26 September 2002 Edition
South America's Cone
Scientific Proof of Market Failure
Events in South America are bringing a new dynamic to left-wing politics worldwide, argues DOMHNALL Ó COBHTHAIGH.
While the world looks on in horror at the daily outrages committed by the inappropriately named Israeli Defence Forces and a collective shiver runs down our backs at the implications and immediate outworkings of a US 'regime change' in Baghdad, attention has moved away from events in Latin America.
Argentina has suffered serious difficulties as a result of it defaulting on repayments on its bulging Debt burden. The country has been left hanging by the World Trade Organisation (WTO), which has dangled the carrot of a further loan to pay off repayments at the cost of massive cuts in social welfare spending and privatisations.
This scenario is not unique in the Third World, or those countries that might be classified as victims of today's imperialism. Argentina was unlucky enough to have linked its national currency, the Peso, to the dollar (in an attempt to re-assure world markets of its continued future fiscal responsibility). Brazil didn't. That meant that as the Peso climbed in value, alongside the stronger dollar, Brazil's Real didn't. Argentina's goods cost more than those from Brazil. Brazil began to displace Argentina in the worldwide beef sector and in the other export sectors that both countries focused on. The net result was that Argentina couldn't keep pace with its debt repayments. The default on payments and subsequent devaluations wiped out much of the middle-classes' bank holdings. There was a run on the banks to withdraw 'hard cash', the Government enforced limits on 'withdrawals' and there was subsequent economic chaos. Since last December, Argentina has had five Presidents and new words have been added to the local lexicon such as 'Cacerolazo' (where professionals who have lost savings go out and bang pots in demonstration at Corruption or the inability of their Politicians).
In a sense, one might (mistakenly) see this as an isolated event: Argentina the victim of an inept or corrupt government, unable to steer a clear course through the chartered waters of neo-liberal economics. In fact, the Argentinian crisis tells us something very fundamental about the nature of the world economy. It is an indictment of neo-liberal hegemony and its underlying imperialist rationale. Argentina was merely the 'weakest link' of the chain of economies in South and Latin America; a region which experienced generalised deflationary periods in the 1980s.
Since the end of last year, deflationary effects have begun to ravage other neighbouring 'Cone' economies. In July, Brazil's government bonds fell to half their face value in a matter of weeks, because of fears of a governmental default. In August, the Brazilian Real touched its lowest point since going into circulation as the national currency in 1994 (dropping 19 per cent against the dollar).
Paraguay is currently teetering on the edge of a banking collapse and a deepening recession. In Uruguay, traditionally dubbed the "Switzerland of Latin America" for its 'rock-solid' financial system, the Government is seeking an immediate loan from the International Monetary Fund to stave off a debt default.
Against this backdrop, Luis Ignacio Lula da Silva, a former metal worker with a long record of left-wing agitation looks set to be elected as President of Brazil. Not something that the Brazilian oligarchy, its banks, foreign investors or the Bush Administration will be happy about. Indeed, in addition to the more usual orchestrated right-wing media attacks directed on the personality of the charismatic 'Lula', the Bush administration patronised a record $30bn International Monetary Fund credit to the debt-ridden country to try to boost the chances of right-wing candidates.
Sometimes a slip-up by a leading figure can illustrate what's really going on in the heads of the people who are trying to coerce an entire planet into implementing market ideology irrespective of its impacts on human suffering, human development or the environment. One such moment was an interview conducted with George Soros, the world's most celebrated currency speculator, by Folha de Sao Paulo, Brazil's leading financial newspaper, in August.
The logic of Soros' argument was that Brazil would not be allowed to elect Lula because of the massive international speculative pressure on the Real that would result. He suggested that, if elected, Lula would be forced to declare a moratorium on Brazil's debt, precipitating a much larger version of the catastrophe that has been played out, to the general indifference of the world, in neighbouring Argentina.
He admitted that this market interference in the democratic process was tough but he added: "In the Roman Empire, only the Romans voted. In modern global capitalism, only the Americans vote. Not the Brazilians." Coming from a man with such influence as Soros, this statement is of huge significance.
Indeed, it is not occurring in isolation. Recently many close to the Bush presidency have made references to the 'Roman Empire'. Such imperial quotes are not without justification.
In history, the roots of the modern Nineteenth Century Empires were economic conglomeration and the thirst for raw materials and resources (including those of the human kind), not qualitatively different from the current basis of 'national self-interest' as expressed by the USA, Russia and Britain.
It is heartening that such comments have failed to scare people in Brazil as they may once have. At this stage in the great neo-liberal experiment, there are few voters in Latin America who have failed to notice that the net result of those policies has been that the gap between rich and poor, already preposterously wide in Brazil, has grown wider.
In South America, as in Europe, voters want jobs, healthcare and education. But in South and Latin America they also now know that the IMF and neo-liberalism cannot deliver in a world in which Imperial interests can unilaterally invoke 'protectionist' measures. The miseries of Argentina, once touted as a neo-liberal model, illustrated the point to populations throughout the region.
The response of the USA to the election of Lula in Brazil may not follow precisely the lines which we might anticipate, given its involvement in the coup against Allende in Chile (Sept. 11th 1973) and in the failed coup against Chavez in Venezuela in April of this year. Brazil is South America's biggest economy and a default there will lead to massive instability around the world.
The possibility exists that the USA itself may fall into a deflation - something I view as probable at this stage. The key for us, as republicans, is how do we orientate our ideology in this period where neo-liberalist structures (and I include the EU in this) have such overwhelming control over democratic policy implementation. Should Lula come to power in Brazil we may at least be able to identify with a growing worldwide movement of those calling for a new way forward.