Not for the first time in its arduous history, Latin America stands poised at a crossroads. Continuing along the present path of deepening indebtedness, never-ending recession, plummeting employment and household impoverishment is simply unsustainable. It would be a mistake to conclude that the dominant economic policy paradigm in the region is exclusively responsible for this sorry performance. Nonetheless, the verdict is now in on the ability of the market-based economic policies associated with the Washington Consensus to generate positive results: The market-driven model has failed miserably, and alternatives need to be put in place sooner rather than later.
Historians may look back on the utter collapse of the Argentine economy in 2001 as the critical moment that awakened the world to the extent of the region-wide crisis. The Argentine debacle carried with it the real possibility of analogous breakdowns in neighboring Uruguay and Brazil. [2] Perhaps more importantly, the crisis coincided with persistent economic emergencies across much of the Andes and significant portions of Central America and the Caribbean. The full range of neoliberal reforms were not applied in all of the countries that teetered on the brink of social and economic catastrophe at one point or another from the mid-1990s through 2002. Yet even where popular resistance had managed to block domestic implementation of some market-oriented reforms, the crises and their social repercussions could be traced to the impact of a broadly neoliberal international regime on domestic economic stability. Argentina was crucial, not only for the extreme nature of its predicament and the breadth of its reverberations, spanning oceans beyond Latin America, but also because it had for so many years served as the model for the advocates of wholesale privatization, deregulation, trade liberalization and financial integration. Finally, Argentina’s ordeal reflected the degree to which today’s Latin American economic crisis is of even greater dimensions than that which accompanied the Great Depression or the debt crisis of 1982.
Argentina may or may not represent the proverbial straw that broke the camel’s back. But there is little doubt that its crisis marked the end of the period during which power-holders in Latin America, and its de facto capital city for economic policymaking, Washington, D.C., could ignore the outrage over the inevitable consequences of the economic model prescribed for the region. However we allocate blame for the economic devastation that has brought ruin to millions of households across Latin America and the Caribbean, it is time to label the experience clearly. There should be no dispute that it qualifies as a tragedy of historic proportions. Protests from the direct victims of this region-wide tragedy have time and again elicited reactions of disinterest, dismissal or suppression from government officials and international financial institutions. Before the Argentine collapse, few were willing to listen to progressive intellectuals or advocacy groups outside the region who condemned, as consciously or inadvertently pernicious, the process of wholesale privatization, institutional dismantling and regressive redistribution that was being foisted upon Latin American countries for roughly two decades.
But those raised voices can no longer be ignored. It is not only that the evidence of failure now exceeds the capacity for denial of even the most impervious economists.[3] Rather, what is most significant is that the political pendulum has now swung decidedly against the champions of the market as a one-size-fits-all solution to Latin America’s economic woes. In one Latin American country after another, progressive leaders have come to office and are confronting the established paradigm, as Cecilia López Montaño notes in her contribution to this NACLA Report. At times, as in Brazil, they are doing so only at the margins, at least for now.[4] But elsewhere, as in Argentina and, arguably, in Venezuela, they are confronting that paradigm and its apostles head on. Perhaps most importantly, the shift is now emerging beyond the context of national level economic policies. This point was driven home last September when developing countries walked out of the trade negotiations at Cancún, declaring themselves fed up with the collusive charade being enacted by the governments of the United States and the European Union.
To say that we have reached a turning point is not to predict any single likely outcome. Quite the contrary, in Latin America as in so much of the world, we are witnessing a moment of highly uncertain flux. That very uncertainty signals the degree to which what is at stake in the debate over Latin American development strategies is a matter of intense struggle. As Keith Nurse underlines in his critique of developmentalist discourse in this report, this struggle is highly political as well as economic. He reveals the often diverging interests of North and South, not to mention the depth of the chasm separating the forces that wish to safeguard hierarchies and privilege from those who would overturn these in the interest of social justice.
This is also an intellectual struggle between the defenders of orthodoxy who inhabit the corporate world, developed country governments and international financial institutions, and on the other side, their critics, who march in the streets or who work in advocacy organizations, academia, policymaking positions in Southern governments or in development agencies of various kinds.
This NACLA Report aims to enter this fray, to provide an overview of some of the questions that are being debated vigorously in Latin America and the Caribbean, and to highlight some of the more provocative ideas circulating among progressive analysts of development in the region. We do not aim to achieve consensus, not to mention closure. Indeed, it would be premature to attempt either. Our admittedly more modest objective is simply to situate the present conjuncture in a broader historical context, to signal areas of particularly heated controversy and to suggest some elements of an eventual alternative. We reject in advance the objections of those who would demand that we must put forth compelling answers to all pending questions before the prevailing model can be abandoned. Quite the contrary: It is well past time for those in the policymaking community who have spear-headed the more than two decades of devastation to recognize the depths of their failure and to acknowledge the legitimacy of schools of thought diverging considerably from their own.
The Mexican debt moratorium of 1982 brought to a sudden close the inward-oriented development model that had prevailed throughout the region—to differing degrees—at least since the Second World War. Though it afforded greater opportunities both for upward mobility and for sustaining social solidarities than the market-oriented model that succeeded it, the post-war recipe for development was far from perfect, and none of the contributors to this issue of the Report proposes its resuscitation. Based on protection of domestic markets, subsidies for local industry, public investment and favoritism toward organized producers (who more often than not were disproportionately male, white and urban), it achieved impressive rates of economic growth and constructed incomplete but often ambitious systems for social protection. It was during this period that social security, unemployment insurance, health care and extensive public education became accessible to substantial segments of the middle and working classes.
Of course, these achievements were woefully partial and in more cases than not were bequeathed from the state by authoritarian leaders instead of conquered from below by a mobilized citizenry. Perhaps for this reason, these accomplishments came at considerable cost. Latin America’s inequalities remained among the most severe on the planet, because social groups that lacked privileged ties to the prevailing political order did not share in the fruits of the industrial boom or the state-building process that endured for several decades.[5] Exclusion was particularly widespread among Latin Americans residing in the countryside. For them agrarian reform all too often remained an unfulfilled promise—if it was promised at all—as oligarchies, which in some cases remain entrenched to this day, resisted even timid efforts to modernize land tenure regimes. Nor did the benefits of this model extend to the tens of millions of urban poor who toiled under conditions of informality, frequently residing in the urban squalor of teeming shantytowns that sprung up inexorably as rural communities migrated to the cities when their agricultural livelihoods disappeared.
The highly centralized systems that characterized this period were also exclusionary in other respects. They typically allowed little space for citizens to articulate demands autonomously or to forge creative solutions to collective concerns at local and community levels or in their relationship to the broader political order. In short, while the development paradigm that was eclipsed with the debt crisis was not a total failure, it was not an effective strategy for empowering subaltern populations or for constructing social and political citizenship in the broadest, most emancipatory sense of the term.
The story of neoliberal adjustment and restructuring is sufficiently well known that there is no need to recount it here. It suffices to say that much of what was constructed during the pre-debt crisis decades of economic growth has eroded to the point of near extinction. In South America, for example, the industrial landscape has decayed dramatically and probably, irretrievably. The minority of industrial units that survive competitively have boosted productivity to levels hardly imaginable not long ago, but these typically represent mere enclaves, accounting for negligible employment and connecting unevenly, at best, to the broader fabric of economic life. Although industry has performed better in Mexico and in parts of Central America and the Caribbean, dynamism has been concentrated in production of relatively low value-added goods in export processing zones that typically afford low wages and limited ties to domestically-oriented enterprises. Thus, the industrial upgrading that is rightfully given priority by several contributors to this NACLA Report remains elusive, and the result is that both the supply of jobs and their quality is inadequate to meet the needs of households and communities throughout the region. Much the same can be said for agricultural production, where again the greatest advances have been achieved in sectors that are oriented to external markets and that provide only limited benefits in employment or in demand for domestic enterprises.
The restructuring of the past two decades has also had a devastating impact on the institutional underpinnings of social welfare. Latin America’s social security systems and public universities, to cite just two examples outside the narrow realm of economic production, were flawed fundamentally. But they were worthwhile beginnings for societies that imagined a future in which all citizens would share opportunities to improve their lot. Those institutions, victims of chronic under-funding and of an ideologically driven crusade to relegate the provision of public goods to the market, now face extinction.
However, all has not been lost. Public expenditures on education and social services have in fact increased substantially in recent years virtually everywhere in Latin America, a trend supported by both the World Bank and the Inter-American Development Bank.[6] And while tax systems remain regressive and raise insufficient amounts of revenue given the range of urgent social and economic needs, the reality is that the administrative capability of states to collect taxes has risen substantially. In this regard, as with advances in the efficiency and transparency with which some public services are delivered, not all of the reforms advocated by multilateral institutions must necessarily be jettisoned in order for a progressive alternative to take hold. Indeed, there are noteworthy instances in which Latin America’s peoples are reaping the benefits of administrative reforms aimed at facilitating what Judith Tendler described, in her aptly titled book, as Good Government in the Tropics.[7]
It is possible to build on these gains, but—as each of the contributors to this issue of the NACLA Report argues—for that to be possible at least two decisive shifts are imperative. Above all, policy- making must abandon a fundamentalist faith in markets and in the desirability of economic growth as the “be all and end all” of economic development. Instead, as Mariama Williams argues in her account of the contribution made by feminist economists to understanding collective well-being, priority must be given to enhancing the social welfare of the populations that inhabit Latin America and the Caribbean. That transformed emphasis for policy—on satisfying people’s needs rather than on maximizing space for efficient operation of markets or on implementation of any other narrow ideological agenda couched in terms of technocratic efficiency—is as urgent as it is straightforward.
Secondly, and not unrelated, development must be understood as inextricably linked to the construction of democratic societies in which people’s needs and preferences are recognized as essential underpinnings of sound public policy. The past decades of Latin American history are replete with examples of market-oriented reforms that were imposed over the objections—or behind the backs—of the citizenry, often by leaders who had been elected to office precisely on the basis of pledges not to enact such measures. Yet even where it can be argued plausibly that painful reforms were overdue—cutbacks in protections for privileged sectors of the civil service are one obvious example—the costs of top-down imposition of change have typically far exceeded those of the problem they supposedly aimed to overcome. Whether motivated by their own distance from the everyday lives of the people they govern or by pressures to conform to the demands of international investors or officials of multilateral agencies, political leaders throughout Latin America enacted the Washington Consensus without regard to public opinion. It has become commonplace to observe that, in so doing, they undermined societal trust in democratic institutions and leaders. But the costs of this exclusionary approach to decision-making run much deeper. They are found in the absence of civic engagement and social solidarity that characterizes many Latin American and Caribbean societies where awareness of collective interests once permeated political discourse.
Overcoming this particular legacy of neoliberal reform will take decades and will require vibrant efforts from social movements, from government officials and from citizens in all walks of life. Juan Pablo Pérez Sáinz and Katherine Andrade-Eekhoff are right to emphasize that the prospects for improving social welfare in the region will hinge on the capabilities of communities to forge integrative projects for development. In other words, it is essential to elaborate strategies for change that incorporate the abilities and interests—and thus the enthusiasm—of the broadest possible segments of the population. Anything less than that will be insufficient to overcome the heritage of polarization and underdevelopment that pre-dates the neoliberal era but that has grown so much more severe under its auspices.
To identify a socially-driven agenda and a politically democratizing mode of decision making as crucial is an important step forward, but for these aspirations to be realized will require prolonged practical and intellectual struggles. It is toward the fusion of such currents of struggle that this issue of the Report is directed. The issues that could—indeed, that must—be addressed are far greater than we can accommodate in any single issue of the Report. Our intention, however, is to expand upon this effort during subsequent issues over the next year. Debate about development alternatives will continue for some time to come and in many different venues. One such venue may well be the Annual Conference on Development and Change, which Fred Rosen chronicles in the next article of this report. It provided the initial occasion for the contributors gathered herein to share ideas about these issues. There will be others as well, and NACLA will strive to bring to its readership information about these events and analyses of the debates that they engender, for Latin America and the Caribbean, as for other regions of the South.
ABOUT THE AUTHOR
Eric Hershberg, a Program Director at the Social Science Research Council, is a guest editor of this Report. He is currently a Visiting Fellow at Princeton University’s Program on Latin American Studies (PLAS) and the Princeton Institute for International and Regional Studies (PIIRS) and President of NACLA’s Board of Directors.
NOTES
1. I am grateful to PLAS and PIIRS for funding support during the writing and editing of this Report and to Fred Rosen for comments on an earlier draft of this essay. Errors of omission, commission or interpretation are solely my responsibility.
2. Indeed, the contagion effects were substantial. Uruguay’s GDP declined by 4% during 2001 and an additional 11% during 2002. By the end of last year, per capita GDP had fallen to $3,700 from $6,800 at the end of 1998. See . The Brazilian economy, meanwhile, labors under draconian budget cuts and interest rates kept sky-high in a desperate—so far successful—attempt to persuade Wall Street bondholders that its left- of-center government can be relied upon to ensure healthy returns on their investments. In both countries, the situation could grow considerably worse.
3. Perhaps the most systematic review of the reforms, and one that ultimately assigns a mixed report card to Washington Consensus policies, is Barbara Stallings and Wilson Peres’, “Growth Employment and Equity,” (Brookings, 1999). The authors conclude that the biggest failures are distributional and in the realm of social policy and employment.
4. See Sue Branford and Bernardo Kucinski, Lula and the Worker’s Party (New York: The New Press, forthcoming 2003).
5. A useful overview of the problem of inequality in Latin America is Kelly Hoffman and Miguel Angel Centeno, “The Lopsided Continent: Inequality in Latin America,” Annual Review of Sociology, Vol. 29, pp. 363-390, August 2003.
6. See the 2003 UNDP Human Development Report, pp. 266-268.
7. Judith Tendler, Good Government in the Tropics (Baltimore: Johns Hopkins University Press, 1998).
