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of foreign ownership permitted are also political decisions to be made by the governing
elite along with or in isolation from the business and the labor. Thwaites and López
(2003) affirm that “regulation is a political strategy” (142) and that the lack of adequate
regulation in the privatizations applied in Argentina was and is in close relation with
various governments’ politics of equating regulation with intervention.
1.2. Factors that link privatizations to democratization:
Political privatizations are closely related to democratization. One such causal
mechanism is the “indirect-economic” one that states that privatizations promote
democratization by producing economic growth. The causal arrow runs from
privatizations increasing economic efficiency (Foster and Braddon 1996, 291) by
stimulating competition, which then enhances the quality and the quantity of goods
produced. This, in turn, generates a rise in the number of jobs created. The more jobs are
created, the more accelerated becomes the economic growth. (Dinavo 1995, 14).
Modernization theory, prevalent in the mid-1960s, asserted that economic
development brings democracy among the less developed countries (Lipset 1960) by
creating a middle class and promoting literacy, urbanization and the increased use of
technology. Later on, Lipset (1994) and other modernization scholars did recognize the
weight of cultural and ideational variables such as ethnicity and the tradition of rule of
law in democratization. The consensus was still fixed at the argument that increased
effectiveness by a government, by which it was meant economic development, augments
the likelihood of democracy. Rueschemeyer, Stephens and Stephens (1992) agreed with
the democratizing effect of capitalist development but differed on the causal mechanism
Convention