John Sheahan, Searching for a better society: the Peruvian economy from 1950 (University Park, Pa.: Penn State University Press, 1999. Pp. xi + 211. 30 tabs. 6 figs. $55; pbk. $18.65)

How a country so rich in natural resources has achieved so little has baffled scholars interested in Peru since the Italian savant Antonio Raimondi first pondered the question in the nineteenth century. In 1978 Rosemary Thorp and Geoffrey Bertram pointed to export-led growth and foreign capital as two of the main culprits. Searching for a better society, Sheahan argues, is a ‘complement’ to the Thorp and Bertram study, although it explains the country’s problems more ‘in terms of internal divisions, inequity and social conflict’ (p. x). It begins with a useful chapter that places Peru in a Latin American context. In the course of the following five chapters, Sheahan examines a number of key issues, ranging from human resource endowment to land reform and the informal sector. Two further chapters help to place these issues in a political and historical context, considering the experience of state-led development between 1963 and 1990 and the move towards an open economy since 1990. A concluding chapter examines the options available to Peru. Rather than any external factor, Sheahan points to poverty and inequality (particularly in access to education) as the main factors holding Peru back.

Sheahan makes the obvious yet important point that both state-led development and economic liberalization have variants. In the 1950s and 1960s Latin American countries, including Peru, chose forms of state-led development that proved largely unsuccessful, in contrast with East Asian economies, where state-led development was highly successful in raising living standards and promoting growth. Sheahan argues that state-led development in Peru could have worked but was doomed by the absence of a coherent macroeconomic strategy. In the 1980s and 1990s, most Latin American countries opted for some form of economic liberalization: he suggests that the variant chosen by Peru in 1990 was least helpful in addressing the problems of poverty and inequality, despite a number of promising policy adjustments since 1993. If economic liberalization is to work, he argues, the state needs to intervene in order to promote employment and rural diversification. However, the legacy of the 1980s crisis (characterized by hyperinflation and extreme political violence) and, in particular, of the failure of the heterodox policies of the Garcia administration (1985-90), has been a generalized aversion to all forms of state intervention. This aversion has had deeply negative consequences for the reduction of poverty and inequality. Sheahan suggests that Peru could learn from the Chilean experience, which has demonstrated that ‘a promotional version of liberalization can combine economic growth with relatively inclusive economic and social policies’ (p. 188).

Some readers may baulk at somewhat glib characterizations: international investors are described as ‘a herd of sheep’ (p. 186), while ex-president Belau’nde is ‘a natural model for anyone’s favourite uncle’ (p. 139). The many typographical errors point to slack proofreading: ‘Ayucucho’ (p. 78) and ‘Huencavalica’ (pp. 109, 110) are two of many. Nevertheless, this is an important book that contributes to the current reassessment of the period of state-led development in Latin America and refines the triumphalist interpretations of the current process of economic liberalization.

 First published in The Economic History Review, New Series, Vol. 53, No. 2 (May, 2000), pp. 391-392.