Private Wealth and Public Revenue: Business Power and Tax Policy in Latin America

I would like to present my book, Private Wealth and Public Revenue: Business Power and Tax Policy in Latin America, which will be published in January 2015 by Cambridge University Press.  A brief description follows:

Inequality and taxation are fundamental problems of modern times.  How and when can democracies tax economic elites?  In this book, I develop a theoretical framework that refines and integrates the classic concepts of business's instrumental (political) power and structural (investment) power to explain the scope and fate of progressive tax reform initiatives in Chile, Argentina, and Bolivia after market reform.

Instrumental and structural power are critical variables that merit greater attention in contemporary political economy. Instrumental power entails deliberate political actions like lobbying.  Structural power arises from the profit-maximizing behavior of firms and investors; if policymakers anticipate that a reform will provoke disinvestment or capital flight, they may rule it out to protect growth and employment.  When economic elites have strong power of either type, their interests shape policy decisions.  When economic elites enjoy both instrumental and structural power, they achieve more consistent and more extensive influence.  Strategies for mobilizing public support or tempering elite opposition can facilitate incremental reforms, and popular mobilization occasionally overwhelms business power.  However, governments have much more leeway to tax elites whose structural and instrumental power are both weak. 

I argue that in Chile, business's multiple sources of instrumental power, including cohesion and ties to right parties, kept substantial tax increases off the agenda during the two decades following the 1990 transition to democracy.  In Argentina, weaker business power facilitated significant reform, although specific sectors, including finance and agriculture, occasionally had instrumental and/or structural power to defend their interests.  In Bolivia, popular mobilization occasionally counterbalanced the power of economic elites, who were much stronger than in Argentina but weaker than in Chile.

The book's in-depth, medium-N case analysis, extensive interview evidence, and close attention to policy-making processes, including the often-overlooked agenda formulation stage, contribute insights on business power and prospects for redistribution in unequal democracies. The book further contributes to research on state-society fiscal bargaining by providing a systematic basis for assessing taxpayers’ bargaining power and by offering a distinct and less sanguine perspective on the causal effects of elite cohesion on extractive capacity and social equity.