Bolivian Revolution

The most important "market reform" isn't on the table.


Bolivia's president Gonzalo Sanchez de Lozada was deposed last week because of his commitment to Market Reform. Or so I read in The New York Times, which reported that before the recent uprising, Bolivia had "embraced the free-market model." And The Washington Post, which mentioned the president's "privatizations of state-run businesses and other free-market reforms." MSNBC said the unrest was "rooted in years of free market reforms," and the Associated Press noted "deep discord with Bolivia's decade-old free-market experiment."

If you unpack Market Reform a bit, you will find some actual market reforms: Bolivia has reduced its tariffs, for example, and has moved to a quasi-private pension system. You'll also find some anti-market reforms: An earlier wave of riots, in February, followed the president's proposal to increase the personal income tax. You will find measures that look like market reforms at first, then change shape when you peer more closely. The city of Cochabamba's infamous water privatization of 2000, in which Bechtel provoked protests and then a violent crackdown after it raised rates by anywhere from 10 percent to 60 percent, would be a more credible example of the free market in action if there were a competing private company on the scene, rather than a single corporation with a government contract and a guaranteed rate of return.

And you'll find the war on drugs. It's a strange species of doublethink that allows the Bolivian government to say it is introducing "market reforms" while simultaneously carrying out a brutal and expensive crusade to wipe out one of the country's most successful markets. I'm not playing word games here. While the proximate cause of the uprising that just brought down Bolivia's president was nationalist opposition to the export of natural gas, a deeper source of both this and other recent revolts is the war on coca cultivation. Before last week's protests, the most significant conflict in 21st-century Bolivia was probably the fight in 2001 over the military's invasion of the Chapare region, launched to destroy the coca fields and interrupted after tremendous protest.

Coca itself is not illegal in Bolivia: The law has allowed farmers to grow up to 13,000 hectares for domestic consumption. (Cocaine is prohibited, but Bolivians may chew the coca leaf, drink coca tea, and ingest the plant in other manners more mild than white powder.) The state's efforts to eliminate all other production of the crop—with the U.S. pushing to eradicate it altogether—has been a human rights disaster, with soldiers assaulting peasant lands and paramilitary forces assassinating activists. And while there is a carrot dangling next to that stick, it hasn't impressed the farmers. To quote the Andean Information Network, which tracks the drug war's effects:

At its core is a gradual transition away from providing compensation to farmers for the coca plants they eradicate. This process involves moving from individual to community compensation, then, within five years, to the complete elimination of compensation….The elimination of individual compensation has a high price for the farmers of the Chapare. Coca farmers were never consulted in the formulation of a new system of compensation and their reaction has been fear and distrust. They fear that they will have to completely eliminate the only crop that gives them a steady income without the security of a marketable replacement crop. And they believe that the compensation money they once used for starting up another income source will instead be diverted to the government's alternative development fund, leaving the individual farmer without a means to provide for his family. The government has done nothing to dispel these fears, and no new alternative crop programs are in the offing.

Meanwhile, it was a short jump from trampling the liberties of the coca growers to trampling other people's freedoms as well, with Amnesty International condemning the use of "excessive force" against demonstrators over the last month. Like, say, shooting them. On October 12, troops fired on protesters in the city of El Alto, leaving at least five dead. In this way, the war on drugs has undermined not just peasant property rights but the rule of law.

Drugs lurk in the background of the news coverage, yet we hear so much more about Market Reform. Well, Bolivia could use some market reforms— not tax hikes and "privatized" monopolies, but a war on the red tape that strangles new enterprises (according to a World Bank study, it takes 67 days and $1,500 to start a small business in Bolivia) and the institutional corruption that has made ordinary Bolivians so suspicious of privatization and foreign investment. But the most important market reform, the most important reform of any kind, is still off the table. It's hard to imagine the country's poverty and social unrest coming to an end until the drug war has ended first.