Coalitions and corporate choices in Argentina, 1976–1994: The recent private sector support of privatization

After sabotaging almost every privatization since the 1970s, the Argentine private sector suddenly began to support privatizations in 1991. While public choice approaches that stress the cost impact of policy can explain the anti-privatization behavior of the private sector prior to 1991, they are less successful at explaining this recent shift in behavior. This article explains this shift by focusing on political coalitions. By expanding (or reducing) the set of attainable outcomes, political coalitions shape the political choices of firms. Prior to 1991, the rent-seeking private sector led a huge multi-sectoral anti-privatization coalition that repeatedly preempted the Executive from privatizing. In 1991, this coalition disintegrated as a result of a reordering of economic institutions. Devoid of its traditional allies, the private sector chose to acquiesce to privatizations. Thus, political coalitions can be more important in shaping firm behavior than economic considerations such as the cost-impact of public policy or the size of rent markets. This article also explains why, in many countries confronting comparable anti-privatization coalitions, privatizations are likely to emerge with an unexpected mixture of competition-enhancing and competition-restricting policies.