainful of fiscal and balance of payments constraints, embarked itself in a wage race, which over time became a major culprit of the economic disaster. The hyperinflation was stopped with a drastic and orthodox program of stabilization, with the side effect of weakening politically the organizations of workers.