Over the course of the 1980s, following Mexico's 1982 debt moratorium and the subsequent inability of many other Southern nations to service their foreign debts, U.S. policy makers and multilateral lenders—mostly based in Washington—imposed a series of market-oriented reforms and "adjustments" upon the debtor countries in the interest of making them once again "creditworthy." These adjustments privatized and deregulated debtor countries' economies, opened them to a liberalized network of global trade and investment and signaled the onset of the neoliberal transformation of the global economy. Among the key components of this new neoliberal order, writes Peruvian economist Oscar Ugarteche in this Report, are the unsustainable (though now serviceable) debts owed by the South to the North, and the central role played by "the old Bretton Woods institutions—the International Monetary Fund (IMF) and the World Bank—now given the task of designing new economic policies and supervising international debt agreements."
This neoliberal transformation, particularly the liberalization of global finance, represented an historic victory for the owners of capital. "Behind the highly visible melodramas—the manias, the panics, the bailouts," writes Doug Henwood of the process, "lies a reconfiguration of power between richer and poorer countries and between owners and workers nationally and internationally."
The old global economic model, put in place in the capitalist world by the Bretton Woods agreements at the close of World War II, was based, however inconsistently, on a kind of social compact. The compact was highly uneven and guaranteed the hegemony of capital—especially U.S. capital—but it was a pact in which large segments of the population were included, and it legitimized the idea of the state's responsibility for the social well-being of its citizens. The model was incorporated in many Latin American countries by way of state-sponsored import-substitution industrialization, state-run systems of social security, and highly regulated trade and investment relations with the developed world. The past two decades have seen the gutting of that old model and the evaporation of the social compact—with a vengeance throughout Latin America—and its replacement with the neoliberal scramble for wealth and survival.
It is becoming increasingly common, as Duncan Green suggests, to hear that this new global financial system is in crisis. "Financial turbulence" has produced a crisis in the world economy, says the IMF in an October 1998 report posted on its Website, and "negative spillovers have been felt in world stock markets, emerging market interest spreads, acute pressures on several currencies and further drops in already weak commodity prices."
There have been, in fact, two distinct though overlapping global financial crises, which taken together have created both the urgency and the opportunity for a different kind of global restructuring, this time in the interests of the world's poor and working classes. The first, the recurrent crisis of the profitability of "emerging markets," is the one that troubles the sleep of the IMF functionaries. The other, the chronic crisis of foreign indebtedness and its accompanying impoverishment, troubles the countries of the South. The latter crisis, seen in the fierce competition among poor countries to attract mobile, unregulated capital with low costs of production—especially cheap labor—has resulted in impoverishment and social exclusion in all countries, even in the midst of macroeconomic growth. The chronic crisis of indebtedness can also be seen in a growing social dislocation that is weakening legitimate social and political structures in virtually all the debtor countries, placing many worried centrist economists and politicians on the side of a new restructuring.
A coalition of groups has now arisen to do battle with the underdeveloped world's huge, unpayable foreign debt. Because of the key role of the debt in the process which defines both the nature and the limits of contemporary economic development, this coalition, called Jubilee 2000, has set in motion a process which calls into question the entire set of financial relationships that now define North and South, and the relations between the wealthy and the impoverished. This NACLA Report examines those relations, some of their consequences, and some of the opposition they have engendered.