Latin America watch

Mark Weisbrot of the Washington, DC-based Center for Economic and Policy Research looks to recent political developments in Latin America, and sees the end of an era of neoliberal policies. His article, forthcoming in the International Journal of Health Services, begins:

The changes that have taken place in Latin America in recent years are part of an epoch-making transformation. To borrow from the Cold War framework that still prevails in U.S. foreign policy circles: we have witnessed the collapse of the Berlin Wall, and the formation of newly independent states. A region that has been dominated by the United States for more than a century has now, for the most part, broken away. Of course there are still strong commercial, political, cultural and even military ties; but as in the states of the former Soviet Union after 1990, these do not have the same economic or political implications that they had a decade or even a few years ago.

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The most important cause of Latin America’s regional leftward shift has been vastly misunderstood: it is the long-term economic growth failure in the region. This is something that even most critics of “neoliberalism” – a one-word description of the last quarter-century’s economic reforms that is more common in Latin America than it is here – have barely mentioned. Most often we read that these reforms have been successful in promoting growth, but that too many people have been left behind and that poverty and inequality have worsened, leading to political unrest.

This explanation misses the most important, indeed historic change, that has taken place in Latin America over the last 25 years: the collapse of economic growth. If we ignore income distribution and just look at income per person – the most basic measure of economic progress that economists use – the last quarter-century has been a disaster. From 1960 to 1980, per capita income in Latin America grew by 82 percent, after adjusting for inflation. From 1980 to 2000, it grew by only 9 percent; and for the first five years of this decade (2000-2005), growth has totaled about 4 percent. To find a growth performance in Latin America that is even close to failure of the last 25 years, one has to go back more than a century, and choose a 25-year period that includes both World War I and start of the Great Depression.

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In Washington, policy-makers engage in a special form of denial about Latin America’s economic failure. After all, they have gotten most of what they wanted: restrictions on international trade and drastically reduced investment flows. Public enterprises have been privatized, even including social security systems in many countries. Governments are running tighter budgets and central banks are more independent and tougher on inflation. The state-led industrial policies and development planning of the past have been abandoned.

But the cumulative results have been an economic disaster, and so it is not surprising that presidential candidates who campaigned explicitly against “neoliberalism” have in recent years won elections in Argentina, Bolivia, Brazil, Ecuador, Uruguay, and Venezuela. Mexico may very well follow suit in July. The question of which policies contributed to the many and varied national economic failures is more complex, and the possible alternatives for restoring growth and development – only now beginning to be explored – vary greatly by country. But it should be clear that what we are now witnessing is a response to this epoch-making economic failure, and – following a series of revolts at the ballot box, and some in the streets – a number of governments looking for more practical and effective ways to make capitalism work.

The long era of “neoliberalism” in Latin America has not yet come to an end – that end is just beginning, for reasons discussed below. What really defines this as a new era is that the influence of the United States in a region that was until very recently its “backyard” has plummeted so rapidly, drastically, and probably irreversibly, that the current situation is truly unprecedented in the modern history of the hemisphere.

This is a dramatic change, especially if we consider that Washington in the 1980s spent billions of dollars, and supported the murder of tens of thousands of innocents, just to keep control over a few small, economically insignificant countries in Central America. President Clinton issued a rare public apology for the United States’ role in what the United Nations determined to be genocide in Guatemala, and Washington’s participation in the mass slaughter of El Salvador and the destruction of Nicaragua was even greater and more direct. Yet in the last few years these same people – literally in the case of such current and recent administration personnel as Elliot Abrams, Otto Reich, and John Negroponte – have watched almost helplessly as the bulk of the region, in population and economic terms, has slipped out of their grasp.