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Forum on Economic Reform (Part VII) Latin America: The End
of an Era1
The liberal/center views are less bellicose, but similarly pessimistic about what is happening in the region. Foreign Affairs has run three articles since the beginning of the year warning of the dangers of Latin America’s left-populist drift, as well as sorry state of U.S.-Latin American relations. The news reports, editorials, and op-ed pages of America’s major newspapers mostly carry the same themes. But
from the point of view of the vast majority of the hemisphere, including people
in the United States, there is actually much to be optimistic about. As
French President Jacques Chirac noted during a recent visit to South America,
"there is a strong movement in favor of
democracy in Latin America, a movement that is growing.” He added that the
newly elected leftist presidents cannot be cause for concern because they
were elected in free democratic elections. Furthermore, there is every reason
to believe that the changes of the last few years will not be reversed, and
that the region will continue in the direction of further economic and
political independence, diversification of trade and finance, some regional
integration, and more successful macroeconomic policies. Not all of these
economic policies and experiments will succeed, but most importantly it
appears very possible that Latin America’s long quarter-century of economic
failure will be reversed in the foreseeable future, and that its hundreds of
millions of poor people will be among the main beneficiaries. Causes
and Consequences: Latin America’s Long-Term Economic Failure 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. Of
course, Latin America also has the worst income inequality in the world. The
contrast between the luxury condos in the Barra da Tijuca neighborhood
of Rio de Janeiro and the favelas in the hillsides
where the police fear to tread, or between the poor barrios of Caracas and
the wealthy estates of Alta Mira jumps out at you. But inequality in the
region has not increased dramatically over the last 25 years. It is the
growth failure that has deprived a generation and a half of any chance to
improve its living standards. And
without growth, it is very difficult to do anything about inequality or
poverty. If the economy is growing rapidly, it is at least possible to
redistribute some of the increases in income and wealth towards those who
need it most. When it is not growing, any gains for the poor must be taken
from someone else – something that is difficult to do without violence. Poverty
and inequality are glaringly obvious in Latin America, and take the form of
flesh and blood, street children and beggars – whereas economic growth is an
abstract concept that most people do not follow. So it is understandable that
the main cause of Latin America’s political changes is overlooked. But
economic growth – which is primarily defined by increases in productivity, or
output per hour of labor – is vital, especially
over such a long period of time. It is the main reason that we live better
than our grandparents. Mexico would have average living standards at the
level of Spain today if its economy had simply continued to grow at the rate
that it grew prior to 1980. There would be far fewer Mexicans willing to take
the risks of illegal immigration to the United States. Since these pre-1980
growth rates were good but not spectacular (e.g. as compared to South Korea
or Taiwan), there is no obvious reason that they shouldn’t be the relevant
level of comparison. 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. 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. The
Collapse of a Cartel One reason the historic nature of these changes has not been appreciated is that Washington’s most powerful influence over the region – especially in the realm of economic policy – has never gotten much attention. And that particular influence has now quietly collapsed. Until recently the International Monetary Fund (IMF) headed a powerful creditors’ cartel that was arguably more important than Washington’s other levers of power – including military, para-military, diplomatic and other “soft power” projections such as foreign aid and “democracy promotion” programs. This cartel was not a conspiracy but rather an informal arrangement – not written into law or into the charters of the participating financial institutions – but nonetheless generally very effective. The way it worked is that the IMF was the “gatekeeper” for most other sources of credit for developing country governments. If a government did not reach an agreement with the IMF, it would not be eligible for most lending from the World Bank, regional banks such as the important Inter-American Development Bank in this hemisphere, G-7 government loans and grants, and sometimes even the private sector. The 184-member IMF has always been dominated by the U.S. Treasury Department. Technically, the other rich countries, including European nations and Japan, could outvote the United States (voting is proportional to a quota system of contributions which gives the rich countries a huge majority) but this has virtually never happened over the last 62 years. During the last 25 years especially, this creditors’ cartel was enormously influential in shaping the “Washington Consensus” policies that were adopted throughout Latin America and most other low and middle income countries. It extended far beyond just the raw power of using control over financial resources to influence policy. As
has been known for decades, the IMF acting as
gatekeeper and enforcer of “sound economic policy” allowed the United States
(and sometimes the other rich countries) to operate through an ostensibly
multilateral, neutral, technocratic institution when pressuring developing
country governments to privatize their natural resources or run huge primary
surpluses to pay off debt. It is much more politically delicate for U.S.
officials to publicly tell sovereign governments what to do. And as we
witnessed in the recent Argentine debt restructuring, individual creditors –
even big banks – do not have all that much power against a government that is
willing to go to the brink. In a default situation, it is in their individual
interest to settle for what they can get, cut their losses, and look to the
future. It takes an external enforcer – outside of the market – to hold the
threat of future punishment over the offending government, in the interest of
the creditors as a class. This
arrangement began to break down in the wake of the Asian economic crisis of
the late 1990s, after which the middle-income countries of that region piled
up huge foreign exchange reserves. They had suffered through a terrible and
humiliating experience with IMF-imposed conditions
during the crisis, and although the post-crisis accumulation of reserves had
other causes, it also ensured that they would never have to take the Fund’s
advice again. But
it was in Latin America that the IMF was reduced to
a shadow of its former self. Argentina defaulted on $100 billion of debt at
the end of 2001, the largest sovereign debt default in history. The currency
and banking system collapsed, and the economy was continuing to shrink.
Almost everyone assumed that the government would have to reach a new
agreement with the IMF and receive an injection of
foreign funds in order to get the economy growing again. But
a year went by without any agreement, and when it was finally reached there
was no new money. In fact, the IMF took about $4
billion net – a huge sum amounting to four percent of GDP – out of the
country during 2002. Yet in defiance of the experts, the Argentine economy
contracted for only three months after the default before beginning to grow.
Four years later it is still growing quite rapidly. In fact it has grown at
the highest rate in the hemisphere, more than 9 percent annually for three years,
despite a continued net drain of money out of the country to pay off the
official creditors (the IMF, the World Bank, and
the Inter-American Development Bank) that reached more than $14 billion
between 2002 and 2005. The
Argentine government under Nestor Kirchner, who took office in May 2003, also
enacted a series of unorthodox economic policies that were strongly opposed
by the Fund, including a hard line in bargaining over defaulted debt, which
invoked hostility from the international business press, along with
predictions of prolonged economic punishment and stagnation. In one of a
number of showdowns with the Fund, Argentina even temporarily defaulted to
the IMF itself in September of 2003 – an
unprecedented and uncharted move that had previously only been made by failed
or pariah states such as Congo or Iraq. Default to the Fund had hitherto
carried the threat of economic isolation, even the denial of export credits
necessary for trade. But the world had already changed, and the IMF backed down. Argentina’s long battle with the Fund –
from the disastrous four year depression, brought on and exacerbated by IMF-backed macroeconomic policies, through the standoff
of 2002, and the economy’s subsequent rapid recovery on its own – was the
final blow to not only the Fund’s credibility as an economic advisor, but as
an enforcer. How
much difference does the collapse of this creditors’ cartel make? Consider
Bolivia today, where the leftist, indigenous former leader of the coca
growers’ union, Evo Morales, was elected with the
voters’ largest mandate ever in December. He promised to nationalize the
country’s energy resources --it was really more of a return to
constitutionality, since the current contracts with foreign energy companies
were not approved by the congress, as required by the constitution – which
account for the biggest chunk of its export earnings, and to use these
resources to increase the living standards of the country’s poor and
indigenous majority. On May 1st, Morales announced that the government was
indeed nationalizing the gas and oil industry, and that foreign companies
would have six months to renegotiate existing contracts. Many details remain
to be worked out, and the situation is complicated by the fact that Petrobras, the state-run Brazilian energy company is the
largest gas producer, and that Bolivia can only export natural gas (which is
the main energy export) by pipeline to Argentina and Brazil. But the Bolivian
government has already increased its revenue from the gas producers, from 3.4
to 6.7 percent of GDP as a result of last year’s hydrocarbons law. The
increase amounts to a share of the economy comparable to most of the United
States’ federal budget deficit. The May 1st nationalization will increase
these revenues even more, allowing the government to deliver on some of its
promises to the poor. The
Bolivian government has since announced its intention to pursue an ambitious
land reform program, which has also been met with hostility from the media.
According to the ministry of rural development, over the next five years the
government hopes to redistribute some 54,000 square miles of land, an area
the size of Greece, to some 2.5 million people – about 28 percent of the
population. The Bush administration had expressed its displeasure with the
new government a couple of times, but until very recently has been relatively
cautious about public statements ever since the U.S. Ambassador’s
denunciation of Morales sent the charismatic leader surging in the polls and
almost carried him to victory in the 2002 Presidential election. But on May
22, in an ominous new turn, President Bush told the press that he was
“concerned about the erosion of democracy” in Bolivia and Venezuela. There
will be further frictions in the near future, not least over drug policy.
Washington has pursued its coca eradication agenda in Bolivia for years with
little regard to its political, economic, or environmental impact on an
increasingly angry local population. Anyone who has been to Bolivia and seen
how ubiquitous coca is there, from the coca tea in restaurants to the leaves
that people chew as a stimulant and to relieve altitude sickness, can only
imagine what it would be like if people in United States were told that they
must co-operate in a “coffee eradication” program at the behest of a foreign
government so as to help prevent foreigners from abusing the product. Most of
Morales’ electoral base wants to kick the DEA (the
U.S. Drug Enforcement Agency) out of the country tomorrow. Morales has taken
a moderate position, pledging to co-operate in the fight against cocaine and
drug trafficking, while supporting the legalization of the coca plant and the
development of new markets for legal products. The Bush administration will
most likely find this unacceptable. But
what can Washington do about its new “problem” government? Not all that much.
This is all the more unprecedented because Bolivia is not Venezuela, the
world’s fifth largest oil exporter, nor Argentina, which until the late 1990s
depression had practically the highest living standards south of our border.
It is not a giant like Brazil, with a land area as big as the continental
United States. It is the poorest country in South America, with nine million
people and an economy not even one-thousandth the size of the United States’,
at current exchange rates. It is poor and indebted enough to have qualified
for the IMF/World Bank HIPC
(Heavily Indebted Poor Country) debt cancellation initiative, and in fact had
its IMF and World Bank debt – about 35 percent of
the country’s total foreign public debt – cancelled this year after passing
through the requisite gauntlet of conditions for several years. But
Bolivia is a free country now. On March 31, after twenty straight years of
operating continuously (except for eight months) under IMF
agreements – and a real per capita income amazingly less than it was 27 years
ago – Bolivia let its last agreement with the IMF
expire. The government decided not to seek a new agreement with the Fund. One
of the first questions that arose was, what about money from other sources?
Bolivia receives not only loans but grants from the governments of
high-income countries, and until now even grants from the more liberal
European countries were contingent on Bolivia meeting the IMF’s
approval. But it appears that this requirement has disappeared along with the
IMF agreement. The Bush administration cut military
aid – an insignificant $1.6 million – and may reduce other aid flows related
to anti-drug efforts. The Spanish government expressed some concern over
Bolivia’s nationalization of the gas industry, since Repsol
YPF, Spain’s largest oil company, is the second
biggest producer there. But so far none of the rich country governments have
tried to use the threat of cutting off loans or grants as a mean of trying to
change Bolivia’s policies. Such a threat, or even an actual aid reduction,
would almost certainly not alter the government’s behavior;
it would therefore be useless and counter-productive from their point of
view. The
fact that we have arrived at such a situation illustrates how dramatically
hemispheric relations have changed. A few years ago, a government like that
of Evo Morales would have had a pretty short life
expectancy. Washington would have had the ability to economically strangle
the country, as it did to Haiti in order to topple the democratically elected
government there just two years ago. The government of Haiti, which was
overwhelmingly dependent on foreign aid flows, was cut off from virtually all
international funding from 2001 on, thus assuring its ultimate downfall in
the U.S.-backed coup of March 2004. For very poor countries and especially
those that are without allies or media attention, the old rules may still
apply – although even that is beginning to change. And in many low-income
countries, for example in Africa, major economic policies are still subject
to IMF approval. But
the Fund has lost its influence in middle-income countries, and that includes
almost all of Latin America. Although it has received little attention in
most of the media, the collapse of the IMF-led
creditors’ cartel is by itself probably the most important change in the
international financial system since the end of the Bretton
Woods system of fixed exchange rates in 1973. This is especially true for
developing countries. In
Latin America this has coincided with a major and unanticipated change that,
combined with the IMF’s loss of influence, has
helped usher in the new era of independence. A new international lender has emerged:
Venezuela. When Argentina decided last December to say its final
goodbye to the IMF by paying off its remaining debt
of $9.8 billion (5.4 percent of GDP) at once, Venezuela committed $2.5
billion to the cause. "If additional help is needed to help Argentina
finally free itself from the claws of the International Monetary Fund,
Argentina can count on us," Chávez announced
on December 15. Kirchner’s statement announcing the decision was even
harsher: "[the IMF has] acted towards our
country as a promoter and a vehicle of policies that caused poverty and pain
among the Argentine people," he said. Last year Venezuela also committed
to buying $300 million of Ecuador’s bonds; in December, it turned out that
Ecuador had sufficient demand for its bonds that it only needed to sell $25
million to Venezuela, but the latter’s commitment was there as a lender of
last resort. Chávez has proposed to formalize this
new relationship by establishing a “Bank of the South,” to finance
development in the region, and offered to start it off with a $5 billion
contribution. In the meantime, Venezuela is also providing discounted oil
financing for the Caribbean countries under its PetroCaribe
program. The
result for Bolivia is that despite its poverty and underdevelopment, the new
government will not have to worry too much about whether the United States
approves of what it is doing with regard to foreign energy companies, trade
negotiations (a bilateral trade deal, long sought by Washington, is now
pretty much dead), macroeconomic policies, or drug policy. Any aid cuts from
Washington, Europe, or international lending agencies will be more than
replaced by Venezuela. When Bolivia was about to lose $170 million in soybean
exports to Colombia as a result of the latter’s decision in April to sign a
bilateral trade agreement with the United States, Venezuela stepped in as a
replacement buyer. Such is the paradox of the new hemispheric order: it is
now even easier for a small, poor country to reject “the Washington
Consensus” than it is for larger, middle income countries to do so – although
the choices for all have been greatly expanded. Venezuela has more than $30
billion in foreign exchange reserves; whatever Bolivia might need will be
pretty small relative to Venezuela’s capacity for lending and aid. In just
the last month (May), Venezuela has announced a $100 million loan to Bolivia
and a similar amount to support the proposed land reform, as well as numerous
other forms of aid. And Venezuela’s lending and aid programs, unlike that of
the international financial institutions or the G-7 governments, do not have
economic policy conditions attached to them. This makes all the difference in
the world. Viewed
through the Cold War lens of official Washington and the foreign policy
establishment, these disbursements and initiatives are either as part of an
attempt to build an “anti-American” axis, or, as Chávez
simply buying friends in the region. Chávez
himself, who has named his revolution after the 18th century liberator Simon
Bolivar, sees it as freeing South America from the grip of the U.S. empire.
But regardless of how it is seen in ideological terms, the impact of this
alternative source of financing has already had an enormous impact on the
ability of governments to ignore pressures from Washington. This trend is
likely to continue unless there is a sudden and very severe collapse of oil
prices. There
are two other important economic changes that will reinforce Latin America’s
drift away from the United States in the coming years. One is that the United
States will no longer provide a rapidly growing market for the region’s
exports, as it has in the past. The reason is that the United States is
running a record trade deficit, now more than 6 percent of GDP, that almost
all economists recognize must adjust over the next decade. The United States
does not have to balance its trade, but the deficit must fall to a level that
allows the U.S. foreign debt to stabilize, rather than growing at an
explosive rate. If the U.S. trade deficit were to remain at its current
level, in 18 years the U.S. foreign debt would exceed the value of our entire
stock market. This is not going to happen; instead, the dollar will fall and
the deficit will be reduced. But one consequence of this adjustment is that
the U.S. market for imports, measured in non-dollar currencies, will barely
grow or possibly even decline. This means that Latin American countries
hoping to expand their exports to the U.S. in the near future will mainly
have to displace other exporters, which will be very difficult. So the United
States does not have so much to offer in its proposed bilateral trade
agreements. On the other hand, it is demanding concessions that are
economically costly, as in the areas of patented medicines, where Washington
insists on even stronger protectionism than is afforded by the World Trade
Organization; and politically costly, as in agriculture, where the demands
for opening up to subsidized exports from the U.S. have sparked considerable
political opposition in most countries in the region. At
the same time, just as the growth of the U.S. import market will be slowing
to a standstill, another market to which Latin American countries can export
is expected to grow by about $1 trillion Euros over the next decade: China.
This will reinforce the decline in the United States’ relative economic
importance to Latin America. Perhaps even more importantly, China has the
potential to be an enormous alternative source of financing for investment in
Latin America. So far the Chinese have proceeded relatively slowly; but they
have discussed plans for $20 billion worth of investment in Argentina, for
example, including major investments in railroads and infrastructure. The
Chinese government now holds more than $800 billion in foreign exchange
reserves. Most of this money is sitting in U.S. treasury bonds, where the
government has lost tens of billions of dollars in the last few years – both
from currency changes, as the dollar has fallen against other currencies, and
capital losses, as U.S. long-term rates have risen. These trends are likely
to continue. Until now, the Chinese have held these bonds as part of their
overall economic strategy, which presumably has included keeping U.S.
long-term rates low so as to support the economic recovery here (since 2001)
and therefore increase demand for their exports. But this strategy will not
persist indefinitely. As it stands now, the Chinese could invest hundreds of
billions of dollars in Latin America, get a zero return on their investment,
and still come out ahead as compared to their present strategy of holding
U.S. treasuries. In reality they would most likely get a positive return. The
Chinese are already interested and investing in energy and extractive
industries to secure supplies of these materials for their booming economy.
But as an emerging economic superpower, they may also come to see it as part
of their strategic interest to have closer political and economic ties with
Latin America. This would be especially true if current tensions between the
United States and China get worse, but it is likely to happen in any case. The
energy and extractive industries in Latin America have also been deeply affected
by the shift in regional power relations, with important economic and
political implications. Although the run-up in energy prices has provided a
strong incentive for governments throughout the region – including Venezuela,
Bolivia, and Ecuador – to renegotiate their contracts and legal arrangements
with foreign corporations, such moves would be more risky and probably less
successful if the IMF consortium, and the United
States government, had the power that it wielded just a few years ago. On May
16, the Venezuelan Congress voted to double the royalties on joint ventures
with foreign oil companies, from 16.7 to 33.3 percent, thus increasing the
government’s total take to 50 percent. This was the second major hike for
this heavy oil production, which a few years ago paid royalties of only 1
percent. The government is also demanding a controlling 60 percent stake in
four joint ventures with foreign oil companies that account for about
one-fifth of Venezuela’s oil production. In Bolivia, even before the May 1
nationalization decree, last year’s hydrocarbons law had already added
hundreds of millions of dollars to the government’s revenue by increasing
taxes and royalties. On
May 16 the government of Ecuador announced that it would seize an oil field
from Occidental Petroleum, the fourth largest U.S. oil company, as a result
of a dispute in which Occidental is alleged to have illegally transferred
part of an oil block that it operated to a Canadian company. Washington
retaliated almost immediately by announcing that it was suspending
negotiations with Ecuador over a proposed bilateral trade agreement. It’s not
clear how much of a punishment this is – the negotiations had already become
a big political liability for the government. In March, indigenous groups
staged 11 days of protests – including highly disruptive roadblocks –
demanding a halt to the negotiations, as well as a national referendum on
whether to proceed, suspending the protests only after the government
declared a state of emergency. On May 28, President Chávez
announced that he would meet with Ecuador’s President Palacio
to expand Venezuela’s energy ties to Ecuador and its state-owned oil
industry, Petroecuador. One proposed accord would
allow Ecuador to refine oil at Venezuelan-owned refineries, which according
to press reports could save Ecuador some $300 million a year. National
control over energy and other natural resources – and demands that these
resources be used to benefit the poor majority – played a major role in the
revolutions at the ballot box in both Venezuela and Bolivia. In Venezuela it
was the driving force: although Venezuela has had a state-owned oil company
since 1976, by the 1990s it was turning over so little revenue to the
government that the state was not fiscally viable. Something had to give, but
it was not until the elected government of Hugo Chávez
had gone through a U.S.-backed military coup (2002) and an economically
devastating oil strike (December 2002- February 2003) that the government
finally gained control over its own nationalized oil industry. In Bolivia,
mass discontent over the privatization and looting of the country’s natural
resources helped bring down two presidents and contributed to the election of
Evo Morales. In Peru, populist candidate Ollanta Humala took first place
in the first round of voting, partly by promising to get a bigger share from
foreign mining and energy companies and use it to benefit the poor. With some
of the largest mining companies there exempt from royalties altogether
(although they pay other taxes), there is plenty of room for negotiation. These
struggles by various governments to capture more of the rents from energy and
natural resources are likely to continue. Latin America’s newfound economic
and political independence has increased its bargaining power, and there is
increasingly less reason to concede any more to foreign producers than is
necessary to make use of technology that these governments need. The shift in
power relations has already provided billions of dollars of gains to the
region, and there is likely more to come. A Brighter Future Despite
the consternation in Washington, the collapse of U.S. influence in Latin
America has already brought important and tangible positive results. In
Argentina, almost 8 million people – 18 percent of the population – have been
pulled over the poverty line as a result of the rapid economic recovery there
– the demise of which has been predicted by most economists and the business
press practically every month since it began four years ago. In order to
achieve this extraordinary economic success, the government had to implement
a number of unorthodox economic policies that were vehemently opposed by the IMF, most of which were presented as reckless and wrong
in the international business press. This included not only hard bargaining
to clear away about two-thirds of the country’s foreign public debt, but also
some macroeconomic policies that were essential to the recovery, including
maintaining a stable and competitive exchange rate and lower interest rates.
The government also refused to raise utility prices as demanded by the
foreign owners and their governments (with the IMF
as an advocate). More recently, the Kirchner administration instituted price
controls to stem inflation rather than sacrifice employment and income by
slowing the economy, as has become the norm in macroeconomic policy. The
Argentine recovery is a remarkable achievement, one that both helped clear
the path towards regional independence, and then continued to flourish in the
new environment. It is easy to see how much weaker it might have been, or
even collapsed altogether, had the government simply followed the orthodox
advice that had been accepted in the past. At the same time, Kirchner has won
high praise among human rights groups for revoking the impunity of military
officers who committed atrocities during the brutal 1976-1983 dictatorship. Venezuela
has also had notable successes, most importantly in providing free health
care for the first time to an estimated 54 percent of the population, mostly
poor people, as well as subsidized food for more than 40 percent, and
increased access to education. It is common to attribute these successes to
high oil prices, but oil prices were even higher in the 1970s in real terms,
and the country’s GDP per capita actually fell during that decade. Chávez is best known – and reviled – in the international
media for his confrontation with the Bush administration, but at home his
unshakable popularity derives mainly from delivering on his government’s
promise to share the country’s oil wealth with the majority of Venezuelans.
And even aside from distribution, it must be recalled that the Venezuela
suffered one of the worst economic declines in the region (and the world) – a
35 percent drop in per capita income from 1970-1998, prior to Chávez’ election. The current government, which took
office in 1999 and is almost certain to be re-elected in December, will
probably be most remembered as the one that finally reversed Venezuela’s
long-term economic deterioration. The economy has recovered remarkably after
stability finally returned to the country, following several opposition
attempts to overthrow the government through a military coup and oil strikes.
In just the past two years it has grown by more than 28 percent and it is
still booming. Bolivia,
too, seems poised to reverse its long economic stagnation and begin to meet
the needs of its poor, indigenous majority. It has created a new water
ministry with the goal of providing clean drinking water to everyone, as well
as water for agriculture. The increased revenue from control over its natural
resources should make this, as well as the proposed agrarian reform and other
anti-poverty programs, feasible. Of
course, all of these governments are still a long way from coming up with a
sustainable, long-term development strategy. This is not necessarily because
they don’t want one, but mainly because – after decades of corrupt rule, as
well as the deliberate shrinking of the state’s capacity for economic
regulation and decision-making – they simply don’t have the administrative
capacity to even make such plans, much less implement them. That is why even
in Venezuela, where President Hugo Chávez talks
about “21st century socialism,” the private sector is a larger share of the
economy today than it was before he took office. The Venezuelan government,
contrary to popular perceptions, has embarked on a project of gradualist
reform, experimenting with land reform, some production and credit
co-operatives, and microcredit programs – but
officials are very aware of the limitations of the corrupt and debilitated
state that they inherited. In Argentina, which has a more developed economy,
there is still little to nothing in the realm of development planning or
industrial policy that could lead to the sustained growth and development of
the Asian success stories, or perhaps even that of Latin America’s pre-1980
past. Nonetheless
the renewal of economic growth, made possible by more sensible macroeconomic
policies, is a vitally important beginning. It is a necessary but not
sufficient condition for long-term economic and social progress in the
region. And it is likely that more changes will follow as the various new
experiments achieve success. The increased control over energy and natural
resources, and a new commitment to poverty reduction, health care and
education – as in Venezuela and Bolivia – are also important first steps, not
only in their own right but also for the sake of democracy. Although both the
Morales and Chávez governments are accused of
authoritarianism by their detractors – which in Venezuela’s case includes
almost everyone who has access to large media outlets – from a more objective
viewpoint, what we are witnessing is a revival of democracy. This is most
obvious in the sense that people are actually getting what they voted for –
in terms of social and some economic policy. It is for this reason that
Venezuela came in first last year when one of Latin America’s best polling
firms, Latinobarómetro, asked people in each
country how democratic their government was. On the question of how satisfied
people were with their country’s democracy, Venezuela came in second, after
Uruguay. Ironically,
Latin American countries in the age of dictators had more national control
over their economic policies than they have had since formal democratization,
and therefore much more successful development and rising living standards
under dictatorships. Hence the long term trends, now beginning to reverse, of
citizens losing respect for democracy in Latin America – after 25 years of
losing ground under democratic governments. Fortunately,
the mass discontent, organization, and revolt at the ballot box has not been
aimed at a return to authoritarian government but rather its opposite,
demands for an extension of democracy to include social and economic policy,
as well as the increased participation of previously marginalized groups – the
poor in Venezuela, the indigenous in Bolivia. The recent mass protests in
Ecuador against the proposed trade negotiations with the United States should
also be seen in that light. So too, the waves of mass organization that
brought Evo Morales to power, and are actively
encouraging the government to pursue pro-poor and pro-indigenous economic
policies. But
it is not only in the countries that have already changed their economic and
social policies that the impact of this huge shift in hemispheric relations
is relevant. Consider Brazil, which continues to provide a classic example of
the failure of “neoliberal” policies in Latin
America. Brazil was once a fast-growing developing country: income per person
grew by 123 percent from 1960-1980. But over the last 25 years, it has
averaged about 0.5 percent annually. The country’s president, Luiz Inácio Lula da Silva of the leftist Workers’ Party, was elected in
2002 on a platform that promised to restore economic growth through lower
interest rates, implement industrial and agricultural policies, and return to
a national development strategy. The Workers’ Party also promised
redistributive policies to help the poor, in a country that has perhaps the
most unequal distribution of income on the planet. Since
taking office, however, Lula’s government has steadfastly maintained the
economic policies of his predecessor, Fernando Henrique
Cardoso, and achieved the same sluggish growth.
Interest rates set by the Central Bank are currently at 15.75 percent
(compare this to our own at 5 percent, after the Fed has raised interest
rates 16 consecutive times). The country’s currency is very much overvalued,
which makes imports artificially cheap, and therefore makes it difficult for
Brazilian industry to compete in either domestic or international markets.
The federal government is paying off debt to the tune of more than 7 percent
of GDP annually, leaving little in the way of funds for any anti-poverty
initiatives. But
it is important to understand that these policies are the result of Brazil’s
internal politics, and the United States today has little to do with it. In
almost every country there are conflicting interests over economic policy,
especially monetary policy, between the financial sector and nearly everyone
else. Bondholders, banks, and creditors generally do not have the same
interest in economic growth that most people have. For the vast majority of
people, more rapid growth means a better chance at employment and higher
income. For the financial sector, economic growth is primarily seen as a
threat of increased inflation, which lowers the value of bonds. This is a
conflict of interest in the United States too, as the Fed sometimes raises
interest rates and slows the economy when most people who have a stake in a growing
economy would not do so. Brazil has an extreme form of this problem, in that
this overwhelming political dominance of the financial sector – which
prevails in all of the major political parties – has led to a prolonged
period of stagnation and slow growth that the economy cannot seem to improve
upon. For the financial sector, the 2.3 percent growth (about 1.2 percent per
capita) of last year is considered to be just right, even if it does not
create enough jobs to match the new entrants to the labor
force. Washington
is very pleased with Lula’s government, and has been supportive, including at
key points in the corruption scandal that has engulfed the government and led
to the resignation of Lula’s chief of staff, finance minister, and top party
officials. The international press is also very pleased, as have been the
international financial markets – in fact the markets were quite nervous at
the prospect of Lula’s impeachment because his vice president, the
conservative Jose Alencar, has committed himself to
lower interest rates. So there is much international support for the current
set of economic policies, but when there is a Brazilian government that
decides to go in another direction, there will be little that anyone can do
to prevent it. Last December, Brazil paid off its entire debt to the IMF, which was one the largest in the world owed to the
Fund, at $15.6 billion dollars. Furthermore,
Lula’s government has not been all that supportive of U.S. foreign commercial
policy. Brazil was one of the leaders of the rebellion in Cancun in 2003,
when developing countries decided that they were not going to negotiate any
more concessions to the rich countries in the World Trade Organization if the
latter were not willing to commit to cutting their agricultural subsidies.
(The Brazilian delegation was more conciliatory at the latest WTO ministerial in Hong Kong.) Brazil has also, together
with Argentina and Venezuela, soundly rejected the proposed Free Trade Area
of the Americas after ten years of negotiation; the rejection by this bloc
has pretty much doomed the agreement. Latin
America’s independence has been spilling over into other multilateral
institutions as well. Chile and Mexico, two governments that the Bush
administration counts among its favorites, killed
the United States’ proposed UN Security Council resolution to confer legality
on its invasion of Iraq. Last May, Washington failed for the first time in
nearly six decades to get its candidate elected to head the Organization of
American States. After Washington’s two failed attempts, the body elected
Jose Miguel Insulza, who was supported by Brazil,
Argentina, and Venezuela. The OAS met in June that year and promptly rejected
a U.S. proposal to amend the Inter-American Democratic Charter that would
have empowered the organization to evaluate the functioning of democratic
institutions in member countries – a move that was widely understood to be
directed against Venezuela. Washington Confronts Venezuela In
U.S. foreign policy circles, there have been a number of approaches to Latin
America’s new independence. The main cause of the electoral shift – Latin
America’s unprecedented long-term growth failure – is almost never mentioned,
although it is well known among economists. Instead there are
acknowledgements that the reforms have been “disappointing,” or failed to
sufficiently reduce poverty. The rise of nationalism and especially
“populism” is seen as a cyclical phenomenon, one that will run its course as
these governments drive away foreign investment, spend their way into debt
crises, and pursue failed economic policies generally. Argentina’s economic
recovery has been buried so many times in the business press over the last
four years that it seems a miracle it has survived. Latin
America’s drift away from the United States is seen as a result of the Bush
administration’s preoccupation with the Middle East, especially the war in
Iraq, which has caused Washington to ignore this hemisphere. The
administration is criticized for the “lack of attention,” for cutting foreign
aid, and for alienating many Latin Americans with the Iraq war, demanding
exemption of Americans from the International Criminal Court as a condition
for military aid, failure to make progress on immigration reform, and other
mistakes. Venezuela is seen as competing for influence in the region on the
basis of its oil revenues; according to this view, its influence and its
economic growth, as well as social programs for the poor, will collapse when
the price of oil drops. The
foreign policy establishment also divides the elected leaders of the left
into “market-friendly” vs. “populist,” or a “Right Left versus Wrong Left,”
in the words of Jorge Castañeda in the May/June
2006 issue of Foreign Affairs. The “Wrong Left” is Chávez,
Morales, and Kirchner – coincidentally the ones who have delivered most on
their electoral promises; the “Right Left” is Lula, Michelle Bachelet of Chile, and Tabaré Vásquez of Uruguay. And
it is Chávez that has become Washington’s main
enemy, even eclipsing Cuba as the demon to be overcome. Although it is
recognized that the Bush administration has mishandled Venezuela, the Chávez government is still portrayed across most of the
political spectrum, and especially in the press, as “anti-democratic,” “authoritarian,”
and a threat to the region. Part of this is a result of our peculiar
electoral system, which gives 900,000 Cuban-Americans in the pivotal state of
Florida disproportionate influence on our presidential race and hemispheric
foreign policy. But much is simply based on ignorance and some of the worst
U.S. foreign policy journalism in decades. In
fact anyone who has been to Venezuela in recent years can verify that it
remains, despite the extreme political polarization and the turmoil that wracked
the country until recently, one of the more open and democratic societies in
the Americas. The vast majority of the media, including the largest
television stations, are controlled by the opposition. It is the most
anti-government media in the hemisphere, and carries on political campaigns
that would not be allowed in most western democracies. Indeed, even the
United States would surely bring back the Fairness Doctrine if any of our
major media outlets were to become the partisan political actors that they
are in Venezuela, not to mention the Venezuelan media’s active participation
in a military coup and other attempts to overthrow the government. The
Venezuelan state is anything but authoritarian – in fact it is more of an
anarchistic state, a weak state that suffers from all the problems that
plague the rest of Latin America, in terms of enforcing the rule of law. That
is why the main victims of political repression in Venezuela are not
opposition partisans, even those who have tried to overthrow the government,
but rather the pro-government activists organizing for land reform in the
countryside, who have been murdered by the landowners’ hired guns. The state
cannot enforce the law even against murderers, even to protect its own
supporters. No
reputable human rights organization would claim that Venezuela has
deteriorated in terms of democracy, human rights, or civil liberties under
the Chávez government; nor that it compares unfavorably with the rest of the region in these areas.
But the Bush administration has created an image of undemocratic government
in Venezuela and has managed to frame it that way for the media. The
administration has also tried to isolate Venezuela, but has so far succeeded
only in further isolating itself in Latin America. Lately the war of words
between Venezuela and the United States has become more heated; last March
U.S. Secretary of Defense Rumsfeld
compared Chávez to Hitler. Chávez
responded by comparing President Bush to Hitler and fixing his rhetoric at
that level of animosity. This will likely continue; for Chávez,
the anti-Bush, anti-imperialist rhetoric plays well both at home and
throughout most of the region. As Larry Birns of
the Council on Hemispheric Affairs noted at a recent Congressional briefing, Chávez has become “the mayor of the Latin American
street.” That Chávez could increase his popularity
with this kind of confrontational posture speaks volumes about how U.S.
foreign policy is perceived in the region. And for Chávez
there is nothing to lose: the Bush administration has done everything it
could do to undermine and topple his government, and will continue to do so,
regardless of anything he says or does. It
is easy to understand this if one looks at the recent historical evidence.
First, the Bush administration not only publicly supported the April 2002
military coup against Chávez, it was actually
involved in trying to make the coup succeed. This can be seen from CIA
documents of March and April 2002, which show first of all that the Bush
administration had advance knowledge of the coup. When it occurred, both the
White House and State Department spokespersons publicly denied that a coup
had taken place, falsely claiming that President Chávez
had resigned, and before resigning had conveniently dismissed his Vice
President and cabinet – so that the head of the Venezuelan Chamber of
Commerce could take power and proceed to dissolve the Congress, Supreme
Court, and the constitution. That fact that administration officials had
prior knowledge of the coup and yet publicly lied about what was happening,
in order to help the coup succeed, is an important form of involvement that
has mostly gone unnoticed here. More supporting evidence comes from the State
Department Office of the Inspector General, which found that that “NED
[National Endowment for Democracy], Department of Defense
(DOD), and other U.S. assistance programs provided
training, institution building, and other support to individuals and
organizations understood to be actively involved in the brief ouster of the Chávez government.” And from Jorge Castañeda,
who stated that “there was a proposition made by the United States and Spain,
to issue a declaration with Mexico, Brazil, Argentina and France recognizing
the government of [coup leader] Pedro Carmona.” But
the documentary evidence combined with the administration’s own statements
leave no doubt about its involvement. All
this has been almost completely ignored by the major media outlets; when
mentioned it is in the form of an “accusation” by Chávez
– and not a very credible one – that the United States was involved in the
coup. Furthermore, Washington did not admit its mistake and change course
after supporting the coup, but rather stepped up its funding to anti-Chávez groups, also tacitly supporting the devastating
opposition oil strike of 2002-2003, which ironically for the first time
disrupted oil supplies to the United States and raised the price of gasoline
here. This demonstrated again how much Washington was committed to “regime
change” in Venezuela, by any means necessary. This commitment continued with
funding for the recall effort in 2004, which Chávez
won overwhelmingly. At that point a number of Latin American and European
governments that had been sitting on the sidelines told the State Department
to give it up – that this was a legitimate, democratic government and they
should learn to live with it. But they did not. The
Bush administration attacked further with a series of economic sanctions
against Venezuela (e.g. at multilateral lending institutions) which, as oil
prices continued to rise, had no impact on Venezuela other than to further
inflame passions there. Last December, the Venezuelan opposition boycotted
national elections, despite statements from the OAS and European Union
observers that opposition demands had been met and they were expected to
participate. Once again, Washington was tacitly supportive. This more than
any other recent action – beyond the economic sanctions, the blocking of
military aircraft and patrol boat sales from Brazil and Spain, and a host of
other provocations -- shows how firmly the Bush administration, along with
its allies in the Venezuelan opposition, is committed to a strategy of
destabilizing and overthrowing the Venezuelan government. The opposition
could have won an estimated 30 percent of the National Assembly but – with
Washington’s blessing – gave that up just to establish the pretense that Venezuela is a one-party state. And so they
have constructed an Orwellian reality, with help from the media, which now
reports that “the [Venezuelan] Congress is completely controlled by President
Chávez.” The reader is not informed that this is
only because the opposition deliberately and without any legitimate reason –
according to OAS and European Union observers –refused to participate in a
democratic and transparent electoral process. These
details are important because they show how mired Washington remains in the
strategy and tactics of the past, how divorced our leaders are from the
changed reality in the hemisphere. Indeed if one looks at the report of the
U.S. Senate’s Church Committee from 1975, on the CIA’s destabilization
efforts leading to the overthrow of Chile’s elected government in 1973, it
reads remarkably like the events of 2001-2003 in Venezuela. You just have to
change the name Allende to Chávez,
Chile to Venezuela, and substitute the National Endowment for Democracy and USAID for the CIA; a truckers’ strike (in Chile) instead
of an oil strike. In both cases, there is opposition control of the media so
as to blame the government for any and all economic problems, even those
caused by the opposition; and manipulation of the international press to
portray an elected social democratic government as despotic and Communistic. But
this is a new world; Chávez remains as head of
state, and without the country having sacrificed civil liberties or
democratic rights – despite all that it has been through. That, too, is part
of the new reality. Democracy is here to stay. As OAS Secretary General Jose
Miguel Insulza told the Financial Times on
May 22, "Latin America is not a baby. When the left or right win in
Europe, nobody pronounces about the destiny of the continent or anything like
that. You have to let the political process take its course." But that
is the one thing Washington is least likely to do. Its refusal to accept the
results of democratic elections in Venezuela will continue for the
foreseeable future, and few if any leaders in Latin America will want to be
seen as taking the Bush administration’s side in this ongoing fight. Most
recently the U.S. media has made disputes between Latin American countries a
major theme, putting forth the idea that current rifts will predominate any
moves toward regional economic integration or independence from the United
States. And of course Chávez is described as
exacerbating these divisions. There is no doubt that there are real disputes
and conflicts of interest: Argentina and Brazil must settle with Bolivia over
the terms and conditions of the natural gas that they receive from Bolivia;
Argentina and Uruguay are in dispute over the potential environmental damage
from two paper mills on the latter’s side of the Uruguay River; the
government of Vicente Fox in Mexico has been in a fight with Chávez since he responded to an attack from Fox in
November by calling him a “lapdog of imperialism.” Peru withdrew its
ambassador from Caracas in protest of Chávez’
endorsement of Ollanta Humala
in the current election; the winner, former president Alan Garcia denounced
Chavez throughout his campaign and in his victory speech. But none of these
conflicts are likely to disrupt the overall trends toward increased
nationalism, regional cooperation, and independence from the United States.
After Bolivia nationalized its energy industry on May 1, the Brazilian media
was spoiling for Lula to start a fight with Morales on behalf of Petrobras, the Brazilian state-run energy giant that is
the largest producer of Bolivia’s gas. The pressure on Lula became so intense
that at one point he turned to the press and said, “I haven’t had a fight
with George W. Bush; why should I fight with Evo?”
Indeed, a fight with Evo Morales might be very
disconcerting to Lula’s political base, which sees Morales as a hero, a
champion of indigenous rights and the poor. On May 4, Lula met with Morales,
Kirchner, and Chávez and they issued a statement
affirming Bolivia’s “sovereign right” to nationalize its energy resources. It
probably didn’t hurt that Venezuela is buying $3 billion dollars worth of oil
tankers from Brazil, which will create an estimated 10,000 jobs in an
election year there; or that Venezuela is lending $2.5 billion to Argentina. Lula
has repeatedly defended Chávez and his government
in public statements. “A president that wins elections, passes a constitution
and proposes a referendum on his own presidency; holds a referendum and wins
the election again – nobody can accuse such a country of not having
democracy,” he said last September. “Indeed it could be said that it has an excess
of democracy.” So
has Kirchner: on May 21, while the stories about Latin American disunity were
reaching their peak in the major English language media, Kirchner told the
press: “I believe that Chávez is working with
determination for the integration of Latin America; his dealings with
Argentina have been admirable and with solidarity . . . Argentines should be
very thankful to President Chávez, who has done
very good things for this country.” He also said that nothing would stop the
process of regional integration. Michelle
Bachelet, who is classified as one of the “good
leftists” in Washington’s lexicon, stood up for both Chávez
and Morales when the international press was raining scorn on them at the
European Union-Latin American and Caribbean Summit of May 11-13: “I would not
want us to return to the Cold War era where we demonize one country or
another,” she said. “What we have witnessed in these countries (Bolivia and
Venezuela) is that they are looking for governments and leaders that will work
to eradicate poverty and eliminate inequality.” The
fact that all of these leaders would not only offer support, but in some
cases unqualified praise for Hugo Chávez, who has
called President Bush a terrorist, a murderer, a donkey, a drunkard, and a lot
of other names including his favorite “Mr. Danger”
– a reference to a nasty American in a famous 1929 Venezuelan novel by Romulo Gallegos – is another indication of how much the
hemisphere has changed. And all this after more than four years of efforts by
the Bush administration to isolate Chávez, combined
with overwhelmingly negative and one-sided international media coverage of
Venezuela. On
May 26, President Jacques Chirac of France threw his weight behind Bolivia’s
oil and gas nationalization, despite the fact that the French energy giant
Total is the third largest producer affected by the decision. He praised Evo Morales as “a man who has restored honor to a people who had lost it for centuries and
centuries.” A
collapse of oil prices would change the immediate political equation, but to
reverse current trends it would have be a crash of a magnitude that almost no
one currently foresees. Venezuela has been pretty conservative in its
fiscal policy, budgeting for oil at about half the price that materialized
last year, while vastly increasing tax collections. The country is enjoying a
budget surplus, a nearly $9 billion trade surplus, and has more than $30
billion in foreign exchange reserves. Its ad hoc “Bank of the South” is not
likely to go bankrupt anytime soon. And certainly not so long as the current
tensions – with possibly worse to come – between Washington and Iran continue
to add to the already war-inflamed risks of oil supply from the Persian Gulf. There
are a number of potential economic problems in the near future. As interest
rates continue to rise in the United States, the possibility of the kind of
destabilizing capital outflows that set off the Mexican peso crisis in 1995 –
when the Fed raised interest rates from 3 to 6 percent beginning in 1994 – is
still real, although the risk is smaller as compared to that of the fixed
exchange rates of the 1990s. And Mexico especially, with more than 85 percent
of its exports now going to the United States, is vulnerable to a likely
downturn here when the U.S. housing bubble breaks. Also, as noted above, a
sharp drop in the dollar would hurt those countries that are most dependent
on exports to the United States. But it is unlikely that even hard times
would cause Latin America to go back to its prior allegiance to U.S.
policy-makers. As
economic integration proceeds, Washington’s influence will continue to wane.
When the Colombian government kidnapped Rodrigo Granda,
the FARC guerrilla’s “foreign minister,” from
Venezuela last January, Chávez was furious and
Washington was hoping for a serious fight. But Venezuela cut off commerce
with Colombia, and as Venezuela is now Colombia’s second largest trading
partner, the impact was immediately felt on the Colombian economy. Colombia’s
President Uribe flew to Caracas and the two
presidents settled their differences. They have had remarkably good relations
ever since, as they have through most of Chávez’
presidency, despite being at opposite sides of the political spectrum. Uribe is Washington’s closest ally in the region, and
highly dependent on U.S. aid. The
governments of Argentina, Brazil, and Venezuela are discussing a proposed
6,000 mile, $20 billion natural gas pipeline. Bolivia is also involved in the
discussions, and other countries may be included. This type of energy
integration, if it materializes, would also promote further economic and
political integration in the region. Successful
examples of economic and social policy also have a way of spreading. Argentina’s
phenomenal growth rate, more than twice that of the region, cannot remaine unnoticed indefinitely. Nor can the provision of
health care and increased access to education in Venezuela, which are likely
to follow in Bolivia. In Brazil, one of the largest and most organized social
movements in the world, the Movement of Landless Workers (MST),
is watching hopefully as Bolivia embarks on what promises to be the largest
land reform program in decades. From
the north, there is little indication that Washington will make major policy
changes in the foreseeable future to accommodate the new reality in Latin
America. Even if the Democrats were to win the House of Representatives in
November, the ranking Democrat and likely chair of the House International Relations
Committee would be Tom Lantos, who is about as hawkish as the Bush
administration on these issues. U.S. policy will therefore almost certainly
continue to reinforce and contribute to current trends, including the loss of
U.S. influence in the region. There
will undoubtedly be political conflicts, mistakes, backlashes, and
unanticipated events as various countries move forward along more independent
pathways. But a tipping point has been reached, and there will be no turning
back of the clock. The most difficult task will be finding new,
country-specific economic policies and development strategies, after more
than a quarter-century of governments refusing to even think about these
things, instead submitting to a narrow range of mostly unsuccessful choices.
In this new era the economic choices have expanded rapidly, and the rules of
the game are changing from month to month. However, a thick ideological fog,
which denies that even the most modest alternatives are possible, still
prevails among the international financial institutions, central banks, the
media, and the institutions where most economists are trained. Governments
that want to do anything different, like Kirchner’s in Argentina, will need
some vision, leadership, and courage to confront a lot of ideological
opposition, in addition to varying political opposition. But so far they are
doing pretty well. Footnote 1. To be published
in the International Journal of Health Services, Vol. 36, No. 4 (2006)
Author Contact: Mark Weisbrot is Co-Director of the Center for
Economic and Policy Research, in Washington, DC ___________________________________ SUGGESTED CITATION: |