Crisis States Research Center

Title : Representation, Participation and Development: Lessons from Small Industry in Latin America

Working Paper No : 45 (series 1)

Author(s) : Kenneth C. Shadlen

Date : June 2004

Abstract : Although it has become accepted as a matter of course that small firms are important for economic development and there exists an abundant literature on small enterprise promotion, very little attention is given to understanding the factors that affect small firms’ capacity to participate in politics. Filling this gap is important, for supporting small firms is not a technical choice but rather the outcome of political processes involving conflicts between actors with competing interests. In the simplest terms, representation affects policy, so anyone concerned with small enterprise development needs to consider the process by which small firms can secure representation.

This paper addresses this political vacuum, analysing the capacity of small industrialists to construct durable mechanisms of representation. Emphasis is placed on representation outside of the electoral realm. Using Stepan’s distinction between “civil society,” where interest groups and social movements articulate their interests, and “political society,” the arena that hosts formal contestation among parties over policymaking authority, the analysis here is focused on civil society. Rather than focusing on political parties, attention is paid to the aggregation and articulation of actors’ interests through business associations.

The analysis is presented in two stages. The first section presents a framework for analysing small industry politics. By drawing attention to the core characteristics that define small firms as political actors, an explanation is presented for why representation may be difficult, and I highlight the key issues at stake: the importance of formal organisation, the difficulties of small firm collective action, the critical role of the state, and the unavoidable tensions between dependence, autonomy, and political marginalisation.

These points are then illustrated with a comparative analysis of small industry representation in post-war Latin America, focusing on the politics of small industry representation in Mexico, Argentina, and Brazil. Each ‘case’ consists of two sub-cases, the first corresponding to the period after World War II until the late 1970s or early 1980s, the second corresponding to the contemporary period in which all three countries have undergone democratisation in the context of implementing neoliberal economic policies. The conclusion extracts the main lessons from the cases and ties the case studies to the framework set out above. This is then linked to the issues of representation and participation to the broader issue of small enterprise development.

Most importantly, the analysis points to the importance of the state, and state institutions more generally, in helping weak actors overcome barriers to collective action and providing nourishment for organisational development. And the analysis speaks to the fundamental tensions that weak actors confront, between autonomy and representation: dependence on the state can distort interest representation, but the absence of the state hardly appears to improve representation. We need to distinguish between the state as a source of political control and the state as a resource that may allow weak actors to overcome their basic political handicaps and be integrated into local and national politics.