The neoliberal disorder

By Ernesto Herrera, International Viewpoint, 17 October 1999

The balance of forces in Latin America is changing. Political, economic, social and political factors are creating a generalised crisis of government. After years of neoliberalism, the landscape is changing again. The United States have reaffirmed their role as the world's indispensable nation. But in their own back yard, they lack what Zbigniew K. Brzezinski calls a geopolitical pivot- a state like Israel, ready to ensure the economic, political and military domination of the region on behalf of the world powers.

There are already clear signs of disorder in Colombia, Venezuela and Ecuador. The next 12 months contain a number of potentially destabilising events:

• the partial US withdrawal from the Panama canal, and the need for the imperialist power to find new, reliable platforms for military intervention and domination of the region.
• the Ibero-American summit in Havana, Cuba, will confirm Cuba's integration into the Latin American Integration Association (ALADI).
• the crisis in the Mercosur trade block will exacerbate already-tense regional economic negotiations, and the underlying question of an all-Americas free trade agreement.
• Mercosur's agreement with the European Union, and the 2000 round of WTO negotiations-in effect, the dominated countries will be renegotiating the terms of their dependent relationship.
• Three Mercosur countries will have elections before the end of 1999. Argentina's Peronists are sure to lose, and Uruguay's broad left front (FA) may win. The outcome of Chile's election is still uncertain.

But the crisis of the region's bourgeois leaderships is mainly the result of the brutal effects of the international economic crisis.

Latin America is also witnessing massive popular resistance-on isolated issues-which is changing the political strategies and programmatic proposals of most of the continent's left wing forces. Recent months have seen a wave of social explosions, strikes, land occupations, protest marches and violent confrontations.

Colombia is in a pre-revolutionary situation. The state is in deep crisis. It is caught between a powerful guerrilla movement and strong trade union and peasant struggles on one side, and a range of far right paramilitary groups and drug barons on the other side. All this, of course, during the deepest economic crisis of recent decades.

In Venezuela, all the institutions of the old political order are collapsing, and being replaced by a new regime which has enthusiastic, mass support. Chavez' populism is a double-sided thing. One the one hand, he is dismantling the clientelist state of the traditional parties, and transforming the country's relationship with the United States. On the other hand, he is applying an austerity plan which will facilitate foreign capital's entry into the oil industry and other strategic sectors of the economy.

There are significant-though less mediatised-conflicts in other countries. Tens of thousands of Brazilian peasants and workers have organised marches demanding the resignation of president Fernando Henrique Cardoso.

Ecuador has been shaken by insurrectional riots. The government has been forced to suspend all foreign debt repayments-a first in Latin America, forcing the IMF to make a very tactical response. The debt question will be increasingly debated in the other countries of Latin America.

There are no signs of weakening of the major strike at Mexico's main university, UNAM. The indigenous people and the Zapatista rebels of Chiapas state are also continuing their protests. Chile's leaders boast of reconciliation, but Mapuche peasants and a range of trade unions have united with human rights groups to demand that the dictator Pinochet face trial.

Peruvians have massively rejected president Fujimori's attempts to extend his term of office. Here too, the level of trade union and peasant protests is increasing.

In all these countries, there are some common threads of opposition: to IMF Structural Adjustment Programmes; to privatisation imposed by the IMF, World Bank, and InterAmerican Development Bank; to the expropriation of people's rights, intensified by unlimited flexibilisation of working conditions; growing unemployment and job precarity; low salaries. There are anti-neoliberal struggles, with an anti-capitalist dynamic, in Argentina, Bolivia, Panama, Nicaragua and Uruguay.

In Latin America today, class identity is not expressed in the same way as in previous decades. Today's struggles involve a wide range of social subjects. But, looking more closely, the urban and rural working people are the key, central element of these new forms of resistance.

But these new struggles involve new social groups which have suffered from the neoliberal counter reforms. More than ever before, small business people, shopkeepers, small farmers, and impoverished middle class groups have taken part in protest activities.

Before the Brazilian crisis of January 1999, Latin America was expected to record a 1% economic growth (CEPAL). But the collapse of Brazil's *real* plan worsened the economic climate for the whole region. In April, the World Bank predicted a 0.8% contraction in economic activity. In May, ALADI predicted a 1.6% contraction.

The opening up of the region's economies since 1990 has created all kinds of disequilibrium between countries with very different productivity levels, and very different levels of foreign investment.

Loans and financial investments have been much more important than foreign direct investment. Most foreign interest has been focused on the wave of privatisation. The much-promised influx of capital, and increase in total investments, has simply not materialised. CEPAL estimates that two thirds of the foreign direct investment has been purchase of existing facilities, rather than creation of new units of production.

According to an economist from Brazil's Getulio Vargas foundation, investments have been concentrated in the service sector-which does not generate new foreign currency earnings. There has been a massive transfer of public property to the private sector, and the imperialists have tightened their control in the process. In many Latin American countries, strategic economic sectors are now directly controlled by a small group of financial institutions, based in the G7 countries.

Earnings from privatisation have been used to pay the foreign debt. Argentina has used 57% of its US$39.6bn from privatisation in 1989-98 to meet its foreign debt obligations.

In conditions like these, Latin America's governments have their hands tied. How can they develop elements of national sovereignty in the face of such imperialist domination? If there is strong pressure from the mass movements, of course, there may be all kinds of unorthodox, nationalist responses to the crisis. Already in Ecuador, the Mahuad government has been obliged to reschedule payment on its Brady Bonds. Venezuela's Chavez government may also try to renegotiate the terms of the country's dependence.

But any serious attempt of this kind would need organised, determined, sustained popular support. And neither the continent's leaders, nor the institutionalised opposition parties, are ready for such a movement. After all, no-body doubts the determination of the imperialists, and their clear intention to consolidate their reconquest of the Latin American economies.

The transfer of wealth from Latin American workers to the banks of the imperialist countries takes a very brutal form. It is hardly surprising that the same mechanism is reproduced inside each country. According to the latest report from the InterAmerican Development Bank, Latin America and the Caribbean is the region with the greatest inequality of income distribution, and the region where the richest in society receive the greatest share of the wealth produced... 40% of national income is in the hands of the richest 1%.

The Bank can give all the technical explanations it wants. But it cannot hide the social results of a continental development system in which one third of the continent's population-or 150 million people-live on less than US$2 per day. The buying power of Latin America's average minimum wage is 27 times lower than in 1980. And many people earn much less than the legal minimum wage. In the huge informal sector, average income fell by 1% during the good years 1990-98. And this is the sector where most new jobs have been created, according to an International Labour Organisation report (Lima, August 1999).

What kind of market are we talking about, if more than one third of the Latin American population is excluded from the market by poverty?, asked Mexican economist Diana Alarcon, in a July 1999 interview with the Argentine magazine Tres puntos. The big political challenge is to incorporate the poor into the market. If we want to improve the mediocre growth rates of recent years, we need to take steps towards income redistribution. Alarcon is a respected employee of the InterAmerican Development Bank. But her words could also have come from the IMF or the World Bank. Global financial institutions are increasingly willing to take preventative measures to channel and reduce the popular struggles which they expect to develop as a result of their own political actions.

But the central axis of all activity is still the structural adjustment of Latin America, to suit the needs of the imperialist heartlands. Enrique Iglesias, president of the InterAmerican Development Bank, told the Brazilian newspaper Folha de Sao Paulo that privatisation at the municipal and state level [Brazil is a federal republic] can support and complete the administrative, institutional and financial reforms. It will liberate the energies of the private sector, attract new resources, technology and management know-how. It will help build a more balanced relationship between public institutions and civil society. Efficient governments, with resources, would be able to handle fiscal autonomy [a sharp reduction in federal tax redistribution] and concentrate on basic needs like health and education. Privatisation would strengthen national and provincial economies. It would be a long-term instrument of development, and of macroeconomic stabilisation. These are the essential conditions for reducing our vulnerability, within an international marketplace that is less predictable and less rational than we imagined.

This second generation of reforms would be accompanied by state initiatives in cooperation with the private sector. The state and its private partners would intervene through social security programmes focused on the very poorest layers of society. They would, of course, also co-operate in installing regulatory systems which, alongside privatisation, will ensure competition. The state will also work with industrialists to develop education programmes that are adapted to companies' technological needs.

So we should have no illusion about the economic and social content of the new programmes which Joseph Stiglitz is trying to popularise on behalf of the World Bank. Popular mobilisation is essential. But so is a continental debate on the alternative policies we should be struggling for. The chapter headings of such an alternative programme could be taken from the slogans of the various social movements already struggling against Structural Adjustment Programmes, against IMF/WB control over the economy, against the usurious foreign debt system, and in defence of health, housing, education, work, salary and job security, human and social rights, democracy and political rights.

It is time for a new look at the relationship between market and democracy, and a redefinition of the role of the state, in response to the opening of the national economy to global pressures. The various sectors of the left each have their own demands. What we need to do now is bring these demands together, in a real debate about growth, the different models of development, the context of capitalist globalisation, and the various alternative social projects. Many of these projects imply some level of relative deconnection from the global economy-asserting national and regional autonomy, in order to meet local needs, rather than simply follow the agenda of global capital.