Contemporary Latin America: Development and Democracy beyond the Washington Consensus

313 Pages·2009·1.51 MB·English

by  Francisco Panizza

About the author
Francisco Panizza is Senior Lecturer in Latin
American Politics at the London School of
Economics and Political Science. He was born
in Montevideo, Uruguay, and studied politics in
Brazil and England. He has taught in universities
in Uruguay, Brazil, Mexico and England, where
he has lived since 1979. His research interests
are populism, democracy and the politics of
economic reform. He combines his academic
career with consultancy and journalism. He is a
frequent contributor to the BBC, Bloomberg TV
and several Latin American newspaper and radio
networks.

Contemporary Latin America
development and democracy beyond
the Washington Consensus
Francisco Panizza
Zed Books
london | new york
Contemporary Latin America: development and democracy beyond the
Washington Consensus was first published in 2009 by Zed Books Ltd,
7 Cynthia Street, London n1 9jf, uk and Room 400, 175 Fifth Avenue,
New York, ny 10010, usa
www.zedbooks.co.uk
Copyright © Francisco Panizza, 2009
The right of Francisco Panizza to be identified as the author of this
work has been asserted by him in accordance with the Copyright,
Designs and Patents Act, 1988
Set in OurType Arnhem and Futura Bold by Ewan Smith, London
Index: [email protected]
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A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data available
isbn 978 1 84277 853 1 hb
isbn 978 1 84277 854 8 pb
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Paradigm found: in search of the Washington Consensus . . . . 9
2 The organic intellectuals of the Washington Consensus . . . . 31
3 The ascent of free market economics: an economic
reformation with popular support? . . . . . . . . . . . . . . 51
4 Democracy and its promises . . . . . . . . . . . . . . . . . 73
5 Democracy and markets: contestation and consent . . . . . . 98
6 Paradigm lost: the unravelling of the Washington Consensus . 121
7 The opening of a paradigm: growth, equity and democracy . . 142
8 The rise of the left. . . . . . . . . . . . . . . . . . . . . . . 168
9 Left governments and the deepening of democracy . . . . . . 197
10 Left governments, economic constraints and policy choices . .225
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . 250
Notes | 256 Bibliography | 267
Index | 295

Introduction
This book is about political change under democracy. The first decade of
the twenty-first century has been a time of great political transformation
in Latin America. After a long period of hegemony of forces of the right
and centre-right, political forces of the left and centre-left (henceforth
left-of-centre, LOC) have made strong advances in the region. The trend
began in 1998 with the triumph in Venezuela of Hugo Chávez – then
perceived more as an anti-establishment candidate rather than a radical
left-winger. It was followed by the victory of Socialist Party candidate
Ricardo Lagos in Chile in 2000 and by the emblematic triumph of Luiz
Inácio Lula da Silva in Brazil in 2002. By the second half of the decade
it looked as though, if not a red tide, at least a pink one was sweeping
throughout the region, as different shades of LOC governments held
office in Argentina, Bolivia, Brazil, Chile, Costa Rica, Guatemala, Ecuador,
Nicaragua, Paraguay and Uruguay. The so-called turn to the left has not
been uniform across the region, while electoral results have revealed
deeply divided societies. But altogether Latin America’s political map
looks very different from that of the 1990s, when centre-right governments
dominated the political landscape of the region.
The LOC political forces that have become ruling parties throughout
the region are highly heterogeneous entities whose political differences
raise difficult questions concerning their categorization, however loosely
we define the left. The answer to these questions depends in turn on
more fundamental theoretical questions: How do we define the left?
Where do we trace the dividing line between the centre-left and the
centre-right? Does it make sense to group together such moderate politi-
cal forces as Chile’s Socialist Party (PSCh) with more radical forces such
as Bolivia’s Movimiento al Socialismo (MAS)? Are not Venezula’s Hugo
Chávez, Bolivia’s Evo Morales and Ecuador’s Rafael Correa populists
rather than leftists? And, what is meant by populist?
I deal with the definitions of the left and populism and other re-
lated questions in the body of this book. But while there are significant
questions concerning the scope and nature of LOC governments in the
region, there appears to be a strong consensus on what is behind their
n political ascendancy, namely a backlash against the economic policies
o
cti that were implemented throughout the region in the late 1980s and 1990s.
u
d Attacks against ‘neoliberalism’, ‘the Washington Consensus (WC)’ or
o
r
nt simply ‘the model’, as the free market economic reforms of the 1990s are
I
often indistinctively referred to in political discourse, has been a central
element of the political appeal of LOC candidates, whether radicals or
moderates.
And yet, a decade earlier the political mood in the region was strikingly
different. As noted in Chapter 3, by the early 1990s Latin America ap-
peared to be on the verge of leaving behind its history of political and
economic turbulence as a mix of liberal democracy, economic liberaliza-
tion and regional integration achieved significant consensus throughout
the region. The formula had considerable support both at elite and at
popular level, as shown by the electoral victories of economic reformers
such as Carlos Menem in Argentina in 1995, Ernesto Zedillo in Mexico in
1994, Fernando Henrique Cardoso in Brazil in 1994 and 1998, and Alberto
Fujimori in Peru in 1995. There were few significant challenges to liberal
democracy in a region in which elections were becoming the only game
in town, where a centrist consensus prevailed over political polarization,
and ‘human rights’ was part of the new common language if not yet the
common practice. The turnaround in economic performance appeared to
vindicate the free trade economic reforms that were being implemented
throughout the region. From Despair to Hope, the subtitle of a book on
crisis and reform in Latin America by the Chilean economist Sebastian
Edwards, reflects the belief that free market economic policies were
working. Published in 1995, the book hailed the new vision of economic
policy based on market forces, international competition and a limited
role for the state in economic affairs, and mapped its implementation
throughout the region (Edwards 1995).
Optimism about the impact of the free market reforms proved pre-
mature and short lived. The so-called Tequila crisis of 1994 in Mexico was
the first in a series of financial crises that affected the main economies
of the region in the second half of the 1990s and the first years of the
new century (Brazil 1999, Argentina 1999 and 2001/02, Uruguay 2002).
Economic volatility made 1997–02 a new lost half-decade for develop-
ment after the so-called ‘lost decade’ of the 1980s. During that period,
GDP per capita fell throughout the region and poverty that had fallen in
the first half of the 1990s again increased in both relative and absolute
2
terms. Equally important to the social and economic consequences of
the financial crises were their intellectual and political repercussions.
Economic stagnation and its social impact in terms of poverty and un-
employment provided the common ground for the emergence of new
development discourses that challenged the Washington Consensus.
As will be seen in Chapter 7, these discourses, which are part of what
is here referred to as the post-Washington Consensus (PWC), differed
significantly among themselves in the ways in which they related to the
WC and in the extent to which they advanced new alternatives. But even
for the more staunch supporters of the free market reforms, the perceived
failures of the reforms opened a period of debate and introspection in
which different explanations were offered about how and why things
went wrong, and what to do to put them right. Edwards’s From Despair
to Hope was followed by his ‘Latin America at the end of the century:
more of the same?’ (Edwards 1999), which perhaps should have been
subtitled ‘From despair to [crushed] hopes’. In this process of reflection
and self-criticism, the international financial institutions (IFIs) that, as
argued in Chapter 2, were the intellectual and financial driving force
behind the WC sought to take on board some of their critics’ objections
and, as shown in Chapter 7, elaborated a more comprehensive develop-
ment framework that acknowledged the importance of institutions for
economic development, promoted a more active role for the state, and
highlighted the importance of reducing poverty and inequality as part of
the development process. Arguably, the agenda, if not necessarily the IFIs’
proposed means to achieve its goals, shifted the development debate to
a terrain more favourable to the traditional concerns of the left.
The period between 2003 and 2008 saw new economic and political
developments in the region. As noted in Chapter 10, the commodity
boom allowed the region to grow at its highest rate for the preceding
forty years. Partly as a result of high economic growth, but owing also to
the implementation of new social programmes, poverty fell to its lowest
level since 1980 in relative terms, and there was also a fall in inequality.
LOC governments took advantage of the new economic conditions in
order to adopt an increasing distance from the International Monetary
Fund, which had seen its influence in the region decline. But, as argued In
tr
in the same chapter, the increased margins of policy autonomy allowed od
u
by a favourable international context between 2003 and 2008 also high- c
tio
lighted significant differences between LOC governments’ approach to n
3