End of the Latin Third Way

Tim Cavanaugh | September 29, 2005

Old timers may recall that way back when, Brazilian President Luiz Inácio Lula da Silva was considered a potentially viable left-lite alternative to the hard leftism taking root in Latin America, a "moderating force" on Venezuela's Hugo Chávez, even a forward-thinking hipster. Now, as Lula's promise rots in an endless corruption scandal, the Independent Institute's Alvaro Vargas Llosa considers how it all went wrong:

The conventional wisdom was that, despite his radical Marxist roots and occasional concessions to his political base, Lula represented a healthy move away from the old left and toward the emergence of a new model for underdeveloped nations similar to Europe's social democracy. Many thought this model would have a moderating effect on the left across the continent and hold Hugo Chávez in check.

However, Lula's capacity to reinvent the left always hinged on something more than keeping interest rates high to stem inflation, maintaining a strong currency, riding on the high prices of certain commodities, and giving cash to poor families. He could either opt for simply managing the perpetual crisis or he could try to overhaul a labyrinthine political system that benefited certain pockets of industrial and agricultural production but keeps millions of people out of the realm of opportunity. He chose the former path.

While technocrats talk about a three percent rate of economic growth for Brazil this year and an export boom that has translated into a trade "surplus" of $40 billion, Lula's voters are indignant at the corruption scandal. But the real point is that corruption has developed naturally in an environment of limited opportunities due to asphyxiating government interference. And the absence of adequate limits on the power of the political bureaucracy is in turn an incentive for corruption at the top level. The corruption of Lula's government, therefore, should be seen more as a symptom than a cause.

Whole article.

Julian Sanchez gives Hugo Chávez a raspberry.

Elián Gonzales, now 11, thinks of Fidel Castro "not only as a friend, but also as a father."

Comments

|9.29.05 @ 11:02PM|#

On the list of Things I Don't Get, Latin America is right near the top. I've seen Llosa speak on the subject and I've read the current Reason interview ... but I still don't get it. Marxism has never actually given them anything. Why keep going back to it?

I know they've only ever seen crony capitalism, but I can't figure out why nothing else has ever shown up.

My brother in law is from Ecuador, and his read is that the most important thing to learn about doing business in Latin America is how to navigate the pervasive corruption. He went on to note that it isn't just the government anymore. Everyone expects to be bribed to do everything. People wind of hiring their cousins not because of some ultra powerful family bond, but because he is the least likely guy to run off with the company car since he has to answer to his mother. Just one guy's take, but still. Russia seems to have the same problem. Corruption may be the beast to kill. Any thoughts?

|9.30.05 @ 12:17AM|#

From what I can see, liberalism in Latin America sowed its own soil for destruction.
Guys who called themselves liberal like Simon Bolivar, were really just your usual strong-man with "lberal" revolutionary make-up, who routinly violated liberal principles (such as allowing the routine pillaging of private property in order to fund his armies). Since the revolutionary "liberalism" failed to change the legacy of the statism, classism, croynism, economic crapulence, etc of the Spain/South America, everyone looked for the newer/better revolutionary movements in the 20th century.

Since Marxism combined changing the existing social order with combatting imerperialism, as exemplified throughout the 20th cent. invasion of Latin American countries and our continued continued hypocrisy of speaking for free trade when our farm subsidies hurt developing nations the most, I can see where many would still cling to the old Marxist nostrums in order to fight against US hegemony and for more "wealth for the poor."
I still think that's all crap considering that Asia produced its economic tigers via economic liberization, but that's from what I gather of our neighbors South of the Border.
Also, the usual melange of the elitist/racist/classist governing class does exist (look at Mestizo vs. indigenous tensions) and they use the government for their own benefit under whatever label they choose. It's a nasty cycle of self-destruction, ignorance, yadda, yadda, yadda, and I can't really see when South America can overcome it's rampant corruption until, as you showed, that people can trust each other. Very depressing.

I know that there's a lot of history buffs here that could correct any egregious errors I've commited, so please any corrections of my assumptions are very welcome.

|9.30.05 @ 1:10AM|#

I think this is actually quite unfair to Lula. Blaming the current pervasive corruption scandals on his left politics would require it to be the case that previous administrations with more rightist politics did not suffer from pervasive corruption. Let's just say that's, well, not so true. Brazil has had shitty corrupt politicians of every stripe, forever. Further, this seems stupid:

"Lula's capacity to reinvent the left always hinged on something more than keeping interest rates high to stem inflation, maintaining a strong currency, riding on the high prices of certain commodities, and giving cash to poor families."

Wait, so competent management of a notoriously poorly run state, such that they are issuing reai-denominated bonds for the first time in Brazil's history, and financial institutions all over the world are snapping them up, this is no big deal for a former Marxist? It may not be enough to make him the greatest Brazilian president ever, but it's pretty damn good. Finally, it derides his social programs to describe them sneeringly as "giving money away to poor people". After the Zero Fome (Zero Hunger) thing didn't really work out, they went back to the drawing board and expanded an excellent policy of the preceding government: the state gives cash benefits to the women of the family (less likely to blow the cash, just as with many micro-loan programs) if and only if they send their children to school, get them vaccinated, and so on. This has the potential to break the cycle of poverty and is regarded by known leftist rag the Economist as one of the best anti-poverty programs in the world today (rolls are also being purged to get middle-class tit-suckers who weaselled their way on due to political connections off the list). In short, gimme a break. Also, I have no idea why I know all this. Too much Economist reading, no doubt.

|9.30.05 @ 1:20AM|#

and is regarded by known leftist rag the Economist

Why is it anyone thinks the Economist is a leftist rag? A republican friend made the same remark. I don't agree at all. They are pro free market and pro free trade. On other issues, they simply respect individual countries' democratic trade offs- typically saying "obviously policy x will lead to higher economic growth, but it is unlikely to be politically possible." They seem favorable to environmental concerns, but they aren't exactly Greenpeace.

|9.30.05 @ 1:35AM|#

Corruption may be the beast to kill. Any thoughts?

My first obnoxious thought is "well DUH."

I've observed Costa Rica for about 10 years (my wife is from there), and I'm convinced that no individual politician like Lula or political party can fix the problem in any country. It's so ingrained in the culture, it is beyond any law or political movement. My father in law, an accountant, has lost at least a couple of jobs for being unwilling to go along with malfeasance. I'm convinced it's going to take a complete cultural shift, on the level of changing religious beliefs or family customs.

|9.30.05 @ 5:36AM|#

dead elvis,

I'm pretty sure Ms. Waring has been sarcastic when she called the Economist "a leftist rag". If you read her postings over at >crooked timber< and other blogs you could see that she's quite fond of said magazine (as I am myself if I may add that).

|9.30.05 @ 5:38AM|#

dead elvis,

I'm pretty sure Ms. Waring has been sarcastic when she called the Economist "a leftist rag". If you read her postings over at >crooked timber< and other blogs you could see that she's quite fond of said magazine (as I am myself if I may add that).

|9.30.05 @ 5:40AM|#

Dear reason: That server of yours is really fucked up!

|9.30.05 @ 9:19AM|#

The Independent Institute seems to be reaching really, really hard to attribute a scandal-based decline in Lula's fortunes to the economic policies it doesn't like.

Personally, I think de Silva's popularity decline is the result of his inadequate attention to sustainable urban planning.

|9.30.05 @ 9:37AM|#

I am not much of a student of South America either, but Hugo Chavez has got me more interested these days. Anyway, South America on average has low per capita income and a high Gini coefficient, and that would seem to make conditions ripe for class conflict, or at least for those who would try to exploit it.

On top of that, there are the cultural factors, as others have mentioned. I'm reminded of a recent article on cross-cultural morality studies - I won't go into the whole thing, but part of it addresses a theoretical question about whether you should take a bus ticket that doesn't belong to you, and claims that the majority of Americans say no, don't take it, but 85% of Indian adults say it's OK to take the ticket. My training as an anthropologist aside, I'm inclined to say yes, some sets of cultural values are better than others; if you have a culture in which people think petty theft and corruption is no big deal, those people are going to stay poor and backwards. I'm not claiming that Latin Americans think that corruption is "no big deal" - from what I understand, many of the common people around the world are profoundly frustrated with it, which may be why they tend to flock to anyone who promises to fight it and seems capable of doing so, which includes Marxists. (Whatever their other failings, Marxists have often been tougher on corruption then their opponents.) However, it does seem to be a culturally ingrained trait in some places.

|9.30.05 @ 10:00AM|#

Legalize corruption?
Or look at it that one man's corruption is anothers pus pie?
Or is it that we are all blind to the particular pond of corruption in which we swim?

M1EK|9.30.05 @ 10:07AM|#

"Marxism has never actually given them anything. Why keep going back to it?"

Compared to Batista, Castro seemed like a step up (and may actually have been, for some subset of the poor).

Compared to the guy before him, the dude in Venezuela is DEFINITELY a step up for a large subset of the poor.

Even if you think Marxism sucks worse than Hitler, one ought to at least be able to acknowledge that for the poorest of the poor, it often beats a thugocracy.

|9.30.05 @ 10:15AM|#

"Marxism has never actually given them anything. Why keep going back to it?"

Also, and a lot of Americans don't know this, the city's run by Marxist administrations tend to be much more liveable, less violent, and have greater opportunity than other cities.

|9.30.05 @ 10:17AM|#

"Even if you think Marxism sucks worse than Hitler, one ought to at least be able to acknowledge that for the poorest of the poor, it often beats a thugocracy."

I don't think history bears that out in Latin America. I don't know that their flavor of Marxism has helped them one bit over their flavor of thugocracy. Sometimes they have been the same thing.

theOneState|9.30.05 @ 10:18AM|#

"60 Minutes" interviewed Gonzalez for 70 minutes three weeks ago at a museum in Cardenas, Cuba, the boy's hometown. He said the boy's father was present, but there were no Cuban monitors or officials and no ground rules.

To reporters: um...would you please make the disclaimer when monitors and ground rules ARE in place? That would be more helpful. Thanks.

|9.30.05 @ 10:19AM|#

Compared to Batista, Castro seemed like a step up (and may actually have been, for some subset of the poor).

Maybe for a short while, but definitely not over the long run. At the time he was overthrown, Cuba's per capita GDP was one of the highest in Latin America. Today, it's one of the lowest. If Batista's government hadn't been overthrown by Castro, and had instead gradually gone the way of Pinochet's, I think the country would at least have a per capita GDP today on par with Mexico, Chile, and Argentina. And perhaps higher owing to the influence of American trade and investment.

|9.30.05 @ 10:20AM|#

"Also, and a lot of Americans don't know this, the city's run by Marxist administrations tend to be much more liveable, less violent, and have greater opportunity than other cities."

Then why does it always collapse when a popular thugocrat spins tales of captialism? It can't be all that great, or you wouldn't see the crony capitalist regimes rise on a wave of populism.

|9.30.05 @ 10:24AM|#

I suppose the trains run on time, too.

|9.30.05 @ 10:42AM|#

Jason, the crony capitalists generally rise on a wave of mid-level officers machinegunning people in basements, not populist surges.

I'm having trouble coming up with a single example of a leftist regime in Latin America that was overthrown by a popularly-supported rightist movement. Not Chile. Not Nicaragua. Generally, you only see popular uprisings for rightist strongmen overthrowing other rightest strongmen.

And when you look at the region's history, it's obvious why - a quasi-feudal system with a tiny number of families controlling most of the wealth is what defines "the right," while land reform and democratic governance (people power) defines the left.

|9.30.05 @ 10:45AM|#

Actually, Doug, it's the buses. Google "Curatiba" And yes, to poor people, actually being able to get to where the jobs are matters.

Eric II, I don't think you get to use Cuba as an example of Marxist vs. capitalist economic growth in Latin America. The embargo makes any comparison meaningless.

|9.30.05 @ 11:03AM|#

Uh, joe, I seem to remember your Marxist buddies getting thrown out on their asses as soon as the people could actually vote in Nicaragua. I also don't think the Soviets were throwing money and weapons into South America for the purposes of "people power".

If we can't count Cuba as a failed Marxist state because of the embargo, then you can't claim Venezuela as a successful one since Chavez built virtually none of the national oil company that props up the economy.

|9.30.05 @ 11:05AM|#

The embargo's done considerable harm, and I've never supported it. But given that Cuba's per capita GDP was higher than that of Mexico or Chile at the time of Batista's ouster, and that today it's less than 1/3 of either nation, it's pretty hard to blame the embargo for the full difference.

|9.30.05 @ 11:34AM|#

Don,

"Uh, joe, I seem to remember your Marxist buddies getting thrown out on their asses as soon as the people could actually vote in Nicaragua."

In favor, not of a right wing populist with a military background, but a democratic quasi-social democrat. Let me know when you get around to addressing my point.

"I also don't think the Soviets were throwing money and weapons into South America for the purposes of "people power"." No, the big powers stuck their noses into that region for reasons of imperial geopolitics, which had little or nothing to do with the local political forces. So...were you going to say something relevant to the point you're trying to address? Soon?

"If we can't count Cuba as a failed Marxist state because of the embargo, then you can't claim Venezuela as a successful one since Chavez built virtually none of the national oil company that props up the economy." Then I suppose it's a good thing I didn't metion Venezuela at all.

Eric II, the embargo was put in place shorty after Castro came to power. Yes, the Cuban economy has failed to grow. This is closely correlated with two credible explainations - its Marxist economic system, and the blockade against the gigantic economy with which it had carried out most of its trade. All I'm saying is, it's impossible to tease out what share of the economic stagnation to blame on each factor.

R C Dean|9.30.05 @ 11:56AM|#

By this time, I find it hard to hang much of Cuba's economic woes on the US embargo. After all, it has access to the other 80% of the world's economies, and for the bulk of the embargo was heavily subsidized by the Soviets.

I seem to recall the contras having a fair amount of support in the hinterlands of Nicaragua. Sure, they got guns and ammo from the US, but no more so than your average lefty movement got guns and ammo from the Russians or their proxies.

For that matter, I seem to recall the Sandanistas getting quite a bit of overseas support as well. Does that disqualify them as a "popular" movement?

How "popular" has any Marxist dictatorship that shot its way into power been, anywhere?

|9.30.05 @ 12:17PM|#

Firstly, what happened to my first comment here? Grr...

And just when I thought joe was being sensible again, he pops up defending Marxists? I'm leaning toward the "just yanking our chain" hypothesis. Anyway, while I'm against the embargo (I think it's foolish and counterproductive, and certainly doesn't helpCuba's economic situation), I think it's disingenuous to claim that it's the source of Cuba's problems. They have the entire rest of the world to trade with, damn it; we are the only country embargoing them AFAIK, and they still can't make a go of it. The EU, collectively the world's 2nd largest economy and almost as big as the US? China, world's 3rd largest economy? Japan, world's 4th largest? Collectively, just these three economies are about twice the size of the US economy, and yet somehow they and Cuba are still powerless in the face of the US embargo? Smells funny to me.

I don't think the "yeah-but-they're-far-away" excuse flies much either: Mexico, about as close to Cuba as the US, is the world's 13th largest economy (12th if we don't count the EU) and 3 times the size of Cuba's (per capita is also about 3 times Cuba's) and yet somehow that doesn't help either? And then there's Canada, another big, relatively close economy with excellent transportation links to the US, the existence of which also mysteriously fails to help Cuba... (All economic data from the CIA World Factbook.)

|9.30.05 @ 12:42PM|#

China, world's 3rd largest economy? Japan, world's 4th largest?

This is just nit-picking, but measured in absolute dollars, Japan's GDP is still almost 3x that of China's. Germany's GDP is also noticeably larger. Right now, China's economy probably comes in at #6, slightly behind the UK and France, though it should surpass them within a few years.

|9.30.05 @ 1:16PM|#

"After all, it has access to the other 80% of the world's economies," on the other side of the planet. We're 9 miles away, and the trade routes and the operations that utilized them had already been established for centuries.

"and for the bulk of the embargo was heavily subsidized by the Soviets." Subsidies don't promote economic growth. They replace economic growth.

Seriously, all of the ranting and raving that goes into arguing that trade barriers are killing - killing! starving! - people in the developing world goes right out the window for some conservatives. When the subject turns to Cuba, the laws of economics go right out the window.

|9.30.05 @ 1:20PM|#

"I seem to recall the contras having a fair amount of support in the hinterlands of Nicaragua." Yes, but never anything close to majority support.

"Does that disqualify them as a "popular" movement?" No, a popular movement can have overseas support. I never claimed otherwise.

"How "popular" has any Marxist dictatorship that shot its way into power been, anywhere?" Generally, the Marxist dictators are part of a popular front coalition when they come to power. That's how it happened in Russia. But the Viet Minh and Mao's army seemed to be plenty popular on their own.

|9.30.05 @ 1:24PM|#

Frank, subsidies don't spur economic growth. Trade spurs economic growth. Sometimes, by masking the harm of bad practices, subsidies can squash economic growth. Don't they teach you this stuff at libertoid school? ;-)

"But why are you conflating the economic policies of Castro and Lula?" I'm not. I was just pointing out a problem in an earlier poster's efforts to compare pre- and post- revolution economic growth in Cuba, and draw conclusions about the two system's vitality, without correcting for the embargo.

|9.30.05 @ 1:28PM|#

JD, " I think it's disingenuous to claim that it's the source of Cuba's problems."

joe, in a comment that preceded JD's "Yes, the Cuban economy has failed to grow. This is closely correlated with two credible explainations - its Marxist economic system, and the blockade against the gigantic economy with which it had carried out most of its trade. All I'm saying is, it's impossible to tease out what share of the economic stagnation to blame on each factor."

If I was interest in "defending Marxists," I probably wouldn't be assigning them a share of the blame, now would I?

Also, Cuba didn't have huge, centuries-long trade ties with Mexico, or Canada. It's economy wasn't built up around the export of goods to buyers in those countries. Even if your premise that Mexico and Canada are an adequate substitute for the United States was true, they already had economies set up. They were already buying all the sugar cane and rum they needed - it's not as if the closing of the American market just shifted all that demand into Canada and Mexico.

|9.30.05 @ 2:14PM|#

Ok, so subsidies do not create growth, my mistake, but it sure helped sustain Cuba for a long while once American trade stopped, as seen here in Wikipedia
(http://en.wikipedia.org/wiki/Cuban_embargo):
...
The U.S. International Trade Commission estimates an ongoing annual loss to U.S. exporters of $1.2 billion. Nevertheless, the embargo had a limited effect on Cuba in its first few decades as the island nation was heavily subsidized by the Soviet Union and the Comecon nations which supplied Cuba with cheap oil, consumer goods, and subsidies. This peaked in the 1980s, when Cuba received around $6 billion per annum. Cuba also was provided with guaranteed export markets for its goods (mainly sugar and nickel), long-term supply and delivery arrangements for Soviet oil and machinery at low prices, and trade credits to support its other trading arrangements.
...
The collapse of the Soviet bloc in 1989 and of the Soviet Union itself two years later resulted in an economic crisis in Cuba and in the embargo, having its greatest effect by denying Cuba the ability to replace Soviet imports with US imports. Cuba has developed trading relations with the rest of the world, including a substantial amount of official (as well as much unofficial) trade with the U.S. but since the U.S. is the closest geographic entity to Cuba and the dominant producer in the region the necessity of importing goods from elsewhere, such as Europe made these goods more expensive due to transportation costs. Despite the difficulties created by the embargo in the 1990s, Cuba defied predictions that without Soviet support it would quickly collapse. The blow was partly softened by Cuba opening up to tourism.
...
What's even more interesting is what joe hinted at his critque of subsidies, that government intervention can be very perverse and harmful to the economy. Does joe truly mean this since most solutions according to Marxism means government intervention? Could those perverse incentives and the subjectivly enforced laws be a reason Lula's government had to bribe people in order to get things done?
That's exactly what the Indepent's article was originally saying, so joe, does this mean that in order to radically change society in Latin America for the better, one must become at least, !GASP!, a classical liberal/libertarian?

|9.30.05 @ 2:17PM|#

"Generally, the Marxist dictators are part of a popular front coalition when they come to power. That's how it happened in Russia. But the Viet Minh and Mao's army seemed to be plenty popular on their own."

This is what I think needs some more thought and investigation. We have to be careful because the rhetoric of the Marxist claims popular support by definition. It is really hard to see except in super obvious cases who is rising on a populist tide. Once they get there, everyone claims to be popular, and I don't see either side having sufficient revolutionary authority to be able to install their system without killing a bunch of dissidents.

As LLosa mentions in the recent paper Reason, though, there was clearly a time when broad support of Marxism had waned due to its failures to produce benefits. There was clearly a time when capitalist rhetoric gained traction. His whole point is that the opportunity was bunged up, so I think the opportunity must have been present.

NathanB|9.30.05 @ 3:00PM|#

Personally, I think de Silva's popularity decline is the result of his inadequate attention to sustainable urban planning.

Yeah joe, South America totally needs another Brasilia.

|9.30.05 @ 3:10PM|#

NathanB, the term "sustainable" isn't actually defined as "neo-fascist and shitty."

|9.30.05 @ 3:13PM|#

Frank, your argument (and your philosophy in general, btw) suffers from lumping too many disparate things under the heading "government intervention." I was referring to subsidization of inefficient businesses and a low performing economy in general. Other government interventions, such as R&D and public works investments, can promote economic growth.

But some of the problems in Latin America could be addressed through de Soto's ideas about private property ownership and land reform.

|9.30.05 @ 3:16PM|#

Don Rumsfeld is giving George W Bush his daily briefing and tells him that three Brazilian soldiers have been killed in Iraq.

George says "that's absolutely terrible", is lost for words, and holds his head in his hands for several minutes. His staff are amazed at the response, and the whole room stays silent.

Finally George lifts his head from the table and says "exactly how many is a brazillion?"

|9.30.05 @ 3:26PM|#

Jason,

I'm not using the term "popular" in the Marxist "Popular Front for the Blabbady Blah Blah" sense.

As far as the opportunity for capitalist rhetoric, such a thing can only exist in conditions of relative peace and opporunity. Under such conditions, neither a right winger claiming a patriotic mandate, not a lefty calling for revolution, is going to get any traction at all.

|9.30.05 @ 4:11PM|#

Well, living under a Marxist regime does teach you certain skills, if you're of a mind to learn, like sailing unseaworthy boats in the open ocean and jumping over walls while being shot at. And I think it's a great service by the Marxists to provide you with those on-time buses when you're trying to flee from paradise.

joe, I'm going to impolite this time and say that your head is so far up your ass on this one I can't believe it. I thought you were just a liberal a la John Kerry but apparently you'd be more likely to vote for George Galloway, given a chance.

|9.30.05 @ 4:51PM|#

"Well, living under a Marxist regime does teach you certain skills, if you're of a mind to learn, like sailing unseaworthy boats in the open ocean and jumping over walls while being shot at. And I think it's a great service by the Marxists to provide you with those on-time buses when you're trying to flee from paradise."

Uh, yeah, that totally captures how people in Curatiba or Genoa feel about their local governments. Not.

It speaks very badly of you that you could so misconstrue what I've written. But don't let me interrupt - you can obviously speak very badly of yourself without any assistance, dipshit.

|9.30.05 @ 5:18PM|#

"I'm not using the term "popular" in the Marxist "Popular Front for the Blabbady Blah Blah" sense."

My concern is that it is hard to tell the difference between popular in this way and popular in the way that we are trying to get at.