In reading about Latin America one has to do display a great deal of fascination for the fact that its people and policymakers have enabled most of the countries to pick the path to prosperity, and improve its standing in the world, even though such process is not seen everywhere. Whereas countries like Haiti have a poverty rate of 80% 1, Brazil, Peru and Argentina will see growth rates of 7.5%. 2
There seems to be a challenge that goes to the heart of the Latin American condition. That between worker’s interests and investors interests. Take for example Argentina: In the 1940s and 1950s, Juan Peron was trying to establish an inward-looking nationalist economic policy. 3 He strengthened labor rights and increased workers wages. This should be seen as a positive development. But the highly popular policies was eroded by the military and civilian leadership. The key conflict was that as soon as workers wages rose too dramatically, western investors saw no interest in supporting the respective economy, which spurred inflation. Hyperinflation would follow that would immediately erode the income gains the workers had made. The government also realized that hyperinflation was untenable and preferred to lure foreign investments and the IMF. The terms of agreement for a stable currency were low public spending and implicitly less worker wages. Even then Argentina was punished with a severe recession in 2001, when massive flight of capital occurred. 4 Along with it income inequality increased. 5
The influx of capitalism may accelerate economic growth, but increases income inequality, which endangers the stability in the society. The overall impression is that countries apparently have to make a trade-off between stable economic growth with low inflation, low public debts. a balanced budget, low taxes, low spending and few worker rights on one hand, and worker improvements on the other hand. Liberalization yields in opening up opportunities that might never have existed before, but it strengthens those set of people that are immediately involved in the financial-economic process (bankers, politicians, businessmen, upper midde class professionals etc.) at the expense of the workers.
Principally, I have no objection to liberalization, as it is easy from the viewpoint of a wealthy country to see the economic aspects and opportunities of growth. With the ascendancy of a nation there automatically comes the desire for more redistribution of wealth, which makes the grim prospect of liberalization somewhat more bearable.
It must be fairly clear by now that resisting the forces of capitalism, as seen in some Latin American countries is not possible (measures include nationalization of industries, price and wage controls etc.), especially not at an individual level. The Chilean economy in the early 1970s was driven into shambles through runaway inflation and high trade deficits. 6
An important link to current Latin America is the role of the United States of America that has virtually replaced Britain, Spain and France from playing the role of the hegemone. America not only played a positive role to fulfill its Monroe Doctrine. In the 1950s, the Eisenhower administration helped overthrow the Nicaraguan government. In the 1960s, the Kennedy administration planned to overthrow the Cuban government, the Johnson administration sent marines to overthrow the communist government in the Dominican Republic. In the 1980s, the Reagan administration overthrew the Grenadian government, the Bush administration overthrew the Panama government. In the 1990s, the Clinton administration overthrew the Haitian government.7 All these plots for ousting unfriendly governments were made in the name of national security and preserving pro-business governments in power. It is no surprise that a socialist government under Salvador Allende could not consolidate its power or the economy, because the United States imposed harsh efforts to undermine the government.8 Oftentimes U.S. friendly elites abused their power. Brazil was the largest beneficiary of foreign aid and at the same time had a highly repressive regime with little pretense of social reform. Argentina received U.S. support for cracking down on guerrilla movements at home. 9 Banks awash with funds from the sale of Middle Eastern oil resources lent Latin America huge sums that were used for elite consumption rather than domestic investment. Staggering debt forced Latin America to take a path toward consolidation and debt reduction. 10
But ever since the time of turmoil, there have also been signs of success. Nowhere is the contrast in success clearer than between Brazil and Cuba. Brazil has rapidly liberalized and modernized its economy, and at the same time lift 30 million people from poverty in the last decade. 11 In the mean time, Cuba held onto its state-based socialism, and a reduced standard of living. 12 Cuba’s position is somewhat peculiar. The first fact is that Cuba is a much smaller country than Brazil, with Brazil being of the most populous countries in the world. Most importantly, the Cuban economy was solely dependent on Soviet support. Once the Soviet Union collapsed, there was no more foreign support since America and its allies were pushing against the Castro regime ever since he took power in 1959. Cuba may have been a genuine threat back in the Cold War, but since it ended, U.S. support for Cuba should have been reinstated to aid Cuba in the process of leading the international community, and improve its economic position.
Yet, despite the chronic shortage of goods for the Cuban people- that especially pro-business Americans self-indulgently like to cite as an argument to denounce socialism- one cannot overlook its functioning health care and education systems that had elevated equality and standard of living. 13 To retain this concept of substantial expenditures on behalf of the masses pf people will remain a challenge. Of course, ever decreasing national wealth is forcing reform on isolated Cuba, but by abandoning well-proven services will over the long term diminish hopes for a fair and equal society.
Fast developing countries like China or Brazil are facing exactly such a challenge. Even as they generate spectacular growth rates, they see increasing income inequality. As they build up huge cash reserves based on their extensive export policy, they also need to consider greater spending on social services including in education, health care, social security, and pension to bolster average standard of living and spur domestic demand. That is a step that China at least pledged to take. 14
1 CIA World Fact Book, “Haiti”,
2 Kraul, Chris. “Latin America Poised for Solid Growth.” Los Angeles Times. 07 Oct. 2010. Web. 10 Oct. 2010. .
3 Skidmore, Thomas E., and Peter H. Smith. Modern Latin America. New York: Oxford UP, 2005. Print. p.103
4 ibid. p. 106
5 Gonzalez-Rozada, Martin, and Alicia Menendez. “Why Have Poverty and Income Inequality Increased So Much? Argentina 1991-2002.” Sept. 2002. Web. 10 Oct. 2010. .
6 Modern Latin America. p.129
7 “On Chomsky”, Stony Brook Interviews, Web. 2003.
8 Modern Latin America. p.423
9 ibid. pp.423-424
10 ibid. pp. 424-427
11 Editorial. “Brazilian Presidency: Lula’s Winning Legacy.” Thestar.com. 5 Oct. 2010. Web. 10 Oct. 2010. .
12 According to the CIA Factbook, 78% of the Cuban labor force is employed in the state sector, as opposed to 22% in the private sector. CIA World Fact Book. “Cuba”.
13 Michael Moore even compared U.S. health care system with the Cuban health care system, and noticed that the Cubans had better access to health care than the Americans. Moore, Michael., “Sicko”. 2007, Documentary.
14 Teachen. “China to Boost Spending on Welfare, Education, Health Care.” Jobs in China(Teach In China). 3 July 2009. Web. 10 Oct. 2010. .