The Changing Political Economy of the Third World 9781685855963

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THE CHANGING POLITICAL ECONOMY OF THE THIRD WORLD

THE CHANGING POLITICAL ECONOMY OF THE THIRD WORLD edited by

Manochehr Dorraj

A?

LYN

N E

R I E N N E R PUBLISHERS

B O U L D E R L O N D O N

Published in the United States of A m e r i c a in 1995 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London W C 2 E 8LU © 1995 by Lynne Rienner Publishers, Inc. All rights reserved Library of C o n g r e s s Cataloging-in-Publication Data T h e c h a n g i n g political e c o n o m y of the Third World / edited by M a n o c h e h r Dorraj. p. cm. Includes bibliographical r e f e r e n c e s and index. ISBN 1 - 5 5 5 8 7 - 5 5 4 - 8 ISBN 1 - 5 5 5 8 7 - 5 7 7 - 7 (pbk.) 1. D e v e l o p i n g c o u n t r i e s — E c o n o m i c conditions. 2. D e v e l o p i n g c o u n t r i e s — S o c i a l conditions. 3. D e v e l o p i n g c o u n t r i e s — P o l i t i c s and g o v e r n m e n t . I. Dorraj, M a n o c h e h r . H C 5 9 . 7 . C 3 4 3 8 1995 330.9172'4—dc20 94-31378 C1P British C a t a l o g u i n g in Publication Data A C a t a l o g u i n g in Publication record for this book is available from the British Library.

Printed and b o u n d in the United States of A m e r i c a

©

T h e paper used in this publication m e e t s the requirements of the American National Standard for P e r m a n e n c e of Paper for Printed Library Materials Z39.48-1984. 5 4 3 2 1

For Patsy and Katti

Contents

List of Tables and Figures Acknowledgments 1

ix xi

Introduction: The Changing Context of Third World Political Economy Manochehr Dorraj

1

Part 1 Regional Perspectives on Third World Political Economy 2

3 4

5

6

7

Debt, Democracy, and Neoliberalism in Latin America: Losses and Gains of the "Lost Decade" Michael W. Foley

17

The Changing Political Economy of the Caribbean Margaretta DeMar

45

The Political Economy of Centralization and Delayed Capitalism in Sub-Saharan Africa Antony T. K. Gadzey

85

State, Petroleum, and Democratization in the Middle East and North Africa Manochehr Dorraj

119

The Political Economy of Growth in Southeast and Northeast Asia Richard F. Doner and Gary Hawes

145

The Changing Political Economy of China Robert E. Gamer

187

Part 2 8

Issues in Political Economies of the Third World

Foreign Aid in the 1990s: The New Realities John W. Newark

vii

223

viii 9

Contents The Third World Agenda in Environmental Politics: From Stockholm to Rio Marian A. L. Miller

10 Women Under Layers of Oppression: The (Un)Changing Political Economy of Zehra F. Arat Index About the Contributors About the Book and Editor

245

Gender 265 295 306 308

Tables and Figures

Tables 2.1 2.2 2.3 2.4 2.5 3.1

3.2 3.3 3.4 3.5 3.6 3.7 4.1 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 8.1 10.1 10.2 10.3

Share of Exports in GDP for Selected Latin American and East Asian Countries Debt Service Ratios T e r m s of Trade, 1 9 7 0 - 1 9 8 8 Growth in Manufacturing and Exports, 1 9 7 0 - 1 9 8 8 Growth of Production, 1 9 6 5 - 1 9 8 0 and 1 9 8 0 - 1 9 8 7 Energy Intake Requirement Ratios and Percentage of Households Deficient in Intake, Barbados and Trinidad and Tobago, 1969 Jamaican Income Distribution, 1958 Per Capita Income and Growth in Selected Caribbean Countries UNDP Human Development Index and World Rank Land Distribution in Jamaica, 1968 and 1978 Jamaican Class Distribution, 1973 Shares of Labor Income Accruing to T o p 20 Percent in Jamaica Basic Economic Indicators for Sub-Saharan States Average Annual Percentage GDP Growth Structure of Production Export Growth Rates Product Composition of Pacific Basin Developing-Country Exports, 1963 and 1988 H u m a n Capital Indicators Export Price Index Numbers of Primary C o m m o d i t i e s Foreign Direct Investment Inflows, 1 9 7 5 - 1 9 8 5 Foreign Direct Investment as Share of Total Investment Net ODA Flows, 1 9 7 0 - 1 9 9 1 Literacy and Education in Developing Countries Employment and Wages Mortality and Population

ix

22 26 27 28 29

51 51 67 68 68 69 69 108 146 147 148 148 149 163 164 164 227 266 267 269

Tables and

X

10.4 10.5

Figures

Fertility and Maternity in Developing and Industrial Countries

277

Patterns o f F e m a l e Participation in the L a b o r F o r c e

280

Figures 4.1

Export Prices for Four M a j o r S u b - S a h a r a n African Commodity Exports, 1961 - 1 9 8 7

4.2

Comparative T e r m s o f Trade B e t w e e n S u b - S a h a r a n A f r i c a

4.3

Gross National Income per Capita in S u b - S a h a r a n A f r i c a and

and All L o w - I n c o m e Countries Other Developing Countries 4.4

110 111 112

Rate o f Return on Investment in S u b - S a h a r a n A f r i c a and South Asia

113

Acknowledgments

I would like to express my gratitude to the authors for their contributions, patience, and cooperation, making the successful completion of this volume possible. I owe a debt to several friends and colleagues who agreed to review some of the chapters and share their critical comments with me and the contributors. For obvious reasons they will remain anonymous. My heartfelt thanks go to Albert Harris, who initiated this project with me and assisted in editing some of the chapters and provided invaluable insights. Unfortunately, due to unforeseen circumstances, he had to withdraw from the project. I am grateful to my colleagues in the Political Science Department at Texas Christian University and to Dean Michael McCracken, Vice Chancellor Larry Adams, and Dean Joe Helmick, who provided me with the necessary financial assistance to do research at the OPEC library in Vienna, Austria, for this project. I would like to express my appreciation to Martha Peacock, acquisitions editor at Lynne Rienner Publishers, for her exemplary professionalism and cooperation, and to Michelle Welsh-Horst, also at Lynne Rienner, for her excellent editorial suggestions. Thanks are also due to the anonymous reviewer for providing insightful and constructive criticism. I must express my gratitude to Dr. Joe Law for his meticulous editorial assistance. Special thanks are due to Marilyn Eudaly for her computer assistance and Carmelita Shepelwich for her patience and diligence as she assisted me with the preparation of the final draft of the manuscript. Last but not least, I thank my wife and daughter for their love and support. Manochehr

xi

Dorraj

Introduction: The Changing Context of Third World Political Economy Manochehr

Dorraj

In the p o s t - C o l d W a r era, as the axis of global conflict has shifted f r o m East-West competition to North-South confrontations, developments in the T h i r d W o r l d have a s s u m e d a new s i g n i f i c a n c e . For e x a m p l e , in an increasingly interdependent world, developing countries import nearly onethird of U.S. exports and are the source of nearly 30 percent of total U.S. imports. M o r e than 73 percent of U.S. petroleum imports originate in the developing countries, which also account for more than 4 0 percent of U.S. iron, steel, and electronic machinery exports. 1 M o r e o v e r , the rise in interest rates to nearly 20 percent during the first term of the Reagan presidency and the mounting debt crisis in Mexico, Brazil, Argentina, and elsew h e r e in Latin America substantiate the reality of global interdependence. C o m p r e h e n d i n g this global i n t e r d e p e n d e n c e may also shed light on the c h a n g e of c o u r s e in those countries that e m b r a c e d a socialist path over capitalist alternatives as an avenue to achieve e c o n o m i c growth and prosperity through self-reliance and central planning. T h e globalization of industry and technology and the e m e r g e n c e of an electronically monitored financial system have allowed multinational corporations to m o v e capital, labor, and t e c h n o l o g y across borders more rapidly. T h i s new internationalization of capital, standardization of technologies, and universalization of labor processes has induced further integration of the Third World in a global capitalist e c o n o m y . Driven by ever larger profit margins and intense competition, many multinational corporations continue to seek expanding sources of c h e a p labor, low taxes, and lax environmental and labor laws; as a result, they m o v e their plants and o p e r a t i o n s to the d e v e l o p i n g nations. T h e old international division of 1

2

Introduction

labor is disappearing, and a new one is emerging. The classical division of labor in which developing nations were the exporters of raw materials and importers of goods from more advanced countries may have ended. The mutual integration of production, migration of labor, capital, and transfer of technology has ushered in a new international division of labor. 2 In other words, with internationalization of domestic capital, universalization of labor processes and consumer taste, and the standardization of commodities, increasingly economic decisionmaking has also become transnational. The old ideas of national autonomy, economic independence, self-reliance, and selfsufficiency have become obsolete as the national economies become increasingly integrated and the state becomes the agent of the international system. To survive in this competitive and interdependent world, Third World economies have become more commercialized, mechanized, and standardized in the process. 3 The new international division of labor based on the law of comparative advantage has transformed many Third World economies from mere suppliers of raw materials into the manufacturing of counterparts already available in the North. T h e global assembly line, the global consumer society, and the unceasing march of new commodities that continue to alter and mediate human relations are also the realities that are molding Third World societies. This process, however, is an uneven one, as parts of the Third World, particularly East Asia, rank among the fastest growing economies in the world, while others, such as Africa, struggle to survive. A s the Third W o r l d — a label given to characterize developing c o u n tries in a bipolar world during the Cold War—itself polarizes into richer and p o o r e r nations with w i d e l y divergent political s y s t e m s and social agendas, it has b e c o m e increasingly clear that the term has b e c o m e obsolete. For example, the newly industrializing economies of East Asia (NIES) (Singapore, South Korea, T a i w a n , and Hong Kong), are a m o n g the fastest g r o w i n g e c o n o m i e s in the w o r l d and possess higher per capita gross national p r o d u c t s (GNPS) than Russia, Eastern Europe, and s o m e S o u t h e r n E u r o p e a n countries such as Portugal. On the other end of the scale t h e r e are A f r i c a n countries w h o s e GNPS are a m o n g the lowest in the w o r l d . W h e r e a s the East Asian e c o n o m i e s grew in the 1980s at the annual rate of 7.4 percent, Africa grew at a rate of only 1.7 percent. 4 Other statistics indicate that in the 1960s, South Korea had a per capita GNP exactly the s a m e as G h a n a ' s (U.S.$230), w h e r e a s today it is ten to twelve times more prosperous. In fact, South Korea is on the road to b e c o m i n g one of the richest countries in the twenty-first century. 5 T h e NIES of East Asia also e n j o y some of the highest literacy rates in the w o r l d . T h e 95 percent literacy rate in South Korea, for e x a m p l e , is similar to that of Spain, w h i l e N i g e r i a ' s literacy rate is only 14 percent. 6 Such profound disparities permeate the entire region. M i n d f u l of the c h a n g e s in global politics and the polarization in the political economy of the developing nations, but lacking a better terminology,

Introduction

3

we use the term Third World in this book to refer to the developing countries of Asia, Latin A m e r i c a , Africa, and the Middle East. T h e colossal changes in the international arena in the past decade have transformed global and Third World politics f u n d a m e n t a l l y . T h e collapse of the Soviet Empire, the end of c o m m u n i s m in the f o r m e r Soviet Union and Eastern E u r o p e , w h i l e depriving s o m e of the T h i r d W o r l d states of possible allies, has also created new c o m p e t i t i o n for others as they find themselves competing with the former Eastern bloc for foreign investment, loans, and export markets. In the new strategy of Western powers, the integration of the f o r m e r Soviet Union, Eastern Europe, and China into the world capitalist system assumes the top priority. Hence, the division of the world into trade blocs and the rise of regional e c o n o m i c powers (European c o m m u n i t y led by G e r m a n y , North Atlantic f r e e trade zone led by the United States, and the Asian economic bloc led by Japan) pose new dilemmas and challenges to the Third World. How can they remain competitive when most of them, with the exception of the m e m b e r s of the ASEAN (Association of S o u t h e a s t Asian Nations) trade bloc and Mexico, are not m e m b e r s of these trade blocs? T w o options remain available to the Third W o r l d . First is the SouthSouth regional trade. In the 1980s there was a m a j o r r e a s s e s s m e n t of dev e l o p m e n t strategies and trade policies. In A f r i c a , the M i d d l e East, and Latin A m e r i c a many countries have abandoned e c o n o m i c nationalism and import substitution a n d have opted for trade liberalization and o u t w a r d looking, export-led e c o n o m i c strategies. By the 1990s multilateralism was on the w a n e , and v a r i o u s less d e v e l o p e d c o u n t r i e s entered into bilateral and regional trading arrangements. The Southern Cone C o m m o n Market in Latin A m e r i c a , the Caspian Sea trading bloc in the M i d d l e East, and the Central A f r i c a n E c o n o m i c Community are a few e x a m p l e s . 7 However, the limitations of T h i r d W o r l d e c o n o m i e s , their need for high t e c h n o l o g y driven industrial g o o d s that can only be imported f r o m the industrial nations, and the p r e v a l e n c e of war and conflict render the viability of regional trading b l o c s a problematic one. T h e s e c o n d option is the possibility of siding with one of the three trading blocs: E u r o p e a n C o m munity (EC), North American Free Trade A g r e e m e n t (NAFTA), or ASEAN. If this scenario materializes, the Third World is likely to play only a minor role in the partnership of this tripolar world. A s many Third World economies abandon the inward-looking nationalist, populist, and socialist policies of the past and e m b r a c e outward-looking a p p r o a c h e s in their trade and development strategies, they will be further integrated in the world capitalist e c o n o m y . While s o m e may benefit f r o m such integration and prosper, others may b e c o m e more vulnerable to crises and f l u c t u a t i o n s prevalent in capitalist e c o n o m i c cycles. I m p o v e r ished and d e p e n d e n t , with the exception of the newly industrializing economies, much of the Third World is ill-equipped to reap the benefits of

4

Introduction

g l o b a l i n t e r d e p e n d e n c e . A s the s o u r c e of w e a l t h i n c r e a s i n g l y c h a n g e s f r o m raw m a t e r i a l s to k n o w l e d g e and e x p e r t i s e , other f a c t o r s s u c h as red u c e d e c o n o m i c i m p o r t a n c e of labor in the a g e of r o b o t i c s r e v o l u t i o n and i n f o r m a t i o n and s e r v i c e i n d u s t r i e s w o u l d lead to f u r t h e r d e c l i n e in s i g n i f i c a n c e of m a n y less d e v e l o p e d n a t i o n s . 8 T h e lack of n e c e s s a r y c a p i t a l , high t e c h n o l o g y , skilled labor, a n d m o d e r n i n f r a s t r u c t u r e m a k e it d i f f i c u l t for m a n y T h i r d W o r l d c o u n t r i e s to p a r t i c i p a t e in the c o m m u n i c a t i o n and i n f o r m a t i o n r e v o l u t i o n a n d h a r v e s t its f r u i t s . H e n c e , s o m e of the traditional c a u s e s of u n d e r d e v e l o p m e n t , s u c h as the f l i g h t of c a p i t a l a n d exc e s s i v e a r m s e x p e n d i t u r e , c o n t i n u e to e s c a l a t e . E a c h y e a r $ 4 3 b i l l i o n f l o w s out of A s i a , A f r i c a , and Latin A m e r i c a to the First W o r l d . T h e adversarial e f f e c t of m a s s i v e military e x p e n d i t u r e s c o n t i n u e s to h a m p e r e c o n o m i c d e v e l o p m e n t by d e v o u r i n g a l a r g e s h a r e of n a t i o n a l b u d g e t s . T h e annual Third World defense expenditure for 1988 alone, for example, a m o u n t e d to $ 1 5 0 b i l l i o n . T h i s f i g u r e h a s r e m a i n e d m o r e or less the s a m e in the 1 9 9 0 s . A s the c o s t of h i g h t e c h n o l o g i e s c o n t i n u e s to s o a r a n d the price of such raw m a t e r i a l s as oil, c o p p e r , a n d coal either d e c l i n e s or d o e s not k e e p pace, the p a u p e r i z a t i o n of the region i n t e n s i f i e s . C o n s e q u e n t l y , the S o u t h b e c o m e s even m o r e d e p e n d e n t on the North than a c e n t u r y a g o under colonial r u l e . 9 N e i t h e r can the S o u t h h o p e f o r a t r i c k l e - d o w n e f f e c t to b e n e f i t f r o m the t e c h n o l o g i c a l r e v o l u t i o n in the N o r t h . T h e e n d e m i c poverty w o u l d not e n a b l e it to a f f o r d s u c h t e c h n o l o g y . H e n c e , the m o u n t i n g debt crisis in m a n y parts of the T h i r d W o r l d is a n o t h e r obstacle to d e v e l o p m e n t and econ o m i c g r o w t h . A c c o r d i n g to o n e a c c o u n t , " s i n c e the m i d - 1 9 8 0 s , the interest a n d principal on loan r e p a y m e n t s f r o m T h i r d W o r l d to First W o r l d has physically e x c e e d e d (by $ 1 0 billion or m o r e a n n u a l l y ) the capital f l o w i n g into the T h i r d W o r l d f o r d e v e l o p m e n t p u r p o s e s . " 1 0 T h e debt crisis e x a c e r bates the e n d e m i c poverty of the region a n d has led to the actual d e c l i n e of living s t a n d a r d s . 1 1 N o r can d e m o c r a t i z a t i o n or d e m o c r a c y act as a p a n a c e a f o r the p r o b l e m s of u n d e r d e v e l o p m e n t a n d r a m p a n t p o v e r t y . T h e r e c e n t w a v e of global d e m o c r a t i z a t i o n h a s had s o m e n o t a b l e s u c c e s s , e s p e c i a l l y in parts of Latin A m e r i c a . H o w e v e r , i n s o f a r as d e m o c r a t i z a t i o n is not a c c o m p a n i e d with m o r e e q u i t a b l e d i v i s i o n of w e a l t h , it is b o u n d to r e m a i n s h o r t - l i v e d and unstable. H e n c e , other c o r r e l a t e s of d e m o c r a c y , such as a high level of literacy, the a b s e n c e of internal s t r i f e a n d e t h n i c c o n f l i c t s , a n d c u l t u r a l n o r m s s u p p o r t i v e of d e m o c r a t i c rule, are m i s s i n g in m a n y parts of the reg i o n . 1 2 T h e s e a t t r i b u t e s r e n d e r the p r e s e n t w a v e of s o c i a l c o m p a c t s a n d elite-initiated d e m o c r a t i z a t i o n a f r a g i l e p r o c e s s in w h i c h the p o s s i b i l i t i e s f o r r e t r e n c h m e n t , r e t r e a t , a n d r e t u r n of r e p r e s s i o n r e m a i n real, as the e v e n t s in m a n y d e v e l o p i n g c o u n t r i e s in recent y e a r s h a v e s o v i v i d l y demonstrated.

Introduction

5

T h u s t h e e n d of the C o l d W a r a n d the a s c e n d a n c e of the n e w w o r i d o r d e r m a y not u s h e r in a new d a w n of prosperity for the S o u t h ; quite to the c o n t r a r y , with the e m e r g e n c e of t r a d i n g b l o c s g l o b a l l y , as e a c h n a t i o n or b l o c s e e k s to m a x i m i z e its d o m i n a t i o n a n d e x p l o i t a t i o n of p r e f e r r e d sectors of the p e r i p h e r y , s u c h r e l a t i o n s h i p s m a y r e n d e r s o m e p a r t s o f the Third World even more dependent, marginalized, and impoverished.1-' T h o s e w h o point to the s u c c e s s f u l e x a m p l e of the NIES in East A s i a f o r g e t that the attributes that m a d e their g r o w t h p o s s i b l e are f o r the most part absent in m a n y parts of the T h i r d W o r l d . T h e NIES of East A s i a d e v e l o p e d in an era w h e n p r o t e c t i o n i s m and c o m p e t i t i o n had m u c h lower priority in the w o r l d m a r k e t . D u e to i n a d e q u a t e i n f r a s t r u c t u r e a n d a poor e d u c a t i o n a l system, the d e v e l o p m e n t of high t e c h n o l o g y is also p r o b l e m a t i c in m a n y parts of the r e g i o n . S i g n i f i c a n t t r a n s f o r m a t i o n s of the past f o r t y y e a r s h a v e a l s o d i m i n ished the s t r a t e g i c v a l u e of the T h i r d W o r l d . T h e n u c l e a r r e v o l u t i o n , the e m e r g e n c e of i n f o r m a t i o n and s e r v i c e - o r i e n t e d i n d u s t r i e s , a n d the d e c l i n e of the S o v i e t p o w e r h a v e all c o n t r i b u t e d to the d e c l i n i n g political s i g n i f i c a n c e of the r e g i o n . T h e m a s s i v e n u c l e a r a r s e n a l s of m a j o r p o w e r s h a v e d e v a l u e d c o n q u e r e d territory, i n c l u d i n g the T h i r d W o r l d territory, in proj e c t i o n of p o w e r . W i t h the a s c e n d a n c e of high t e c h n o l o g y a n d i n f o r m a t i o n b a s e d i n d u s t r i e s as w e l l as the e n v i r o n m e n t a l m o v e m e n t , it is likely that the W e s t e r n r e l i a n c e on raw m a t e r i a l s (with the e x c e p t i o n of oil) will d e c l i n e in the near f u t u r e . 1 4 B e c a u s e the s e c o n d C o l d W a r w a s f o u g h t o v e r the c o n t r o l of the T h i r d W o r l d , 1 5 the d i s i n t e g r a t i o n of the S o v i e t U n i o n a l s o r e n d e r e d the T h i r d W o r l d s t r a t e g i c a l l y less s i g n i f i c a n t . S i n c e m a n y d e v e l o p i n g c o u n t r i e s that d u r i n g the C o l d W a r h a d a d v e r s a r i a l r e l a t i o n s with the U n i t e d S t a t e s ( C u b a , N i c a r a g u a , A n g o l a , E t h i o p i a , V i e t n a m , and C a m b o d i a , to n a m e a f e w ) w e r e also the r e c i p i e n t s of S o v i e t aid a n d a r m s , in the a b s e n s e of S o v i e t assistance they have o p t e d for a m o r e a c c o m m o d a t i o n i s t p o l i c y t o w a r d the U n i t e d S t a t e s . In d u e t i m e the n e c e s s i t y of c o m m e r c i a l ties w i t h the North has r e n d e r e d the ideological politics of the 1960s a n d 1970s irrelevant in the 1990s. S o f a r a n e w s e n s e of p r a g m a t i s m s e e m s to hold s w a y a m o n g many radical T h i r d W o r l d states. H e n c e , the att e m p t to break a w a y f r o m the w o r l d m a r k e t a n d chart a path of e c o n o m i c i n d e p e n d e n c e a n d s e l f - s u f f i c i e n c y b a s e d on socialist or p o p u l i s t p r o g r a m s has not p r o v e n e f f e c t i v e . A w h o l e r a n g e of p o l i c i e s — s u c h as n a t i o n a l i z i n g W e s t e r n c o m p a n i e s , s e t t i n g u p c o m m o d i t y e x p o r t i n g c a r t e l s s u c h a s the O r g a n i z a t i o n of P e t r o l e u m E x p o r t i n g C o u n t r i e s (OPEC), s u b s i d i z i n g ind i g e n o u s m a n u f a c t u r i n g to p r o m o t e i m p o r t s u b s t i t u t i o n , a n d c a l l i n g f o r a n e w e c o n o m i c o r d e r b a s e d on r e d i s t r i b u t i o n of r e s o u r c e s — h a v e f a i l e d . T h e s t r u g g l e against the " m a r k e t " b a c k e d by d e v e l o p e d e c o n o m i e s h a s f u r ther w e a k e n e d the T h i r d W o r l d . 1 6 T h e r e f o r e , it is not s u r p r i s i n g that with the e x c e p t i o n of East A s i a , o t h e r r e g i o n s of the T h i r d W o r l d d e c l i n e d in

6

Introduction

t e r m s of t h e i r a v e r a g e per c a p i t a g r o s s d o m e s t i c p r o d u c t (GDP) in the 1980s. S u b - S a h a r a n A f r i c a d e c l i n e d f r o m 3.2 percent in the 1 9 6 0 s to - 2 . 2 in the 1980s. Latin A m e r i c a a n d the C a r i b b e a n d e c l i n e d f r o m 3 . 7 percent in the 1 9 6 0 s to - 0 . 6 in the 1 9 8 0 s , the M i d d l e East a n d N o r t h A f r i c a d e clined f r o m 5.5 percent in the 1960s to 0.8 in the 1980s. In c o n t r a s t , East Asia i m p r o v e d f r o m 5.1 p e r c e n t in the 1 9 6 0 s to 6.7 in the 1 9 8 0 s . 1 7 S i m i l a r l y , the W o r l d B a n k e s t i m a t e s that "as m a n y as 9 5 0 million of the w o r l d ' s 5 . 2 billion p e o p l e a r e c h r o n i c a l l y m a l n o u r i s h e d — m o r e than t w i c e as m a n y as a d e c a d e a g o . In A f r i c a , per capita f o o d p r o d u c t i o n has declined e v e r y year f o r the past thirty years." 1 H Hence, the a v e r a g e i n c o m e in the 1 9 8 0 s fell by 10 p e r c e n t in m o s t of Latin A m e r i c a a n d by o v e r 2 0 percent in S u b - S a h a r a n A f r i c a . In s o m e urban areas, real m i n i m u m w a g e s declined by as m u c h as 5 0 p e r c e n t . 1 9 A c o m b i n a t i o n of d e c l i n e in the price of r a w m a t e r i a l s , d e t e r i o r a t i n g t r a d e w i t h the N o r t h , d i m i n i s h i n g S o u t h S o u t h t r a d e , d e c l i n i n g f o r e i g n i n v e s t m e n t , the m o u n t i n g d e b t crisis, the f l i g h t of c a p i t a l , and the s t a g g e r i n g p o p u l a t i o n g r o w t h — a l l w e r e r e s p o n sible for the relative d e c l i n e of the T h i r d W o r l d e c o n o m i e s in the 1980s. 2 0 T h e p r o b l e m s of e c o n o m i c g r o w t h , political stability, e q u i t y , aid, g e n der, d e m o c r a c y , and e n v i r o n m e n t a l d e g r a d a t i o n will d o m i n a t e T h i r d W o r l d a f f a i r s in the c o m i n g d e c a d e s . A crucial i s s u e b e f o r e the T h i r d W o r l d is h o w it utilizes its limited r e s o u r c e s to o p t i m i z e d e v e l o p m e n t and g r o w t h . T o a c h i e v e this goal, T h i r d W o r l d nations m u s t opt f o r a realistic d e v e l o p m e n t strategy. T h u s an a s s e s s m e n t of past history and present d y n a m i c s of the political e c o n o m y of the T h i r d W o r l d is a first s t e p t o w a r d the d e v e l o p m e n t of any v i a b l e s t r a t e g y of g r o w t h . T h i s b o o k is a m o d e s t a t t e m p t to g r a p p l e w i t h s o m e of the d i f f e r e n t issues of e c o n o m i c and political d e v e l o p m e n t . T h e b o o k a l s o d e l i n e a t e s the regional disparities, thus e x p l a i n i n g w h y t h e r e is n o u n i f o r m s t r a t e g y of g r o w t h . W h i l e the e x a m ple of s u c c e s s in East A s i a m a y p r o v i d e s o m e u s e f u l l e s s o n s f o r o t h e r countries, historical a n d cultural h e r i t a g e also play a s i g n i f i c a n t role in e x p l a i n i n g s u c c e s s or f a i l u r e . T h e r e f o r e , w h a t may w o r k f o r o n e r e g i o n m a y be totally i n a p p l i c a b l e in a n o t h e r . T h e s e issues are f u r t h e r e x p o u n d e d by the c o n t r i b u t o r s to this v o l u m e . T h e f i r s t part of the b o o k f o c u s e s o n c a s e s t u d i e s of d e v e l o p m e n t in the d i f f e r e n t r e g i o n s of the T h i r d W o r l d . D r a w i n g upon historical a n a l y s i s a n d theoretical literature, the a u t h o r s p r o v i d e a c o m p r e h e n s i v e a c c o u n t of r e gional political e c o n o m i e s . T h e c h a p t e r s in Part T w o d i s c u s s s o m e of the most p r e s s i n g p r o b l e m s f a c i n g the T h i r d W o r l d political e c o n o m i e s . In this section indepth study of such issues as financial aid, e n v i r o n m e n t a l d e g r a dation, a n d o p p r e s s i o n of w o m e n are u n d e r t a k e n . T h e d i v e r s i t y of r e g i o n a l c a s e s t u d i e s a n d t h e o r e t i c a l a p p r o a c h e s in this v o l u m e is intended to p r o v i d e an a c c o u n t of the d i s p a r i t i e s of g r o w t h and d e v e l o p m e n t and the v e x i n g d i l e m m a s f a c i n g the T h i r d W o r l d in t h e

Introduction

7

i n c r e a s i n g l y interdependent and c o m p e t i t i v e world o f the twenty-first c e n tury. W h a t f o l l o w s is a b r i e f d e s c r i p t i o n o f e a c h c h a p t e r . In C h a p t e r T w o M i c h a e l F o l e y i n v e s t i g a t e s what he terms a " r e v o l u t i o n " in L a t i n A m e r i c a n p o l i t i c a l e c o n o m y . T h e n u m e r o u s military and c i v i l i a n authoritarian r e g i m e s that pervaded the c o n t i n e n t in the s i x t i e s and s e v e n t i e s have all been r e p l a c e d by nonauthoritarian c i v i l i a n g o v e r n m e n t s . T h e s e c i v i l i a n g o v e r n m e n t s must now take up the task on which the military r e g i m e s , f o r the most part, f a i l e d to m a k e m u c h p r o g r e s s : e c o n o m i c growth s u f f i c i e n t to f o s t e r political stability. F o l e y s h o w s the c i v i l i a n , authoritarian, and military r e g i m e s to have b e e n less s u c c e s s f u l in their penetration o f c i v i l s o c i e t y than is g e n e r a l l y b e l i e v e d . C o n s e q u e n t l y , t h o s e r e g i m e s w e r e u n a b l e to i m p l e m e n t p o l i c i e s c a p a b l e o f s o l v i n g the e c o n o m i c c r i s e s o f the s e v e n t i e s and e i g h t i e s , i n c l u d i n g the debt i m b r o g l i o . T h e new d e m o c r a t i c r e g i m e s have been a b l e to r e d u c e the size o f certain state institutions regulating the e c o n o m y , w h i l e at the s a m e time introducing n e o l i b e r a l p r o p o s a l s f o r r e f o r m . In s e v e r a l i n s t a n c e s the a u t h o r i t a r i a n or m i l i t a r y r e g i m e s w e r e a l s o inept at m a n a g i n g social protest, w h e t h e r guerrilla m o v e m e n t s in the c o u n tryside or urban d e m o n s t r a t i o n s . F o l e y s e e k s to e x p l a i n why the c i v i l i a n g o v e r n m e n t s that s u c c e e d e d those r e g i m e s have s u r v i v e d despite the drac o n i a n austerity m e t h o d s they have s o m e t i m e s i m p o s e d . He appraises their p r o s p e c t s for the future, c o n t e n d i n g that the a n s w e r c a n b e found in the rec o n s t i t u t e d and resurgent c i v i l s o c i e t y t h r o u g h o u t L a t i n A m e r i c a . In this new c i v i l s o c i e t y the e l i t e s h a v e r e v i s e d their attitudes toward the use o f a u t h o r i t a r i a n i s m . T h e r e has a l s o b e e n an i n c r e a s e in the strength o f aut o n o m o u s groups c a p a b l e o f r e p r e s e n t i n g s o c i e t a l d e m a n d s and o f r e m a i n ing i n d e p e n d e n t o f s t a t e c o n t r o l , p a r t i c u l a r l y f r o m t h e b u s i n e s s s p h e r e . F o l e y b e l i e v e s that the p r o s p e c t f o r the future o f d e m o c r a t i z a t i o n in m a n y parts o f Latin A m e r i c a w o u l d d e p e n d on the c o n t i n u e d t o l e r a n c e for e c o n o m i c austerity currently e x h i b i t e d by their p o p u l a t i o n s . In C h a p t e r T h r e e M a r g a r e t t a D e M a r p r o v i d e s a historical a n a l y s i s o f the C a r i b b e a n political e c o n o m y and e x p o u n d s on its present mode o f int e g r a t i o n . D e M a r b e l i e v e s the internationalization o f l a b o r , o f production, and p a r t i c u l a r l y o f f i n a n c e c a p i t a l has p l a y e d a c r u c i a l r o l e in the d e v e l o p m e n t o f the C a r i b b e a n political e c o n o m y . In her a n a l y s i s , D e M a r d i f f e r e n t i a t e s C a r i b b e a n history s i n c e the late fifteenth c e n t u r y into six periods, with a s p e c i a l e m p h a s i s on the period f r o m 1 9 7 0 to the present. S h e a l s o d e l i n e a t e s how the shift o f the C a r i b b e a n islands f r o m mercantilist to f r e e trade r e l a t i o n s with the m e t r o p o l e c o u n t r i e s w a s integrated with the d e c o l o n i z a t i o n o f the r e g i o n . T h e a b s e n c e o f p r e f e r e n t i a l trade a r r a n g e m e n t s s u c h as the E u r o p e a n C o m m u n i t y ' s L o m é C o n v e n t i o n and the r e l a t i v e l y i n s i g n i f i c a n t i m p a c t o f the U . S . - C a r i b b e a n B a s i n I n i t i a t i v e are d i s c u s s e d as w e l l .

8

Introduction

D e M a r e x p l a i n s h o w the i n t e r n a t i o n a l i z a t i o n of c a p i t a l a n d d e c i s i o n m a k i n g c o n c e r n i n g the d i s p e n s a t i o n of t h e capital has c o n s t r a i n e d the c a p a c i t y of t h e C a r i b b e a n s t a t e s to c o n t r o l the s t r u c t u r e of their e c o n o m i e s . S h e a s s e r t s that the C a r i b b e a n g o v e r n m e n t s h a v e b e c o m e " a g e n t s " of the i n t e r n a t i o n a l political e c o n o m y . E v i d e n c e f o r this belief is f o u n d in an e x a m i n a t i o n of t h e s t a t e r o l e in p r o m o t i n g the a c c e p t a n c e of i n t e r n a t i o n a l l y s t a n d a r d i z e d t e c h n o l o g i e s in local C a r i b b e a n n a t i o n a l e c o n o m i e s . F u r t h e r e v i d e n c e is d r a w n f r o m the ability of the I n t e r n a t i o n a l M o n e tary F u n d to i n f l u e n c e e c o n o m i c d e c i s i o n m a k i n g w i t h i n C a r i b b e a n s t a t e s t r u c t u r e s . F i n a l l y , as is i l l u s t r a t e d by the i n c r e a s i n g p r e s e n c e of t r a n s n a tional c o r p o r a t i o n i n v e s t m e n t s in the C a r i b b e a n s t a t e s , D e M a r tells us that t h e d o c t r i n e of i n t e r n a t i o n a l i z a t i o n of p r o d u c t i o n , l a b o r , a n d c a p i t a l h a s been a b s o r b e d by C a r i b b e a n g o v e r n m e n t s such as A n t i g u a ' s V e r e Bird a n d Jamaica's Michael Manley. In C h a p t e r F o u r A n t o n y G a d z e y e x a m i n e s the c r i s i s of " s t a t i s m " ( e x t e n s i v e s t a t e d o m i n a t i o n of a n a t i o n ' s e c o n o m y ) in a n u m b e r of A f r i c a n countries. Although several African governments (Angola, M o z a m b i q u e ) a p p e a r to be p r e p a r i n g f o r s i g n i f i c a n t d e p a r t u r e f r o m s t a t i s m , G a d z e y p o i n t s o u t w h y t h e r e is g o o d r e a s o n to d o u b t t h e d e p t h a n d d u r a t i o n of s u c h c h a n g e s . H e b e l i e v e s the a n s w e r is to be f o u n d in A f r i c a n social a n d e c o n o m i c h i s t o r y . G a d z e y a s s e r t s that o n e of the key i s s u e s in u n d e r s t a n d ing t h e A f r i c a n political e c o n o m y is to c o m p r e h e n d w h y s u r p l u s a c c u m u l a t i o n , p a r t i c u l a r l y in a g r i c u l t u r e , has yet to t a k e p l a c e in m a n y A f r i c a n countries. G a d z e y first d i v i d e s A f r i c a n e c o n o m i c h i s t o r y into t h e p r e c o l o n i a l , c o l o n i a l , a n d p o s t c o l o n i a l p e r i o d s . He e x p l o r e s the critical s h i f t f r o m r e l a t i v e a b u n d a n c e to r e l a t i v e s c a r c i t y . L a t e r he e x a m i n e s t h e i n c o n s i s t e n c y b e t w e e n the n e e d s of the m e t r o p o l e w i t h its c o m m o d i t y e x p o r t p o l i c y a n d the d e v e l o p m e n t n e e d s of t h e s u b j u g a t e d A f r i c a n p o p u l a t i o n s . F i n a l l y , he analyzes postcolonial statist r e g i m e s and suggests policy r e f o r m s that m i g h t r e v e r s e their p o o r p e r f o r m a n c e s . In his d i s c u s s i o n s G a d z e y n o t e s that the capitalist e c o n o m i e s of K e n y a a n d I v o r y C o a s t , a l t h o u g h s u c c e s s f u l in p r o d u c i n g s u b s t a n t i a l a g r i c u l t u r a l a n d i n d u s t r i a l s u r p l u s , h a v e not b e e n a b l e to a c h i e v e this goal w i t h o u t e x t e n s i v e d e p e n d e n c e on f o r e i g n c a p i t a l . T h e w e a l t h c r e a t e d h a s not b e e n e q u a l l y d i s t r i b u t e d , a n d G a d z e y s u g g e s t s this c r e a t e s a s t r o n g p o s s i b i l i t y f o r f u t u r e political t e n s i o n s in b o t h c o u n t r i e s . G a d z e y c o n c l u d e s , h o w e v e r , that c a p i t a l i s t t r a n s f o r m a t i o n , b u t w i t h a g r a s s r o o t s d e r i v a t i o n , o f f e r s t h e g r e a t e s t p r o b a b i l i t y f o r a real s o l u t i o n to t h e s t a g n a n t d e v e l o p m e n t e f f o r t s of m a n y A f r i c a n c o u n t r i e s . In C h a p t e r F i v e M a n o c h e h r D o r r a j a n a l y z e s the political e c o n o m y of t h e M i d d l e East a n d N o r t h A f r i c a by s t u d y i n g t h r e e c e n t r a l f a c t o r s i n s t r u m e n t a l in m o l d i n g t h e p o l i t i c a l e c o n o m y of t h e r e g i o n : s t a t e a n d s t a t e

9

Introduction

f o r m a t i o n , p e t r o l e u m as both a financial and strategic asset, and the current d r i v e t o w a r d d e m o c r a t i z a t i o n . D o r r a j e x p o u n d s on the historical dev e l o p m e n t , o b s t a c l e s to s t a t e f o r m a t i o n , a n d t h e e m e r g e n c e of an a u t h o r i t a r i a n s t a t e in t h e t w e n t i e t h c e n t u r y . H e a s s e r t s t h a t t h e i n f l u x of t h e p e t r o d o l l a r in t h e r e g i o n s i n c e t h e 1 9 6 0 s has s t r e n g t h e n e d the a u t o n o m y of the state f r o m the society. D o r r a j t h e n f o c u s e s o n t h e p i v o t a l r o l e o f p e t r o l e u m a n d OPEC a s a n e x a m p l e of r e g i o n a l a n d T h i r d W o r l d e c o n o m i c c o o p e r a t i o n a n d a p p r a i s e s the r o l e of t h e o r g a n i z a t i o n in t h e d e v e l o p m e n t of t h e p o l i t i c a l e c o n o m y of t h e r e g i o n . H e a r g u e s that t h e f o r e c a s t s a b o u t t h e i m m i n e n t fall of OPEC a r e p r e m a t u r e a n d that t h e o r g a n i z a t i o n w i l l c o n t i n u e t o p e r s i s t in t h e n e a r f u t u r e . H e i d e n t i f i e s t w o m a j o r f a c t o r s as t h e p r i m a r y s o u r c e of c o n t i n u e d OPEC v i a b i l i t y . First, t h e s y m b i o t i c i n t e r d e p e n d e n c e b e t w e e n OPEC a n d t h e oil m a r k e t is t o o f a r - r e a c h i n g to s u c c u m b to t h e t e m p o r a r y w i n d s of s h i f t i n g p r i c e s a n d m a r k e t f l u c t u a t i o n s . T h e g l o b a l m a r k e t n e e d s OPEC a s m u c h as OPEC n e e d s t h e g l o b a l m a r k e t . S e c o n d , o v e r r i d i n g p r a g m a t i c c o n s i d e r a tions unite the political foes within the s a m e o r g a n i z a t i o n . Despite internal d i v i s i o n s a n d e v e n w a r s a m o n g its m e m b e r s , p a s t e x p e r i e n c e h a s d e m o n s t r a t e d t o OPEC m e m b e r s t h a t t h e i r p o w e r s t e m s f r o m c o l l e c t i v e b a r g a i n ing and m a i n t a i n i n g a united front. T h e s e two f u n d a m e n t a l factors are the f o r c e s b e h i n d OPEC'S r e s i l i e n c y . H e t h e n e x a m i n e s t h e l i m i t a t i o n s of a s i n gle c o m m o d i t y and mineral export-led growth. T h e t h i r d c e n t r a l i s s u e in t h e p o l i t i c a l e c o n o m y of t h e r e g i o n is d e m o c r a t i z a t i o n . D o r r a j c o n c l u d e s that e c o n o m i c r e f o r m (privatization) has o u t s t r i p p e d t h e p r o c e s s of p o l i t i c a l r e f o r m ( p o l i t i c a l p a r t i c i p a t i o n ) . T h e w e a k n e s s e s of the incipient civil society has r e n d e r e d elite-initiated dem o c r a t i z a t i o n a highly m a n i p u l a t e d p r o c e s s c h a r a c t e r i z e d by limited and c o n t r o l l e d political o p e n i n g s f o l l o w e d by periods of r e t r e n c h m e n t and return of political r e p r e s s i o n . T h e r e t r e n c h m e n t p o l i c y , h o w e v e r , d o e s not h a v e l o n g - t e r m v i a b i l i t y , a n d M i d d l e E a s t e r n s o c i e t i e s c a n not i n s u l a t e t h e m s e l v e s f r o m t h e i m p a c t of a g l o b a l t r e n d t o w a r d d e m o c r a t i z a t i o n . In C h a p t e r S i x R i c h a r d D o n e r a n d G a r y H a w e s e x a m i n e t h e p o l i t i c s of e c o n o m i c g r o w t h in t w o g r o u p s of P a c i f i c R i m c o u n t r i e s : T h e East A s i a n newly

i n d u s t r i a l i z i n g c o u n t r i e s (NICS) c o m p r i s e d o f S i n g a p o r e ,

Hong

K o n g , T a i w a n , a n d S o u t h K o r e a , a n d t h e ASEAN-Four, w h i c h i n c l u d e s I n donesia, Malaysia, the Philippines, and T h a i l a n d . T h e authors f o c u s on the e x t e r n a l a s w e l l as t h e i n t e r n a l s o u r c e s of e c o n o m i c g r o w t h in t h e r e g i o n . Critical external conditions include a Japanese-led product cycle, access to the U.S. m a r k e t , a n d a particular structure of h e g e m o n i c p o w e r and intere s t in t h e r e g i o n . In t h i s c o n t e x t , t h e i m p a c t o f t h e p r o t e c t i o n i s t p o l i c i e s a n d the rapid d i f f u s i o n of f i n a n c e a n d t e c h n o l o g y , especially f r o m J a p a n , a r e a l s o a n a l y z e d . T u r n i n g to d o m e s t i c f a c t o r s , t h e a u t h o r s a d d r e s s t h e s i g n i f i c a n c e of s u c h i s s u e s a s t h e s t a t e s t r e n g t h (in E a s t A s i a ) in p r o m o t i n g

10

Introduction

e c o n o m i c g r o w t h , t h e c o n s t r u c t i v e r o l e of b u s i n e s s g r o u p s , a n d a s s o c i a tions a n d t h e p r i v a t e - p u b l i c s e c t o r c o l l a b o r a t i o n . T h e i m p a c t of e c o n o m i c and p o l i t i c a l l i b e r a l i z a t i o n is also a n a l y z e d . D o n e r a n d H a w e s c o n t e n d that t h e d e v e l o p m e n t s t r a t e g i e s a n d instit u t i o n s c o m m o n to S o u t h e a s t A s i a n c o u n t r i e s m a y b e a r s o m e u s e f u l l e s s o n s f o r o t h e r less d e v e l o p e d c o u n t r i e s , m o s t of w h i c h a r e r e s o u r c e rich and h a v e little h o p e of d e v e l o p i n g a u t o n o m o u s a n d o r g a n i z a t i o n a l l y c o h e sive s t a t e s typical of t h e East A s i a n NICS. T h e c o n t r i b u t i o n of c u l t u r e is add r e s s e d in t h i s c o n t e x t . U s i n g c o u n t r y a n d i n d u s t r y c a s e s t u d i e s , t h e a u thors c o n c l u d e w i t h s o m e r e f l e c t i o n s on the c o n s e q u e n c e s of t h e s e r e f o r m s f o r f u t u r e g r o w t h a n d s t a b i l i t y of the r e g i o n , a n d t h e o r e t i c a l a p p r o a c h e s to the political e c o n o m y of g r o w t h . In C h a p t e r S e v e n R o b e r t G a m e r p r e s e n t s a h i s t o r i c a l a n a l y s i s of C h i n e s e p o l i t i c a l e c o n o m y . G a m e r a r g u e s that r a p i d e c o n o m i c g r o w t h w i l l c o n t i n u e in C h i n a but will not p e r m e a t e the s o c i e t y u n l e s s a c c o m p a n i e d by p o l i t i c a l c h a n g e . S u c h c h a n g e is u n l i k e l y to d e v i a t e f u n d a m e n t a l l y f r o m t r a d i t i o n a l C h i n e s e p o l i t i c a l c u l t u r e . T h a t c u l t u r e , h o w e v e r , c o n t a i n e d latitude f o r g i v i n g i n t e l l e c t u a l s m o r e c h o i c e than t h e y h a v e t o d a y . G a m e r d i v i d e s the e v o l u t i o n of C h i n e s e p o l i t i c a l e c o n o m y i n t o f o u r stages: first, the period immediately after the c o m m u n i s t revolution; seco n d , t h e p e r i o d of c o l l e c t i v i z a t i o n a n d the G r e a t L e a p F o r w a r d ; t h i r d , the great proletarian cultural revolution; fourth, the p o s t - 1 9 7 8 period. He shows how e c o n o m i c growth d e m a n d s and fosters change. T h e need for roads, airports, petroleum, telecommunications, convertible currency, banking, securities trading, and other infrastructural adjustments, for exa m p l e , can put g r e a t s t r a i n s on the C h i n e s e f i n a n c i a l a n d p o l i t i c a l s y s t e m . D u e to the a t t r i b u t e s of C h i n e s e h i s t o r y a n d c u l t u r e , G a m e r a r g u e s that f u ture c h a n g e s in C h i n a a r e unlikely t o e m u l a t e W e s t e r n d e m o c r a c y or its interaction with capitalism. Capitalism with a populist political program and r e g i m e is m o r e in t u n e w i t h C h i n e s e C o n f u c i u s i a n s as w e l l as a c o m m u n i s t h e r i t a g e of h i e r a r c h y a n d e g a l i t a r i a n i s m . In C h a p t e r E i g h t J o h n N e w a r k d i s c u s s e s t h e c h a n g e s in t h e n a t u r e of f o r e i g n a i d in r e c e n t y e a r s . H e a r g u e s that t h e d o n o r c o m m u n i t y , w i t h much success, has i m p o s e d a new conditionality on aid f l o w s . Recipient nations must increasingly demonstrate a c o m m i t m e n t to " m a r k e t f u n d a m e n t a l i s m , " w h i c h e n v i s a g e s a m i n i m a l role f o r t h e s t a t e in t h e p r o m o t i o n of d e v e l o p m e n t and w i d e s p r e a d e c o n o m i c l i b e r a l i z a t i o n a n d p r i v a t i z a t i o n . T h e d e b t c r i s i s h a s l e f t m a n y less d e v e l o p e d c o u n t r i e s w i t h f e w o p t i o n s o t h e r t h a n a c c e p t i n g t h e n e w p r o p o s a l s that r e p r e s e n t a r a t h e r d r a m a t i c b r e a k w i t h past p r a c t i c e . A f t e r a brief e x a m i n a t i o n of t r e n d s in aid f l o w s , N e w a r k t u r n s t o an a s s e s s m e n t of b o t h t h e t h e o r y a n d p r a c t i c e of m a r k e t f u n d a m e n t a l i s m . It is a r g u e d that this a p p r o a c h has clearly f a i l e d to r e d u c e the d e b t b u r d e n , to

Introduction

11

restart e c o n o m i c g r o w t h , or to p r o v i d e a r e m e d y f o r the i n c r e a s i n g p o v e r t y . T h e e v i d e n c e strongly s u g g e s t s that t h e r e are important roles f o r the state to play in p r o m o t i n g e c o n o m i c d e v e l o p m e n t , w h i c h had been ignored by the a d v o c a t e s of the new s t r a t e g y . In C h a p t e r N i n e M a r i a n M i l l e r c o n t e n d s that w h i l e the global e n v i r o n m e n t has risen on the a g e n d a of w o r l d p o l i t i c s , g l o b a l e n v i r o n m e n t a l politics are played out within the c o n t e x t of an i n e q u i t a b l e e c o n o m i c system. B e c a u s e of their role in the global e c o n o m y , the T h i r d W o r l d and dev e l o p e d nations o f t e n b r i n g d i f f e r e n t interests to the b a r g a i n i n g table. An e x a m i n a t i o n of the b i o d i v e r s i t y r e g i m e is i l l u s t r a t i v e . A s this r e g i m e has e v o l v e d , the d e v e l o p i n g c o u n t r i e s have been particularly c o n c e r n e d about issues of sovereignty, t e c h n o l o g y t r a n s f e r , a n d f i n a n c i a l assistance. W h i l e the 1 9 9 2 b i o d i v e r s i t y c o n v e n t i o n in Brazil a d d r e s s e d s o m e of their c o n c e r n s r e g a r d i n g the issue of s o v e r e i g n t y , asserts Miller, their int e r e s t s r e g a r d i n g t e c h n o l o g y t r a n s f e r a n d f i n a n c i a l a s s i s t a n c e w e r e dealt with only in v a g u e , n o n c o m m i t t a l l a n g u a g e . By a d o p t i n g a c o m m o n position, d e v e l o p i n g c o u n t r i e s have been able to i n d u c e incremental c h a n g e s in e n v i r o n m e n t a l politics; h o w e v e r , they are at a d i s a d v a n t a g e b e c a u s e global e n v i r o n m e n t a l politics reflect the s t r u c t u r e of the global e c o n o m y , w h i c h is closely controlled by the d e v e l o p e d c o u n t r i e s . In C h a p t e r T e n Z e h r a Arat d i s c u s s e s the diversity of issues that f a c e the w o m e n of d e v e l o p i n g nations. S h e asserts that w o m e n are a m o n g the p o o r e s t and the least p o w e r f u l s e g m e n t of the p o p u l a t i o n t h r o u g h o u t the w o r l d . T h e o p p r e s s i o n of the T h i r d W o r l d w o m e n , h o w e v e r , is m o r e p o i g n a n t due to the legacy of the W e s t e r n i m p e r i a l i s m — c u l m i n a t i n g in the f o r m of e c o n o m i c d e p e n d e n c y and crises. M o r e o v e r , the structural c h a n g e s i n t r o d u c e d by c o l o n i a l p o w e r s , a n d later by i n t e r n a t i o n a l a g e n c i e s , h a v e f u r t h e r w i d e n e d the g e n d e r g a p in t h e s e c o u n t r i e s . W o m e n h a v e held s u b o r d i n a t e p o s i t i o n s s i n c e the b e g i n n i n g of civil i z a t i o n s and the f o r m a t i o n of p a t r i a r c h a l s t a t e s . H o w e v e r , as the state p o w e r increased a n d the c o u n t r y ' s i n t e g r a t i o n into the capitalist w o r l d e c o n o m y b e c a m e s t r e n g t h e n e d , w o m e n ' s social a n d e c o n o m i c c o n d i t i o n s deteriorated further. Both colonial and postcolonial state policies underm i n e d w o m e n ' s social a n d e c o n o m i c v a l u e a n d m a r g i n a l i z e d their labor. E x c e p t for a f e w c a s e s a n d s h o r t p e r i o d s of r e v e r s a l s , the d i s a s s o c i a t i o n of w o m e n f r o m the p r o d u c t i v e labor and f o r m a l e c o n o m i c s e c t o r s continued at an accelerated rate, and they w e r e p u s h e d t o w a r d r e p r o d u c t i v e tasks or a l l o w e d to participate m a i n l y in the i n f o r m a l e c o n o m y . Not r e c o g n i z e d as f u l l p a r t n e r s , e i t h e r in the f a m i l y or in the s o c i e t y , w o m e n are d e n i e d equal a c c e s s to e d u c a t i o n , j o b training, e m p l o y m e n t , health c a r e , and p o litical power. D e v e l o p m e n t p o l i c i e s a n d p r o j e c t s , i n i t i a t e d e i t h e r by national g o v e r n m e n t s or international a g e n c i e s , n e g l e c t e d w o m e n in p l a n n i n g and did

12

Introduction

not s e e k t h e i r p a r t i c i p a t i o n at t h e s t a g e of i m p l e m e n t a t i o n , c o n t e n d s Arat. C o n s e q u e n t l y , w o m e n ' s lot w a s n o t i m p r o v e d e v e n at t i m e s of e c o n o m i c g r o w t h . H o w e v e r , d u r i n g t h e p e r i o d s of e c o n o m i c s t a g n a t i o n a n d c r i s i s — w h i c h h a v e b e e n the w a y of l i f e in d e v e l o p i n g n a t i o n s s i n c e t h e m i d 1 9 7 0 s — w o m e n had to m a k e a d j u s t m e n t s , and they s t r e t c h e d t h e i r a l r e a d y l o n g w o r k d a y s to m a k e u p f o r t h e lost f a m i l y i n c o m e . P a r t i a l l y as a reaction to t h e i n c r e a s i n g l e v e l s o f e c o n o m i c a n d p o l i t i c a l o p p r e s s i o n , h o w e v e r , t h e s a m e p e r i o d w a s m a r k e d by the d e v e l o p m e n t of v i a b l e w o m e n ' s m o v e m e n t s in s e v e r a l c o u n t r i e s , as well as i n t e r n a t i o n a l c o o p e r a t i o n and solidarity among w o m e n ' s groups. They researched and documented w o m e n ' s e c o n o m i c c o n t r i b u t i o n s , r a i s e d c o n s c i o u s n e s s a b o u t t h e b i a s e s in the n a t i o n a l a n d i n t e r n a t i o n a l s y s t e m s , a n d p u s h e d t h e p o l i c y a g e n d a s t o include w o m e n ' s issues. C o n s e q u e n t l y , several international charters and a g e n c i e s w e r e c r e a t e d to i m p r o v e w o m e n ' s p r o s p e c t s , a n d the e x i s t i n g d e v e l o p m e n t a g e n c i e s m a d e a d j u s t m e n t s to i n c o r p o r a t e w o m e n a n d their c o n c e r n s into their p r o g r a m s . T h e f u l l i m p a c t of t h e s e c h a n g e s o n t h e lives of t h e T h i r d W o r l d w o m e n is yet to b e s e e n . In w h a t f o l l o w s t h e s e i s s u e s w i l l b e d i s c u s s e d in m o r e d e p t h and detail.

Notes 1. Anne O. Krueger, Economic Policies at Cross-Purposes: The United States and Developing Countries (Washington, D.C.: The Brookings Institution, 1993), p. 2. 2. Margaretta DeMar, "The ' N e w ' Internationalization: Implications for Development and Welfare in the Third World," Cheryl R. Lehman and Russell M. Moore, eds., Multinational Culture: Social Impacts of Global Economy (Westport, Conn.: Greenwood Press, 1992), pp. 23-32. See also James A. Caporaso.A Changing International Division of Labor (Boulder: Lynne Rienner Publishers, 1987). 3. Ibid. See also Craig N. Murphy & Roger Tooze, eds., The New International Political Economy (Boulder: Lynne Rienner Publishers, 1991). Maurice Estabrooks, Programmed Capitalism: A Computer-Mediated Global Society (Armonk, N.Y.: M. E. Sharpe, Inc., 1988). 4. Paul Kennedy, "Preparing for 21st Century: Winners and Losers," The New York Time Review of Books (February 11, 1993), p. 33. 5. Ibid., p. 32. 6. Ibid., p. 35. 7. For studies on the rise of economic regionalism see Robert C. Hine, "Regionalism and the Integration of the World Economy," Journal of Common Market Studies 30, no. 2 (June 1922): pp. 115-123, and Rolf J. Langhammer, "The Developing Countries and Regionalism," Journal of Common Market Studies 30, no. 2 (June 1992): pp. 210-231. 8. Dennis Pirages, Global Technopolitics: The International Politics of Technology and Resources (Belmount, Calif: Wadsworth, Inc., 1989), pp. 144-156.

Introduction

13

9. Kennedy, "Preparing for 21st Century: Winners and Losers," p. 43. 10. Donald Snow, Distant Thunder: Third World Conflict and the New International Order (New York: St. Martin's Press, 1993), p. 22. 11. Ibid., p. 203. 12. Zehra Arat, Democracy and Human Rights in the Developing Countries (Boulder: Lynne Rienner Publishers, 1991). 13. Dave Broad and Lori Foster, The New World Order and The Third World (Montreal: Black Rose Books, 1992), pp. 3 - 4 . 14. Stephan Van Evera, "The United States and the Third World: When to Intervene?" Kenneth Oye, Robert Lieber, and Donald Rothchild, eds., Eagle in the New World (New York: Harper Collins, Inc., 1992), p. 115. 15. Fred Holiday, The Making of the Second Cold War (London: Verso Publishers, 1983). 16. Kennedy, "Preparing for 21st Century: Winners and Losers," p. 43. 17. Michael Dolan, "Global E c o n o m i c T r a n s f o r m a t i o n and Less Developed Countries," Robert Slater, Barry Schutz, and Steven Dorr, eds., Global Transformation and the Third World (Boulder: Lynne Rienner Publishers, 1993), p. 265. 18. Gar Alperovitz and Kai Bird, " T h e Fading of the Cold War and the Demystification of Twentieth-Century Issues," Michael J. Hogan, ed., The End of the Cold War: Its Meaning and Implications (New York: Cambridge University Press, 1992), p. 212. 19. Ibid., p. 213. 20. Dolan, "Global Economic T r a n s f o r m a t i o n and Less Developed Countries," pp. 2 6 4 - 2 6 5 .

Parti REGIONAL PERSPECTIVES ON THIRD WORLD POLITICAL ECONOMY

Debt, Democracy, and Neoliberalism in Latin America: Losses and Gains of the "Lost Decade" Michael W. Foley

A little o v e r a d e c a d e a g o , m o s t o f the S o u t h e r n C o n e o f Latin A m e r i c a w a s in the g r i p o f m i l i t a r y d i c t a t o r s h i p s that, with a p p a r e n t s u c c e s s , had s e i z e d p o w e r to s t i f l e e x p l o d i n g s o c i a l t e n s i o n s and i m p o s e d i s c i p l i n e on faltering e c o n o m i e s . Central A m e r i c a , by contrast, w a s in the midst o f revo l u t i o n a r y upheavals that threatened to bring the U n i t e d S t a t e s , and the region as a w h o l e , into a c o n f l a g r a t i o n u n m a t c h e d s i n c e the M e x i c a n R e v o lution.

Mexico

i t s e l f had built

upon

the ruins o f

that r e v o l u t i o n

a

r e m a r k a b l y s t a b l e political s y s t e m , d o m i n a t e d by the party o f the r e v o l u tionary g e n e r a l s now f i r m l y in c i v i l i a n hands and e x p e r i e n c i n g , to all app e a r a n c e s , the fruits o f thirty y e a r s o f industrial e x p a n s i o n and the w i n d fall o f e n o r m o u s oil h o l d i n g s u n c o v e r e d in 1 9 7 6 . H o w different the picture today. T h e military r e g i m e s o f the 1 9 7 0 s have all withdrawn, mostly in disgrace, their " e c o n o m i c m i r a c l e s " shattered and their e f f o r t s to suppress s o c i a l f o r c e s widely r e v i l e d . T h e y have b e e n rep l a c e d by c i v i l i a n r e g i m e s c a p a b l e in many c a s e s o f d e m a n d i n g far m o r e s a c r i f i c e o f their populations in pursuit o f e c o n o m i c stability than military and c i v i l i a n elites o n c e thought p o s s i b l e . T h e c o n f l i c t s in Central A m e r i c a have g i v e n way to r e m a r k a b l e , though still tenuous, settlements. In M e x i c o two s u c c e s s i v e adminstrations have had to deal with the deepest e c o n o m i c c r i s i s o f the twentieth c e n t u r y , and o p p o s i t i o n f o r c e s c a m e very c l o s e to w r e s t i n g control o f the political s y s t e m f r o m the ruling party in

1988.

T h r o u g h o u t the region, f i n a l l y , c o u n t r i e s have f a c e d a c o m p l e x e c o n o m i c crisis that has turned b a c k the c l o c k f o r large s e g m e n t s o f the population.

17

18

Regional Perspectives in Political Economies

This revolution in the political economy of the region stems from the extreme inequality that has always characterized Latin American societies combined with questionable economic policies reaching back to the beginnings of import substitution industrialization in the 1940s; but the problems of the region were compounded by the neoliberal experiments of the military regimes, the remarkable financial somersaults of the 1970s and 1980s, the impact of the world recession of the early 1980s, and the explosion of repressed social tensions under a variety of more or less authoritarian regimes throughout the region. Paradoxically, the "strong" military and civilian authoritarian regimes appear in hindsight to have been quite weak in their penetration of civil society and their ability to implement policies capable of surmounting the crisis. In South America, at least, democratic regimes have been able to use a certain legitimacy to impose policies that would have been unsustainable in other circumstances. At the same time, civilian leaders have imposed their own versions of the neoliberal vision, scaling back both the size of governmental institutions and the scope of state action on the economy. Finally, the region has seen the emergence of autonomous forces in civil society at once committed to democracy and capable of confronting authoritarian and democratic regimes alike on a variety of fronts. The concluding section considers the implications of these changes.

The Flaws in the Authoritarian Heaven Throughout Latin American, authoritarianism acquired a certain cachet in the 1970s, as elites attempted to deal with the strains of the rapid development that had characterized most of the region since 1940. Economic crisis accompanied by popular unrest, guerrilla movements, and, in some cases, the ascendancy of parties of the left brought military coups first in Brazil in 1964, then in Bolivia that same year, in Argentina in 1966 and again in 1976, and in Peru in 1968, followed by Chile and Uruguay in 1973. In Central America, demands for greater popular participation and the appearance of new political forces prompted repressive crackdowns in Nicaragua, Honduras, El Salvador, and Guatemala. Even in Mexico, where civilian control has been more or less assured since the mid-1930s and where the level of repression has always been relatively low, the government of José López Portillo moved to repress the independent peasant and labor mobilizations that had gathered steam during the previous administration. In most cases, authoritarian regimes were justified by their supporters as essential to the establishment of economic discipline, and the new governments imposed harsh austerity measures followed by sometimes radical experiments in economic restructuring. The neoliberal experiments adopted

Latin America

19

after 1973 in Chile and Uruguay and in the wake of the 1976 coup in Argentina preceded by several years the similar measures undertaken in Britain by Margaret Thatcher and in the United States under the first Reagan administration. Brazil's military governors and Mexico's civilian administrations of the 1970s, by contrast, remained much more statist in orientation and much more committed than the governments of the Southern Cone to furthering industrial development. In most of these cases, supporters of authoritarian regimes and more sceptical outsiders alike noted what appeared to be "economic miracles" under authoritarian rule. The New York Times and the Wall Street Journal waxed eloquent about the recovery of the Chilean economy after 1976 (as they were to do again in the late 1980s, once the collapse of 1981 was forgotten). Brazil could point with pride to an enormous expansion of heavy industrial capacity in the early 1970s and to evidence of steadily rising incomes. Argentina experienced a consumer boom in the late 1970s, while Mexico was investing its newfound petroleum wealth in infrastructure development and social services. Even Bolivia under Hugo Banzer could attest to the economic advantages of authoritarian rule. Most of these regimes employed repression generously in pursuit of their goals. Brazil and the countries of the Southern Cone were embarked on programs not only of economic but also of political restructuring. The military coups in these countries were intended not simply to block one or another party's ascent or to temporarily quell civilian unrest, but to replace the political system with another, more efficient form of public administration—justifying the label "bureaucratic-authoritarian," which the Argentine political scientist Guillermo O'Donnell was to give them. 1 The generals distrusted politics and politicians and moved quickly to suppress the politically active population, closing legislatures, outlawing or suspending party activities, removing party and labor leaders, jailing, torturing, and murdering thousands of activists and suspected activists. Repression varied widely among regimes, from hundreds of torture victims and "disappeareds" in Mexico and Brazil to thousands in Argentina and Chile to tens of thousands in El Salvador and Guatemala. In Mexico, the wave of repression that followed the student massacre at Tlalteloco in 1968 abated under President Luis Echeverría, only to be renewed during the López Portillo administration. Repression in Mexico, however, has been largely random, concentrated in the countryside, and often carried out by more or less independent police units or local political bosses. In Brazil and the Southern Cone, it acquired a much more coherent character, coordinated by specialized security agencies like the Brazilian SNI (National Information Service) or the Chilean DINA (National Intelligence Directorate) or run through the military services themselves, as in Argentina. In Central America, the bulk of the state-sponsored terror was

20

Regional Perspectives

in Political

Economies

accomplished by networks linking military and police units with civilian organizations like El S a l v a d o r ' s O R D E N (National Democratic Organization), designed to mobilize significant portions of the population in a fight against "subversion," defined as any activity that challenged established economic and political arrangements. 2 The suppression of politics and the widespread repression of dissent are only two expressions of the relative autonomy of authoritarian regimes from the societies they governed. 3 Equally striking in retrospect was the ability of these regimes to develop and implement economic policies at variance with the interests of important sectors of the elite. The neoliberal experiments of the Southern Cone are the most striking example. Here, military governments backed economic teams representing relatively pure versions of the monetarist orthodoxy then gaining strength throughout the West. While economic elites were generally willing to swallow the stabilization policies that these regimes initially imposed and, indeed, greeted with enthusiasm prescriptions for scaling back state spending and the privatization of state-run enterprises, other measures, such as tight credit policies, trade liberalization, and the subsequent influx of foreign investment, seriously threatened much of the industrial sector in Chile, Uruguay, and Argentina—so much so that observers have spoken of the de-industrialization of these economies during the late 1970s and early 1980s. 4 In Brazil, similarly, heavy state investment in steel, petroleum, energy, and other lines of production, accompanied by the rapid growth of foreign investment in significant subsectors of the economy, eventually prompted complaints from Brazilian industrialists that they were being squeezed out of markets that should by rights belong to them and out of the process of decisionmaking that determined their chances. 5 In all these cases, however, the state was able, by and large, to impose its will on the business community for a considerable period of time, distributing the substantial gains from the " b o o m " years of the late 1970s to international capital, the largest enterprises of the industrial sector, and, in the cases where monetarist policy dominated, to financial interests. 6 Eventually, of course, the piper had to be paid, but widespread pressure for change did not develop until these regimes proved themselves as vulnerable to economic failure as their more democratic counterparts. The change came precipitously, for most, in 1981 and 1982, but the roots of the crisis that engulfed the authoritarian regimes of Brazil, Mexico, and the Southern Cone reach back through the illusory b o o m of the 1970s to the consequences of the import-substitution industrialization (ISI) policies of the postwar period in societies characterized by extreme inequality. While these policies made possible the enormous industrial expansion of the more developed countries of the region, key elements in their design impeded the concomitant expansion of exports needed to finance development,

Latin

America

21

while l o w - w a g e policies and inequality b l o c k e d the d e v e l o p m e n t of significant internal markets. As Jeffrey Sachs has shown, the fault lay not in heavy state investment, regulation, or taxation. Latin American countries are comparable to their more successful East Asian counterparts in most of these respects, and in regard to rate of taxation they actually lag considerably behind. T h e key to the slow growth in exports lay rather in e x c h a n g e rate and trade policies that were prejudicial to the export sector throughout Latin A m e r i c a . 7 Many Latin A m e r i c a n countries did attempt to e x p a n d and d i v e r s i f y exports in the 1970s. Nevertheless, the more d e v e l o p e d Latin A m e r i c a n e c o n o m i e s had not achieved either the level of exports or the security of markets that Taiwan, Korea, and other Asian exporters enjoyed by the time financial crisis engulfed the world economy in the early 1980s (see Table 2.1); and the industrial expansion that had begun in Central America in the late 1950s ran into serious difficulties by 1970. For various reasons, moreover, Latin A m e r i c a n c o u n t r i e s (like their Asian c o u n t e r p a r t s ) had acquired considerable debt in the course of the 1970s. In M e x i c o and Brazil, debt financed not just capital spending but g r o w i n g fiscal deficits. In the Southern Cone, where military governments had imposed monetarist formulas f o r e c o n o m i c restructuring, a c o m b i n a t i o n of policies e n c o u r a g e d enormous inflows of foreign capital that financed short-lived c o m m e r c i a l booms and disastrous speculative bubbles. T h e bubbles burst in 1981 in response to a downturn in terms of trade, rising international interest rates, and a s l o w d o w n in l e n d i n g , but it was the fall of p e t r o l e u m prices and M e x i c o ' s subsequent declaration of an inability to meet current interest payments in N o v e m b e r of 1982 that brought the debt crisis into full view. T h e economic collapse hit business hard. The World Bank reported in 1984 that "in Argentina bankruptcies and judicial interventions increased f r o m fifty-two in 1977 to three hundred in 1981. In Chile several hundred b a n k r u p t c i e s were r e p o r t e d in 1982." U n e m p l o y m e n t increased precipitously, and consumption fell by 2 to 10 percent during 1 9 8 1 - 1 9 8 2 in countries that had seen both rising e m p l o y m e n t levels and rising real w a g e s during the 1970s. 8 By 1983, the authoritarian r e g i m e s in these c o u n t r i e s were in disarray. T o o n e d e g r e e or another all had had to m a k e c o n c e s sions to both a g g r i e v e d b u s i n e s s p e o p l e and the larger p o p u l a c e w h i l e struggling to meet international obligations. A r g e n t i n a ' s military g o v e r n ment resorted to a catastrophic military adventure in the Malvinas W a r in an attempt to divert p u b l i c attention f r o m the crisis. C h i l e ' s General Pinochet replaced the hardline monetarists (the so-called C h i c a g o B o y s ) with economists more willing to use state powers to shore up crumbling financial institutions and to cushion the blow of the recession on incomes. 9 Brazil and U r u g u a y ' s military leaders struggled to maintain their control of the process of d e m o c r a t i z a t i o n . A n d M e x i c o ' s new a d m i n i s t r a t i o n

22

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Perspectives

in Political

Economies

Table 2.1 Share of Exports in GDP for Selected Latin American and East Asian Countries

Mexico Brazil Argentina Chile Peru Colombia Indonesia Republic of Korea Malayasia Thailand

1965

1983

1987

1991

9 8 8 14 16 11 5 9 44 18

20 8 13 24 21 10 25 37 54 22

7 9 10 34 9 19 26 45 64 30

16 10 11 36 9 21 27 29 81 38

Source: World Development Reports, 1985, 1989, and 1993, Tables 5 and 9 (Washington, D.C.: IBRD/World Bank).

attempted to regain the c o n f i d e n c e of the business c o m m u n i t y , badly shaken by the nationalization of the b a n k s in late 1982, w h i l e a p p l y i n g harsh austerity m e a s u r e s in the f a c e of g r o w i n g p o p u l a r challenges. At the s a m e time, M e x i c o led the way in extracting new t e r m s f r o m its creditors and f r o m the International M o n e t a r y Fund (IMF), without, however, g a i n i n g significant relief in a badly deteriorated international e c o n o m i c e n v i r o n m e n t . In each of t h e s e cases, civilian o p p o s i t i o n c o u l d c l a i m that it w a s the n a t u r e of a u t h o r i t a r i a n rule itself that h a d c o n t r i b u t e d to t h e crisis. T h e very a u t o n o m y that had attracted b u s i n e s s elites to a u t h o r i t a r i a n solutions in an earlier period w o r k e d to e x c l u d e t h o s e s a m e elites f r o m c o n s u l t a t i o n a n d i n f l u e n c e o n e c o n o m i c p o l i c y m a k i n g . 1 0 If " t h e f l a w in t h e p l u r a l i s t h e a v e n , " as E. E. S c h a t t s c h n e i d e r put it, is that " t h e h e a v e n l y c h o r u s sings w i t h a s t r o n g u p p e r c l a s s a c c e n t , " at least o n e i m p o r t a n t f l a w in the a u thoritarian h e a v e n a p p e a r s to have b e e n the f a i l u r e of military g o v e r n o r s to listen to even so restricted a " h e a v e n l y c h o r u s . " 1 1 R e p r e s e n t a t i v e s of the popular s e c t o r , f o r their part, c o u l d a r g u e that the f o r e i g n debt f o r w h i c h the p o p u l a t i o n w a s b e i n g f o r c e d to e n d u r e such s a c r i f i c e s w a s illegitimately i m p o s e d o n their s o c i e t i e s a n d o u g h t to b e rep u d i a t e d a l o n g w i t h the g o v e r n m e n t s that had a c q u i r e d it. P o p u l a r protests m u l t i p l i e d t h r o u g h o u t the r e g i o n , in s o m e c a s e s f o r c i n g c a n c e l l a t i o n of p o l i c i e s i m p o s e d in an e f f o r t to m a n a g e the d e b t . 1 2 A u t h o r i t a r i a n r e g i m e s , it a p p e a r e d , w e r e n o m o r e adept at m a n a g i n g either e c o n o m i e s or p o p u l a r p r o t e s t t h a n their d e m o c r a t i c p r e d e c e s s o r s . 1 3 S o c i e t a l p r e s s u r e s , f i n a l l y , c o n t r i b u t e d to c o n s i d e r a b l e c o n c e r n w i t h i n a u t h o r i t a r i a n e s t a b l i s h m e n t s t h e m s e l v e s a b o u t the costs of c o n t i n u e d a u t h o r i t a r i a n rule. Military e s t a b l i s h m e n t s in p a r t i c u l a r f o u n d t h e m s e l v e s i n c r e a s i n g l y d i v i d e d o v e r t h e q u e s t i o n as f a c t i o n s , a n d in s o m e c a s e s w h o l e b r a n c h e s of t h e a r m e d

Latin

America

23

services b e c a m e convinced that authoritarian rule threatened the integrity of the military institution itself. 1 4 What had a p p e a r e d to be a u t o n o m o u s states b a c k e d by p o w e r f u l repressive a p p a r a t u s e s c a m e apart, in s o m e cases s u d d e n l y , under pressures f r o m within and f r o m the larger society. T h e restoration of d e m o c r a t i c r e g i m e s in the A n d e a n countries, by contrast, pursued a more clearly political logic. A s C o n a g h a n , Malloy, and A b u g a t t a s put it, " D e m o c r a c y r e s u r f a c e d as the political f o r m u l a to cure the severe representation crisis induced by military authoritarianism." 1 5 In Peru and E c u a d o r in particular, business opposition to the reformist tendencies of the military governments were exacerbated by the military's efforts to marginalize business leaders f r o m decisionmaking. Interest groups representing business gained in strength and professional acumen in the effort to c o u n t e r g o v e r n m e n t a l policy and w e r e instrumental in f u r t h e r i n g neoliberal discourse against what w a s seen as the heavily statist orientation of the military governments. T h e transition to d e m o c r a c y took place, t h e r e f o r e , not in the context of the generalized e c o n o m i c crisis of the 1980s but in the late 1970s, before the crisis broke. Although we might expect the d e m o c r a t i c r e g i m e s that e m e r g e d to be m u c h m o r e fragile than their c o u n t e r p a r t s elsewhere on the continent b e c a u s e they replaced less onerous military regimes and could be saddled with the blame for the ensuing crisis, they persisted throughout the troubled d e c a d e of the 1980s with only rumors of military opposition. Each of these regimes, moreover, saw important experiments in neoliberal e c o n o m i c s , this time under civilian a d m i n i s t r a t i o n s but no less oblivious to political pressures than similar e f f o r t s in the Southern C o n e . In Bolivia in particular, under the Paz Estenssoro g o v e r n m e n t , neoliberal policy w a s seen as part of a battle to reconstitute state authority in the f a c e of w i d e s p r e a d corruption and bureaucratic o v e r e x t e n s i o n . As P a z ' s M i n ister of P l a n n i n g Gonzalo Sánchez de Lozada put it, " T h e fundamental institutions of the state's productive apparatus have been feudalized, corruption has b e e n generalized and is b e i n g institutionalized, and the m e c h a n i s m s of control and oversight have stopped operating. In this context, the state is unarmed and lacks the capacity to execute and implement any e c o n o m i c policy that the g o v e r n m e n t p r o p o s e s to put into practice. T h e r e f o r e , the first political goal consists of reestablishing the authority of the state over society." 1 6 As in the Southern Cone (and in Mexico today), the neoliberal project was associated with the ideal of a smaller, but, perhaps paradoxically, stronger state. As in the Southern Cone, its implementation d e p e n d e d heavily upon the concentration of p o w e r in the e x e c u tive—a f u n c t i o n , in the democratic cases, of the strengthened presidential powers bequeathed already strong presidential systems by outgoing military r e g i m e s . 1 7 A n d , as in the Southern Cone, business opposition eventually forced reconsideration of the neoliberal policies and, in Peru especially, a

24

Regional Perspectives

in Political

Economies

s h o r t - l i v e d but d i s a s t r o u s r e t u r n to e s s e n t i a l l y h e t e r o d o x s o l u t i o n s u n d e r Alan Garcia. T h e situation of the C e n t r a l A m e r i c a n c o u n t r i e s in the late 1970s, by c o n t r a s t , r e f l e c t s lower levels of industrial d e v e l o p m e n t a n d u n i o n i z a t i o n a n d , m o r e tellingly, the f a i l u r e of military r e f o r m i s m to take h o l d and alter p o w e r r e l a t i o n s w i t h i n t h e s e c o u n t r i e s . T h e long p e r s o n a l d i c t a t o r s h i p of the S o m o z a s in N i c a r a g u a a n d the increasingly r e p r e s s i v e military g o v e r n m e n t s of El S a l v a d o r a n d G u a t e m a l a f a c e d g r o w i n g u n r e s t in the 1 9 7 0 s f r o m e l e m e n t s of the b u s i n e s s c o m m u n i t y a n d m i d d l e c l a s s and f r o m an inc r e a s i n g l y o r g a n i z e d p o p u l a r s e c t o r . R e p r e s s i o n a n d u n r e s t in f a c t f e d u p o n o n e a n o t h e r in c o u n t r i e s w h e r e control of political p o w e r had traditionally g r a n t e d e f f e c t i v e control of labor a n d control o v e r labor p r o v i d e d e l i t e s with their only m a j o r h e d g e a g a i n s t the v o l a t i l e a n d p r e c a r i o u s international m a r k e t s that d o m i n a t e d e c o n o m i c activity. E c o n o m i c d e v e l o p m e n t s a f t e r 1950, m o r e o v e r , had s e r v e d to e x a c e r bate social t e n s i o n s and p r o v i d e d the g r o u n d s for the political activation of u r b a n a n d rural labor that e l i t e s f o u n d so t h r e a t e n i n g in the d e c a d e s that f o l l o w e d . T h e m o d e r n i z a t i o n a n d e x p a n s i o n of export a g r i c u l t u r e f r o m the 1 9 5 0 s on a n d the c r e a t i o n of the C e n t r a l A m e r i c a n C o m m o n M a r k e t in 1 9 6 0 t o g e t h e r p r o v o k e d i n c r e a s i n g u r b a n i z a t i o n and the g r o w t h of an industrial w o r k f o r c e and u r b a n m i d d l e class w h i l e c o n t r i b u t i n g to i n c r e a s i n g d e s p e r a t i o n in the c o u n t r y s i d e . T h e g r o w i n g organization of u r b a n w o r k e r s and the m i d d l e class r e v e r b e r a t e d in the c o u n t r y s i d e , w h e r e repression prov o k e d the r a d i c a l i z a t i o n of f o r c e s f o r r e f o r m . 1 8 T h e d e e p e n i n g of g u e r r i l l a c o n f l i c t s in N i c a r a g u a in 1 9 7 8 a n d in El S a l v a d o r a n d G u a t e m a l a in 1 9 7 9 - 1 9 8 0 are directly c o r r e l a t e d with the i n c r e a s i n g d e s p e r a t i o n of p o p ular s e c t o r l e a d e r s ( a n d in the c a s e of N i c a r a g u a , of b u s i n e s s a n d c h u r c h leaders) u n d e r the r e p r e s s i o n of the late 1970s. T h e mild r e f o r m i s t military g o v e r n m e n t of H o n d u r a s a v e r t e d this o u t c o m e , t h o u g h the m i l i t a r y ' s s u p port for the contra w a r a n d g r o w i n g r e p r e s s i o n in the 1 9 8 0 s w a s f o l l o w e d by the first signs of guerrilla activity at the e n d of the d e c a d e . 1 9

Democracy and Economic Reconstruction: Contradictory Imperatives? T h e return to d e m o c r a t i c f o r m s that s t a r t e d in the A n d e a n n a t i o n s in t h e late 1970s c o n t i n u e d , in Brazil a n d the S o u t h e r n C o n e , as both a return a n d a r e n e w a l of d e m o c r a t i c i n s t i t u t i o n s a n d p r a c t i c e s . M e x i c o , l i k e w i s e , h a s s e e n g r o w i n g p r e s s u r e f o r d e m o c r a t i z a t i o n , a n d all of C e n t r a l A m e r i c a w a s , by 1990, in c i v i l i a n h a n d s , a l t h o u g h m o s t of these r e g i m e s c o u l d b e d e s c r i b e d as d e m o c r a t i c only in a restricted s e n s e . 2 0 At the s a m e t i m e , r e g i m e s t h r o u g h o u t the r e g i o n f o u n d t h e m s e l v e s c o m p e l l e d to direct o f t e n p a i n f u l p r o c e s s e s of e c o n o m i c a d j u s t m e n t u n d e r

Latin

America

25

circumstances thai were by no means encouraging from an economic point of view. By 1985, when most of the region was under democratic forms of governance, foreign and domestic debt had risen to unprecedented levels, and most economies were scarcely in a position to restart, much less regain the considerable losses of the preceding few years. The situation changed little over the next several years. Though debt had increased enormously in the 1970s, as late as 1979 Brazil's external debt was just over $50 billion, and most of this was private sector obligations. By 1984, Brazil's external indebtedness had passed $ 1 0 0 billion, and the government had assumed the bulk of it. Brazil and Mexico had owed just over $3 billion in 1970, Argentina close to $2 billion. 2 1 Interest payments had spiraled as well. As a percentage of exports, interest payments for Argentina went from 7.0 percent in 1980 to 32.6 percent in 1985, for Brazil f r o m 18.0 percent to 19.3 percent, and for M e x i c o from 15.8 percent to 25.3 percent. 2 2 Rising interest rates and a difficult international economic environment were reflected in increasingly onerous debt service ratios (interest plus amortization as a percent of export earnings—see Table 2.2 for comparative data). Terms of trade turned decidedly against Latin American exporters in the 1980s, as the world economy entered a prolonged recession and First World countries adopted increasingly protectionist policies. (See Table 2.3.) Declines in terms of trade were more disastrous for primary commodity exporters like the countries of Central America and Bolivia (whose tin mining sector collapsed in the 1980s, driving many miners into the lowlands and coca production). It has been estimated, in fact, that, quite apart from the effects of the military conflicts in the region, the decline in terms of trade alone accounts for the trade deficits of El Salvador, Guatemala, Honduras, and Costa Rica in the early 1980s, and that without the impact of such price changes these countries would have registered surpluses. 2 3 Indeed, export volume, particularly in tropical and primary commodities, grew overall during the period, while incomes fell or remained stagnant. The new democracies also faced a weakened industrial base. In some cases (Chile, Argentina, and Uruguay), this was the result of the neoliberal policies of military regimes, which subjected domestic industry to overwhelming foreign competition without compensating measures (see Table 2.4). In other cases (Mexico, Brazil, and Colombia), manufacturing continued strong into 1980 but declined thereafter in face of the recession that gripped all these economies. In Central America (with the exception of Costa Rica and Nicaragua), the spurt of industrial growth that began in the 1960s was largely spent by the 1970s, and war and the regional recession brought stagnation or declines in manufacturing activity. Nevertheless, after the first shock of the crisis, the stronger economies of the Southern Cone, Mexico, Brazil, and Colombia show substantial

26

Regional Perspectives in Political

Economies

Table 2.2 Debt Service Ratios

Mexico Brazil Argentina Chile Uruguay Bolivia Ecuador Peru Costa Rica El Salvador Guatemala Honduras Nicaragua Colombia Venezuela

1975

1980

1983

1986

1991

24.9 17.9 22.0 27.2 41.2 15.3 4.4 25.6 10.7 9.0 1.8 4.7 12.0 10.9 5.3

32.1 34.6 17.7 21.9 12.4 27.8 18.9 31.1 16.8 3.3 2.4 10.1 16.0 9.0 13.3

40.0 28.6 25.0 18.3 20.6 32.2 19.9 19.8 51.6 16.9 12.1 14.8 17.6 22.2 15.3

36.8 33.2 50.4 30.8 20.9 23.6 32.3 14.4 26.3 18.0 23.3 18.5 13.0 27.6 28.5

30.9 30.0 48.4 33.9 38.2 14.7 14.7 13.4 18.4 5.8 6.7 15.8 62.4 13.8 18.7

Source: 1975-1986: World Debt Tables, 1987-88, Vol. 2, Country Tables (Washington, D.C.: IBRD/World Bank, 1988); 1991: World Development Report, 1993, Table 24.

growth in export activity from the mid-1980s on, in both manufacturing and agriculture (though Argentine manufacturing activity was nearly stagnant). Costa Rica, Ecuador, and Venezuela, too, show substantial gains, though Venezuela in particular could scarcely recoup entirely from the loss of oil revenues as prices dropped during the decade. T h e hard hit primary commodity producers (Bolivia, Peru, and the Central American nations) won only uncertain advances (most notably, Guatemala) or saw actual declines in export earnings. But the relative success of some in expanding exports should not obscure the difficulty of the situation, which is clear in the overall stagnation of manufacturing activity (see Table 2.4). GDP growth has in fact been minimal or negative throughout the decade, as Table 2.5 shows, an effect as much of the enormous weight of the debt as of the world recession and the decline in the terms of trade Latin American nations face. T h e new governments of the region have met the crisis with a variety of measures, but the majority have attempted to gain control of the inflation and balance of payments problems released by the international situation with a mixed bag of orthodox and heterodox policies while undertaking m a j o r economic restructuring along neoliberal lines. Argentina, Brazil, and most recently Mexico created new currencies (Brazil twice); Brazil's Collor de Mello froze private bank holdings upon taking office; and Mexico, Argentina, and Brazil have resorted to wage and price freezes in attempts to block inflation. Countries throughout the region, largely under urging from the IMF and World Bank, have cut government spending,

Latin America Table 2.3

Terms of Trade, 1970-1988 (index 1980 = 100)

Mexico Brazil Argentina Chile Uruguay Bolivia Ecuador Peru Costa Rica El Salvador Guatemala Honduras Nicaragua Colombia Venezuela Source:

27

World Tables,

1989-90

1970

1980

1985

1988

108.2 185.4 138.4 238.3 197.3 68.9 129.8 130.5 131.3 111.2 111.4 122.9 139.9 76.5 14.6

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

97.7 89.1 89.8 79.3 87.2 84.4 93.7 80.8 94.8 96.2 86.7 93.1 85.2 98.3 93.4

66.8 116.8 86.2 94.2 99.4 57.0 50.1 79.8 98.1 86.2 87.5 101.9 84.4 70.0 41.5

Edition,

(Washington, D.C.: I B R D / W o r l d B a n k , 1990).

sold off state enterprises, and strengthened tax systems in efforts to slash government deficits. Such policies have met with varying degrees of success. Argentina and Brazil's earlier efforts were manifest failures. More recent initiatives await judgment. Bolivia's "shock treatment" under the Paz Estenssoro government blocked the continent's worst case of hyperinflation, and the Paz Zamora government appeared in 1990 dedicated to preserving the gains of that effort. Mexico's Economic Solidarity Pact of December 1988 continued into 1993 holding back inflation, without, however, achieving the announced goal of single-digit rates. Deficits proved harder to control, though Mexico enjoyed significant success with draconian cuts, in part because a significant portion of government budgets throughout the region continue to be consumed by debt payments. The costs, both of short-term anti-inflationary measures and of the longer-term efforts to restructure Latin American economies (the so-called structural adjustment policies), have been enormous, with most of the weight falling on working and middle classes. In Mexico, where a dominant-party government with considerable political leverage over organized labor has been able to impose harsh austerity measures with some consistency through most of the decade, real industrial wages have fallen 45 percent since 1980. 24 Unemployment was a persistent effect of the recession throughout the region. Mexico, for example, lost some three hundred thousand jobs in an economy that needs to create a million new jobs a year just to keep up with population growth, and jobs continue to evaporate despite significant new investment, most of which, it appears, has gone into the

28

Regional Perspectives

O o es c f r--' ^ r-

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in Political

Economies

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