A
profound change of
attitudes towards
Latin America's development
By
Jonathan
Power
TFF Associate
since 1991
Comments to JonatPower@aol.com
January 5, 2005
LONDON - Whilst the United States
has been moving to the right South America has moved to
the left. The presidents of Brazil, Argentina, Chile,
Venezuela and Ecuador all came to power partly by
challenging Washington's economic prescriptions. But
this, even middle of the road bankers believe, is working
out for the best.
It is important to report that this
latest turn in Latin America's chequered political
history does not presage a return to the caudillo- the
often flamboyant, dictatorial, populist. With the
exception of Venezuela most of this anti-Americanism has
two ingredients. First it is profoundly democratic.
Second it is pro market reforms, even as it rejects
publicly the so-called "Washington Consensus". No longer
is it true, as political scientist Glen Dealy wrote over
a decade ago, that "In Latin American minds the vision of
freely competing factions seems a choice between chaos
and privilege. Latin Americans maintain that union comes
from unity, not from diversity. Their political beliefs
are based on the corporatist medieval and renaissance
political theory that predated the contractarian thought
of Locke."
Still, there are some who challenge
this benign interpretation, pointing to two recent
opinion surveys, one conducted by the UN's Development
Program and the other by the Chile-based
Latinobarómetro, that reported that most
respondents would choose a dictator over an elected
leader if it provided economic benefits. In fact a closer
reading of the surveys shows that although it is true
that respondents are fed up with the slow way market
reforms are working, support for democracy as the form of
government and generic support for market policies has
actually grown
At last the sacrifices of the last
few years appear to be paying off- in part because the
"Washington Consensus" has been implemented and secondly
because the authors of the Consensus have revised their
model in the light of experience and they have become
more tolerant of social democratic priorities.
The "Washington Consensus" was an
attempt in 1989 by a group of bankers and development
experts brought together by John Williamson of the
Institute for International Economics to design a
10-point package of reforms that could put Latin America
on a path to sustained growth. Its essentials were
healthier budgets, lower inflation and lower external
debt ratios.
It did not work quite as planned-
unemployment rose, poverty remained widespread, while its
emphasis on market openness made countries vulnerable to
surging flows of short term capital that often
disappeared as quickly as they arrived.
The appeal of the Consensus was
dissipated and the Bush Administration's disdain for
anything that smacked of income distribution contributed
to giving it an even worse name. Whilst the World Bank
and the International Monetary Fund have worked to adopt
a refined Consensus the Bush Administration continues
forward blindly with its free market nostrums- for
example still using bilateral free trade agreements to
bully Chile (and Singapore) into ridding themselves of
necessary capital controls.
John Williamson in his latest book
has sought to refresh the Consensus in the light of this
somewhat confused and sometimes bitter experience. One
important step, he writes, means emulating the Chilean
example of limiting the influx of "hot" money. Second, it
means avoiding the early mistakes of a too simplistic
implementation of the Consensus' original prescriptions-
taking steps to make sure privatization is not
substituting a private monopoly for a public one;
ensuring proper supervision of a liberalized financial
system; not just liberalizing trade by lifting tariffs
but working to improve export market access; establishing
a competitive exchange rate; and although loosening union
protection of a small core of organized workers at the
same time extending health insurance, pension rights and
unemployment safeguards to the half of the workforce that
works in the shadows of the informal market.
Not least, in a confession of the
original Consensus' great omission, it demands tackling
the world's worst income distribution- which means more
educational opportunities for the poor, giving them title
to their assets however small, including their shanty
town houses, so that they are eligible for micro credit,
and in some cases pushing through land reform
too.
The hopeful news from Latin America
is that Brazil, its largest country, appears to be
setting about doing most of this. Other countries like
Chile, Argentina, Mexico, Uruguay, Costa Rica and El
Salvador are also at varying stages going down the same
road. At last these Latin American economies after years
in the doldrums are beginning to show significant growth
again. Even better news is that, although they may not
call it that, the revised Washington Consensus has appeal
to the modern day Latin left, which should ensure its
longevity- as long as the Bush administration doesn't
work to undermine it.
Copyright © 2005 By
JONATHAN POWER
I can be reached by
phone +44 7785 351172 and e-mail: JonatPower@aol.com
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