Alternate Development Paths

in Latin America

Society for International Development12.11.2008

Arne Ruckert, Centre for International Policy Studies (CIPS)

Towards a Post-Neoliberal Development Path in Latin America?

• Introduction• The multiple failures of neoliberalism in LA• The emergence of post-neoliberal development

strategies (ideal-type)• Contradictions of and challenges to the post-

neoliberal turn• Conclusion

Introduction

• Latin America laboratory for neoliberal development model• Neoliberalism initially implemented by authoritarian regimes

(e.g. Chile) and with elements of coercion (union busting and disappearance of union leaders)

• Because of its deep transformation, LA first continent to (as a whole) move beyond the neoliberal era (more left governments in power than ever before in its history)

• Countries with largest degree of neoliberalization more likely to remain wedded to neoliberal model (cultural entrenchment of neoliberalism and institutional path dependency)

• But post-neoliberal turn (to varying degrees) visible in almost all countries

Economic Performance of LA under Neoliberal Policy Regime

Latin America's Per Capita GDP Growth

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1960s 1970s 1980s 1990s

Latin America

Social Failure of Neoliberalism

Latin America's Poverty Rate as % of National Population (World Bank 2006)

40.548.3

42.5 39.8

0

10

20

30

40

50

60

1980 1990 2000 2005

Latin America

Growing Inequality in LA under Neoliberalism

1980 1985 1990 1995 2000

0.49

0.5

0.51

0.52

0.53

0.54

0.55

0.56

0.57

Inequality in Latin America as Measured by GiNI coefficient

The Emergence of Post-Neoliberal Policy Alternatives

• While there are significant divergences between various New Left governments in Latin America, I propose the term post-neoliberalism to conceptually grasp the changes currently underway in the hemisphere (co-edited book: Post-Neoliberalism in the Americas, Palgrave/Macmillan)

• Post-neoliberalism should not be understood as the temporal transcendence of neoliberalism but rather signifies an experimentation with heterodox development policies, representing both significant continuity and discontinuity with the neoliberal era

• Post-neoliberalism a search for policy alternatives that is on-going and dynamic (no clearly identifiable model available yet)

Continuity with Neoliberal Era

• Application of ‘sound macroeconomic policies’ in most Latin American countries

• Amassing of huge budget surpluses by some New Left governments (e.g. Bolivia)

• Improvements in external reserve positions • Markets acknowledged as most important resource

allocation devices (with the exception of Cuba and Venezuela)

• But, at the same time:

Discontinuities and Progressive Policy Alternatives

• Willingness to use state power to stimulate the economy and correct for wide-spread market failures (market limitations)

• Use of state institutions to reduce social inequalities through redistributive measures and address poverty through consumption subsidies to the poor (Oportunidades and Bolsa Familia)

• Re-nationalization of parts of the economy, especially in the energy, minerals and service sectors (Venezuela, Bolivia, and Argentina)

• Commitment to substantially deepen democracy through engaging citizens more directly

Discontinuities…

• Trade agreements that reflect a neostructuralist understanding of the economy and are critical of ‘free trade’ with developed countries (ALBA, Unasur = Mercosur+Andean Trade Pact) [but also simultaneous signing of BFTAs]

• Higher inflation rates tolerated if accompanied by higher economic growth (Argentina, Venezuela, Brazil)

• Achieve independence from international financial institutions (IFIs) by re-paying public foreign debt and installing the Bank of the South (Banco del Sur)

• Endogenous growth preferred over export-driven growth (backward linkages to economy if export driven development)

Conclusions: Challenges and Contradictions of Post-Neoliberal Turn

• Decline in commodity prices and global financial crisis• US empire strikes back (Venezuelan coup attempt, US support

for secessionist right in Bolivia)• Democrats more likely to tolerate post-neoliberal policies in LA• Conflicts amongst New Left leaders (e.g. Brazil versus

Venezuela)• No new development model yet available (trial and error)

What Should Post-Neoliberal Development Model for LA Look Like?

• Acknowledge idiosyncrasies of each country, no mono-economics a la Washington Consensus

• Allow state to play greater role in economy (infrastructure, education, resource sector, etc)

• Decommodify social services (stimulate human capital and reduce inequality)

• Avoid regressive taxation regimes • Protect industries that are not competitive yet but have potential to

become “winners” (infant industry argument)• Promote solidaristic South-South trade (free trade amongst equals not

necessarily bad)• Simultaneously integrate into and disassociate from world markets

(historically most successful development strategy)• Focus on demand-side of the economy (see workers as consumers not

just as a production cost, wage increases required)