After the Sacking: Latin American Capitalism at the Beginning of the XXI century

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Boron, Atilio A.. After the Sacking: Latin American Capitalism at the Beginning of the XXI Century. En libro: Politics and Social Movements in an Hegemonic World: Lessons from Africa, Asia and Latin America. Boron, Atilio A.; Lechini, Gladys. CLACSO, Consejo Latinoamericano de Ciencias Sociales, Ciudad Autónoma de Buenos Aires, Argentina. Junio. 2005. pp: 145-175.
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Atilio A. Boron*

After the Sacking: Latin American Capitalism at the Beginning of the xxi Century

Do not accept the usual as a natural thing. Because in times of disorder, of organized confusion, of dehumanized humanity, nothing must appear to be natural. Nothing must appear to be impossible to change

Bertolt Brecht

THE CENTRAL CONCERN of this article is to examine the possibilities and limits of a democratic capitalism in peripheral capitalism. Unfortunately, the main issue that we are going to briefly recapitulate, which can be deemed as exceedingly pessimistic by a complacent observer of the Latin American scene, have been emphatically confirmed by the historical developments unfolded in the last quarter of a century in our region.

Let us succinctly revise some of these arguments.

- The struggle for democracy in Latin America, that is to say, the conquest of equality, justice, liberty and citizen participation, is untenable apart from a resolute struggle against the capital’s despotism. More democracy implies, necessarily, less capitalism.

- Neoliberalism leads to an ideological conception and a political practice deeply authoritarian in the management of the public affairs. That is why the neoliberal dilemma is not between the state and the market, as it ideologues want us to believe, but between democracy and the market. And their agents don’t hesitate to sacrifice the first for the sake of the second.

- The de facto predominance of the dominant classes, defeated in the electoral arena but still controlling the commanding heights of the state apparatus, has disappointed the expectations of justice that large social sectors have entrusted to the new democratic order. It will not be long before the ominous sequels of all this are felt.

- The social agents of democracy cannot expect to “democratize the market”. In that privileged kingdom of the private interests, the arguments of distributive justice don’t fit.

- Latin American capitalism is so reactionary that even the most timid reforms are perceived as dangerous catalysts of revolution and, as such, fiercely fought back by the dominant classes.

- The discourse and the politics of “possibilist realism” are incapable of transforming reality and consummate the glorification of the status quo, consolidating society’s inequities and structural injustices and frustrating the popular hopes nurtured by the recovery of democracy.

- Neoliberal policies bring forth the progressive exhaustion of the new democratic regimes. These revert to a pure formality deprived of all meaningful content, a periodical simulacrum of the democratic ideal while social life regress to the paroxysm of a “quasi-Hobbesian” situation of the war of the all against all, of the every one minding only for himself, which opens the doors to all types of aberrant and anomalous situations.

- Marxism is not a collection of fossilized and canonized dogmas, its theoretical and practical “success” guaranteed in advance. Without the creative praxis of men and women who are the real makers of history, the noble utopia designed by Marx can be frustrated, and what today we know as “civilization” can decay into the darkest barbarism.

Quite regrettably, history’s unappealable verdict has confirmed the prognosis we drew up more than a decade ago about the course of capitalist development in our region. It was neither a profound pessimism nor a perverse desire for things “to go wrong” in the new historical cycle brought about by the advent of democracies in Latin America. Our forecasts were founded on a concrete analysis of the nature and dynamics of Latin American capitalisms, and this analysis did not allow to share the illusory predictions formulated by the social sciences’ conventional wisdom about the future of the new democracies and the type of society that would sprout out of the cruel processes of capitalist restructuring going on in the region. Just as we have repeatedly asserted in several opportunities, that debate has been settled, and not as a product of a scholastic polemic but as the result of the practical historical developments of our peoples.

In fact, there are no longer doubts about the significance and goals of neoliberal policies; neither as for the limitations of the re-democratization launched under so many hopes in the eighties. The myths that hid the real intentions of such policies vanished in the white-hot furnace of historical practice. What before were theoretical forecasts and postures –strongly combated by the representatives of pensée unique, of coursenow give place to the distressing reckon up of the sacking, the mournful inventory of the victims that have been left in the lurch, the discouraging balance of the plunder of our riches, and the theft of our dreams. The Washington Consensus pseudo “reformism” was laid bare, and when the battle’s haze and smoke and the false hopes cunningly promoted by the propaganda of the ideological agencies of capital were driven away, what appeared to our eyes was a terrifying landscape. An entire continent devastated by poverty, indigence and social exclusion; the environment assaulted and to a large extent destroyed, sacrificed for the profits of huge monopolies; a shattered society undergoing an accelerated process of social disintegration; an increasingly dependent economy, vulnerable, controlled by foreign firms; a political democracy reduced to a periodical electoral simulacrum in which the people’s mandate (“people” being an expression that has been expelled from the public language and replaced by others more anodyne and deceptive, like the “folks”, “civil society” or the “citizenry”!), not to talk of their hopes and expectations, is systematically ignored by the successive authorities sworn into office after each election. And lastly, in a listing that does not intend to be exhaustive, a state usually pockmarked by corruption, and almost always distressingly powerless to deal with the challenges of our time and to put an end to the anthropophagical vocation of monopolies, big imperialist capital and its allies.

Behind were left all the illusions neatly cultivated by the ideological apparatuses of capital: as predicted by Marxist theory the famous “trickle-down” that according to the neoliberal doctrinaires would prodigally discharge over the homes of the poor part of the wealth accumulated by the richest didn’t occur. In its place, we have seen an unheard-of process of social and economic polarization and the phenomenal increase in the concentration of riches, which led our dominant classes to enrich more and more each day, while the number of poor and indigents that plunged into an unprecedented deprivation in our history skyrocketed. Commercial liberalization, which supposedly was to be corresponded by an equivalent move practiced by the developed economies at the capitalist core turned out to be an autistic gesture, with catastrophic consequences in the levels of employment of our societies. Privatizations hallowed the legal plundering of the public wealth and its transfer to huge monopolies –in many cases state-owned companies of the imperialist metropolis!– that in that way retained, at a shabby price, firms and resources that the countries had accumulated throughout several generations. Lastly, the financial deregulation, exalted by the neoliberal catechism as a sure source of capital inflows for our region, converted most of Latin America and Caribbean’s economies in cheap subsidiaries of that biggest world casino of our times: the international financial system1.

It is no surprise then to verify the increasing social destabilization of our countries and the worrying signs that speak of the weakness of their painfully recovered democracies. This is a fact usually skipped by those who feel content themselves with just a glance at the appearances and at the most superficial aspects of reality. A shining example of this attitude is found in the numberless papers written by the World Bank or the International Monetary Fund staff extolling the soundness of the economic reforms in Latin America (Edwards, 1997). The fact, instead, is that, beyond formalisms, Latin American democracies have run empty of substance. Not by chance, diverse opinion polls applied in the region record the high frustration rates of citizens as regards the performances of democratic governments. Skepticism, apathy, and indifference with regard to democracy’s institutional devices, grew with no respite in the last years. If this disenchantment persists, it would be scarcely a matter of time before it extends from governments –which are supposed to embody democratic aspirations– to the democratic regime itself. This contagion will be unavoidable insofar as governments, with scarcely slight differences among them, have completely detached themselves from the fate of the citizenry, widening the gulf dividing rulers and the ruled, and concentrating their efforts to satisfy the demands of the privileged minorities and of a rapacious plutocracy. This regrettable condition now appears as the historical concretion of the democratic conquests and as an example of the free market’s virtues.

The political expression of this widespread civic dissatisfaction has been varied: it goes from the Chiapas’ Zapatista insurrection of January 1, 1994 to the formidable popular mobilizations of December 19 and 20, 2001, in Argentina, which overthrew Fernando de la Rua’s government and, later, the mass repudiation that blasted, in the presidential elections in Argentina in April 2003, the attempted return to power of the man who has been the paradigm of neoliberal policies in the region, Carlos Saúl Menem. Other milestones in this path have been: the three great indigenous and peasants’ mobilizations in Ecuador, which just recently ousted the third president in eight years; the urban protest in Peru which precipitated first Alberto Fujimori’s fall and which now holds at bay the government of Alejandro Toledo, blessed from its beginnings by George W. Bush in person during his visit to Peru; the health workers’ struggles in El Salvador and the rising popular demonstrations against the Free Trade Agreement in Guatemala and Nicaragua; the Bolivian new popular insurgency, linked to the fight for water and the defense of the autochthonous crops and strategic gas and oil reserves, and against the policies of infinite structural adjustment promoted by the, himself ousted too, president Sánchez de Lozada, a loyal viceroy of the White House who could barely speak Spanish; the crushing defeat suffered by the candidate of “neoliberal continuism” in Brazil, José Serra, in the hands of Luis Inácio “Lula” da Silva, with a clear popular mandate, unfortunately not honored yet, of abandoning those nefarious policies; the consolidation of Hugo Chávez in Venezuela’s presidency, legitimized by an endless string of electoral victories notwithstanding the contrived conspiracy, with the White House’s consent and organizational and financial support, by the most reactionaries and corrupted sectors of the Venezuelan society; the constitution of a striking protest movement in the Mexico of Vicente Fox, “The countryside can no longer hold” (El campo no aguanta más), against the neoliberal policies incited in the NAFTA and, more recently, the huge popular mobilization in Mexico City which forced the government to drop the charges of the phony legal process against López Obrador.

In the following pages we will try to bring forward an overview of the transformations that have come about in Latin American societies in recent years and that rest at the foundations of their tremulous political superstructures.

Nature and extents of neoliberal “reformism”

The decade of the eighties has witnessed a veritable reformist wave, which in an unequal way affected almost all the countries of the region. But before presenting the most outstanding outlines of this process it will be convenient to make a short pause to clarify a by no means irrelevant semantic matter.

It so happens that it has become a commonplace to talk about “reforms” to refer to what, in the tradition of western political thought, better responds to the expression “counter-reform”. We have explored this theme in another place, so we are not going to make any further considerations on this matter2. It is enough for us to say that, actually, the policies executed in our region far from having introduced “reforms” –this is, gradual changes directed towards a greater equality, more social welfare benefits, and an enlarged enjoyment of all sort of freedoms for the whole population, in accordance with the meaning of the word “reform” in the tradition of the political philosophy–, what they did was exactly the opposite: to boost a set of transformations which cut down old civic rights, dramatically reduced the state’s social security benefits, and consolidated a much more unjust and unequal society than the one that existed at the beginning of the “reformist” stage. What happens is that neoliberalism’s ideological victory is expressed, among other things, by a singular semantic slide that causes words to lose their classic significance and adopt a new one; and in some cases, such as this one, clearly an antithetic meaning. In that sense, the “reforms” suffered by our societies in the last decades were in fact cruel “counter-reforms”, unleashing profound processes of social regression. But the word “reform” has such a positive significance that the neoliberal ideologues were not ready to relinquish it into the hands of their adversaries, and they persisted in their claim that neoliberal rulers were the standard bearers of change and innovation, and their opponents a bunch of nostalgic defenders of a decaying old order that deserved to be buried as soon as possible.

One of the most militant advocates of this peculiar brand of “reformism”, Sebastian Edwards, former chief economist of the World Bank, offered an extraordinarily optimistic version of what has occurred since the eighties: “Halfway through 1993, analysts and international economic media perceived the reforms towards a market policy as a success and proclaimed that several Latin American countries were on the way to convert into a new generation of ‘tigers’. Foreign investments rapidly came near the region and the consultants and studious hastened to analyze the experiences of Chile, Mexico and Argentina with the purpose of learning first-hand how countries that only a couple of years before appeared to have no hopes had become so attractive for the international money”3. According to this peculiar appreciation, Edwards divided the countries of the region into four categories (1997: 18-19):


The considerable time passed since the beginning of these “reforms” allows us to evaluate in a more complete way their merits and compare them with the promises made by successive “reformers”. It is no longer a discussion about the interpretation of one or two isolated facts or figures, but a much deeper analysis that allows the identification of the long term tendencies nurtured by the new policies implemented since the boom of the neoliberal ideas in the eighties and nineties. Of course, even the most elementary analysis done on this long run structural trends, with whatever methodology, will throw a result that will surely disappoint Edwards and the neoliberal ideologues: ten years after such a jubilant diagnostic, our region has miserably failed to produce a single economic “tiger”, not to talk so of an entire generation of them.

When referring to the reform processes that took place in Brazil, a “late reformer”, according to Edwards, Francisco de Oliveira noted that actually the expression “state reform” was a title that bore little connection with reality. As happened in other countries of the region, under that pompous name it was hidden a well-known and much more pedestrian policy: wholesale public budget cuts, massive lay offs of public servants and dramatic cuts of the labor rights of the survivors. Seen in historical perspective to this was reduced the much-celebrated “rationalization” and “modernization” of the public sector promoted by the governments of the G-7, the IMF, the World Bank and the Inter-American Development Bank (IDB) and carried out by the region’s governments (Sader, 1996: 94-95). A few years later, the same World Bank would lament the deplorable implications of this policy. The state destruction promoted by neoliberalism in order to make room for the market dynamics went so far that at the end of the journey the state apparatus needed to run the countries, under any economic system, was no longer there. In some African countries the decay of the already rudimentary post-colonial state system reached to the point that the WB people realized to their dismay that there was not a single public agency left capable of organizing a rational distribution of the foodstuff coming from the international cooperation to fight famine. The enlightened “sorcerers” of capital began to get worried about how to “bring the state back in”, to paraphrase a well known book dealing with these matters5.

Oliveira’s remarks are pertinent for the rest of Latin America, where the state reform was undertaken by governments dominated by a neoliberal zeal which led them first to demonize the state and then to its simple destruction. The consequences of these policies, promoted by the so-called “multilateral economic institutions” –euphemism to name institutions which are neither multilateral nor solely economic but mainly political, like the International Monetary Fund, the World Bank, the Inter-American Development Bank and the World Trade Organization, among others– through the “conditionalities” imposed to indebted nations either too weak to resist foreign pressures or in bankruptcy, were, on the one hand, a dramatic increase of social exclusion in all the countries of the region and, on the other, a worrying debilitation of the democratic impulse that so many hopes had aroused in our countries since the decade of the eighties.

This process took place at a time in which the state as an institution was the object not only of concrete, material attacks (privatizations, budgetary reductions, organizational dismantling and “downsizing”, etc.) but also of doggedly ideological criticisms by which the states was presented to the general public as an incurably corrupt and immoral institution dominated by selfishly politicians completely detached from the search of the public good, an institution by “nature” inefficient in the management of delicate economic and financial matters and, as if the former were not enough, plagued by populist and demagogic propensities that must be uprooted in order to guarantee the good governance and sound economic policy-making.

However, while these attacks were carried out with renewed fervor, a kind of Hegelian “cunning of reason” gave back to the state the “centrality” and importance that was denied to it in other spheres. Thus, its irreplaceable contribution was paradoxically reaffirmed by a succession of governmental “summits” that against the prevailing neoliberal ethos emphatically underlined the crucial role of the states, and not of markets, in the struggle against poverty (Copenhagen), to promote women’s rights, (Beijing), to control the exorbitant increase of the population (Cairo), or to preserve the biodiversity and the environment for future generations (Rio de Janeiro). In all these cases, in which several crucial civilizational problems today challenging humanity were confronted, the bankruptcy neoliberalism was blatantly evident, to the extent that even its more staunch supporters had to recognize that the “markets magics” don’t have the slightest possibility to solve the crises analyzed in these summits, and that to find a way out of these problems the only alternative was in the hand of concerted state policies.

This certainty, which silently undermined the neoliberal “anti-statism”, acquired even more decisive features when ratified by one the “gurus” of the free-market economic thought, Peter F. Drucker. In an article published in the commemorative number of the 75° anniversary of Foreign Affairs, Drucker examines what has happened with the states in the context of globalization. And after verifying the “amazing resistance” of the former to the influences of the latter, he concludes that “in all probability, therefore, the nation-state will survive the globalization of the economy and the information revolution that accompanies it” (Drucker, 1997: 160). Drucker rejects, in this way, the one of the more widespread beliefs of the pensée unique of late twentieth century: the illusion of the state extinction, a daydream that has captured not only the minds of intellectuals and ideologues of the right but has also made some important inroads in the thought, supposedly anti-establishment and contesting, as witnessed in the recent production of Michael Hardt and Antonio Negri (2000), and John Holloway (2002)6.

In Argentina, this destructive task was literally carried out with unsurpassed meticulosity by several governments, especially after 1989. It is only fair to recognize, though, that the decade presided by Carlos Saúl Menem has the doubtful merit of being the real champion of this neoliberal crusade. In this country the so-called capitalism’s “creative destruction”, so extolled in Joseph Schumpeter’s work, was exclusively limited to the first term of the expression: destruction was the voice of order of the day, while the task of creation is still a long way off. Not much different is the story of the “shock therapies” recommended urbi et orbi by the IMF pundits to “solve” the traditional problems of Latin American –and African, East European, Asian, etcetera!– economies. Again, the “shocks” proliferated but the therapies were conspicuously missing. In Argentina, this destructive enterprise went so far that it left the country at the mercy of all types of circumstances: if the natural forests of the Patagonia are set on fire there are no personal and material resources to face the catastrophe, save to elevate our prayers to the good Lord. Shocked by the losses of the 1996 fires, the Menem government decide to create a special fund to finance the fire fighting of the next dry season, discounting from the already ridiculously low budget of the national universities five million dollars.

Another absurd example: some areas of the rich province of Buenos Aires are flooded due to the lack of maintenance of the drainage channels its rivers and lagoons. These works have been postponed for years because of the need to ensure the control of public expenditures to pay the external debt. Nevertheless, the “savings” obtained with this official inaction originate much bigger losses in the production of one of the richer agricultural areas of the world. But this is a little thing that doesn’t disturb our rulers and their experts, determined as they are to attain a “fiscal superavit” which would appease the angers of the envoys of the IMF and WB and facilitates the obtaining of new and ever more leonine foreign loans. All this is all the most tragic when one hears, at the same time, the ideologues and publicists of neoliberalism asserting that such a monstrous irrationality is necessary to “attract” foreign investments and reduce, or simply suppress, the taxes which may discourage big companies and big fortunes to invest in the country.

Loyal to this belief, the Argentine Minister of Economy Domingo Felipe Cavallo, a man who as president of the Central Bank during the rule of the bloody military junta “socialized” a external private –not public, but private!– debt of near 30 billion dollars, decided under the “democratic” government of Carlos S. Menem to eliminate the “discriminatory taxes” which were placed on cola drinks, champagne and luxury rugs. As such initiative, applauded by the neoliberal experts, implied a loss of some 300 million dollars per year in tax incomes the government also decided to augment in two years the minimum retirement age of women, from 60 to 62 years, and in that way take advantage of the supposedly excellent health and medic care conditions available in neoliberal Argentina. Tragicomic examples as these may be multiplied ad infinitum, specially if it is reminded that the Argentine case, even though it was the most radical, was far from being alone. This real “crusade” that our governments undertook against the state, completely demonized by the dominant ideology, is a monument to the irrationality of capitalist development (Boron, 2003b).

To sum up, the verdict of history is unequivocal. Neoliberal “reforms” miserably failed in three fundamental aspects: they didn’t promote a steady process of economic growth; they didn’t succeed in fighting and reducing poverty and diminishing the social exclusion settled in our region as result of the collapse of the import-substitution model and the debt crisis; and far from strengthening the democratic institutions and their popular legitimacy, this model has weakened and discredited them up to an unprecedented level in the history of Latin America.

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