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Is there a future for Latin America?Alfredo Toro‐hardy a
a Venezuelan Diplomat and Scholar and author of several books oninternational relationsPublished online: 21 Oct 2010.
To cite this article: Alfredo Toro‐hardy (2004) Is there a future for Latin America?, CambridgeReview of International Affairs, 17:1, 155-166
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Cambridge Review of International Affairs,Volume 17, Number 1, April 2004
Is There a Future for Latin America?
Alfredo Toro-HardyVenezuelan Diplomat and Scholar and author of several books on internationalrelations
Abstract If Latin America is to have a future that transcends more than three or foursuccessful national stories and a few competitive clusters and niches around the region,there must be fundamental cultural change from within combined with a friendlier andless predatory international atmosphere.
One of the most interesting battles in the world of big US corporations is the onethat took place between Microsoft and Netscape a few years ago. The battle wasfought over control of the increasingly important internet information super-highway. While Netscape had achieved a comfortable lead in the early days ofthe internet, in large part thanks to its Navigator programme, the giant Microsoftsuddenly appeared on the scene with its Explorer programme, attempting towipe Netscape off the map and control the internet superhighway in the sameway it had controlled other strategic markets of information technology.
Why did Microsoft do this? Why did Bill Gates, the world’s richest man,think it was necessary to crush Netscape? The answer is simple. Had he notdone so, he would have run the risk of seeing Netscape launch its ownprogrammes for personal computers through the internet, thus threatening theMicrosoft empire. This was something Gates could not let happen, given that thefoundations of his own success were based on smashing any rivals who hadshown themselves to be vulnerable or technologically backward, those who hadleft some loose end that prevented them from keeping up with the latest trendin high technology. Among his victims were corporations like Intel, whichinitially led in the area of microprocessors, and WordPerfect, which first putword processors on the market.
The situation highlights the prevailing reality in the field of advancedtechnology. Those who nod off are overrun by those who approach from behind.As Andy Grove, the former president of Intel, correctly pointed out, ‘In thisworld only the paranoids survive.’ A few years ago, Microsoft’s Chief Technol-ogy Officer, Nathan Myhrvold, one of Gate’s closest deputies, said it did notmatter how good your own product might be because you were only 18 monthsshort of failure. According to many analysts, this period has now been reducedto six months and is becoming ever shorter (Time, 16 September 1996). This is,in fact, the very peculiar world of high technology, where one always lives insuspense and runs the risk of being pushed aside at the least oversight.
Although this situation is especially notable in the world of Gates and Grove,it applies to a large extent to the global corporate world as a whole. The
ISSN 0955-7571 print/ISSN 1474-449X online/04/010155-12 2004 Centre of International Studies
DOI: 10.1080/0955757042000203704
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competitive pressure faced by companies is such that their continuance andsurvival depend on their ability to make obsolete their own products before thecompetition does. In an atmosphere in which razor-thin profit margins andprices are capable of influencing decisions of stockholders and consumers alike,the anxiety of industry bosses reaches the highest level. It is not an accident thatdelegates at the 1999 World Economic Forum in Davos, Switzerland concluded,‘The executive presidents of corporations are showing increasing signs of stress,insomnia, cardiovascular problems, loneliness, marital failures and depression,among other problems.’ Nor was it an accident that in the World EconomicForum held in New York, business leaders from all over the world referred tothe anguish and uncertainties caused by the change-for-sake-of-change philoso-phy that prevails today in the corporate arena.
On the level of states, global competition presents new challenges that arenot always easy to overcome. Consider Japan and Germany, which embodiedthe two great economic miracles of the post-1945 period. Like the phoenix, bothcountries rose from the ashes to become, respectively, the second and thirdlargest economies of the world. By the 1980s Japan had grown so strong thatFriedman and Lebard (1981) predicted that an armed conflict with the UnitedStates would be the inevitable result of their economic rivalry. In fact, afterreaching second place in the world economy in the 1970s, Japan was able toincorporate into its economy during the 1980s an aggregate production capacitythat equalled that of France. Moreover, in the 1990s it was able to build up theequivalent of a second France through a network of factories established in othercountries. For its part, West Germany became the driving force behind theeconomic integration of Western Europe and the mainstay of the CommonMarket, which eventually led to the creation of the European Union. In the caseof both Japan and Germany, technology was the fundamental reason behindeach country’s success.
Their respective economic models became so admired that they were con-sidered to be valid alternatives to the Anglo-Saxon market economy. In contrastwith the latter, however, their norms were thought to be more rational andsocially responsible. Compared with the Wall Street model, with its short-termvision and its dictatorship of stockholders focused exclusively on quarterlyearnings, Japan and Germany seemed to justify the wisdom of long-termplanning. The link between their industries and banks and the social consensusamong the diverse productive forces created a stakeholders atmosphere that wasmore structured and much less predatory. In addition, it was recognised that thesafety nets of their welfare programmes were an essential part of their systems.
However, the rapid acceleration of capitalism that resulted from globalisationshook the foundations of both models. At the same time, their educationalsystems, which were based on the primacy of the group over the individual,proved to be incapable of facing the challenge of technological change. TodayJapan and Germany look beaten and are sunk in recession. Japan is sliding downthe slippery slope of economic deflation and its unemployment rate has risen to5.6%. Germany has a fiscal deficit that threatens to get out of control and hasmerited a formal reprimand from the European Commission while at the sametime showing an 11% unemployment rate. According to The Economist (11February 2002), ‘Those who are charitable consider Japan to be irrelevant. Thosewho are less charitable consider it to be a burden. Those who are fearful consider
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Is There a Future for Latin America? 157
it to be a danger.’ Newsweek in turn, also in its 11 February 2002 issue, quotedthe following words of Gerhard Fels, President of the German Business Institute:‘We are no longer the locomotive of Europe, but the brake at the end of thetrain.’ According to Jurgen Donges, former Chairman of Germany’s five ‘wisemen’ (the top council of economic advisors), quoted by Business Week on 17February 2003, ‘We used to speak of the British disease. For the next 10 or 20years, we’ll talk about the German disease.’
The Triumph of the American Paradigm
If Bill Gates is worried about being displaced by a new competitor, if the healthof presidents of major corporations is being ruined by competitive anguish anduncertainties, and if Japan and Germany have not risen to the challenges of thepresent world economy, what can the poor countries of Latin America do in themidst of this ferocious global competition?
A bit of history is in order to situate ourselves in context.
The fall of the Berlin Wall represented the triumph of capitalism oversocialism. What won, however, was the capitalist model in general, a model withdifferent variants, each claiming the right to be the best expression of it. Amongthese different tendencies we find the Anglo-American version, the variouscontinental European ones (the Rhenish, Alpine, French, etc.) and the Asiatic onethat had shown such great success in Japan and Southeast Asia (Albert 1991). Inessence, the big difference between the Anglo-American model and the rest hadto do with the fact that the latter placed a greater emphasis on consensus, stableemployment and the safety net of the welfare state, while the former had a muchmore aggressive character and placed its emphasis on short-term gains withfewer guarantees of job security.
It soon became evident that the American version had no rivals. The Asianmodel collapsed as an option in the wake of the prolonged crisis suffered byJapan from the 1980s and the cataclysm that hit the regional economies at theend of the 1990s. At the same time, the economies of Europe were unable tosustain the pace defined by the American model. While all of this was going on,American capitalism regrouped itself around a number of strategic sectors. Tobegin, there was cooperation among information technologies, telecommunica-tions and entertainment, resulting in products that blurred the traditionaldistinction between goods and services. Biotechnology was also significantlystrengthened. In turn, this advance in sectors of high technology upheld a rapidacceleration of the financial markets, leading to the emergence of a multitude ofnew products. The extraordinary dynamism of American capitalism enabled itsmodel to become the definitive base of the globalised economy. Both theEuropean and East Asian economies had to capitulate to this new reality—a newreality that represents one of those great revolutionary periods that erupt inhistory from time to time, shaking the foundations of the established order.Despite the unprecedented speed at which the world economy, especiallydeveloped country economies, have grown, some fundamental criticisms may bemade of globalisation.
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The Critics’ View
In the first place globalisation is responsible for the loss of cohesion in societies.In a great number of countries globalisation has brought with it a growingdeterioration of the rules of the game that used to support political and socialconsensus. Under the impact of competition that has neither borders norrestraints and which has transformed the reduction of costs into a dogma, roomfor social considerations no longer exists. This path tends to lead to a levellingdown, whereby the cheapest manpower or the replacement of manpower bytechnology determines the market survival of producers. The web of relationsthat gave cohesion to whole societies is collapsing. In different parts of the worldsocieties that were known for their high levels of harmony are now sufferingextreme internal stresses.
Secondly, globalisation is responsible for the marginalisation of a largenumber of countries and productive sectors. According to Paul Kennedy (1994),‘The enthusiasts of globalisation seem to mainly concentrate upon what itrepresents for the “triad” of prosperous societies found in North America,Europe and Japan, dedicating little attention to the prospect of marginalisationthat it represents for the four-fifths of the earth’s population which is not wellprepared to face up to these new commercial and financial trends.’ In fact, in aDarwinian global society where only the fittest survive, there is not much roomfor illusion among those who lack capital and technology. Apart from a fewcompetitive clusters and niches, it will be difficult for the developing countriesto be able to face up to the challenges that this system presents. Nevertheless, itis not only in the developing countries that problems are found. Within theindustrialised world itself, whole productive sectors are heading towards a deadend. Economies such as the Japanese have become divided into net winners andlosers. Lester Thurow (1996) warns about the risk of creating a genuine ‘apart-heid’ economy in the industrialised countries.
Thirdly, globalisation has stimulated the volatility of the internationalfinancial markets. Under the shelter of modern communications technology andwithin the ruling ambience of laissez-faire, the world’s stock markets dailymobilise incredible amounts of money. The handling of stock market instru-ments that are becoming ever more complex and risky by yuppies eager to makea quick fortune is transforming financial markets into casinos. The situation hasits origins in the consolidation of vast reservoirs of investments that aremanaged by professional financiers who face enormous competitive pressure toobtain short-term profits. Such competition imposes time limits that are too shortto allow productive investments to mature. The solution has been to simplyabandon productive investments, and instead develop formulas that allow oneto create money without creating value.
Other criticisms revolve around the possibility of sudden and devastatingcrises in given countries or regions, and the enlargement of such crises to aworld scale by means of the inexorable domino effect that globalisation creates.Stimulated by a piece of good or bad news, billions of dollars flow into or outof countries with astonishing ease, breaking up a country’s economy and leavingit at the mercy of speculators with short-term vision. In recent years the financialmarkets have gone through a succession of such intense crises. On each of theseoccasions the world economy was faced with a snowball effect that threatened
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to get out of control and smash everything in its path. This financial situation,Htichcock-style, is one of the most outstanding traits of the globalisation process.With an astonishing facility, a nation-state or a whole region may, from one dayto the next, fall victim to the ill will of investors. And because the worldeconomy is so intermeshed, the shock waves from these cataclysms with alocalised epicentre usually expand around the planet, making themselves feltover and over again.
While all this has promoted the greatest creation of wealth in the history ofhumankind, never before in history have losses attained such magnitude astoday. In its 11 June 2001 issue, The Economist confirmed that the period elapsedsince 1990 has witnessed the most exuberant creation of wealth in history. Thisbeing private wealth, of course. The magnitude of this private wealth isstaggering: the combined assets of the billionaires listed by Forbes in 2002equals the combined gross domestic product (GDP) of The Netherlands,Switzerland, Belgium, Sweden, Denmark, Norway, Austria and Poland—developed nations with a combined population of about 100 million. On theother hand, the dimension of the losses has never been so large. According toThe Economist (25 August 2001), US$10 trillion in global financial assets vanishedbetween January and August 2001 alone. Since then, losses have continued at astaggering pace. Newsweek, in its edition of 10 February 2003, states, ‘The markethas fallen more in percentage terms [during the first two years of PresidentGeorge W. Bush’s administration] than in the first two years of anyother modern president, including Herbert Hoover, who was in charge whenthe Great Depression began. And you can’t blame 9/11. Stocks fell at a muchfaster rate from Bush’s inauguration through Sept. 10, 2001 than they havesince.’
Finally, globalisation has promoted an extraordinary gap between rich andpoor. According to the 1996 Report of the United Nations Development Pro-gramme, of the US$23 trillion that made up the world GDP, only US$5 trillioncorresponded to the developing countries where 80% of humankind lives. The358 billionaires at that time had combined assets higher than the combined GDPof countries that house 45% of the world’s population. Today, the number ofbillionaires has risen to 495 and a good many of them are worth as much as theGDP of such countries as Malawi (US$6.3 billion, 11,308,000 inhabitants), Zam-bia (US$7.4 billion, 6,300,000 inhabitants), Swaziland (US$4 billion, 1 millioninhabitants), Rwanda (US$7.3 billion, 7,609,000 inhabitants) or Burundi (US$3.8billion, 6,356,000 inhabitants).
Quick- and Slow-Moving Nations
All the above-mentioned elements conspire dramatically against Latin America’scapacity to respond. Alvin Toffler (1991) referred to the distinction betweenquick- and slow-moving nations. This gap, which has always existed, has nowbecome immense in the face of the exponential velocity of the developedeconomies. For Latin America, the consequences of this situation have beenstaggering. Whereas the developed economies are turning more and more intowhat are known as ‘knowledge-based economies’, Latin American ones are stillhindered by the same old limitations, limitations that require a more detailedexplanation.
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As Swedish economist and sociologist Gunnar Myrdal observed in 1968 inAsian Drama; An Inquiry into the Poverty of Nations, certain cultures are notparticularly apt for development. Their beliefs, ways of life and mental attitudesmay become gigantic obstacles to the achievement of higher levels of materialwealth. In reality, this idea that culture determines attitudes towards materialprogress was not a new one. As far back as the beginning of the 20th centuryMax Weber (1972) formulated a thesis within similar parameters that turned outto be fundamental for understanding the evolution of capitalism in the West.The originality of his thought lay precisely in the affirmation that culture actedas a conditioner of economy, and not the other way around, as Marx hadargued. Weber concentrated on a particular kind of culture, the one that arosefrom the Protestant revolution in Northern Europe. His thesis revolved arounda human being who, when motivated by compulsory tendencies of a religiousorigin, anxiously sought to obtain material success. What Myrdal and Weberhad in common was the idea that the role of the economy is subordinate toculture. Nevertheless, there was a fundamental difference between them. Weberdealt with the question of why some people seem destined to material wealth;Myrdal with why some seem destined to say poor. In the end, they were talkingabout two sides of the same coin.
Following the stance of Myrdal, American sociologist Oscar Lewis (1979)studied the reason for the material backwardness of the ‘Chicano’ population inthe United States. That led him to coin a dramatic new term: ‘the culture ofpoverty’. Among the causes for its existence were such factors as the lack of aparticipatory and organisational stimulus, the absence of a civic spirit, a fatalisticview of life, a tendency to live in the present without making a diligent effort toconstruct a future, a low level of initiative in the resolution of one’s ownproblems, a parochial view of events, and a high degree of dependence onsolutions handed down from above. It has to be said that the ‘culture of poverty’is in no way exclusive to the Chicano community of the United States. Lewis hadcome up with a precise description of the cultural traits of most of that immenseregion that lies south of the Rio Grande. Unfortunately, the conclusion is clear:while some are born into a culture that pushes them forward, for others cultureis a heavy burden that weighs them down. To our regret, Latin Americans areamong the second group. To make matters worse, the overall collapse of thesafety net embodied in social welfare programmes, which has occurred through-out the region as a result of the globalisation process, has seriously affected LatinAmerica’s most fundamental tool for overcoming its cultural limitations: edu-cation.
Brazil offers a good example. A number of Brazilian economists have giventheir country the fancy name of ‘Belindia’, a mixture of Belgium and India.While a small number of states in southeast Brazil have the economic impetusof Belgium, the rest of the nation is characterised by the poverty of India.Without reaching the prosperity of southeastern Brazil, most of the LatinAmerican countries mirror this dualism. They have established a few competi-tive clusters and niches but these have to bear the immense burden of under-development and poverty elsewhere. Globalisation has only served tostrengthen these dichotomies to an extreme degree, allowing a few dynamicclusters and niches to find a place in the international economy while placingimmense strain on many other sectors. Good examples of the former would be
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the electronic, telecommunications, entertainment and automotive sectors, whichhave proved highly successful in several countries of the region. Good examplesof the latter would be agriculture, the textile chain and shoe manufacturing.Unfortunately, the affected sectors are precisely those which employ a higherpercentage of the working population within the region. Not surprisingly, thehistory of Latin America over the past fifteen years has included numerouspolitical upheavals, social confrontations and governability crises. In thisenvironment, only small, homogeneous, manageable countries, which have higheducation levels and understand how to insert themselves into internationallycompetitive clusters and niches, will be able to succeed. In fact, in a globaleconomy that obliges nations to be quick footed, only the small and agile will beable to survive. As these become bigger and heavier, their possibilities ofadapting to a Darwinian environment are reduced and the burden of theexcluded frustrates any possibility of sustainable development (Toro-Hardy2002). Good examples of these quick-footed countries are Costa Rica and Chile.
Small Is Beautiful but There Are Exceptions
Costa Rica is a small Central American country that corresponds to the dimen-sions of Ireland. Both nations have populations of 3.8 million, while the labourforce in Costa Rica is 1.5 million compared with 1.6 million in Ireland. Havinga relatively homogeneous population, Costa Rica enjoys a level of civic culturethat stands apart in Latin America. Its literacy is among the highest in the regionwith a youth literacy of 98.3% and an overall literacy rate of 95.5%. It has 6,147primary and secondary schools and 50 universities. It is the oldest democracy inthe region with uninterrupted elections since 1949, and is the only country inLatin America (and probably in the world) to have successfully eliminated itsarmed forces. This is particularly meaningful in a subregion characterised by ahighly convulsive history. The country has emphasised the creation of aneducated work force within a friendly business environment, promoting freetrade agreements with as many partners as possible. According to Costa RicanInvestment Board, CINDE, the country shows the following results:
• It is among the top 30 leading exporters of high-tech products (HumanDevelopment Report 2001).
• It has been classified as one of the six most successful countries—along withChina, Hungary, Ireland, Mexico and South Korea—in attracting foreigndirect investment (FDI) and raising competitiveness (UNCTAD, 2002 WorldInvestment Report).
• It has been highly successful in developing economic clusters or niches, suchas electronics, medical devices and telecommunications. Electronics havecontributed US$650 million (1997–2002), equivalent to 22% of the total FDIaverage of US$2.9 billion during the same period. Total electronics exportsaccounted for US$1.3 billion, or 26% of total exports. At the same time, CostaRica has become a top medical device manufacturer, competing closely withIreland in this area. More than fifteen medical device companies are presentin Costa Rica, making this sector the most dynamic in the country, with anexport growth rate of more than 200%. The nation has also become a centrepoint for international telecommunications, having built a dense web of optic
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fibre cables and transforming itself into a thriving call centre spot that targetsthe US, Europe and Latin America.
• In the context of sustainable development, Costa Rica is ranked ninth out of142 countries in the Environmental Sustainability Index (World EconomicForum 2002).
If Costa Rica represents the smallest Latin American version of a quick-footed country, Chile would probably represent the ceiling of the quick footedwithin the region. With its 15 million inhabitants it is still a manageable country,with the capacity to avoid the dichotomies that plague larger nations. Thedictum ‘small is beautiful’ applies in both cases. To that we may add thestrength of its institutional framework and its civic culture. These translate intopatterns of continuity, allowing successive governments to follow a charteredroute.
With an adult literacy of 95.2%, 62 universities, 10,705 educational establish-ments and an organic interspersing of institutions and associations that givemeans of support to its society, Chile is prepared to face the challenges of globalcompetition. Its strategy has focused on building sound macroeconomic founda-tions and strong institutions, while promoting domestic savings, competitionand international integration. Its high level of investments is financed mainlythrough domestic savings, which represented 20.3% of its GDP in 2001. This hasbeen translated into a successful story of economic diversification. In themid-1980s more than 80% of Chile’s exports depended on copper. Today copperaccounts only for 38.7% of the country’s returns, while more than 2,500 productscomprise the remainder of the exports on offer. The private sector represents80% of the economy. Services account for more than half of Chile’s GDP, whilegoods account for 40%. At the same time, the country has followed an intelligentstrategy of market diversification, each of its main regional trade partnersrepresenting a proportionate percentage of its total exports: Latin America28.8%; Europe 23.8%; Asia 21.5%; US and Canada 20%. This diversificationprovides adequate balance to compensate for crises that may occur in anyspecific regional market, as is currently the case in Latin America or was the caseduring the Asian crisis at the end of the 1990s. It must be added that more than65% of Chile’s GDP is accounted for by its exports and imports (Chile’s ForeignInvestment Committee). Not surprisingly, Chile has sustained the highestgrowth rate in the region and one of the highest worldwide: 5.9% between 1990and 2001. During that same period, the country’s GDP multiplied by two.
Further up to the Chilean size, as a small and manageable country, theproliferation of the excluded generates burdens and contradictions hard toovercome. That is, dual societies in which, side by side, the Latin Americanversions of Wall Street and Madison Avenue coexist with the most primitiveThird World elements of society. Within the above context, we could only findone possible exception—Mexico. Insofar as its economy is increasingly integrat-ing into the developed economy of the United States, it has a clear, systematicand stable path. This does not override the gigantic internal dichotomiesderiving from its size, but it at least guarantees a sustainable strategy and asafety net, resulting from the interweaving of shared interests.
Mexico could never qualify as a quick-footed country: the burden of theexcluded is too overwhelming. Notwithstanding the dynamism of certain clus-
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Is There a Future for Latin America? 163
ters such as electronics, the automotive industry or the industrial density ofwhat has been called the ‘hot frontier’ with the United States or even thesuccessful diversification of this economy (in 1980 oil exports amounted toUS$10.4 billion and non-oil exports to US$7.59 billion, whereas in 2002 oilexports amounted to US$14.5 billion and non-oil exports to US$146.2 billion),the social inequalities are too big and too difficult to ignore. There is stilla substantial part of the population among whom the cultural factor mani-fests itself as a heavy weight militating against any possibility of sustainabledevelopment. Mexico is the typical example of a country in which theFirst World and the Third World coexist amidst gigantic tensions. But in themidst of its contradictions, integration into the North American Free TradeAgreement (NAFTA) has provided Mexico with some fundamental toolslacking in most Latin American economies: continuity of policies, security ofmarkets, a permanent attraction to FDI and an economic safety net.
Continuity of policies implies that Mexico is not subject to the comingsand goings so typical of Latin America, which so often frustrate economicstrategies. Mexico has made a long-term bet with NAFTA, supported by anational consensus that can be considered non-reversible. Security of marketsmeans not being vulnerable to the uncertainties that plague Latin Americaneconomies in the midst of the complexities posed by international trade.Being a neighbour and privileged trade partner to the US presents very obviousbenefits. The permanent attraction to FDI as a result of integration into thelargest economy in the world implies not being susceptible to the suddenfalling out of love of international capital. A safety net symbolized by thelong-term commitment by the American authorities to prevent the fall ofa main economic partner. All of the above makes Mexico exceptional withinthe region.
In sum, Latin America presents two clear poles of viability. On one sideis the possible Singapore, Finland or Ireland of the region, meaning smallcountries with educated populations and civic responsibility patterns.Within this context, we could include Chile and Costa Rica. Uruguay couldalso become a candidate for this group, given its 3.5 million inhabitants, itssocial and racial homogeneity, its level of literacy (98%) and its out-standing educational patterns. It is, however, too much of a welfare state witha traditional agrarian and cattle-raising economy, tightly linked to its twofrequently-in-trouble main trading partners and neighbours. Many funda-mental changes would have to be made for Uruguay to be able to turn into aquick-footed country. At the other extreme we have Mexico, with its veryparticular characteristics. Between these two poles, we find a vulnerableregion confronting the challenges of globalisation, a region condemned to livefrom crisis to crisis with gigantic social contradictions, torn apartby the demands of competitive pressures, and abandoned by social protectionnets.
Where should and could Latin America look in search of hope? The answerscould come from either above or below. From above, a change in internationaleconomic conditions might create a less predatory and more flexible environ-ment. From below, the promotion of social capital within the region could bepromising.
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Where to Look in Search of Hope
Let’s begin the search from above. In its projections for future scenarios whichappeared in the year 2002, the Shell Group of Companies foresaw two possibleroutes to 2020. The first scenario (called ‘business class’) represents the cont-inuation of a fully integrated global economy and the homogenisation of valuesand cultures with an increasingly weak state always the victim of pressureson many different levels. Within this frame of reference, power will remaintilted in favour of the big corporation, and the nation-states will keep competingamong themselves to attract foreign investment. In this scenario, the volatilityof financial markets will continue to be the norm and the markets will equallypunish the guilty, the innocent and the vulnerable.
The second scenario (‘the prism’) entails, on the contrary, substantialchanges. While this second route does not imply an abandonment of‘modernity’, it does foresee the emergence of a pluralist modernity, the pos-sibility that in a world economic scene increasingly divided into regions,each region may have its own response and way of doing things. Thus, therelations among regional blocks will determine the essential shape ofthe world economic order, with international financial bodies losingtheir influence. Within a context in which respect for cultural particularities isthe order of the day, the nation-states will recover much of their lost influence.What is more, it is not the nation-states that will have to fight to makethemselves attractive to the great multinational corporations. Instead, thecorporations will have to compete against each other in order to better under-stand and attend to the host nations and communities. In fact, the success of thecorporations will be measured by their capacity to adapt to this pluralistatmosphere.
This vision, it must be added, would be in harmony with the positionadopted by the developing nations during the meeting of the World TradeOrganisation in Doha, Qatar, under the leadership of India, Brazil and SouthAfrica and later at Cancun under the banner of the so called G-20. Should thisscenario become a reality, Latin America would have much more room formanoeuvre and less pressure on its shoulders.
From below, Latin America will have to emphasise the search for theso-called ‘fourth capital’. In accordance with the followers of the ‘socialcapital’ school, (sustainable) economic development has traditionally focusedon three elements: natural capital (raw materials), physical capital (manu-facturing) and human capital (knowledge). They argue that there is a fourthelement that unites the other three and is critical for development: socialcapital. This may be defined in a double sense. In the first, it is the organicinterweaving of the institutions and associations that sustain a society. In thesecond, it is the set of values and rules that determine the framework forinterpersonal relations within that society, among which a sense of trustand civic responsibility stands out. The closer a society comes to this idealof structured institutions within the context of interpersonal trust and civicculture, the greater will be its social capital. ‘Social capital seems to be not onlythe sum of the institutions, rules, norms and attitudes that shake the inter-actions of actors within a society, but the glue that holds them together’(Grootaert 1998).
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Is There a Future for Latin America? 165
Authors like James Coleman (1998), Robert D. Putnam (2002), Mancur Olson,Jr (1986) and Christiaan Grootaert (1998) have been developing and articulatingthe concept of social capital. At the same time, the World Bank has shown agreat interest in the subject.
The challenge of development agencies such as the World Bank is to opera-tionalise the concept of social capital and to demonstrate how and to what degreeit affects development outcomes. Ways need to be found to create an environmentsupportive of the emergence of social capital as well as to invest in it directly.These are the objectives of the Social Capital Initiative (SCI). With the help of agenerous grant from the Government of Denmark, the Initiative has funded a setof twelve projects which will help define and measure social capital in betterways, while finding ways to improve monitoring of the stock, evolution andimpact of social capital. (Grootaert 1998, 2)
For most countries in Latin America, the ideas formulated by the school of socialcapital can only lead to sombre reflections. If we accept that the fundamentalbases of development are raw materials, manufacturers, knowledge and theinterweaving of institutions, associations and civic culture, then it becomes clearthat Latin America is at a great disadvantage because most of its nations onlyshine with respect to natural capital. The region thus has to place an emphasison creating the three other types of capital. The attainment of physical capitalrequires the creation of a varied set of conditions that encourage economicdiversification, the expansion of the industrial base and the incorporation ofaggregate value in exports. Human capital must be based on the sustainedgrowth of education, science and technology. And social capital must rest on therestructuring and strengthening of institutional and associational frameworks aswell as in the promotion of civic culture patterns and interpersonal trust. Of allof these, however, it is the fourth kind of capital which must be given priority.As history has repeatedly shown, even societies that are short of raw materialsmay achieve true development and, with this, industrial growth and knowledge,by having sound institutions, patterns of association and a genuine civic culture.The active search for and promotion of this fourth capital should be aparamount task for Latin America. This is the path that has to be followed inorder to overcome the ‘culture of poverty’ that plagues the region and frustrates,again and again, strategies of development.
At the end of the day, if Latin America is to have a future that transcendsmore than three or four successful stories and a few competitive clusters andniches, there must be a fundamental cultural change from within combined witha less predatory and friendlier international atmosphere. Gilpin (1987), Attali(1990) and Ruffin (1991) have written about the emergence of a dichomousworld divided between spaces of prosperity and spaces of backwardness andregression. Within current trends, Latin America would be condemned to bepart of a space of backwardness and regression. Let’s hope that this is not thecase.
References
Albert, M. (1991) Capitalism contre Capitalism (Paris, Editions du Seuil).Attali, J. (1990) Lignes d’Horizon (Paris, Fayard).
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166 Alfredo Toro-Hardy
Chile’s Foreign Investment Committee, http://www.foreigninvestment.cl/http://www.cinver.cl
CINDE (Costa Rican Investment Board), http://www.cinde.or.crColeman, J. (1998) Foundations of Social Theory (Cambridge, MA, Belknap Press).Friedman, G. and Lebard, M. (1981) The Coming War with Japan (New York, St Martin’s
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Kennedy, P. (1994) Preparando para o Seculo XXI (Rio de Janeiro, Editora Campus).Lewis, O. (1979) Children of Sanchez (New York, Vintage).Myrdal, G. (1968) Asian Drama; An Inquiry into the Poverty of Nations (New York,
Pantheon).Olson, Jr, M. (1986) The Rise and Decline of Nations: Economic Growth, Stagflation and Social
Rigidities (New Haven, Yale University Press).Putnam, R.D. (2002) Democracies in Flux: The Evolution of Social Capital in Contemporary
Society (Oxford, Oxford University Press).Ruffin, J.C. (1991) L’Empire et les Nouveaux Barbares (Paris, Fayard).Shell Group of Companies (2002) People and Connections: Global Scenarios to 2020 (London).Thurow, L. (1996) The Future of Capitalism: How Today’s Economic Forces Shape Tomorrow’s
World (New York, William Morrow).Toffler, A. (1991) El Cambio de Poder (Barcelona, Plaza & Janes Editores).Toro-Hardy, A. (2002) The Age of Villages: The Small Village vs. the Global Village (Bogota,
Villegas Editores).Weber, M. (1972) The Protestant Ethic and the Spirit of Capitalism (London, Routledge).World Bank World Development Report 2000/2001 (Oxford, Oxford University Press).
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