From the Council on Hemispheric Affairs

Movement Towards a Mixed Economy in Latin America Quickens as Neoliberalism’s Eternal Verities Begin to Come Undone

Just as the Bush administration’s market liberalization drive seemed to have been reaching its apogee, serious setbacks were registered as the utility of the Free Trade Area of the Americas (FTAA) and various bilateral FTA’s began to be successfully challenged. The Bush administration, like the Clinton administration before it, acted as if the evolution of economic practice had reached its home port with free trade achieving global ascendancy. Rather than recognizing the historical reality of cyclical development – the relatively brief ascendancy of a specific economic school of thought – the White House, congress and the economic establishment acted out the meretricious belief that unlike the commercial revolution or the physiocrats in 18th century Western Europe, in neoliberalism, economic evolution had had achieved its ultimate destiny.

But such prescriptions did not seem to solve the problems of persistent poverty in the Western rich nations – or substantially lower it in developing ones – and protagonists of NAFTA and other free trade pacts were not able to entirely live up to their claim that unrestricted multilateralism, couched in terms of free trade and Washington Consensus requirements, inevitably produced a win-win situation for all sectors of the population. Rather, the outcome of those economic battles predictably produced winners and losers. The world’s rich nations (and the rich within poor ones) – the winners – were determined to guard the portals of success, and preserve both their dutiful multilateral institutions (like the WTO) and the international lending institutions in their present form.

Skeptics then began to reflect that the rich nations had devised a system in which individual sovereign states would eventually came to defer to multinational corporations, whose legal status would eventually challenge and then triumph over the traditional nation-state. This line of development paralleled the White House and its allies’ conventional wisdom that what was private was incorruptible and must be made to triumph over what was public, which was inherently venal. Beginning with the early Clinton administration, these credal beliefs were identified with such Clinton hemispheric cronies as Argentina’s Carlos Menem, Mexico’s Carlos Salinas, and too many other Latin American presidents. These worthies then staged fixed auctions, wired deals, and rampant instances of corruption that often resulted in the selling off of state assets at no more than 10 cents on the dollar. Now, in the era of Enron and a thousand like cases, including the $25 million dollar bribe by IBM of Argentina’s Central Bank governors during the Menem-era, it became impossible to defend the thesis that private companies were inherently more ethical than their public counterparts.

While it is unclear what direction the present rejection of multinational corporation-driven globalization will take, opponents of neoliberalism would argue that it surely will involve some form of mixed economy, where a logical role for both private and public corporations will be staked out, and other economic structures will be allowed their orbit of responsibility. This is why last minute developments in Ecuador regarding the cancellation of Occidental Petroleum's contract – which signifies a greater move to exert state control over hydrocarbon resources – are so important. These represent, along with developments in Venezuela and Bolivia, a return to an earlier epoch where efforts were made to keep the U.S. fox out of the Latin American chicken house, leading to a struggle – be it in Allende’s Chile or Arbenz’s Guatemala – to reconcile democratic forms in both a nation’s political and economic institutions.

This analysis was prepared by COHA Director Larry Birns