Despite dome of their clamis, proponents of neoliberalism in Latin America have no real interest in reproducing the free market of the nineteenth century. Though even if the interest were there, it would not he possible. Transnational corporations—with their centralized control of money, their regulation of prices and profits, and their centrally planned management—now dominate the world economy. This domination, along with the relentless pace of the ongoing technical-scientific revolution, has irreversibly transformed the character of competition in the global marketplace, introducing new forms of cooperation and integration among industrialized countries. It is in this “new world order” that we have to understand the neoliberal model.
Neoliberalism, promotes, above all, total freedom of movement for capital, goods and services. It advocates the opening of economies, and competition in the world market in conditions of absolute freedom. To achieve this, it attempts to remove controls on prices. Labor, in contrast, is the only commodity which is not considered free in the market, due supposedly to the need for permanent extra-economic state regulation to reduce its cost. This regulation can include everything from legal measures, to the repression of strikes and the co-optation of union leaders.
Neoliberalism would eliminate the regulatory functions of the state and promote the denationalization and privatization of its goods and services. Instead of the state, it favors using the market to determine distribution and stimulation. The invisible hand of the market is to take care of the movement of resources, the growth in productivity, the renovation of technology, and the reinforcement of comparative advantages. However, once the state is reduced and weakened, the national economy’s capacity to withstand external economic pressures is diminished, because only the state could have sufficient control over resources and regulatory mechanisms to soften the blow. To attenuate the negative social consequences of the model, neoliberals have designed certain instruments and escape valves, such as the negotiation of conflict (firm or flexible, according to the case), the growth of the informal economy, and programs of social assistance which are more propagandistic than effective.
The neoliberal discourse emphasizes the ideological neutrality of state management and the “de-ideologization” of the notions and principles underlying the economic system. Among these notions—which are held to be universally valid—are competition, iron work discipline, pragmatism, realism, asceticism, and the replacing of social groupings with individuals as the principal intermediaries and interlocutors in society.
The reformulation of the world economy according to the new interests and needs of the great capitalist corporations is explained by proponents of neoliberalism as the natural result of historical evolution, a process all countries must inevitably join. This logic is used to justify the denationalization of states in the dominated countries of the South, with the pretext that it is the cost they must pay to form part of this new world order, which supposedly offers interdependence among all nations.
The concepts of sovereignty, development, social justice and democracy have also been redefined. The so-called new “interdependence” among nations sets the limits for national sovereignty. Development is conceived of as a goal which all countries can achieve if they join in the neoliberal process (it’s just a question of time and sacrifice). Social justice becomes a function of the opportunities created by individual effort, while democracy is a universal value with no class or political qualifications whatsoever.
To date we can identify three stages in the implementation of the model in the region. The first period was really an antecedent, undertaken without the express rationality of neoliberalism. This was characterized by the so-called “openings” of the end of the 1960s. These policies criticized the developmentalist process of industrialization based on state protectionism. Its proponents claimed that stagnation was the result of inefficiency due to lack of foreign competition, and inflation caused by government efforts to stimulate employment and growth. Such “openings” were not attempted in all countries, nor did they lead to any real reduction in the role of the state. By the mid- 1970s, their most enduring legacy was to open the economics to foreign investment and credit.
During the second stage, the neoliberal model was applied in a radical and obvious way in several countries. The necessary pre-condition seems to have been military rule, as in Pinochet’s Chile after 1973, and Argentina after 1976. In those countries, particularly in Chile, the economy was opened completely to foreign capital and services, and the state’s roles as economic regulator and social benefactor were rapidly diminished.
Squeezed by the foreign debt, the new democratic governments of the Southern Cone tried to pursue a more social-democratic model of development, in part because neoliberalism was so closely associated with military rule, but also because the governments feared neoliberalism’s negative social consequences might affect their chances for re-election, or even the survival of the new and fragile democratic regimes.
But the economic crisis of the 1980s, in particular the deepening problem of the foreign debt, led these countries to eventually abandon their social-democratic plans, which the United Nations’ Economic Commission on Latin America and the Caribbean (ECLAC) had principally developed. On the one hand, governments could not find a way to spread the growing costs of adjustment fairly. On the other, they fell prey to pressure from international finance capital and its powerful hold through the debt. Neoliberalism in its most savage forms was therefore adopted throughout the region by the end of the 1980s and the beginning of the 1990s.
The roots and context of the crisis of the 1980s are well-known. From the 1950s to 1980, the Transnationalization of capitalism brought annual economic growth of 5% in Latin America. The price of that induced expansion was the structural incorporation of the region’s economies into the global division of labor of that period. Import-substitution industries lost their national character. The agrarian sector was partially modernized to fit foreign markets. And the principal basis of the economy came under the control or hegemony of foreign capital, creating a nearly total subordination in the areas of technology and science.
In the 1960s, national populist movements led by the industrial bourgeoisie since the early 1930s were snuffed out by the new system of foreign domination. Sectors of that bourgeoisie put up some resistance, but most jumped on the bandwagon and accepted the role of junior partners. In most countries, save a few temporary and partial exceptions, governments tried to avoid the negative effects of the new subordination by borrowing money, which was readily available during the 1970s.
Thus, the countries of Latin America and the Caribbean turned to massive foreign credit to confront the deterioration of the terms of trade, the over-valued dollar, and the other effects of transnationalization. Indebtedness allowed several countries to artificially maintain certain elements of the import-substitution industrialization model for several more years. Thus the crisis of that model was worsened by the diabolic trap of debt, which, from the end of the 1970s through the 1980s, generated a vicious cycle of crisis-debt-crisis.
From then on, international financial institutions and the governments of the Group of Seven industrialized countries helped reproduce and accentuate this spiral by demanding that debtor countries apply onerous adjustment measures. During the first stage, these measures were intended to allow them to collect—at least in part—on the debt. Later, when it became clear that no more liquid capital would be forthcoming, institutions of the North began sucking out natural resources, and goods and services of the state in return for reductions in the debt.
The consequences of the current “savage” round of neoliberal policies have been dramatic. To begin with, we are in the midst of a profound and accelerated process of economic restructuring and foreign takeovers of Latin American productive systems. Industries characterized by low productivity and outdated technology, nearly all of them owned by mid-sized national capital, have been destroyed and replaced by speculation and imports. While the desperate opening of the economy to foreign interests often responds to the immediate desire to obtain favorable terms for repaying the foreign debt, the dismantling of the state—including privatization and drastic budget cuts—has caused faster rises in both unemployment and the relative and absolute levels of poverty than at any other time in the region’s history.
Governments throughout Latin America have virtually abandoned their efforts to win national independence and economic development—goals which to one degree or another they had pursued in past decades. Never before have government policies been so directly managed by the International Monetary Fund (IMF), the World Bank, U.S.AID and other well-known institutions of transnationaI capital. Neoliberalism is synonymous with the definitive neo-colonization of the subcontinent. Neither can the new dynamics of subregional, regional and hemispheric integration be termed a victory for sovereignty. The principal beneficiaries of the current market-oriented integration will once again be the transtiational corporations.
From neoliberalism grows neo-marginality, euphemistically called the informal economy. This change of name seeks to recategorize the causes, the attributes and the perspectives of this enormous sector of society that the model generates. It is an escape valve in which private and familial solutions replace social ones. In reality, the informal economy is one of the most prominent and harmful effects of neoliberalism, both in its human dimensions and its economic, ideological and political ones.
Since full employment is excluded from the model, this “informal” route is designed not only to compensate for the steep rise in unemployment, but to thwart the efforts of the working class to resist, by pressuring the most exploited to seek out private solutions. The model preaches that informal workers stand at the base of a ladder of bourgeois accumulation. Now they have to resolve as individuals their problems of health, education and social security. Neoliberal ideology has inverted people’s expectations. Before, poor people considered themselves wage earners, and their hope lay in the power of their class. Now, informal workers are told to believe that they are or can become part of the bourgeoisie.
This virtual swarm of poor merchants will become poorer and more marginal, since they number ever more in the same market, and receive ever fewer of the social benefits that used to be the responsibility of the state. Informality is not a step toward wealth, nor even along the road toward wage labor. It is a dead-end social phenomenon, a structural fruit of the model.
Many other social consequences of neoliberalism are visible and well-known, from cholera to the steep rise in crime rates and drug trafficking. More children are in the street; retired people get fewer benefits; urban and rural workers are more exploited if they have work at all; the middle class has become an impoverished petit bourgeoisie; millions of bureaucrats and state employees have become small merchants or “informal” workers; youth find no work and many turn to crime, become “informals,” or emigrate to survive; and women suffer the most, as they try to compensate with personal sacrifice for the lack of basic necessities.
Paradoxically, this picture of social and human suffering has yet to produce significant resistance and struggle. The ideological and political roadblocks that the system has set up have managed to twist the truth, and neoliberalism is not yet perceived as the cause of the problem. Worse yet, many of those affected are convinced the system can work. This false vision produces resignation and apathy both among the marginalized poor and among a sector of the working class who fear for their jobs.
Nonetheless, although we can’t know the form it will take, nor the exact moment it will occur in any country, the unravelling of neoliberalism seems inevitable. The design of a viable way out that favors development, integration, social justice and democracy will contribute to the crisis of credibility of the current model. Such a design would have to take into account the objective international situation and the tendencies that define the current drift of the world economy. But in the new design, a country would insert itself into that economy in order to move toward economic independence.
This supposes several lines of action. First of all, it implies the accelerated development of new high-producfivity areas of production, principally in high-tech fields. Without state-of-the-art technology it would be very difficult to compete in the world economy or to obtain the large influx of capital necessary for integral social development. Second, efforts to move towards a New Internafional Economic Order (the renegotiation of the global division of labor and terms of trade) must be given high priority. Third, the process of handing the economy over to transnational corporations must be stopped and reversed, beginning with the achievement of a satisfactory resolution of the foreighn debt. Regional integration of groups of countries should be pursued, guided by the goals of developing our countries and achieving independence and equity in the interests of the people.
The entire gamut of economic restructuring should be addressed, from the land question to the transformation of obsolete industries. Existing industrial infrastructure should be utilized wherever possible, while at the same time its renovation and the creation of a material infrastructure capable of satisfying the basic needs of the domestic market should be pursued. Radical change in agrarian structures is indispensable for several reasons, including the need to broaden the internal market and to stimulate food production so that the basic human need for food can finally be met.
New industries should be patterned to fit the consumer needs of the majority, not only of the top 10 to 20% of the population. Along with this ethical/productive transformation, for some time to come it will be necessary to make use of and stimulate people’s experience in grassroots economy—the ingenious ways in which the poor survive—by providing the necessary technical, political and other support so that people can continue to get by.
Income distribution must be radically altered to break the pattern which favors (at most) 20% of society. The existence of great inequalities and social backwardness is incompatible with the scientific-technological base which must be laid if we are to take charge of the emerging modes of production. If knowledge today is more important than ownership, a crucial factor in development is the guarantee that education, culture and scientific-technical knowledge are accessible to all. Human capital is today more decisive for development than physical capital.
All of these great tasks will require a state that is clearly legitimate in the eyes of the majority of the population, and capable of taking sweeping measures, firmly defending them, concentrating resources, creating programs, and directing development in all its dimensions. It is not a question of indiscriminate state intervention in the economy nor forced protectionism, which in the past often served only to transfer resources to private businessmen. The state should remain at the helm of the economy, so as to be in a position to resolve the basic problems of education, health care, mass transit and housing for the poor, along with pursuing specialized development policies in the areas of science and technology. Such a conception supposes, of course, that the state and civil society would share essentially the same interests. This in turn must be assured by means of a democratic system based on popular and national sovereignty.
The fundamental axis of any program which seeks to overcome neoliberalism with real development, equality and national independence rests on the political and social forces capable of opposing and defeating the economic and political actors who sustain and reproduce the current system of domination. Herein lies the challenge we must take up.
ABOUT THE AUTHOR
Gernán Sánchez Otero, a sociologist at the University of Havana, presented a version of this article to the workshop Integration and Attemative Development, held in Lima in February, 1992. He participated in the workshop as a representative of the Cuban Communist Party.
