With the bulk of international news coverage over the past few months focused on Iraq, Sudan, and the Asian Tsunami, it would be easy to miss one of the handful of articles describing the increasingly clear leftward political trend in South America. This trend has serious implications for both the trade and security agenda of the Bush administration. It reflects both a disillusionment with the neo-liberal economic model and the continued rejection of policies which strengthen or support the use of force to solve problems.

In the past six years, left-leaning presidents have taken office in five South American countries, including Hugo Chávez in Venezuela in 1999, Ricardo Lagos in Chile in 2000, Luis da Silva in Brazil and Néstor Kirchner in Argentina in 2003 and Tabaré Vázquez in Uruguay earlier this year. The inauguration this past March of Tabaré Vázquez of the Frente Amplio , a left-wing coalition of social democrats, socialists and communists  founded in the early seventies, is the latest and  in some ways, most intriguing case.  Some three decades prior  the government, which at the time was a military dictatorship, kidnapped and tortured hundreds of people, especially  singling out Tupamaro guerrilla leaders. Now,  Senator Jose “Pepe” Mujica, a founder of the Tupamaro movement, presided over the swearing in of the president and vice-president during the inauguration ceremonies. During one part of the ceremony, Mujica was presented the flag by the Army’s Florida Batallion, the very same Army installation under which he was tortured and kept at the bottom of a well for several years. The left, once repressed and marginalized, is now empowered with the political capital and institutional authority to lead the country along a new path of development. Why has this seemingly 180 degree reversal come to pass in Uruguay and elsewhere in the region?

It is important to note that today’s left is not the same left as decades past. While the goals and priorities remain constant, the ways to achieve them have evolved within the context of globalization and with the lessons learned from past unsuccessful development programs. The new left grasps the importance of macroeconomic discipline and regulated market economies as well as the value of the rule of law. Nevertheless, this new left is no longer willing to unconditionally conform to the neoliberal set of policies that urge governments to  curb social spending in the pursuit of fiscal discipline.

Neoliberalism, which contends that people act according to self-interest and markets produce the best possible (although not perfect) outcomes, favors free trade, liberalized capital markets and minimal government intervention in the economy. While one could argue that markets yield the most efficient outcome, they rarely yield an equitable one. Neoliberal economic policies have widened the income inequality gap between developed and developing nations, as well as the inequality within developing nations. It is precisely on this issue of whether the first priority of government should be to increase the economic pie or to redistribute the economic pie that Neoliberalism and the left diverge.

In this context, the” left” is not a new phenomenon in Latin America. For over a century, the values and principles of the left have formed the foundation of Latin American society. Beginning with the contributions of anarchist and socialist Europeans immigrants at the turn of the century, continuing with Jose Batlle’s  precocious welfare state in Uruguay and the sophisticated  Marxist analysis of Jose Mariategui of Peru in the l920’s  , the role of communist and socialist parties in many countries  and the ideal of social justice, today’s left is deeply rooted in a strong historical foundation.

However, with the rise of the Cold War and the increasing United States hostility toward  anything that was remotely progressive, the left in Latin America was first, mildly,  and then severely repressed. The list of casualties is long and includes: The Arbenz regime in Guatemala; Goulart in Brazil; Allende in Chile and democracy in Uruguay and Argentina. The plague of repression that Latin America suffered from the late l960s into the early l980s was a major blow to both the left and the cause of democracy in the region. 

The rebirth of the left is a story of both the failure of the Bureaucratic-Authoritarian regimes to find an economic model that resulted in stable growth and the rejection of a non-democratic mode of governance by their citizens. This process was slow and painful but led to a resurgence of democratic values-even by those groups that some might consider revolutionary.
 

Lessons from Uruguay

Democracy’s fragile comeback was buffeted by economic policies and international trends, which moved citizens to take another look at a seemingly demoralized and demonized left. This has especially been the case in Uruguay. Uruguay’s European- style welfare state, which was a strong presence throughout most of the twentieth century, gradually eroded in the l960’s and l970’s, worsened with the debt crisis of the 1980s and the conservative fiscal policies of the 1990s and was under almost unsustainable pressure in the economic crisis of 1999-2002

 It is in this context that Tabaré Vázquez took office as the first socialist president of Uruguay on March  2005. Vázquez , who had campaigned on a platform of social change at a time when Uruguay was experiencing unprecedented high levels of income inequality and poverty, was elected with 50.45 percent of the vote- a vote so scrupulously conducted that no one doubted  its legitimacy.

Upon assuming office, one of the first measures of the Vázquez government was the passage of an Emergency Social Plan with an initial one year budget of $100 million. The plan is comprised of education, job-training, housing and healthcare programs for the more than one-third of the Uruguayans who now live in poverty.  The government expects the plan will continue into a second year, operating as a model for how a socialist government can thoughtfully steer aid toward targeted development goals.

This cuts to the heart of what socialism means: the government is focusing on giving all of its citizens an equal opportunity to succeed. All the while, the Vázquez administration has pledged to continue to service Uruguay’s foreign debt, maintain stable monetary policies, honor international business contracts, and reform the tax system to encourage foreign investment.
 

Development and Equity in Latin America

In recent years, international aid organizations worked to incorporate the recipient countries’ individual development goals and encourage local ownership through a more inclusive planning process. The perceived tradeoff between honoring international obligations and maintaining commitments to the community is gradually being dispelled.

Between the October election and the March inauguration, the World Bank worked with the incoming administration to find Uruguay’s sources of growth and to balance the administration’s social objectives with its economic goals. In February, the IMF approved the seventh and last stage of its three billion dollar stand-by agreement with Uruguay, which was contingent on prudent macroeconomic and fiscal conditions.  Additionally, the United Nations Development Program will help facilitate the implementation of the Emergency  

It is now widely understood that development should not be a top-down externally imposed technocratic process but rather an on-the-ground inclusive process. This conclusion was not easily arrived at in the development community; it involved many disappointing experiences with unsuccessful development programs.

The new left’s disillusionment with neoliberalism is not simply a difference in values. It is representative of a deeper frustration with how development was managed throughout the twentieth century.  During the last decades of the twentieth century, development was approached as a one-size-fits-all science, when it really should be more of a custom-tailored art. The one-size-fits-all approach is akin to a doctor writing a prescription for an individual patient she knows is sick without knowing any of the patient’s specific symptoms and assuming that the patient must have the same illness as the other patients in the hospital.

Every few decades, a group of economists put forth a new theory explaining why certain economies are less advanced than others. The economists laid out a set of policy guidelines intended to right the course of these ailing economies. The new theory was force-fed to the developing economies through development aid conditions or by virtue of neglect in international financial markets.

If these theories were the silver bullets their authoring economists held them to be, then conditional aid and international market exclusion might have engendered more positive change. The reasons why they did not range from the limited context and short time horizon in which the theory was conceived and tested to the standardized implementation regardless of the country’s unique characteristics and complex circumstances.

New theories often arise in reaction to the shortcomings of previous theories. A developing economy, upon advice from economists, would increase its social spending to stimulate the economy, only to be told a few years later that it must exercise fiscal discipline and remove all subsidies and tariffs to free the markets. These policy vacillations not only caused economic vertigo but also impeded policymakers from achieving any long-term goals and being accountable to their constituents.

From the 1860s to 1920s, modernization theorists proclaimed that Latin America was just a few decades behind Europe and the United States on the development path,  believing that economic progress was only a matter of time. Developing countries were advised to simply sit tight.

Beginning in the 1930s and 1940s, scholars began to view Latin America’s economic challenges not as short-term speed bumps on the road to economic progress but as ingrained flaws in the organization of their economies. The state was seen as the only body capable of benevolently and coherently guiding economic development. Theorists prescribed government intervention in the economy.

During the post-war era, Import Substitution Industrialization (ISI), which favored protectionist trade policies for local industries, was adopted as a short-term solution to jumpstart the domestic manufacturing sector. It was championed by Raul Prebisch,  an Argentine economist who headed the United Nations Economic Commission for Latin America.

While ISI produced economic growth in the short term, it failed in the long run to produce sustainable economic growth. The political difficulties of removing subsidies, creating budgetary reform and restructuring labor and financial associations prevented the transition to a post-ISI model. The bloated state sector created ample opportunity for clientelism political payoff and a propensity to print money as elections neared.  Additionally, it crowded out private sector competition and stifled an entrepreneurial atmosphere. The culture of protectionism facilitated an incentive system that discouraged domestic manufacturers from making products competitive in international markets.

In the 1960s, dependence theory, in an attempt to explain why advanced industrial economies had higher standards of living than natural resource rich developing economies, posited that a country’s economic position and progress depended not on its natural endowments but its position of power (or lack thereof) in the international capitalist arena. Although dependistas held sway with many intellectuals and leftists, their ideals were swept away (along with many of their adherents) in the wave of military dictatorships and plague of repression that swept across Latin America in the late l960s and l970s.

The debt-led development strategy of the 1970’s imploded in the early 1980s as interest rates on dollar-denominated debt rose. Fears of currency devaluation led to capital flight, undermining macroeconomic stability and domestic policy makers’ ability to direct fiscal and monetary policy. Latin economies were burdened with fiscal deficits, mounting external debt, trade imbalances and spiraling inflation.  However, the dire economic situation generated enough dissatisfaction to incite political change. Ironically, the very same reasons that these dictatorships came to power in the 1970s – the failure to develop a sustainable economy and achieve political stability – kindled their demise in the 1980s.   Latin American nations, told that the liquidity crisis was a result of their debt led ISI development strategy, were advised to reduce the size of their public sector by selling public companies and cutting back on social spending. Hundreds of domestic industries folded, thousands lost jobs and millions more slid into poverty. The 1980s became appropriately known in Latin America as “The Lost Decade.”

 In 1990, John Williamson set forth 10 policy instruments believed to successfully guide economic policy reform in developing countries in what later became known as “The Washington Consensus”.[1] These policy instruments corresponded with the three overarching goals of free-market capitalism, outward economic orientation and prudent macroeconomic policy. Whatever skepticism might have existed in the face of this formula, it could not withstand the exhaustion felt in Latin America after decades of economic crisis, military intervention, wholesale human rights violations  the debt crisis and the collapse of the Soviet Union.  Washington had the ball, made the rules, and there was no alternative out there.  The restored democracies in the region had little choice but to accept the new rules which, while contributing to some  positive growth early on,  led in most cases to an economic meltdown.

More recently, economist Dani Rodrik laid out a three step approach to formulating economic growth strategies at the Barcelona Forum 2004.[2] The approach begins with a diagnostic analysis that identifies the constraints of economic growth and then targets the constraints with innovative policy program. Most importantly, the diagnostic approach calls for institutionalization of the diagnostic cycle and policy response, to make the development process iterative, responsive and sustainable.

Significant research has been conducted on why certain development programs failed in the past and what a development program should look like for the future. But little research has been done to understand how development programs work within the context of the cultural, political and historical values of a developing country, or rather how development can be tailored to the country’s existing values and institutions.

Historically, the method has been to prescribe a set of development policies and let the social and political institutions conform to the policies. Perhaps we have approached development from the wrong angle. The leftward trend in Latin America demonstrates both a rejection of failed policies and an adherence to the historic values and ideals of a significant segment- if not a majority- of the voters. In an era when progress means making things easier for ourselves, it will be hard to return to the perspective that economic development is a challenge riddled with complexity and unknowns for which there is no one precise solution or comprehensive model. Yet the history of development programs demonstrates the necessity of this paradigm shift. The citizens of Latin America have increasingly empowered the left to carry out this task.

As indicated at the beginning of this essay, there is another victim of this resurgence of progressive voices in Latin America. Latin American political leaders have rejected the Bush Administration’s “War on Terrorism.” The “civilization of fear” the United States is currently promoting strikes too close to the Cold War paradigm that led to so much of the State Terrorism that dominated Latin America in the recent past. Elected and electors alike would rather concentrate on poverty, inequality and truly fair trade while resisting  the U.S. attempt to reorder the world around a culture of fear.