by Prof. James Petras
October 2, 2011
Introduction - Images
of the Past
The image of Latin America
portrayed by the mass media and held by the
educated public is a region of frequent coups, periodical revolutions,
perpetual military dictatorships, alternating boom and bust economies and an
ever-present International Monetary Fund (IMF) dictating economic policy.
In contrast the same opinion makers plus their academic counterparts project
images of the United States and the European Union as stable societies, with
steady economic growth, incremental expansion of social welfare programs,
resolving issues via consensual compromises and practicing sound fiscal
In recent times, the better part of the current decade, these images have
taken on the character of ideological dogmas - they no longer correspond to
In fact a good argument can be made that the roles have been
the U.S. and EU are in perpetual crises and
Latin America, at least most of the major countries, have experienced
stability and growth which is the envy (or should be) of Washington
pundits and financial commentators.
This ‘role reversal’ has been recognized by many
U.S., EU and Asian investors and multinationals, even as respectable
journalistic hacks for the Financial Times, NY Times and Wall Street Journal
still write about vulnerabilities, imbalances and other weaknesses while
grudgingly acknowledging the dynamic growth of the region.
Progressive opinion is equally at fault, focusing on the ‘advances’ of the
left regimes but overlooking the underlying dynamics affecting most of the
region and thus losing sight of the new points of conflict and contention.
We will proceed to outline the contrasting realities between the crises
ridden “North” (U.S./EU) and the sustained growth of the “South” (South
The analysis will raise questions of whether the
South American experience is transferable to the North and what ‘structural
adjustments’ would be necessary to pull the U.S. and EU out of the downward
spiral of stagnation and violent conflicts which have characterized these
regions for the better part of the past decade.
The Lost Decade, U.S.
and EU Style
The Latin American countries during the 1980’s experienced a deep and
persistent crises, manifested in negative growth, increased poverty levels
and heavy indebtedness, which allowed creditors (like the IMF) to impose
harsh and regressive austerity measures and “structural adjustment” policies
which came to be known as ‘neo-liberalization’.
These included the privatization of most
strategic, lucrative public enterprises, and the ending of any semblance of
state directed industrial strategies. For the peasants and the working and
middle class the short-lived neo-liberal “boom” of the 1990’s was a
continuation of the ‘lost decade’ of the 1980’s.
The neo-liberal policies of the 1990’s were
based on fundamentally flawed structural foundations and polarizing income
and public expenditures involving huge transfers of income to capital and
downward pressures on wages and welfare.
The neo-liberal regimes went into a deep crisis
early in 2000 provoking major popular upheavals.
The outcome resulted in a
new set of political configurations and social power equations, which
evolved into new post-neoliberal regimes, at least in most of the major
countries in Latin America .
In contrast and in part thanks to the profitable opportunities opened by the
debt crises and neo-liberalization of Latin America in the 1990’s (and in
the ex-Soviet Union, Eastern Europe and the Baltic/Balkan states) the U.S.
and EU prospered. In Latin America over 5,000 lucrative extractive resource
based industries, banks, telecommunications and other industries passed into
the hands of foreign private MNC and local capital.
High returns on bonds and loans and rents from
technology transfers enriched the Northern capitalists even as poverty
multiplied in the South. The 1990’s was the “golden age” of Western capital
as profits rose and leftist parties and the traditional urban trade unions
appeared unable to withstand the ‘wave’ of predatory capitalism capturing
the commanding heights of the economy.
The very successes of the U.S. and EU countries, the enormous easy gains
from pillage, speculation, and exploitation led to the dominance of
financial capital and the belief in an irrevocable “new world order”.
The dominance of the U.S. and EU was built on
their military superiority backed by pliant, collaborative, neo-liberal
client regimes. The ‘new order’ lasted less than a decade:
crises of 1999-2000 smashed the illusions of a century of imperial grandeur.
As markets collapsed so too did the Latin American oligarchic electoral
regimes (dubbed “democracies”) which along with the financial elite and the
military formed the triple alliance that defined Western supremacy.
The final blow was the economic crises of
2001-2002 in the U.S. and EU which steeply eroded their capacity to
intervene and prop up their collapsing Latin clients ousted by rebellious
The first decade of the new millennia has been the ‘lost decade’ of the
North. Over the course of the past eleven years the North has witnessed
stagnation and recessions which have not given way to recoveries. The
capitalist states temporarily saved the bankers but were powerless to set in
motion economic growth.
The credit rating of the U.S. economy was downgraded by the risk agencies.
Unemployment and underemployment hovers close to one-fifth of the labor
force, figures comparable to stagnant Third World countries.
Social programs are severely slashed in the U.S.
and throughout the European Union, reversing decades of incremental gains.
Trade and budget deficits in the U.S. have become chronic, while private and
public lenders are becoming increasingly reticent to lend in the face of
deep-seated recessionary tendencies. The financial sector in the U.S. and EU
is rife with large scale fraud, swindles, mismanagement and falsified
balance sheets, conditions previously prevalent among Latin economies.
Wars proliferate. Military spending far exceeds
productive investments, draining the U.S. economy in a fashion reminiscent
of the weapons spending during the reign of the warlords of Africa and the
military dictators of Latin America.
In the EU faced with brutal cuts in wages,
pensions and jobs millions of workers and unemployed youth in Greece,
Portugal, Spain and Italy have taken to the streets. General strikes
threaten the stability of increasingly isolated regimes, reminiscent of the
popular rebellions which resulted in regime changes in Latin America in the
late 1990’s and early 2000’s.
In the U.S., public protests reflect deepening
over 75% of the population expresses negative views of
the Congress and 60% of the White House.
Deepening political alienation of
the U.S. electorate is comparable to the loss of popular faith in Latin
governments during the “lost decades”, 1980-2000.
Both the U.S. and the EU have been radically transformed for the worse
during the ‘lost decade’ of the current century.
and socially the ‘North’ has been “Latin Americanized’:
over by corrupt political elites.
Signs of the Better Times -
Recently the finance minister of Brazil raised the possibility that the
BRIC (Brazil, Russia, India and China) might take a hand in a “rescue
plan” to prop up the crises ridden economies of Europe.
While the statement had greater symbolic rather
substantive consequences, it does reflect a certain reality: while the North
plunges into deeper, unending crises, the Latin economies are doing
Except for the Latin countries still under U.S. dominance, especially Mexico
and most of Central America, the rest of Latin America has not only avoided
the crises afflicting the North but have been growing at a healthy rate,
three times that of the U.S. over the decade. The new millennium, especially
between 2003-2011 (except for a brief interlude in 2009) has been a period
of high growth, general prosperity, booming exports, rising imports, greater
inter-regional co-operation, and large scale poverty reduction.
Brazil alone has reduced the number of poor by 30 million. Regular
elections, relatively honest and competitive, result in stable legitimate
transfers of political power.
Except for U.S. backed coups in Honduras and
intervention in Haiti and Venezuela, violent seizures of power have
disappeared, over the past decade. Regional institution-building has
prospered with the advent of
UNASUR and a Latin American regional bank.
Because of fiscal controls and banking regulations, both results of the
lessons learned from the crisis of the lost decades (1980-2000), Latin
America was only slightly affected by the U.S.-EU financial crash of
Latin American trade has doubled, especially
with Asia, aided by China ’s double digit growth. Demand for agro-mineral
commodities has tripled. The key to this new export powered growth is Latin
America ’s growing economic independence. This has led to the
diversification of its markets, taking advantage of new opportunities and
reducing their dependence on the U.S.
Latin America’s emphasis on economic growth, new
markets and investments, has led it to avoid entanglements in the
proliferating and costly colonial wars which engage the U.S. and EU.
While the U.S. and EU print more money and increase indebtedness to cover
trade deficits, Latin America has quadrupled its foreign reserves. These
cushion any downturns and avoid any dependence on the IMF, architect of the
lost decades of the 1980’s and 1990’s.
Within Latin America, the issue of poverty reduction has been tackled with
varying degrees of effectiveness.
With Venezuela under President Chavez leading
the way the general direction has been toward increasing social payments, by
increments in most cases, but with greater efforts in others.
Mexico, nothing resembling the social cuts of the U.S.-EU has taken place in
The most striking structural advances have
occurred in Venezuela and to a lesser degree in Argentina. They have
significantly increased the minimum wage and pensions and increased welfare
payments to the most vulnerable (single mothers, the disabled, those in
With the exception of Colombia (the U.S.’s principle military ally in the
region) which is still the murder capital of the world for human rights
advocates, trade unionists and peasant activists, human rights violations
While the U.S.-EU have vastly increased
human rights violations geometrically via multiple colonial wars in,
...and clandestine death squad ‘operations’,
Latin America’s overseas human rights violations are largely limited to its
occupation forces in Haiti - at the behest of the U.S. and EU. Nevertheless
repression of popular movements, especially indigenous peoples and peasant
movements and students has increased in Bolivia, Chile, Brazil and elsewhere
as the high growth policies on community rights and social expenditures.
Because of Latin America’s current political stability and dynamic growth,
institutional and corporate investment is pouring into the region. In
contrast the U.S. and EU are suffering from disinvestment and declining
rates of private investment.
In other words, the development of Latin
America is the other side of the coin of the U.S.-EU underdevelopment.
Latin America - New
The class struggle is still the motor force in the social progress of Latin
But unlike EU-U.S., Latin America’s class struggle is directed at
increasing social and monitory wages, even if incrementally, as part of an
offensive strategy to capture a greater shares of rising income.
In the U.S.
and EU the class struggle is ‘defensive’:
an effort to stop declining income
shares, limit job losses and cuts in pensions.
While militant class action including land occupations, street
demonstrations and strikes are still part of the repertory of working class
social weapons, they take place within the political parameters of
In Europe the elites have increasingly ignored mass
street protests and strikes, largely pursuing austerity policies dictated by
non-elected domestic and foreign bankers and creditors.
The limitations and ‘contradictions’ affecting all Latin America countries
are located in the internal class inequalities.
As national income has
increased and exports boom, the inequalities between the ruling investor
class and the mass of wage earners has increased. While initially the
problem of class inequality was papered over by the general rise in living
standards and employment, over time the employed and productive classes are
no longer satisfied with incremental gains which barely surpass inflation
The rising standards of living have raised expectations. The
percentage of poor may have declined but subsisting just above $4 dollars a
day is increasingly unacceptable. Growth brings forth its own set of
contradictions and a new set of demands. Formerly excluded classes included
in the system, but exploited, have only their class organizations as their
weapons to advance their socio-economic interests.
This is clearly the case in contemporary Chile where long term growth is
accompanied by deeply entrenched inequalities comparable to the worse in the
Beginning in July 2011 massive student protests over the high cost of
public and private education and low levels of social expenditures have
detonated mass activity from trade unions covering the gamut of economic
sectors from teachers to copper miners.
The new and explosive issue confronting rulers and ruled in most of high
growth Latin America is raising incomes for whom? The class issues are front
and foremost in the current period and immediate future.
Growth, stability and democratic class struggles characterize most of the
major countries, but not all. In several countries, the authoritarian and
violent legacy of the dictatorial regimes continues robust.
practice of murdering trade unionists, peasant leaders, journalists and
human rights activists continues unabated: over 30 trade unionists were
murdered during the first 8 months of 2011.
Honduras’ ruling regime, product of a U.S. backed coup and its allies among
the paramilitary private armies of landowners, have killed scores of
peasants and dozens of pro-democracy political and social activists.
Mexico’s killing fields are notorious: over 40,000 people have been killed
by the police, military and drug gangs in a ‘war on drugs’ promoted by Obama
and implemented by President Calderon.
What these three retro-regimes have in common is that
they continue to
follow the dictates of Washington, remain highly militarized states, with a
strong U.S. military and police presence in the form of bases, overseas
advisers, and an intrusive role in setting policy.
All three have failed to
diversify markets and continue with a high degree of dependence on the
stagnant U.S. market. All have secured or are in the process of signing
bi-lateral free trade agreements at the expense of exploring greater links
with the dynamic Asian markets.
The 3 retro-regimes have never experienced the kind of popular rebellions
and resultant center-left regimes which have emerged in most of Latin
In Mexico pro-democracy candidates were twice defrauded of
electoral victories, first in 1988 and later in 2006.
In Honduras, a
progressive liberal democratic President seeking to diversify markets was
ousted by a military coup backed by the Obama regime in 2010.
the murder of 5,000 activists and leaders of the pro-democracy Patriotic
Union between 1984-86, the subsequent assassination of several thousand
social activists, blocked a democratic opening.
The abrupt termination of
peace negotiations in 2002 and the total militarization of the country
(2002-2011) funded by $6 billion in U.S. military aid precluded the
emergence of the political and social changes, which have dynamized the rest
of Latin America’s sustained growth and opened the door for ‘democratic
While most of Latin America has forged ahead, thus far largely avoiding the
instability and economic crises of the U.S. and EU, past legacies and
present inequities present a new set of structural impediments to the
consolidation of long-term growth and political and social stability.
The profits and investments of this power
configuration has been driven by the growth of agro-mineral exports, rising
commodity prices, easy consumer credit and state regulation of financial
The economic returns on growth have been disproportionately
appropriated by the “big three” with incremental payoffs to a minority of
better paid organized workers. The ‘residuals’ are used to “lift the poor”
from abject poverty to subsistence. These growing inequalities have been
“papered over” by the general rise of income, easy credit and improved
But rising incomes have set in motion a new set of class
conflicts which will be exacerbated when the prices of commodities decline
and the governments can no longer fund incremental improvements.
severe conflicts have emerged between predator mining and timber, multinationals and
These sometimes violent struggles between the state/MNC and
peasants in the “periphery of the countryside” can detonate a larger
conflict in the central cities, if export revenues decline.
Conservative and closely aligned with the rapacious multi-nationals, these
new middle class investors have enriched themselves on the bases of
unregulated plunder of natural resources and contamination of the adjoining
rural communities. If and when commodity prices nose dive, the regimes will
face a bankrupt hysterical middle class looking for a political savior where
none exist, at least among the existing civilian parties.
The rightward drift of the center-left regimes and their opportune links to
big business especially in,
...has led to corruption in high places.
Liberalization and exorbitant
executive salaries has been accompanied by “unofficial payoffs” to public
officials. Corruptions has eroded the social ethic of center-left
politicians and replaced it with the ethos of “bringing in new and bigger
investments”, whatever shortcuts and payoffs it requires.
Corruption at the
top spreads downwards greasing the wheels for foreign investors, but
certainly lowering the trust and loyalties of employees and formal and
informal workers not in the ‘magic circle’ a bribe takers and givers.
“Patronage” and poverty reduction payouts can limit the fallout from
corruption in high places among poverty funded recipients.
However, in time
of economic downturn, it can turn social protests toward political regime
The third contradiction is found between the high level of dependency on
commodity exports (which heretofore have been the dynamic element of growth)
and the relative and absolute decline of manufacturing exports and
The growth of income from commodities has led to the
appreciation of the currency which has lessened the competitiveness of
nationally produced manufactured products, leading to a sharp decline in
profits and even bankruptcy.
Asian manufacturer-exporters - especially in China and to a lesser extent
India and Korea - are increasingly penetrating Latin markets with lower cost
finished products “de-industrializing” the Latin economies. In some cases,
Latin American capitalists are looking to investing in Asia to lower costs
and exporting back to their “home markets”.
Brazilian industry which has
been hardest hit, has initiated “protectionist” measures including tariffs,
65% local content rules and state subsidies to counter the
de-diversification of the economy.
The fourth contradiction is found precisely in the successful economic
growth and high returns, which has attracted both speculative and “takeover”
capital as well as productive
Speculative capital will flee and destabilize the financial
system at the first sign of slowdown. Foreign ownership will lessen the
government’s ability to leverage investment decisions in time of crises.
Productive investments respond to expanding markets they do not create them.
In summary, Latin America’s decade long dynamic growth has certainly
out-performed the U.S. and EU on a whole series of important economic,
social and political dimensions.
Yet, out of this growth have emerged a new
set of contradictions and the need to correct increasingly grave
popular demands for a shift in income distribution
industrialists pressure for a rebalancing of the economy from dependence on
finance and commodities to manufacturing
the urban poor demand improved
social services especially in public health care and crowded classrooms
These changes require a structural adjustment in the power structure.
economic imbalances reflect the growing concentration of political power
among the extractive capitalists, bankers and local middle class investors
of the major cities. Public employees, labor, the urban poor, the peasants
and environmentally concerned indians (natives) and ecologists, are marginalized from
the key economic posts.
They need to once again take to the streets with new
independent movements which raise two basic questions:
What kind of growth
and growth for whom?
Lessons Latin America
- Listen Yankees and Eurocrats
Can the positive lessons of the dynamic Latin American experience provide a
‘model’ for the U.S. and Europe ? Is the “model”, in whole or part,
transferable to the North or are the two regions so different that the
lessons are not applicable?
Granted there are vast historical, cultural, economic and political
differences between the regions yet some lessons from the Latin America’s
decade of dynamic growth, provides new ideas to counter the negative,
self-defeating economic formulas put forth and practiced by U.S. and EU
experts, economists and policymakers.
Let us start from the beginning. The rise of Latin America was precipitated
by a deep economic crisis, the breakdown of the economy, large scale
unemployment and the impoverishment of the middle class. The crises led to
the total discrediting of what has been called alternately the “free
market”, “neo-liberal” and “de-regulated” capitalist model.
So far so good:
the U.S. and EU likewise are experiencing a prolonged and deepening economic
crises which has bankrupted Southern Europe, plunged the U.S. into a double
dip recession and led to a 20% un and underemployment rate.
“political class” in the U.S. and Europe is largely discredited. From there
forward the regions diverge.
In Latin America, the crises led to mass protests, popular uprisings and
regime changes. Post neo-liberal center-left regimes, under mass pressure,
subsequently launched employment generating investments and aid poverty
reducing public works programs.
Argentina facing a financial crisis similar
to Greece, Portugal and Spain today, defaulted on its foreign debt -
channeling public revenues into reviving the economy. Because financial
speculation linked to Wall Street and the City of London precipitated the
crises, the Latin regimes instituted financial controls and regulations
which limited financial volatility.
The new regimes, influenced by the
commodity boom, diversified their trading partners, entering dynamic Asian
markets, reaping high returns and stimulating local consumption and public
What lessons can the crises ridden U.S. and EU learn from the
Latin America’s successful recovery and expansion?
First, the beginning of a successful response depends on a political
transformation. Regime change a complete break with the ‘neo-liberal’ free
market, and the political leaders and parties who are totally embedded in
failed institutions and policies. Regime change presupposes the eruption of
dynamic mass organizations, new, old, improvised and organized, capably of
moving from protest and resistance to political power.
The object is to rebalance the U.S. and EU economies from ‘financialization’
and “militarism” to large scale, long term investments in manufacturing,
applied technology, civilian infrastructure and social services.
public investments and loans applied to concrete employment generating
projects; total rejection of trickle down, monetary policies which never
move from private banks to public works.
The entire militarist-Zionist-permanent war mentality is entirely
vulnerable to change: doing so, will create jobs, the top priority for over
two-thirds of the U.S. public.
The “war on terrorism”, the banner of the
warlords in office, is considered a priority by only 3% of Americans. Once
again the shift from ‘militarism’ to the civilian economy in Latin America
was a result of popular civilian upheavals, via the street and the ballot
Of course the Latin American republics had an easier time in rebalancing
their economic priorities from failed military rulers and discredited
Citizen movements in the U.S. and EU imperial states
will have a harder time in closing down hundreds of military bases, ousting
militarist politicians backed by powerful domestic and foreign lobbies and
converting the empires to productive republics.
Yet, Latin American
exporters have prospered by avoiding entanglement in overseas imperial wars.
They continue to pursue new markets in the Middle East and elsewhere instead
of destroying adversaries
of Israel as the EU and U.S. have done through
colonial wars in Iraq and Libya and sanctions against Iran, Syria and
The contrasting performance between Latin republics and Euro-American empire
builders is striking. The U.S. and EU should shed their self-centered images
of “successful” developed countries and outdated stereotype of Latin America
as a collection of “volatile”, coup prone underdeveloped countries.
is in deep trouble and it is heading into a
deeper, less manageable economic
crisis with few resources to counter it. Internationally it is increasingly
isolated and in conflict with potential economic partners. Washington sides
with Israel, alienating over 1.5 billion rich and poor Islamic peoples, from
Saudi Arabia to Pakistan and all points east, west and south. It antagonizes
Brazil via financial pump priming, overpricing the real (Brazilian currency)
without helping U.S. recovery.
Domestic and international failures multiply as the crisis deepens and
nothing proposed by the blighted incumbents and besotted opposition offers
any programmatic solution.
As in Latin America during the first years of this decade
we need a popular
we need a profound regime change
we need to think of productive public
investments not monumental loss of capital via Wall Street
speculation and the waste of public resources via expenditures in
weapons of destruction