June
1998, Vol. 2, No 2
by Dr. Atilio A. Boron
Neoliberal policies
have vastly increased
the numbers
of the poor and “extremely poor,”
and widened
the gulf separating rich and
poor....After
15 years or more,
it is time to
arrive at a balance.
CHILE'S former
president Patricio Aylwin once commented that in his own country, the most
pressing issue confronting democracy was to redress the current “social
debt.” As Aylwin’s remark indicates, the new democratic institutions have
disappointed citizen expectations not only in Chile but throughout Latin
America. Against the opinion of the mainstream political scientists the
citizenry in our region does not conceive of democracy as simply a system
of rules to organize electoral competition. People in Latin America, as
did the populations in post-World War II in Western Europe, expect democratic
regimes to provide the essential goods and services needed to live a decent
life.
Yet the emergence
of democratic process in Latin America unfortunately coincided with the
ruthless adoption of the so-called neoliberal economic “reforms”. And these
reforms have had disastrous consequences for ordinary citizens.
The essentials
of neoliberal economic reform are well-known: monetary stabilization, economic
liberalization, balanced budgets, deregulation, privatization, downsizing
of the state, and free rein to market forces. This “blueprint” was adopted,
with varying degrees of enthusiasm, in all the countries of the region.
After 15 years or more, it is time to arrive at a balance. The results
of these policies are crystal clear: the ideological accomplishments of
neoliberalism far exceed its modest economic achievements, which in any
case have imposed enormous social costs.
Consider the
case of Chile, currently cited as the paradigm of neoliberal success. By
1988, after 15 years of economic restructuring, per capita income and real
wages of workers were not much higher than in 1973, notwithstanding an
average unemployment rate of 15% between 1975 - 85 (with a peak of 30%
in 1983). Between 1970 - 87 the poverty rate increased from 17% to 38%,
and in 1990 the per capita consumption in Chile was still below its 1980
level. After celebrating the “important gains” experienced by urban minimum
wages in Chile between 1990 - 92, a recent report from the UN Economic
Commission for Latin America concludes that they have now recovered the
purchasing power they had achieved . . . in 1980! Not that all Chileans
were standing still: Between 1979 -1988 the richest decile increased its
earnings from 36.2% to 46.8% of national income, while the bottom half
declined from 20.4% to 16.8%.
 In
Mexico, more than a decade of orthodox adjustment has produced
manifest social and economic involution. According to official
Mexican data, per capita national income fell 12.4% between 1980
and 1990, despite the triumphalist rhetoric used by PRI governments
to “sell” their conversion to neoliberalism. Between 1982 and
1988 real wages dropped 40%, and have remained close to their
1988 level ever since. While the unemployment rate – traditionally
high in Mexico – increased, per capita consumption dropped 7%
between 1980 - 1990. According to Jorge Castañeda, (La
Utopia Desarmada) “when in 1992 the Mexican government publicized
the first statistical accounts of income distribution in 15 years
the data were terrifying.” Still, it took an insurrection
in Chiapas, two political assassinations, a huge trade deficit,
and the collapse of the peso to make local elites and their advisors
realize that neoliberal policies were not working. And when they
did, President Ernesto Zedillo proposed a new emergency package
that was bound to impose further hardships on the poor. Government
officials anticipated a 32% drop in the purchasing power of salaries,
bringing additional suffering and deprivation to most Mexicans.
Neoliberal reforms,
in short, have failed to produce either a self-sustained growth, a more
equitable income distribution, or a better society. Nor should that be
a surprise. As 50 years of Western European experience clearly shows, and
as more recent experience in East Asia sharply underscores, capitalist
development requires an appropriate balance of public policies, and this
means a state endowed with sufficient capacity for market intervention
and regulation.
Indeed, it is
worth recalling that Chile’s own economic restructuring – rather
unimpressive compared with East Asia or China – has kept the strategic
copper industry in the government’s hands. Nationalized during the Allende
years, state-owned copper firms account for about 50% of Chilean export
revenues. Moreover, this revenue goes directly to the fiscal treasury –
not, as in Argentina, Brazil, and most Latin American economies, to the
pockets of private businessmen – thus strengthening public finances and
state capacity. In 1995 the state-owned Corporación del Cobre transferred
US$1.8 billion to the fiscal treasury, a figure far greater than the taxes
paid by all private firms in Chile.
Putting aside
the particulars of the copper industry, the size of the Chilean state (measured
by the ratio of public expenditures to GDP) grew continuously in the last
decade, as did the governmental regulations concerning the functioning
of the financial markets. So Chilean economic restructuring is hardly a
compelling example of neoliberal policies, and the economy would arguably
be in vastly worse shape had it not been for these sharp and blatant departures
from the neoliberal project. Yet all these “peculiarities” of the Chilean
model have apparently passed unnoticed at the World Bank. In a recent official
document – which includes a section on “Chile as a Model” – the former
World Bank’s Chief Economist Sebastián Edwards fails to mention
these disturbing facts even in a modest footnote.
The disappointing
results of this “free-market fundamentalism” extend throughout the region,
and are not at all confined to Chile and Mexico, the countries once advertised
as “success” stories. Neoliberal policies have vastly increased the numbers
of the poor and “extremely poor,” and widened the gulf separating rich
and poor. According to the Economic Commission for Latin America and the
Caribbean, “Poverty is the greatest challenge for the economies of Latin
America and the Caribbean. Between 1980 and 1990 it worsened as a result
of the crisis and the adjustment policies, wiping out most of the progress
in poverty reduction achieved during the 1960s and 1970s. Recent estimates
place the number of poor at the beginning of this decade, depending on
the definition of poverty, somewhere between 130 and 196 million...Recession
and adjustment in the eighties also increased income inequality in most
of the region. In the countries with the most highly concentrated income
distribution, the richest 10% of the households receive 40% of the total
income.”
A very recent
report, the 1997 Social Panorama of Latin America, noted that “in the 1990s
the high concentration of incomes has been maintained or accentuated” in
the countries of the region, making Latin America one of the more backward
areas in terms of social equity.
Thus, the medium
– and long-term consequences of neoliberal reforms have been an increase
in the economic inequality of our societies, the strengthening of the bargaining
power of a handful of privileged collective actors (whose demands are heard
at the upper echelons of the government and central bureaucracy), the undermining
of the material foundations of citizenship by fostering a demobilized,
disorganized, depoliticized, often submissive populace, and a suicidal
weakening of the state’s capacities to redress these corrosive impacts
of orthodox economic policies on the very fabric of our societies and on
the prospects of our democratic institutions.
Dr. Atilio A. Boron is Executive
Secretary of Consejo
Latinoamericano de Ciencias
Sociales (CLACSO),
Avda. Callao 875, tercer
piso., 1023 Buenos Aires, Argentina.
Tel. (54-1) 814-2301 / (54-1)
811-6588; Fax (54-1) 812-8459.
Email: aaboron@clacso.edu.ar
or aaboron@mail.retina.ar
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