Friday, December 01, 2006

Latin America Marches Left

As somebody who takes active interest in world politics, it is impossible not to notice the sweeping change in the world of Latin American politics – the Left is making its strongest ever showing in recent times. Veteran leader Fidel Castro has been replaced by the charismatic Hugo Chavez as the poster boy of this anti-Americanism and this could have interesting implications for the world, especially considering the diminishing stature of the American democracy.

An attempt for an alternate economic and political vision is emerging in the fields of Latin America. A vision which has contempt for American policies, IMF and World Bank strategies is gaining ground and it’s an exciting movement, fostered by the grassroots and people’s movements rather than corporate lobbying. The definition of Leftism, of course, varies from country to country. It probably makes sense to look at this trend not as a Left vs Right issue but as a shift away from a more capitalistic stand, characterized by elitist policies, to an economics dipped in socialism, driven by pro-poor concerns.

Fidel Castro, the old friend of the Yankees, has been its torch bearer for several decades now and has survived more than 50 odd assassination attempts, sponsored by the CIA. But as he grows old, Venezuelan President Hugo Chavez has taken over his role as the flag bearer of an alternate economic order, which is different from those dreamt at the corridors of global financial powerhouses. But what has caused this to happen?

The US pumps in a lot of effort and time in promoting US-friendly “democracies” by doling out funds liberally or through coercion (as in Iraq). But the last few years have seen it putting a lot of its energies into tackling Middle East issues. Osama, Saddam and Islamic states, being in the US radar, has meant that Latin America has not been prioritized by them (except for its paranoia towards Chavez). This has resulted in the creation of many groups in Latin America, formed by small farmers, human rights activists, and trade unionists etc. who have a fundamentally different agenda as compared to the industrialized nations - an agenda dictated by local people rather than MNCs.

Moreover, the failure of the US administration policies in fighting drugs and expanding free market reforms have provided further impetus to this. The US administration’s controversial coca eradication strategy, to eliminate the cultivation of coca, as part of its “War on Drugs” policy has alienated people in coca growing areas like Peru, Bolivia and Columbia and the rise of Evo Morales in Bolivia (its first democratically elected indigenous head of state), who is essentially a coca farmer, is testimony to this.

There’s a general disillusionment with the way US has gone about using institutions like World Bank and IMF to further its economic and political interests. More than 30 years back, General Augusto Pinochet overthrew the elected President of Chile, Marxist Salvador Allende, in a bloody coup, covertly backed by the CIA because it would be a blow to Washington's international prestige if an avowed Marxist won a fair presidential election in South America. He held power for the next 17 years, relinquishing control in 1990 only after arranging immunity for himself and his top generals.

The Bush administration’s animosity towards Hugo Chavez (and the other way around) is quite well known. While US uses all opportunities to paint him as “anti-democratic” (despite winning 2 democratic elections) and uses this as an excuse to foment hatred for him, the world sees it clearly as a combustible conflict being fuelled by America’s vulnerability over Venezuela’s massive oil reserves. It's an open secret that there have been behind the screen attempts by US to rock the Chavez boat, though denied repeatedly by the administration.

The World Bank and IMF are not exactly the most popular institutions in the minds of developing nations. Rather than being seen as welfare financial institutions, they are increasingly being perceived as Shylock styled-creditors out to extract their pound of flesh. Nobel Laureate and former Chief Economist at the World Bank, Joseph Stiglitz, says one of the main problems with IMF is that it believes in a one-stop shop treatment for all economic problems facing the world and blasts it for being every bit as secretive, undemocratic and indifferent to the poor as its critics claimed.

All that the IMF seems to be bothered is fiscal deficit management through decreased govt. spending on social programmes, greater privatization and facilitation of international trade, irrespective of the problem. They conveniently forget that any such kind of reduced government spending affects the poor the most. UN estimates say that Latin America has the most unequal wealth distribution of any region in the world, despite religiously sticking to the prescriptions given by the IMF and World Bank. This kind of increased intolerance to the local needs has led to countries veering away from these institutions.

Argentina, under Nestor Kirchner, has recovered remarkably after its economic collapse in 2001 by greater public investment, hard bargaining with private creditors and has gone to the extent of prepaying its entire debt to the IMF by borrowing from Venezuela, to free itself from the IMFs clutches.

Under pressure from the World Bank, the Bolivian government in 2000 sold off Cochabamba's (its third largest city) public water system to Bechtel subsidiary Aguas Del Tunari. Within weeks of taking control of the city's water, Bechtel hit poor families with huge increases in their water bills, enough to spark a popular rebellion and chase Bechtel out of the country. This was followed by another controversial deal in 2003 where the country’s natural gas was sold off to California through a private consortium, Pacific LNG, at a pittance. The great civil conflict that arose because of this led to the resigntion of two Presidents and eventually the nationalization of all gas reserves in Bolivia in May 2006.

All these changes have seen a dramatic shift in world politics, currently dwarfed by the events in Middle East and parts of Asia. Countries like Argentina, Brazil, Venezuela and others are working together to foster a spirit of Latin American unity to fight the might of US and other global financial powerhouses. The focus is moving to the state and people determining the economic policies being framed rather than being dictated by colonial powers and private lobby houses which have their own vested interests.

There will always be conflicts when corporations try to use their clout and lobbying power to bag contracts heavily skewed in their favour and neglect the needs of the local population. The resultant exploitation of local conditions for greater profit making will eventually lead to a backlash against the company. Closer back home, Coca-Cola signed a deal with the Kerala Government to extract water at very low prices. The result was depletion and contamination of ground water in Plachimada in Palakkad District; so while agriculture suffered due to paucity of water, Coke was making heavy profits by selling at about 10 Rs per bottle. Hopefully, we would learn from the Latin American countries and standing up for the rights of our people.

Will this movement change the way the world moves? Can problems of poverty and malnourishment be solved by these countries by giving a human face to economic reforms or is this an aberration driven by a few leaders? Only time will tell but this is a transition we must observe carefully and it has wide repercussions in the global balance of power. As Atila Roque, Executive Director of ActionAid USA, says, “Democracy must go beyond elections of the President and Parliament. Democracy is the freedom to make innovative economic decisions that will improve people’s lives”.

As I began writing this article, news came in that Ecuador has also elected a Leftist Government led by economist Rafel Correa. One more state down.......


  1. somebody said 'Capitalism spreads unequal wealth - Socialism spreads equal poverty.'
    If unequal wealth gives me a glimmer of an opportunity to catch up on my own...i would grab it gladly than wait for somebody to dictate to me what i deserved and what i did not....

  2. I dont think this article is about capitalism vs socialism. Economic policies which facilitate entrepreneurship should definitely be encouraged. After all businesses bring jobs with it too. As long as capitalism is about fostering in free spirit, innovation and competition to improve efficiency, it is always welcome. But can every function be privatised and can every function of the society be run on business lines. If a particular policy is increasing the wealth of a few but at the same time, it is increasing the number of poor, increasing the gap between these too sections, do you think it is sustainable for a government who is dependent on vote of the people who have brought them to power.

  3. The issue is not which is better because no system can claim to be the best. The idea is how we can go about economic reforms without regarding social reforms and the voice of the people. Privatisation is not the solution for every problem. Before going for privatisation and free market access, it is imperative to create a framework/structure which can ensure that this will not result in any kind of cartelisation or harm overall interests.The West is the way it is largely due to the strengthening of its laws and regulations. Atleast, I'm not of the opinion that free markets are a univeral panacea and that it will bring in changes itself. Since the very objective of a corporate is maximization of profits and shareholder value, public interests may be sacrificed. Therefore, the state has an important regulatory role in the country's affairs.

    Hugo Chavez has secured a massive 2/3rds majority in his third term which also means that people endorse his ways. Let's not dismiss people's mandate as insignificant and that only economists understand what is right.