World Bank

Hidden fist hits the buffers
As the World Bank and IMF meet for their annual conference in Washington, Duncan Green looks
at their record in Latin America since the debt crisis erupted 13 years ago.

Unimpressive record: the state of the roads in San Christobal, Chiapas, Mexico.

Thatcherismo has failed. Since 1982 the debt crisis in Latin America has swept aside existing economic orthodoxies. For 13 years market forces have blown at gale force through the region’s economies. In this ‘silent revolution’ an alliance of local élites, transnational corporations and the mighty IMF and World Bank have privatized thousands of state companies, deregulated the banks, removed trade barriers, buried labour rights, axed state spending and sacked hundreds of thousands of state employees. Is is now possible to assess their record and see the full extent of their failure.

Even in the free-marketeers’ preferred safe haven of economic abstractions the record is unimpressive. Economic growth has barely kept up with rising population. An investment collapse has left the region burdened with a crumbling infrastructure of potholed roads, electricity blackouts and water shortages which will take decades to make good. The sole unalloyed success has been in getting inflation down to single, or at most double figures across the continent.

In human terms the failure has been far more profound. Adam Smith’s benign market forces have in practice become an ‘invisible fist’, inflicting terrible damage on the poor. By 1993, 60 million more Latin Americans had been driven below the poverty line, bringing the total to nearly half of the population.

The deterioration in the quality of life is as much psychological as material, but no less painful for that. Adjustment has brought new levels of anxiety into millions of lives by generating more insecure, part-time or informal-sector jobs. Cuts in social services have placed even greater burdens on women, who must now juggle the increased demands of workplace and home, when the already inadequate level of state support has been further reduced. Their families and communities are collapsing around them as crime and social disintegration have topped the list of public concerns in many Latin American societies.

Not everyone has lost out, of course. The Latin American élite has snapped up some rich pickings in the fire-sale of privatization, boosting the number of Latin America’s super-rich billionaires from 6 in 1987 to 42 in 1994. What remains of the middle class is able to enjoy everything from Apple Macs to Big Macs as economies open up to overseas trade and investment.

The official response to growing poverty and inequality has been a swing towards a ‘kinder, gentler’ form of Thatcherismo. Poverty relief is back in vogue as the World Bank acknowledges that no country is likely to make the grade saddled with an illiterate, undernourished workforce. Oxfam is unimpressed with the Bank’s change of heart, criticizing its failure to make income redistribution an essential part of any poverty-reduction strategy and arguing, in a report released last year, that ‘simply bolting on social-welfare provision to wider adjustment policies which are themselves exacerbating poverty does not amount to a poverty-reduction strategy’.

But one piece of Thatcherite rhetoric is still flourishing south of the Rio Grande. Remember TINA – There is No Alternative? ‘Neoliberals’, as the free-marketeers are known in Latin America, routinely dismiss their critics as economic dinosaurs bereft of alternative ideas, and accuse them of wanting to return to the failed models of the past. Even some of neoliberalism’s most trenchant critics confess themselves at a loss when asked what they would do instead.

They need not be so gloomy, for the raw material for alternative economic models is all around. Look at history, where every single successful economy (except the first, Britain) has industrialized by protecting its fledgling industries – a policy anathema to the World Bank and IMF.

Look at Asia (despite NI’s recent attempt to rubbish the ‘Asian Miracle’). Here you will find a country with the most equal distribution of income in the world, whose exports rose 100-fold from 1965-87 without ever becoming a member of GATT, which uses a strong state to control the activities of foreign investment to the benefit of local industries, which carried out a radical agrarian reform and boasts numerous highly efficient state companies. The name of this apparently progressive utopia? Taiwan.

But the left cannot bring itself to learn from a country run by such an undoubtedly repressive government. On the other side of the argument, the World Bank and other neoliberals insist on portraying Taiwan and other Asian ‘tigers’ as paragons of the free market, thereby missing the point that success in Asia has been built on high degrees of efficient state management of the economy.

Finally, those seeking alternatives at the top should look downwards, to the Latin American grassroots, where local organizations are getting on with the business of developing new models of just and sustainable development. Such initiatives take a small-is-beautiful approach, basing their work on community needs. In time their experiments could become the foundation for the kind of ‘people-centred adjustment’ the region so desperately needs.

Will such alternatives be grasped in time? The signs are not good. Latin America’s silent revolution required the catastrophe of the debt crisis and the unceasing arm-twisting of the IMF and World Bank to bring it about. History suggests that another such trauma will be required to achieve another sea-change in economic and political thinking.

For the half of all Latin Americans already submerged beneath the poverty line the trauma is already here, but they may have to wait until it harms the region’s élites and powerful interests abroad before real change becomes possible. Is it really too much to ask that those currently in charge of the region’s destiny, whether they be in Latin America or in the economic powers of the North, learn from history and make the necessary changes before the next disaster occurs?

Duncan Green is author of Silent Revolution: The Rise of Market Economics in Latin America, has just been published by Cassell in Britain and by Monthly Review Press in the US.

©Copyright: New Internationalist 1995

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