The New York Inquirer: LEFTIST LATIN AMERICA: A Neoliberalism Primer

There’s a specter haunting Latin America, and it goes by the name neoliberalism.

Simply put, neoliberalism is the name for economic reforms encouraged by the United States and the European Union in Latin America that were first instituted in the 1980s and then codified in 1990 by the Washington Consensus. The Cold War had ended. Capitalism, at least for the States and the E.U., was flourishing. Neoliberalism would open markets to free trade, and in turn expand economic development. Or so the argument went.

In Latin America, democracies had emerged from the rule of brutal dictators. Government-imposed trade restrictions would be reduced. The idea was to erect free-market economies around those fledgling democracies. Developing nations would benefit from increased investment. Developed nations could expand their markets. In theory, everybody would come out winners. Only, there was one problem. The theories didn’t pan out. Twenty-five years hence, it’s clear that neoliberalism didn’t work.

What’s more, the failure of neoliberalism is the chief cause of the polarized political situation in Latin America today.

Poverty on the continent has almost doubled since 1980. Unemployment has increased. The popular argument has become: moving the continent forward means resisting, in earnest, all overtures from the big bully to the north. Evo Morales in Bolivia was the sixth candidate in seven years to be elected by campaigning against neoliberalism. Though, when Morales talks about it, it’s called imperialism.

The term “neoliberalism” comes from the liberalism that emerged in the 18th century Enlightenment. Free people, free markets and private property make for a fair society where value comes from work and intelligence. “Neo” simply means new.

Debates rage from Washington to Lima about how to proceed. Many in Latin America, especially a new crop of populist leaders who’ve made a career of lambasting the economic imperialism of the U.S., say that neoliberalism was a disaster. Opening up markets was an invitation to U.S.-based multinational corporations to buy up local industries and economies. Because of the U.S.’s immense economic power, the playing field was never level enough to give rise to competition, the essential ingredient for a true market. Lastly, corporations privatized industries at the expense of an outraged and disaffected public.

Take, for instance the case of Bechtel in Bolivia. Soon after the company took over the city of Cochabamba’s water supply, prices spiked. Families couldn’t afford drinking water. What happened? What else – they revolted. A teenager died, many were wounded.

The other camp explains neoliberalism’s failure by arguing that policy reforms never went far enough. They say that democratic structures are inadequate. Political parties, not voters via primaries, choose national candidates. Provincial leaders have few ties to their municipalities. And lastly, it’s just terribly hard to start a business, especially if you don’t have a lot of money to navigate the complex systems of regulations.

Take Peru, where opening a small business used to take 289 days. Reforms cut the time to a single day, reduced costs from $1,200 to $174 and in six years, half a million jobs were created.

Only, it’s clear that the mid-century Latin American economic boom not only ended with neoliberalism, but has since set off a chain of discouraging events. According to Jorge Castenda, Mexico’s Foreign Minister until 2003:

“Between 1940 and 1980, Brazil and Mexico, for example, averaged six percent growth per year; from 1980 to 2000, their growth rates were less than half that. Low growth rates have meant the persistence of dismal poverty, inequality, high unemployment, a lack of competitiveness, and poor infrastructure. Democracy, although welcomed and supported by broad swaths of Latin American societies, did little to eradicate the region's secular plagues: corruption, a weak or nonexistent rule of law, ineffective governance, and the concentration of power in the hands of a few. And despite hopes that relations with the United States would improve, they are worse today than at any other time in recent memory, including the 1960s (an era defined by conflicts over Cuba) and the 1980s (defined by the Central American wars and Ronald Reagan's "contras").”

Simple to say, then, that we’ve come to a post-neoliberalism age. Economically, the strongest Latin American countries today, Argentina and Chile, have engineered policies that strike a balance between opening markets while keeping in place government restrictions. Interestingly enough, Chile has developed a very profitable relationship with the U.S. while at the same time maintaining an entirely independent stance, which at times has overtly challenged U.S. foreign policy.

This is post-neoliberalism where the changing tide of Latin American politics makes it clear that this is the Age of Enlightenment no longer. And as the political tide turns, it will be a new approach -- a hybrid? an outside force? -- that garners success. How much of a mix will it be? How much will the shifting politics allow?

(Photo from flickr.)