Capitalist modernization and growth in small countries: El Salvador's experience in the neoliberal era

Alexander Segovia

Chapter 21 in The Elgar Companion to the Economies of Latin America and the Caribbean, 2025, pp 434-451 from Edward Elgar Publishing

Abstract: In the first half of the 1990s El Salvador seemed to have found the formula that would finally take it out of underdevelopment, since after more than a decade of war, crisis and stagnation, the economy registered high growth accompanied by a reduction in unemployment and poverty. In that period, El Salvador was sold by the promoters of that paradigm as a success story that confirmed the virtuous relationship between capitalism and democracy. Unfortunately, this situation was short-lived, since from 1996 the economy entered a process of low and unstable growth. In this paper, I analyze the development of El Salvador during the ARENA governments (1989–2009), and the main argument I present is that in that period the problems of low growth and insufficient social development have to do, to a large extent, with the rentier behavior of the economic elites and their opposition to redistribution and the payment of taxes, with the conflicts between elites and between them and governments around economic models and economic management, with the existence of an extreme political and ideological polarization around the role of the state and the market, and with the institutional and fiscal weakness of the state. Added to these factors are the negative effects caused by violence and the occurrence of adverse natural phenomena, which in the Salvadoran case have become a structural restriction on growth.

Keywords: Development-underdevelopment; Elites; State; Social conflict; Economic models; El Salvador (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035317196
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