Globalization in Latin America • Neoliberalism • The “Chicago Boys” • NAFTA • The Promise of Neoliberalism • The Performance of Neoliberalism • The Return of Democracy
Neoliberalism • "The policies of privatization, austerity, and trade liberalization dictated to dependent countries by the International Monetary Fund and the World Bank as a condition for approval of investment, loans, and debt relief." • Since the late 1990's activists have used the word 'neoliberalism' for global market-liberalism ('capitalism') and for free-trade policies. In this sense it is now widely used in South America. Some people use the word interchangeably with 'globalization'. But free markets and free trade are not new, and this use of the term ignores developments in the advanced economies. The analysis here compares neoliberalism with its historical predecessors. Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism • "Neo" means we are talking about a new kind of liberalism. So what was the old kind? The liberal school of economics became famous in Europe when Adam Smith, an English economist, published a book in 1776 called THE WEALTH OF NATIONS. He and others advocated the abolition of government intervention in economic matters. No restrictions on manufacturing, no barriers to commerce, no tariffs, he said; free trade was the best way for a nation's economy to develop. Such ideas were "liberal" in the sense of no controls. This application of individualism encouraged "free" enterprise," "free" competition -- which came to mean, free for the capitalists to make huge profits as they wished.
Practical meanings of neoliberalism as applied to Latin America • Opening economies to foreign competition by removing tariff barriers • Privatizing state owned companies and reducing the work force • Elimination price ceilings on food, gas, electricity and other items of necessity • Turning government pension funds over to the private sector
The “Chicago Boys” • First seen in Chile after the overthrow of Allende in 1973 • 30 Chilean economists who had studied at the University of Chicago began to dismantle the Chilean economy and open it to world trade during the Pinochet dictatorship • Experiment lasted for 16 years and was proclaimed an “economic miracle”.
Social Consequences of the “Economic Miracle” • Designed to place the costs of restructuring the economy on the poor • Unemployment rose from 9 to 18% as inflation fell • Opponents to neoliberalism “disappeared” and many never reappeared.—Over 11,000 people “disappeared” • Initial consequences were negative growth rates that only later were followed by impressive growth rates • By 1980 workers were earning less than in 1973, while the wealthy became even wealthier • By 1989 Chile’s poverty rate was 41.2%
The North American Free Trade Agreement (NAFTA) • Implemented in 1994 by the U.S. after bitter debates in the United States • U.S. labor opposed it because jobs would be lost to Mexico • Environmentalists were concerned about a series of issues including the entry of polluting Mexican trucks in to the US; the deterioration of public health inspections along the border, and, eventually, the export of genetically-engineered agriculture.
The realities of NAFTA • US jobs have been lost to Mexico and other countries • The distribution of wealth in Mexico has gotten worse, not better • The cost of living has increased tremendously in Mexico, along with pollution, especially in Mexico City • More women than ever before began to enter the labor force to help make ends meet. Seen in all classes • Mexican wages dropped by 29% during the 1990s, Americans lost 440,000 jobs as the result of the agreement
Other Regional Free Trade Agreements • MERCOSUR • A common market among Argentina, Brazil, Paraguay and Uruguay, known as the "Common Market of the South" ("Mercado Comun del Sur"). It was created by the Treaty of Asunción on March 26, 1991, and added Chile and Bolivia as associate members in 1996 and 1997 • CAFTA • CAFTA is a free trade agreement that includes the United States, El Salvador, Nicaragua, Guatemala, Honduras and Costa Rica. The Dominican Republic may also be added to the group. This agreement has not been finalized in Congress
The New Poverty in Latin America • In 2002, more than 43% of all Latin Americans lived below the poverty line • In countries like Argentina that have suffered severe economic reverses, the poverty level has doubled • Results in Latin America are somewhat mixed