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.
