During the past decade, Latin America has become the most exciting region of the world. The dynamic has in part flowed from right where you are meeting at the Social Summit in Caracas, after the election of a leftist president committed to using Venezuela’s rich resources for the benefit of the population rather than for wealth and privilege at home and abroad, and to promoting the regional integration that is so desperately needed as a prerequisite for independence, for democracy, and for meaningful development. The initiatives taken in Venezuela have had a significant impact throughout the subcontinent, what has now come to be called “the pink tide.” The impact is revealed within the individual countries, most recently with the election of Fernando Lugo in Paraguay; and in the regional institutions that are in the process of formation. Among these are the Banco del Sur, an initiative that was endorsed in Caracas a year ago by Nobel laureate in Economics Joseph Stiglitz; and the ALBA, the Bolivarian Alternative for Latin America and the Caribbean, which might prove to be a true dawn if its initial promise can be realized.
The ALBA is often described as an alternative to the U.S.-sponsored “Free Trade Area of the Americas,” though the terms are misleading. It should be understood to be an independent development, not an alternative. And, furthermore, the so-called free trade agreements have only a limited relation to free trade, or even to trade in any serious sense of that term; and they are certainly not agreements, at least among populations. A more accurate term would be “investor-rights arrangements,” designed by multinational corporations and banks and the powerful states that cater to their interests, established mostly in secret, without public participation or awareness and often over public opposition.
Another regional organization that is beginning to take shape is UNASUR, the Union of South American Nations. This continental bloc, modeled on the European Union, aims to establish a South American parliament in Cochabamba, Bolivia, a fitting site for the UNASUR parliament. Cochabamba was not well known internationally before the water wars of 2000. But in that year events in Cochabamba became an inspiration for people throughout the world who are concerned with freedom, justice, and elementary human rights, as a result of the courageous and successful popular struggle against privatization of water, which awakened international solidarity and was a fine and encouraging demonstration of what can be achieved by committed activism.
The aftermath has been even more remarkable. Bolivia has forged an impressive path to true democratization in the hemisphere, with large-scale popular initiatives and meaningful participation of the organized majority of the population in establishing a government and shaping its programs on issues of great importance and popular concern, an ideal that is rarely approached elsewhere, surely not in the colossus of the North, despite much inflated rhetoric by doctrinal managers.
Much the same had been true fifteen years earlier in Haiti, the only country in the hemisphere that surpasses Bolivia in poverty—and like Bolivia, was the source of much of the wealth of the West. In 1990, Haiti’s first free election took place, a stunning victory for democracy, as already discussed, quickly reversed with U.S. support. Washington finally permitted the elected president to return, but only on the condition that he adhere to harsh neoliberal rules that were guaranteed to crush what remained of the economy, as they did. And in 2004, the imperial powers that had destroyed Haiti, France and the United States, joined to remove the elected president from office once again, launching a new regime of terror, though the people remain unvanquished and the popular struggle continues despite extreme adversity. All of this is familiar in Latin America, not least in Bolivia, the scene of Latin America’s most intense confrontation at this moment between popular democracy and traditional U.S.-backed elites.
Sixty years ago, U.S. planners regarded Bolivia and Guatemala as the greatest threats to its domination of the hemisphere. In both cases, Washington succeeded in overthrowing the popular governments, but in different ways.
In Guatemala, Washington resorted to the standard technique of violence, installing one of the world’s most brutal and vicious regimes, which extended its criminality to virtual genocide in the highlands during Reagan’s terrorist wars of the 1980s.
While in Guatemala the Eisenhower administration overcame the threat of democracy and independent development by violence; in Bolivia, it achieved much the same results by exploiting Bolivia’s economic dependence on the United States, particularly for processing Bolivia’s tin exports. Stephen Zunes, one of the leading scholarly analysts of these matters, points out that “at a critical point in the nation’s effort to become more self-sufficient [in the early 1950s], the U.S. government forced Bolivia to use its scarce capital not for its own development, but to compensate the former mine owners and repay its foreign debts.”1
The economic policies forced on Bolivia in those years were a precursor of the structural adjustment programs imposed on the continent thirty years later, under the terms of the neoliberal “Washington consensus,” which has generally had harmful effects wherever its strictures have been observed. By now, the victims of neoliberal market fundamentalism are coming to include the rich countries, where financial liberalization is bringing about the worst financial crisis since the Great Depression of the 1930s and leading to massive state intervention in a desperate effort to rescue collapsing financial institutions.
We should note that this is a regular feature of contemporary state capitalism, though the scale today is unprecedented. A study by two international economists fifteen years ago found that at least twenty companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments “socialize their losses.” Such government intervention “has been the rule rather than the exception over the past two centuries,” they conclude from a detailed analysis. That is apart from the crucial state role, particularly in the post–World War II period, in socializing the costs and risks of R&D while privatizing profit.2
We might also take note of the striking similarity between the structural adjustment programs imposed on the weak by the IMF and the huge financial bailout that is on the front pages today in the North. The U.S. executive director of the IMF, adopting an image from the Mafia, described the institution as “the credit community’s enforcer.”3 Under the rules of the Western-run international economy, investors make loans to third world tyrannies, and since the loans carry considerable risk, make high profits. Suppose the borrower defaults. In a capitalist economy, the lenders would incur the loss. But existing capitalism really functions quite differently. If the borrowers cannot pay the debts, then the IMF steps in to guarantee that lenders and investors are protected. The debt is transferred to the poor population of the debtor country, who never borrowed the money in the first place and gained little if anything from it. The method is called “structural adjustment.” And taxpayers in the rich country, who also gained nothing from the loans, sustain the IMF through their taxes. These doctrines do not derive from economic theory; they merely reflect the distribution of decision-making power.
The designers of the international economy sternly demand that the poor accept market discipline, but they ensure that they themselves are protected from its ravages, a useful arrangement that goes back to the origins of modern industrial capitalism and played a large role in dividing the world into rich and poor societies, the first and third worlds.
This wonderful anti-market system designed by self-proclaimed market enthusiasts is now being implemented in the United States to deal with the very ominous crisis of financial markets. In general, markets have well-known inefficiencies. One is that transactions do not take into account the effect on others who are not party to them. These so-called externalities can be huge. That is particularly so in the case of financial institutions. Their task is to take risks, and if well managed, to ensure that potential losses to themselves will be covered. To themselves. Under capitalist rules, it is not their business to consider the cost to others. Risk is underpriced, because systemic risk is not priced into decisions. That leads to repeated crisis, naturally. This inherent deficiency of markets is well known. Ten years ago, at the height of the euphoria about efficient markets, two prominent economists, John Eatwell and Lance Taylor, wrote an important book in which they spelled out the consequences of these market inefficiencies and suggested means to deal with them. At the same time, international economist David Felix warned that “the increasing frequency of financial crises [during the period of financial liberalization] could terminate in an uncontrollable one.”4 Such voices were unheard during the deregulatory rage that was then consuming the Clinton administration, under the leadership of those whom Obama has now called upon to put Band-Aids on the disaster they helped create.
After the predicted disaster occurred, an “emerging consensus” developed among economists “on the need for macroprudential supervision” of financial markets, that is, “paying attention to the stability of the financial system as a whole and not just its individual parts.” Two prominent international economists added that “there is growing recognition that our financial system is running a doomsday cycle. Whenever it fails, we rely on lax money and fiscal policies to bail it out. This response teaches the financial sector: take large gambles to get paid handsomely, and don’t worry about the costs—they will be paid by taxpayers” through bailouts and lost jobs, and the financial system “is thus resurrected to gamble again—and to fail again.” The system is a “doom loop,” in the words of the official of the Bank of England responsible for financial stability.5
One might say “better late than never,” except that the chances of any meaningful financial regulation appear to be dim, given the grip of the financial industry on the government, matters to which we return.
When crises hit the South, the masters of the international economy turn to the IMF solution. The costs are transferred to the public, which had nothing to do with the risky choices but is now compelled to pay the costs: the poor countries are instructed to raise interest rates, slow the economy, pay their debts (to the rich), privatize (so that the Western corporations can buy their assets), and suffer. The instructions for the rich are virtually the opposite: lower interest rates, stimulate the economy, forget about debts, consume, have the government take over (but don’t “nationalize”—the takeover is a temporary measure to hand it back to the owners in better shape). And the public has almost no voice in determining these outcomes, any more than poor peasants have a voice in being subjected to cruel structural adjustment programs.
Others do have a voice, and well-established practice is a good guide as to where to look and listen. The best guide I know of is political economist Thomas Ferguson’s “investment theory of politics,” mentioned above, the thesis that to a good first approximation, we can understand elections to be occasions in which groups of investors coalesce to control the state, a very good predictor of policy over a long period, as he shows. For 2008, we would therefore anticipate that the interests of the financial industries, the major funders (who preferred Obama to McCain), would be “most peculiarly attended to” by government policy, in accord with Adam Smith’s maxim. And so we find.
For the world, there are many very serious crises, such as the food crisis, already mentioned, or the environmental crisis, which threatens real catastrophe for everyone. But for the West in 2008–9, the phrase “the crisis” refers unambiguously to the financial crisis that has its deeper roots in inherent market inefficiencies, neoliberal doctrines about the alleged value of financial liberalization, dogmas about “efficient markets” and “rational expectations,”6 deregulation, exotic financial instruments that yielded profits beyond the dreams of avarice for a few—all brought to a head by an $8 trillion housing bubble that somehow regulators and economists did not perceive, portending ultimate disaster, as a few warned all along, notably economist Dean Baker.
The costs of underpricing of risk are magnified by the perverse incentives designed by policy makers, primary among them the government insurance policy called “too big to fail.” After the bursting of the housing bubble in 2007, Fed chairman Alan Greenspan was criticized because he hadn’t followed through on his brief warning about “irrational exuberance” at the height of the late ’90s tech bubble. But that is the wrong criticism: it was quite rational exuberance, when the taxpayer is there to bail you out under the operative principles of state capitalism. The doctrine has been observed with precision by Obama and his advisers—selected from the leading figures who were largely responsible for creating the crisis, while excluding those, among them Nobel laureates, who had been issuing warnings about it. And the doctrine appears to have worked very well. The big financial institutions that were the immediate culprits have been making out like bandits, bigger than ever, reporting great profits and paying huge bonuses to the culprits, enjoying even a more lavish government insurance policy, and therefore encouraged to set the stage for the next and worse crisis. That is recognized, but the managers who play by the rules cannot really be criticized. These are institutional decisions. Managers either play the game, or someone else replaces them who will.
As for those who are too small to matter, they suffer. That includes the general population, whose real wages have stagnated for thirty years while benefits decline, and now face huge unemployment and loss of their homes. It also includes the banks that serve the public, going under while those that engage in risky investments and reap enormous profits are doing just fine, thanks to the nanny state they largely control.
In theory, inherent market inefficiencies and perverse incentives could be overcome by efficient regulation. But the same deep-seated tendencies that concentrate wealth and power in private tyrannies reduce the likelihood of such steps. In late 2009 there seemed to be one faint hope that Congress might institute some meaningful regulation: proposals by Senator Christopher Dodd, chair of the Senate Banking Committee. But Dodd succumbed to Wall Street pressure and abandoned his proposal in December 2009. One of its components was a new Consumer Financial Protection Agency intended to “crack down on abusive and risky lending practices that helped fuel last year’s financial crisis,” Michael Kranish commented in a rare press report. “Banks and other financial institutions have fought hard to kill the proposal,” he adds. And succeeded. He quotes Elizabeth Warren, the Harvard Law professor who originated the idea for the agency: “When all the dust settles, the real question for the history books will be whether Congress was able to create an independent consumer agency with the tools necessary to end abusive practices and to prevent future crises.” The answer appears to be a loud no, in our business-run democracy.
More generally, Kranish observes, “despite being portrayed as responsible for myriad national ills, Wall Street bankers, oil and coal companies, and health industry executives bounced back in Congress this year with remarkable success, stalling or weakening the biggest regulatory threats on President Obama’s domestic agenda,” after a $1 billion lobbying blitz. The decline of the threat of financial regulation coincided with a “major victory” of the insurance industry “when Democratic leaders scuttled a government insurance option” in the health care reform plan—incidentally, overruling support for the measure by a considerable majority of the population.7
In a narrow sense, the financial crisis will presumably be patched up somehow or other, but leaving the institutions that created it pretty much in place. There are many indications. Thus in June 2009, the Treasury Department permitted early repayments of its TARP loans to banking institutions, which reduces their capacity to lend, as was immediately pointed out, though it allows the banks to pour money into pockets of the few who matter. The mood on Wall Street was captured by two Bank of New York Mellon employees, who “predicted their lives—and pay—would improve, even if the broader economy did not.”8
Financial institutions are exulting that talk of reform has been effectively beaten back. “The likely result” of the huge public bailout, the business press predicts, will be “a package of worthy but lukewarm reforms that leave the global financial system—and taxpayers—exposed to another costly bust some years down the road.” The most powerful may in the end gain the most. “The crisis may be turning out very well for many of the behemoths that dominate U.S. finance,” the press reports: “A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit,” and with even better opportunities to take risks and gain profits without concern for the consequences of failure, thanks to the government insurance policy.
Martin Wolf of the Financial Times, the media’s most respected financial commentator, writes that the financial system was saved from “an abyss” only by massive robbery of taxpayers to pay off the financial sector’s creditors—a decision that was “quite unbearable,” but “also correct,” given the alternative. The lesson learned “is that every systemically significant institution must be rescued in a crisis,” though “we cannot let stand the doctrine that systemically significant institutions are too big or interconnected to be allowed to fail in the crisis.” In brief, a shocking indictment of financial liberalization. This virtual contradiction could, he believes, be overcome by “pre-emptive tightening,” the proposal of former chief economist of the Bank of International Settlements, William White: measures to compel the financial institutions to control their profit-seeking in advance. In a socioeconomic system where even mild regulatory measures are easily beaten back, the proposal, however necessary, has about as much chance of realization as significant measures to prevent environmental catastrophe.9
The reasons are similar. Business executives understand as well as other educated elites that the world is heading toward environmental catastrophe if no serious steps are taken to avert it. Nevertheless, they are dedicated to bringing about this result. They put huge efforts into convincing the public to reject what they know to be true and ominous. And they are successful, as polls illustrate. An enormous business-backed propaganda campaign is surely a factor in the very sharp decline of concern among Americans over global warming, to the point where by late 2009, barely one-third believe that it is influenced by human activity.10 The standard explanation for the willingness of business executives to dismiss the fate of their grandchildren and even to destroy what they own is that short-term profits outweigh long-term considerations. That is not false: as noted earlier, institutional structures virtually require conformity to that principle. But the answer is incomplete. Once again, the choice results from fundamental market inefficiencies: the pressure to ignore the impact on others in undertaking transactions, if one wants to stay in the game. In this case, the externalities happen to be the fate of the species, but the logic is the same.
A more general conclusion is that markets may more or less work for a while, but unless sharply constrained they almost necessarily lead to disaster. And constraints are unlikely when major media are often adjuncts of business, the government is largely in its pocket, and the general public is marginalized in one way or another, and susceptible to manipulation.
The success of the health care industry in 2009 in blocking meaningful reform of the notoriously inefficient and expensive U.S. health care system, to which we return, did not pass unnoticed. Within weeks the energy-intensive industries, which had been pouring funds into lobbying against bills that might regulate fossil-fuel use and emissions, adopted the successful model of the insurance industry. They began organizing public rallies with employees bused in by the companies, portrayed as “citizens’ movements” that are protesting government efforts to undermine the unconstrained use of oil, a principle that “we hold dear [and is] our future,” in the words of a rodeo announcer recruited to express the will of the public—who happen to favor the measures the industries are opposing, but that is another footnote. The campaign is supported by the major business lobbies—the National Association of Manufacturers, the American Petroleum Institute, and the U.S. Chamber of Commerce—which mounted an expensive campaign of ads and rallies to try to win over key senators, particularly the “moderate Democrats,” so-called: Republicans reliably follow instructions. In this case the efforts will not just break the bank but may also lead to environmental catastrophe, but profits for the next quarter (leading to huge bonuses for the CEOs) far outrank any such improper thoughts, and institutional structures virtually dictate such outcomes unless an aroused public intervenes.
One of the PR agencies hired to promote the cause, Bonner & Associates, conceded that letters they were sending “purported to be from groups like the National Association for the Advancement of Colored People and Hispanic organizations” were in fact forgeries. The “error” was quickly forgiven. That is quite unlike the treatment of ACORN, which works for the poor and oppressed and was virtually destroyed when some of its poorly paid employees were caught in a scam set up by a right-wing organization. And of course the major corporate brigands, like those ripping off billions of dollars for “reconstructing Iraq,” are exempt even from censure.11
No less impressive is the assault of the financial institutions on regulation of the practices that led to the near-collapse of the international economy in 2007–8, and are now even better placed for the next chapter of “rational exuberance,” with the world’s ten largest banks, all “deemed ‘too big to fail,’” having increased their share of assets from 18 percent of the top 1,500 banks at the end of 2008 to 26 percent a year later. The measures by which they ensured that the “moderate Democrats”—that is, the “pro-business Democrats” whose “ties to Wall Street are strong”—would join the Republicans in blocking any serious regulation at the behest of the major business lobbies are spelled out in a Business Week cover story, aptly entitled “In Wall Street’s Pocket: The Inside Story of Who’s Really Running Financial Regulation.”12 No one answerable to the public, surely.
Recalling the “dismal truth” that “nothing succeeds like failure,” economics correspondent Gretchen Morgenson observes that “even though calamitous lending practices laid waste to the nation’s economy, surprisingly little has changed about how the financial arena operates and is supervised. Sure, a couple of venerable brokerage firms have vanished, but many of the same players remain on the scene, in the same positions of power.” As for the regulators, the “senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max.”13
The chair of the prestigious law firm Sullivan & Cromwell is very likely right in predicting that “Wall Street, after getting billions of taxpayer dollars, will emerge from the financial crisis looking much the same as before markets collapsed.”14
Only the naïve should be surprised.
A basic principle of modern state capitalism is that cost and risk are socialized to the extent possible, while profit is privatized. That principle extends far beyond financial institutions, the current focus after the financial meltdown of 2007–8. But much the same is true for the entire advanced economy, which, as discussed earlier, relies extensively on the state for innovation, R&D, procurement when purchasers are unavailable, direct bailouts, and numerous other benefits. Furthermore, financial liberalization has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy, for reasons already reviewed.
There are some encouraging signs elsewhere, at least. Germany and Spain are well in the lead in development and use of solar energy, and China, though it remains a very poor country with enormous internal problems, is dedicating substantial resources to a “green revolution” and may soon surpass them. It already makes one-third of the world’s solar cells, is in the lead in mass production of electric cars and the latest generation of “clean coal” power stations, and is predicted to surpass the United States as the largest market for wind turbines. China is also providing the most successful model for financial institutions, Martin Wolf concludes: “China has emerged as the most significant winner from the financial and economic crisis” because of its successful management—and not coincidentally, it rejected the financial liberalization of the neoliberal era.15
The primary victims of military terror and economic strangulation are the poor and weak, within the rich countries themselves and far more brutally in the South. But there are significant signs of change. In South America and elsewhere there are promising efforts to bring about desperately needed structural and institutional changes. And not surprisingly, these efforts to promote democracy, social justice, and cultural rights are facing harsh challenges from the traditional rulers, at home and internationally.
For the first time in half a millennium, South America is beginning to take its fate into its own hands. There have been attempts before, but they have been crushed by outside force, in cases too numerous and too familiar to review. But there are now significant departures from a long and shameful history. The departures are symbolized by the UNASUR crisis summit in Santiago in September 2008. At the summit, the presidents of the South American countries issued a strong statement of support for the elected Morales government, which was under attack by the traditional rulers: privileged Europeanized elites who bitterly oppose Bolivian democracy and social justice and, routinely, enjoy U.S. backing. The South American leaders gathered at the UNASUR summit declared “their full and firm support for the constitutional government of President Evo Morales, whose mandate was ratified by a big majority”—referring to his overwhelming victory in the recent referendum. Morales thanked UNASUR for its support, observing that “for the first time in South America’s history, the countries of our region are deciding how to resolve our problems, without the presence of the United States.”16
A matter of no slight significance.
The significance of the UNASUR support for democracy in Bolivia is underscored by the fact that the leading media in the United States scarcely reported what happened, or not at all, though editors and correspondents surely knew all about it. Ample information was available on wire services.
That has been a familiar pattern. To cite just one example, the important Cochabamba declaration of South American leaders in December 2006, calling for moves toward integration on the model of the European Union, apparently passed unreported by U.S. media.17 There are many other cases, all illustrating the same fear among the political class and economic centers in the United States that the hemisphere is slipping from their control.
Current developments in South America are of historic significance for the continent and its people. It is well understood in Washington that these developments threaten not only its domination of the hemisphere, but also its global dominance. Control of Latin America was the earliest goal of U.S. foreign policy, tracing back to the earliest days of the republic, with ambitious expectations already discussed. Though the more extreme aspirations, those of Jefferson, for example, were not achieved, nevertheless control of Latin America has remained a central policy goal, partly for resources and markets, but also for broader ideological and geostrategic reasons.
As already discussed, the Nixon administration regarded control of Latin America as a necessary condition for establishing a “successful order elsewhere in the world,” while devoting itself to barring a successful social democracy in Chile that could be a model for others. Nixon’s right-hand man Henry Kissinger warned that success for democratic socialism in Chile might have reverberations as far as southern Europe—not because Chilean hordes would descend on Madrid and Rome, but because success might inspire popular movements to achieve their goals by means of parliamentary democracy, an ideal upheld as an abstract value in the West, but with crucial reservations. In Nixon’s own words, “Our main concern in Chile is the prospect that [Allende] can consolidate himself and the picture projected to the world will be his success.… If we let the potential leaders in South America think they can move like Chile and have it both ways, we will be in trouble.… No impression should be permitted in Latin America that they can get away with this, that it’s safe to go this way. All over the world it’s too much the fashion to kick us around.” Even mainstream scholarship recognizes that Washington has supported democracy if and only if it contributes to strategic and economic interests, a policy that continues without change through all administrations, to the present.18
These pervasive concerns are the rational form of the domino theory, sometimes more accurately called “the threat of a good example.” For such reasons, even the tiniest departure from strict obedience is regarded as an existential threat that calls for a harsh response: peasant organizing in remote communities of northern Laos, fishing cooperatives in Grenada, and so on throughout the world. It is necessary to ensure that the “virus” of successful independent development does not “spread contagion” elsewhere, that a “rotten apple” does not “spoil the barrel,” in the terminology of the highest-level planners.
Such concerns have motivated U.S. military intervention, terrorism, and economic warfare throughout the post–World War II era, in Latin America and throughout much of the world. These are leading features of the Cold War. The superpower confrontation regularly provided pretexts, mostly fraudulent, much as the junior partner in world control appealed to the threat of the West when it crushed popular uprisings in its much narrower Eastern European domains.
But times are changing. In Latin America, there are important moves toward integration, which has several dimensions. One is regional: moves to strengthen ties among the South American countries of the kind I mentioned. These are now just beginning to reach to Central America, which was so utterly devastated by Reagan’s terror wars that it had mostly stayed on the sidelines since, but is now beginning to move—and also eliciting familiar reactions. Of particular significance are recent developments in Honduras, the classic “banana republic” and Washington’s major base for its terrorist wars in the region in the 1980s. Washington’s ambassador to Honduras, John Negroponte, was one of the leading terrorist commanders of the period, and accordingly was appointed head of counterterrorist operations by the Bush II administration, a choice eliciting no comment. In an unexpected development, President Manuel Zelaya not only raised the minimum wage and carried out other internal reforms, but also declared that U.S. aid does not “make us vassals” or give Washington the right to humiliate the nation, and began to improve ties with Venezuela, joining the Venezuelan-subsidized oil program Petrocaribe, then the ALBA as well.19
The elite reaction was not long in coming. In June 2009, the president was ousted in a military coup and expelled to Costa Rica. As observed by economist Mark Weisbrot, an experienced analyst of Latin American affairs, the social structure of the coup is “a recurrent story in Latin America,” pitting “a reform president who is supported by labor unions and social organizations against a mafia-like, drug-ridden, corrupt political elite who is accustomed to choosing not only the Supreme Court and the Congress, but also the president.”20 The aftermath we have already reviewed.
Regional integration of the kind that has been slowly proceeding for several years is a crucial prerequisite for independence, making it more difficult to pick off countries one by one. For that reason it is causing considerable distress in Washington, and is either ignored or regularly distorted in commentary.
A second form of integration is global: the establishment of South-South relations, and the diversification of markets and investment, with China a growing and particularly significant participant in hemispheric affairs. Again, these developments undercut Washington’s ability to control what Secretary of War Henry Stimson called “our little region over here” at the end of World War II, when he was explaining that other regional systems must be dismantled, while our own must be strengthened.
The third and in many ways most vital form of integration is internal. Latin America is notorious for its extreme concentration of wealth and power, and the lack of responsibility of privileged elites for the welfare of the nation. It is instructive to compare Latin America with East Asia, as already discussed. Needless to say, development of the East Asian style is hardly a model to which Latin America, or any other region, should aspire. The problems of developing truly democratic societies, based on popular control of social, economic, political, and cultural institutions, and overturning structures of hierarchy and domination, remain a serious challenge, posing formidable and essential tasks for the future.
The problems of Latin America and the Caribbean have global roots, and have to be addressed by regional and global solidarity along with internal struggle. The growth of the social forums, first in South America, now elsewhere, has been one of the most encouraging steps forward in recent years. These developments might bear the seeds of the first authentic International, heralding an era of true globalization: international integration in the interests of people, not investors and other concentrations of power. Those taking part in this Social Summit today are right at the heart of these dramatic developments, an exciting opportunity, a difficult challenge, a responsibility of historic proportions.