Firms in a Neoliberal Transition: The Case of Mexico 1990-1994
Author(s)
Danby, Colin
Abstract
This paper takes issue with the bifurcation in analyses of the crises that often follow neoliberal reforms. The run-up to these crises typically includes startling levels of private sector risk-taking, including large short positions in foreign currency. Advocates of neoliberalism have explained some of this private risk-taking with the concept of moral hazard; structuralist critics have dismissed this explanation as yet another effort to blame governments for what are actually inherent flaws in neoliberal reforms. An attempt is made to rescue the notion of moral hazard from the orthodox, methodologically individualist literature in which it is usually couched. The example of Mexico is used to argue that relations between states and large firms are often more institutionally complex than portrayed in either neoclassical or structuralist accounts. Such complexity is not mere detail but goes to the basic question of the conditions under which private accumulation takes place. In the Mexican case, it is shown that an ostensibly neoliberal reform had the perverse effect of strengthening implicit state insurance against exchange-rate losses by large firms.
