Back to the future? Lessons in capitalism from Latin America

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When looking at the policies and programmes of some Latin American states, one could be excused for thinking that the continent is transforming into a state akin to 1950s Social Democratic Europe. The rise of leftist ‘Pink Tide’ governments in states such as Brazil, Bolivia and Venezuela has coincided with the implementation of an ambitious state centred capitalism, incorporating nationalisation and social welfare. (Ludlam 2009). This could not contrast more with the withdrawal of the state and ‘austerity’ in Western nations such as the United Kingdom, such that it is unsurprising that the accomplishments of the Pink Tide have made some on the Western left green with envy.

Perhaps the most striking results are those resulting from programs that aim to tackle social exclusion and inequality. In Bolivia, President Morales, leader of governing party Movement for Socialism, has implemented Juancito Pinto, a cash transfer initiative for families with children who attend state primary schools. This incentive based programme tackles two of the most prominent issues in Bolivia, poor educational standards and poverty. It also serves the long term interests of the nation, assuming education is a contributor to economic success. Similarly, in Ecuador, President Correa has doubled poverty assistance payments, increased housing credits and has introduced subsidised electricity rates for low income consumers. It is hoped that these welfare programmes will go some way to addressing the huge poverty and inequality issues created during the Neo-liberal decades of 1980 and 1990.

This ‘new capitalism’ goes further; in many cases it represents a reassertion of the state as a business actor. Various formerly private industries have been nationalised, in addition to re-regulation of business and increased taxation of corporate profits. In Bolivia, the water company has been re-nationalised and taxation on foreign investors in the gas fields significantly increased. (Buxton 2009) Lithium Fields have also been nationalised; a lucrative move considering that lithium is an essential component of batteries, and Bolivia has the largest supply. Similarly, in Venezuela, an earlier emphasis on business-government partnerships has been abandoned in favour of ‘socialism with business’ which values state-to-state, public-sector-to-public-sector cooperation agreements’. (Buxton 2009) PDVSA, the state oil company, has also been nationalised in a move which prompted fury, especially the Bush administration in the US.

In a sign of solidarity, some of the Pink Tide governments have created regional agreements and organisations tasked with broadening and deepening the ‘new capitalism’. The ALBA agreement between Bolivia, Cuba, Nicaragua and Venezuela offers radical economic objectives that diverge from the Neo-liberal consensus. These include a re-definition of trade (spearheaded by Fidel Castro and Hugo Chavez) based on needs-based lines, as opposed to profit. Achievements of this relationship include Operation Miracle, which has offered free eye surgery to 100,000 Venezuelans, supported by Cuban doctors. (Kellogg 2007). In addition, ALBA has also established the Bank of South, a multilateral development bank that is reminiscent of the World Bank, yet exclusive to the states of Latin America. This represents an explicit challenge to the Neo-liberal policies of the West and undermines the power of Western international financial organisations such as the oft lambasted IMF and the World Bank.

Should the West view the new capitalism emanating from the new Leftist Latin American administrations as a challenge, or an opportunity? Some on the Western Centre-right have condemned the actions of Pink Tide governments: former US Secretary of State Condoleezza Rice condemned Chavez in 2007, arguing that he ‘is destroying his own country, economically and politically’. (Condoleezza Rice: Hugo Chavez ‘Destroying’ Venezuela 2009). Her choice of words is unsurprising considering the erosion of US hegemony in what is essentially ‘America’s back yard’, and the fact that Venezuela is a major oil supplier to the US. Orthodox think tanks such as Economist Intelligence Unit have described policies of Pink Tide governments as being unsustainable, yet so far the Pink Tide states have weathered the financial crisis better than their Western counterparts, with few problems encountered. (Kellogg 2007) That is not to say that there aren’t issues. The Venezuelan project depends heavily on global oil demand, as oil revenues are used to finance the nationalisations and social expenditure. In Bolivia, President Morales is on uneven political turf, suffering from splits in his own party as well as pressure from separatist movements in the richer Eastern departments of Bolivia pushing for autonomy.

That is not to say that the new capitalism does not provide lessons for the West. The success of French Socialist President-Elect Hollande shows that leftist ideas are far from dead in Europe. Hollande’s victory was based on promises of greater spending, increased growth, more emphasis on social welfare and a degree of economic nationalism – a sharp contrast from the austerity policies that prospered under his predecessor, Nicholas Sarkozy. Perhaps a Pink Tide will emerge in Western Europe? This is yet to be seen, but it is clear that history has far from ended and there is much to be learned from the new capitalism of Latin America. There is still a chance that West Europe may return back – back to the future.

Article by Nathan Tanswell. Edited by Chris Olewicz.

Bibliography

Buxton, Julia. “Venezuela: the political evolution of Bolivarianism.” In Reclaiming Latin America: Experiments in Radical Social Democracy, by Geraldine Lievesley & Steve Ludlam, 57-74. London: Zedbooks, 2009.

Condoleezza Rice: Hugo Chavez ‘Destroying’ Venezuela. February 7th, 2009. http://archive.newsmax.com/archives/ic/2007/2/7/120814.shtml (accessed May 05th, 2012).

Kellogg, Paul. “Regional Integration in Latin America: Dawn of an Alternative to Neoliberalism?” New Political Science, 2007: 187-209.

Ludlam, Geraldine Lievesley & Steve. “Introduction: A ‘Pink Tide’?” In Reclaiming Latin America: Experiments in Radical Social Democracy, by Geraldine Lievesley & Steve Ludlam, 1-20. London: Zed Books, 2009.