How neoliberalism vandalized Latin America

November 21, 2018

Why would people in Central America endure the enormous risks and hardships of the migrant caravan’s journey north? Because of the economic and social devastation caused during the neoliberal — which the U.S. government is predominantly responsible for. In this article based on a speech given to an ISO meeting in Chicago, Natalia Segura explains why the roots of the migrant crisis go back decades.

I WANT to begin by naming the region I am writing about as America, I don’t mean the United States of America — I mean America, the continent.

For us in Latin America, America is one continent, not a single country. As Eduardo Galeano writes in his book Open Veins of Latin America, “We even lost the right to call ourselves Americans.”

The reason to talk about the continent of America, not the country of the United States of America, is that many people continue to live with the illusion that a simple change of elected leadership in a Latin American country can bring a fundamental change for the region. I would argue that this is not possible.

When we focus only on who is elected into power in one country or another in America, there can be a tendency to ignore the ruling class forces that hinder the possibilities for social change and the working class forces that fight for liberation.

Soldiers watch over leftists and labor organizers in Chile’s National Stadium in 1973
Soldiers watch over leftists and labor organizers in Chile’s National Stadium in 1973

We have seen over the past decades that even when a populist leader — even one who holds many social justice and left-wing ideals that threaten the interests of the bourgeoisie — is elected in Latin America, forces like the International Monetary Fund, World Bank and international corporate interests quickly start to establish limits to what reforms are possible, and they force governments to embrace more neoliberal policies.

When governments don’t follow this “advice,” leaders can be pushed out — by any means necessary, as we saw in Honduras during the Obama years, for example.

How Neoliberalism Began in Latin America

In order to understand the role of international capital in Latin America, we need to go back to the beginning of colonialism in America. After the Europeans arrived, conquered new territories and began the “discovery of America,” the resources of the colonies were managed in different ways.

To take farming as an example, before the “conquest” of America, the people of each country cultivated all they needed to survive. Colonialism changed multicrop agriculture to the monoculture system we see today.

The land of the new conquered territories was used to cultivate specific crops to satisfy the needs of the colonizers, not the people living there — and these crops were in turn exported to Europe and/or the United States at a low price. In addition, colonies became a place to extract raw materials.

This is why Latin America didn’t develop a more self-sustaining multicrop system and balanced economies. Examples of the monocultural-extractive system include: Colombia and bananas/coffee, Cuba and sugar cane, Venezuela and petroleum, and Brazil and rubber trees/coffee.

Monoculture and mineral extraction in these underdeveloped countries are also used as a mechanism of dependency, because their economies are now managed by corporate interests based in the U.S. and/or European countries. For example, we learned how dependent Puerto Rico was on the U.S. after Hurricane María in 2018: most of the island’s food was imported.

This means of exercising power over “conquered” territories was transformed from physical occupation in the colonies, termed colonialism, to economic control through the imposition of policies that we identify as neoliberalism. We see that the same purpose was carried out in a different way.

How Neoliberalism Developed in South America

One way to illustrate how neoliberalism became dominant in Latin America is to look at what happened in Chile in the 1970s.

In 1970, Salvador Allende became the democratically elected president of Chile. As president, he passed socialist economic reforms, but more importantly, his election represented an awakening of the people themselves, who were organizing from below for a socialist society.

One example of this was the way that assemblies of workers were formed, based especially in factories, just like the soviets in Russia came together during the revolutions of 1905 and 1917. These councils — or “cordones” in Spanish — were making decisions about conditions of life and work across the country.

But Allende and the people of Chile weren’t the only ones who were waking up. The U.S. awoke up to the threat that Chile’s revolutionary struggles could lead to a wave of governments in Latin America resisting neoliberal policies.

So it launched Operation Condor. The U.S., with assistance from militaries from several Central and South American countries, including Chile, Argentina, Paraguay, Uruguay, Brazil and Bolivia, plotted how to take power away from the people and keep it in the hands of the bourgeoisie.

In 1973, with help of the CIA, Chilean Gen. Augusto Pinochet staged a coup to overthrow Allende’s democratically elected government. Allende was killed, and Pinochet took power as the dictator of Chile. His reign lasted until 1990.

In addition to the U.S.-backed coup in Chile, the “Chicago Boys” — a group of Chilean economists who were trained in neoliberal economic policies at the University of Chicago — returned to Latin America, where they took high positions in the government under Pinochet. The economic policies they promoted deepened the implementation of neoliberalism, which would gain a tighter grip across the region.

What Is Neoliberalism and How Is It Implemented?

The underlying objective of neoliberalism is to create better conditions for capitalist accumulation, and in particular by having a minimalist state that places the free market above all other considerations.

Neoliberalism prioritizes the interests of financial capital. One of the methods used is to concentrate capital in the hands of very few capitalists by deregulating the economy and allowing the expansion of monopolies. A second feature of neoliberalism is austerity, which means a program of spending cuts, reductions of taxes or a combination of both.

Deregulation and austerity in the economy of a country opens the way for privatization of public enterprises and firms, and it increases the role of the private sector in both the economy and society. Examples of public services targeted for privatization include education; health care; water, gas, electricity, heating and other utilities; and public transportation.

This year alone, in Argentina, Colombia and Puerto Rico, there have been mass protests against the privatization of universities and the lowering of state investment in higher education, as well as in schools.

Neoliberalism also leads to strict control over wages to drive them down.

In the U.S. and Latin America, big companies and multinational corporations like McDonald’s lobby for a minimum wage to be kept as low as possible. Both multinationals and governments work together to make sure that profits rise and workers are paid as little as possible.

Another component of neoliberalism is opening up the economy to foreign interests and a liberalization of the flow of commodities and foreign capital — but not labor — across borders.

We can see clearly how this policy was applied in Puerto Rico after Hurricane María. The destruction from the storm served as the excuse for welcoming foreign investment to an even great extent. As a result of neoliberalism, the Puerto Rican economy is even further away from being managed by or for the people of Puerto Rico than ever. This has resulted in mass emigration from the country.

As a result of neoliberalism, multinational corporations play an outsized, undemocratic role in governments and societies across Latin America.

Free trade agreements established under neoliberalism make it easier for multinational corporations to move across borders. Obviously, these agreements are not free. The big winners, as always under capitalism, are the multinational corporations — usually based in more powerful countries like the U.S. — while the price is paid by small farmers and workers of all countries, but especially the weaker ones.

Because of the North American Free Trade Agreement (NAFTA), U.S. businesses are able to sell goods cheaply, undermining local economies like Mexico’s. As a result of the agricultural agreements in NAFTA, massive numbers of small Mexican farmers went bankrupt.

Mexico has been a self-sufficient corn producer for hundreds of years, but suddenly, corn growers were in competition with corn that was coming from the U.S. at a much lower price because the U.S. government subsidized it.

One of the results of this “free trade” was a massive number of farmers losing their livelihood and being forced to leave their country in search of a better life. Many emigrated to the U.S.

Of course, we didn’t hear much in the news about these Mexican farmers. The discussion of free trade has been one of politically divisive rhetoric and racism.

Misinformation published through the mass media is also a tool of neoliberalism. The U.S. media collaborated with politicians to spread the idea that poverty in Latin America is the result of things like overpopulation — and to then propose solutions like forced sterilization of poor women.

We saw this carried out not too long ago in Puerto Rico, when women were convinced that sterilization would help them and their country advance economically — large numbers of women were sterilized as a result.

Resistance to Neoliberalism

Since the rise of neoliberalism in Latin America, many countries have elected officials on platforms to expand the public sector and support social issues. Unfortunately, these changes in government didn’t go far enough. Left-oriented presidents have been able to pass laws that improve the quality of life of working people, but the reforms are limited and don’t represent a complete revolution.

Evo Morales in Bolivia (2005 to today), Hugo Chávez (1999 to 2013) and Nicolás Maduro (2013 to today) in Venezuela, Luiz Inácio Lula da Silva in Brazil (2003 to 2011) and Manuel Zelaya in Honduras (2006 to 2009) have all been associated with attempts to implement various reforms, including:

Free education for all children
Subsidies to small farmers
Reduction of bank interest rates
An increased minimum wages (in Honduras under Zelaya, it rose by 80 percent)
School meals guaranteed for children from poor families
Domestic employees integrated into the social security system
Direct state assistance for families in extreme poverty
Free electricity supplied to those in the most need
National control of natural resources

After some years of these policies, poverty was reduced in each of these countries. In Honduras under Zelaya, poverty rates declined by almost 10 percent in the first two years of his government.

But though these governments, often given the label the “pink tide,” tried to slow or stop many neoliberal policies, they still presided over economies based on capitalism — and particularly economies that remained dependent on exporting natural resources and cheap commodities.

Thus, oil revenues were used to fund many reforms under Chávez in Venezuela, but when the price of oil plummeted on the international market, many of these reforms could not be sustained.

One lesson from these left movements in Latin America is that no one can make a revolution on their own in isolation from the larger world economy. People need to join forces across borders, and the revolution must also be international.

Consequences of Neoliberalism

Unfortunately, as we know, the pink tide has not been enough to defeat neoliberalism in Latin America. As a consequence, people all over Latin America have seen their countries plunged into poverty, and they are desperate for better living conditions. This is leading to a mass migration of refugees fleeing north in the search for something better.

This, along with fears about violence and political repression, is what’s behind the decision of the people from Honduras to flee with the caravan, journeying toward the U.S.

A pattern has developed over the last several decades that continues to play out in Latin America:

First, people get tired of the economic and social violence they are subjected to as a result of imperialism and neoliberalism.

Second, a popular candidate with left ideas appeals to the masses, gets elected to power and attempts to satisfy people’s needs through a series of reforms.

Third, the new leadership goes against institutions like the IMF and U.S. multinational corporations by making reforms that diminish inequality. But the leadership isn’t able to follow through with the social change that was promised as neoliberal institutions begin to push back and apply pressure to halt reforms.

Finally, if the leadership doesn’t reverse course and follow neoliberal policies, the head of state can be thrown out of power by a military coup supported by the U.S. government and multinationals, or even in some cases threatened with an outright imperialist invasion.

In the end, for real change to take root and thrive in Latin America , a revolution from below, across many countries, is needed. Reforms to the neoliberal policies under capitalism or partial revolutions won’t be enough.

While we stand with those resisting neoliberalism and imperialism across Latin America today, we also want to help build the seeds of a revolutionary struggle at the same time.

Further Reading

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