PERUVIAN ECONOMIC POLICY IN THE 1980S: FROM ORTHODOXY TO HETERODOXY AND BACK (original) (raw)

This paper examines the dramatic fluctuations in Peruvian macroeconomic policy in the 1980s. We trace the failure of "orthodox" or neoliberal policy in the first half of the decade to external shocks, economic inconsistencies, and the erosion of the state's institutional and administrative capacities. These difficulties paved the way for the triumph of the American Popular Revolutionary Alliance (APRA) party in 1985 and the subsequent adoption of a "heterodox" economic program. This program "worked" briefly, then collapsed owing to inattention to the external sector, a flawed approach to inflation control, rising class conflict, and the state's continuing inability to implement its decisions. We close by reviewing the legacy of the decade: deepening social cleavages, highly volatile politics, international isolation, a severely weakened state, and a populace wary of new policy shifts.