John Rapley - Foreign FocusIT WAS only a few years ago that books on the death of the Left dominated the political literature on Latin America. The continent that had produced Simon Bolivar and Che Guevara, we were told, had firmly renounced its socialist heroes and traded them in for pin-striped suits and business schools.
After all, the neoliberal age the era of free markets, privatisation and minimalist states arguably began in Latin America. On 11 September 1973, a military coup overthrew Chile's socialist president, Salvador Allende. The generals who succeeded him, and who came to be led by Augusto Pinochet, brought back from exile young economists trained in neo-classical economics at the University of Chicago. Inspired by their mentor, Milton Friedman, they introduced the world to the principle of monetary shock therapy, a programme of radical reform whereby Chile freed up her markets and slashed her public spending.
The pain was great. Not only were millions of people plunged into misery, but the remnants of Chile's socialist movement were rounded up, tortured, exiled and murdered. But in time, the price would come to be seen by the coup's supporters as reasonable. For by the 1980s, Chile was on the path to rapid economic growth and renewal.
Inspired by her success, and prodded by their international creditors at the time of the debt crisis, other Latin American governments began implementing similar policies of neoliberal transformation. This transition, away from Latin America's traditional model of state-led development, went into high gear in the 1990s. At that time, the US administration strongly encouraged Latin American governments to toe the neoliberal line. Democracy, prosperity and freedom, they were promised, would all follow in the wake of the reform process.
For a time, the promise seemed to hold true. Although the gap between rich and poor widened, incomes rose across the board for much of the decade. Then the Asian Crisis hit in 1998, and the flaws in the neoliberal model began coming to light. The same freedom of movement that had drawn capital in during the growth years, enabled it to flow back out during the bust. Currencies came under pressure, inflation rose and recessions broke out.
The conventional response to this sort of crisis is for governments to reflate economies. However, Latin American governments faced few choices. With their economies threatened by capital outflows, they needed bailouts in a hurry. The only government able to help them was the US. Rather than support reflationary programmes, though, the US demanded more pain: more cutbacks, more privatisations, more layoffs.
Some Latin American econ-omies, like Brazil's, managed to re-emerge from recession. Others, like Argentina's, saw things get worse and worse. But even those which rebounded soon fell back as the world economy slowed.
Today, with the stock markets of the Western world finally caught in the backwash of the Asian Crisis, Latin America's capital markets are in turmoil. Its streets, meanwhile, are seething. The Bush administration has abandoned its policy of non-intervention and has begun bailing out Latin
American governments, which are once again fighting runs on their markets. But the move may come too late to mollify ordinary people, who have suffered the pain of adjustment and have little to show for it.
In several countries, the Left, supposedly dead, is returning. In Brazil, the two leading candidates in the race for October's presidential election are socialists. In Paraguay and Ecuador, street protests recently forced governments to abandon privatisation policies.
Peru's government was shaken up by similar demonstrations. Venezuela's Hugo Chavez has, since he overcame the ill-fated coup attempt against him, turned his government against neoliberalism. And nowhere is the rage felt more palpably than in Argentina, which has seen its economy, once lauded by Washington as a model, implode.
US Treasury Secretary Paul O'Neill is currently touring Latin America, trying to shore up governments and prevent economic contagion spreading from Argentina. Time may reveal this current wave of instability to be just another bump in the neoliberal road. But the anger is rising, the sense of betrayal is strong, and the populists are returning. In which case, it may turn out that Mr. O'Neill's battle to make Latin America safe for neoliberalism ends up being something of a last stand.
John Rapley is a Senior Lecturer in the Department of Government, UWI, Mona.
