Vol.2 No.20, 16 August 2002
Latin America: Graveyard for Structural Adjustment?
By Margaret Legum
During my exile years I took part in a deputation to a British government minister, who shall be nameless, on a matter concerning Africa. He was confident and jolly, confiding at one point: 'Of course I think all Africans are mad - whether they are Black or White - something to do with the climate perhaps.' He laughed merrily.
I have thought about that remark when considering my own blind spots about places and people I didn't bother to think about. One of those, I confess, was Latin America, the countries of which seemed indistinguishable.
We can no longer afford that luxury, since we entered the global free market by adopting the structural adjustment policies of GEAR. What is happening in Latin America is a dire warning to us in South Africa. Latin America is becoming the second continent - after Africa - to fall into economic chaos as a result of those same policies imposed by Washington, via the IMF.
It is no use holding thumbs thinking we are different - that we will not fall into terminal decline like many African countries, or collapse like Argentina, possibly followed by Brazil and Uruguay, unless we have some idea of why we should escape the same fate. As we used to warn complacent White people in the apartheid years, once a system is allowed to oppress others without objection, you will have no defence when it attacks you as well.
Argentina, a country of rich natural resources, and an educated and sophisticated population - 92% are literate - was known as 'the Switzerland' of Latin America. The World Trade Organisation congratulated it in 1999 for a 'robust macroeconomic performance, with sound fundamentals'. (Does that remind you of anything?) That was when, in exchange for an IMF bail-out of debt incurred by a previous corrupt military government, it agreed to structural adjustment.
That prescription included pegging the peso to the dollar, allowing foreign ownership of the banks to produce 'stability' in the banking system, freedom for capital to flow abroad, unrestricted access to Argentina's markets for foreign goods, severe government expenditure cuts and privatisation of public utilities.
Today Argentina is in free fall. Over 200,000 government jobs have been lost, while the pay of the remaining civil servants was cut by 15% and pensions by 13%. When the peso was detached from the dollar to encourage exports, it fell by two-thirds of its value. A run on the banks led to their being closed for the past nine months. The middle classes patronise the pawn shops, and join in the street riots. Over 150,000 people had their phones cut off in the first three months of this year. At least one middle-class woman has immolated herself by fire in public.
Official statistics show half the population can no longer afford basic food and household supplies. Per capita income is a quarter of what it was in 1999. Children are fainting at school from hunger; others no longer attend school, because they are begging. Families rummage through rubbish bags, and the public tips have been cleaned out. In the rich agricultural rural areas, malnutrition is rising by 20% a year.
Perhaps the most appalling single incident took place last month when news that a cattle truck had overturned on the freeway led to a mob with machetes and knives from the nearby shanty town descending upon the cattle, some still alive, struggling with each other to salvage pieces of meat. According to a Washington Post reporter, under the headline After Economic Collapse Deep Poverty Makes Dignity a Casualty 'the scent of blood, death and fresh meat filled the highway. Cows bellowed as they were sloppily diced. Fights broke out for pieces of meat…Traditionally proud, Argentines have begun to despair. Talk today is …of a nation diminished in ways not previously imaginable.'
The same fate is now threatened for Brazil and Uruguay. Brazil's currency has lost 34% of its value, because two left-wing candidates for the Presidency may defeat the foreign-approved right-wing incumbent. The IMF is being asked for a bail-out. It has announced that 'pro-market reforms' will be the price. Uruguay, trying to recover from a four-year recession, is also asking for loans. Its banks are periodically closed to pre-empt a panic. Many have had their reserves depleted by rich Argentineans' withdrawal of their funds, stashed there when their country collapsed. Uruguay's peso has halved in value since the middle of June.
Two lessons stand out. First, IMF bail-outs are not the answer for countries threatened with bankruptcy by the effect of past loans and/or speculative capital movements. Jubilee 2000's proposal for an international bankruptcy mechanism must be instituted so that countries, like individuals, can recover from indebtedness. Creditors should carry some of the risk of lending.
Second, the IMF prescriptions for structural adjustment towards the global market have so clearly failed that one is at a loss to understand how they can still be enforced. Joseph Stiglitz, former World Bank chief economist says: 'One seldom restores economic strength with policies that force an economy into deep recession'
Indeed, we need to ask ourselves what 'recession' means when a country has the resources, natural and human, to nourish its people and put them to work. Recession means that the people of South Africa - like those of Latin America - do not have the purchasing power to buy what they can produce. They are being robbed of that capacity by the failure of their governments to adopt policies that would put them to work. Their governments need to be able to control their exchange rates and the movement of their own capital, to protect their own resources and their employment, to focus resources and policies on their own potential growth. None of these things should be a function of other countries' needs or prescriptions.
Perhaps the agony of Latin America will finally put an end to structural adjustment ideology. Perhaps it will restore to our government and others the courage to insist that they have the right to take their economy back into their own hands. Indeed they have the duty to justify their policies by reference to their own electorates rather than foreign institutions.
© South African New Economics Network 2006. Page generated at 17:21; 24 September 2006