Mercosur’s Hope

September 25, 2007

We can get a better sense of what the privatizing, austerity-driven Washington Consensus for the South is all about if we remember the market-based economic programs put in place in the North over two decades ago by Margaret Thatcher and Ronald Reagan. Back in the early 1980s, for example, as the Reagan administration was gearing up its economic program of privatization, deregulation, union busting and fiscal cutbacks—a program that went under the rubric “supply-side economics,”—a liberal critic of the supply-siders quipped that “Reaganomics” amounted to the simple belief that people weren’t working hard enough: the rich because they weren’t rich enough, and the poor because they weren’t poor enough.

The quip was not far off the mark. The rich became richer and the poor became poorer and the global economy—then known as the capitalist world—recovered from the doldrums in which it found itself in the late 1970s and early 1980s. In the interim, the imperfect egalitarian instincts of Keynesian economics and social democratic policies were swept into the dustbin of ideas, left there to commingle with other antiquities like alchemy and astrology. The growing inequality and concomitant resentment we see throughout Latin America today is not a simple by-product of the recovery of the past two decades, but its very essence. Discipline, the creation of a willing, sometimes desperate, always available workforce has been at the center of the recovery engendered by the Washington Consensus, a legacy of the Reagan and Thatcher years.

In early June, the UN’s Economic Commission on Latin America and the Caribbean (ECLAC) released its latest figures on hemispheric poverty. In 2001, there were 214 million poor people in Latin America, 43% of the region’s population, people who, by ECLAC’s estimation, could not afford to adequately feed and shelter themselves—nearly half of whom were extremely poor, or “indigent.” By ECLAC’s estimates, there had been 209 million Latin Americans living in poverty in 1994, and 197 million in 1990; the trend has been upward.

And during the 1990s, a period of almost unprecedented accumulation of individual wealth, the UN Development Program tells us that 60 countries actually grew poorer. In Latin America, even those countries that have not grown poorer have grown more powerless. Indeed, among the demands the Washington Consensus makes on Latin American countries is that they produce principally for export to the North, a process that has led to foreign markets setting the priorities of many domestic economies.

Until now, individual Latin American economies have been too small and/or too weak to negotiate their way into the world economy on more favorable terms. Given the easy mobility of capital, and the concomitant power that has accrued to it since Thatcher and Reagan changed the rules and sensibilities of economic politics, policymakers in poorer, peripheral countries have seen their choices severely constricted.

That is why a group of South American governments, led by Brazil and Argentina, are attempting to expand their choices—and their economies—by revitalizing Mercosur, the South American Common Market. Meeting on June 18 in Asunción, Paraguay, under the leadership of Brazil’s indefatigable President Lula, the presidents of seven South American countries—Mercosur members Brazil, Argentina, Uruguay and Paraguay; associate members Chile and Bolivia; and invited guest Venezuela—met to reinvigorate the dormant organization and perhaps expand it northward to include Peru, Ecuador, Colombia and Venezuela. With the European Union as a rough model, the seven presidents even talked about forming a Mercosur parliament and, eventually, a common currency.

Lula told the press that active cooperation within Mercosur “is what could awaken in our South American brothers the idea that integration is more than a word used during election campaigns.” This struck a chord with Venezuela’s Hugo Chávez, whose “Bolivarian Revolution” exalts regional strength and integration. Néstor Kirchner, the newly elected Argentine president, was enthusiastic. “Our future lies in the political integration of Latin America,” he remarked at the Asunción meeting, “not in the automatic alignment with the U.S.A.” Even more notable is the so-far willing participation of Chile’s Ricardo Lagos who up to now has been much more interested in joining an expanded NAFTA. Lagos emphasized his interest in seeing Mercosur develop as a political union and to see the South Americans negotiate with the North Americans as a bloc. All present would be happy to see their economies produce for an expanded “domestic” market of South America’s nearly 400 million people.
None of this is welcome news to U.S. trade negotiators who would rather deal with the Americas one country at a time, especially in the negotiations to form the Free Trade Area of the Americas (FTAA). The South American presidents would like to see an expanded Mercosur up and running by 2006. Washington is committed to having the U.S.-dominated FTAA negotiations completed by 2005. It will be interesting to see which gets off the ground first.

Fred Rosen is contributing editor of the NACLA Report on the Americas

Tags: Mercosur, economics, trade, neoliberalism, globalization

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