The spectacular resurgence of left movements across Latin America in the early 2000s baffled even the most seasoned students of Latin America. In a region where traditional leftist movements had been all but destroyed by brutally repressive authoritarian regimes and where governments of all hues and colours had unquestioningly adopted thoroughgoing structural adjustment reforms aimed at reintegrating Latin American economies into the neoliberal world economy, this “laboratory of neoliberal experiments”1 was the last place anyone would have expected to witness large-scale political success of anti-systemic movements. But starting from Hugo Chávez’s electoral victory in 1998 to the resounding victory of the Bolivian indigenous leader Evo Morales in 2006, a sequence of leftist governments with explicitly anti-neoliberal programs rose to power in various regions of Latin America. If the initial scale of this pink tide wave was not surprising enough the fact that these governments survived, and in fact prospered, in the face of stiff political opposition and the threat of imperialist interventions from their North American neighbour was even more noteworthy.
All these achievements notwithstanding, since 2012 the leftist regimes have started to unravel. In country after country the delayed impact of the global financial crisis and the steep decline in commodity prices world over, increased economic pressures on these fledgling experiments. The problems began in Argentina when growth slowed down and mobilizations from the right picked up. The Kirchner government eventually lost support and was defeated in the 2012 elections only to be replaced by a blatantly pro-business regime. In Brazil, after a decade of robust growth, recessionary clouds gathered over the economy and brought it to a virtual halt. In countries like Venezuela economic chaos was of a much larger magnitude. Inflation rates skyrocketed, production of oil ground to a halt and with all of this, poverty rates increased dramatically (Economic Commission for Latin America and the Caribbean 2014). To make things worse, this period coincided with massive elite mobilizations which were successful in uniting the splintered opposition. The untimely death of Hugo Chávez opened up new opportunities for the resurgence of pro-neoliberal forces and in Brazil, Dilma Rousseff’s government found itself squeezed between a powerful financial sector on the one hand and dwindling growth rates on the other. Having completely isolated her, the opposition then drummed up sufficient support to impeach Rousseff on completely flimsy grounds.
It is in this context that this book seeks to evaluate the broad changes that have been occurring within Latin America over the pink tide decade and seeks to understand the limitations and contradictions within these projects. The book focusses on the cases of Brazil and Venezuela.
Contextualizing the Left Turn in Latin America
For most of the nineteenth century, Latin American economies though nominally sovereign, remained within the orbit of influence of British imperial rule. This was not surprising as Latin American economies were important markets for Western manufactures, and perhaps more importantly, they were important sources of primary goods like cotton, sugar, rubber and coffee. As exporters of primary commodities Latin American nations were successful in capturing global markets and these international linkages were crucial for incipient economic growth, but the reliance on primary commodity exports also meant that these economies were extremely dependent on American and European markets and remained vulnerable to exogenous price volatilities (Kohli 2004). Apart from giving foreign investors untrammelled control over economic decisions, the deepening pattern of economic dependency also strengthened the political clout of the agro-exporters, much to the detriment of industrial classes. As a result, industrialization remained muted and the sort of structural change that advanced capitalist nations were undergoing, completely bypassed Latin America (Bagchi 1972, 1982).
In this context the global commodity slump of the 1930s proved to be a game changer (Franko 2007). In the face of falling demand from major export markets, Latin American economies began to face severe balance of payments problems. As primary commodity prices fell and foreign finance dried up, Latin American economies were forced to experiment with protectionist policies. In addition to external changes, this period also coincided with the growth of economic nationalism in the region. There was growing resentment against the export oriented pattern of development and by the early decades of the twentieth century several voices had begun to openly criticize the excessive dependence on foreign trade, which they argued, had restricted Latin American economies to being producers of raw materials and had allowed foreign capital to gain a foothold in domestic economy to the detriment of local capitalists (O’Toole 2014; Ocampo 2006; Burns 1968). Moreover, faced with dwindling international prices it was felt that the only way these economies could hope to develop themselves was by espousing an autocentric development strategy based on state interventionism, protectionism and across-the-board industrialization. This provided the backdrop to the adoption of the import substitution industrialization policies (ISI) across the continent.
In terms of economic performance, the developmentalist policy-stance proved to be successful on several dimensions. For instance, between 1950 and 1980 GDP growth rates averaged 5.5% (Ocampo 2006). During the same period the growth rates of the manufacturing sector were around 6% (Ffrench-Davis et al. 1994). As an indicator of the extent of import substitution we may note that “For Latin America as a whole, the share of imported capital goods in total capital formation fell from 28 per cent in 1950 to 15 per cent in 1973” (Ffrench-Davis et al. 1994: 192). Therefore, what was striking about the rapid rate of growth in the region was that it was the industrial sector that played an important role in the process. Manufacturing became the leading “…engine of growth, reaching a peak share of 26% of GDP in 1973, seven percentage points more than in 1945, a feature shared by all countries” (Ocampo 2006: 68). As can be expected much of this growth was fuelled by high rates of investment which grew at an average rate of 7.4% per year in 1951-80 for the region taken as a whole (Ffrench-Davis et al. 1994).
Underlying all these achievements were some glaring flaws which had started to become apparent by the 1970s. Despite all the rhetoric, most countries avoided radical changes in the economy’s income and asset distribution structure and thus the size of the home market remained very narrow and inequalities remained high. Added to this, the capital intensive nature of industrialization meant that industrial growth far outstripped the rates of labour absorption (Baer 1972; Prebisch 1978; Tokman 1982). As a result, large sections of the society were effectively excluded from formal sector jobs and since most social security benefits were linked to formal sector jobs, only a few could enjoy the welfare benefits that the state provided. On the whole therefore the developmentalist project became locked into a self-defeating cycle of inequality, informality and limited industrialization. The inability to address income concentration was reflective of a larger malaise in the institutional structure of Latin American economies. Unlike in Asia where anti-colonial movements successfully pushed states and native bourgeoisie to seek greater autonomy from foreign capital, in Latin America the entire institutional structure retained a dependent character which severely restricted the state’s reach and power (Kohli 2009). The dependent nature of economic development meant that not only were politically contentious reforms avoided but the Latin American variant of ISI also came to be heavily dependent on foreign capital. By the 1970s this dependence increasingly took the form of debt.
Initially because foreign capital was easily accessible and interest rates were low, the unsustainability of debt did not seem to concern policymakers.2 Eventually however this entire process of funding growth via foreign finance ran into problems when the United States hiked its interest rates in 1979 causing a sudden increase in interest payments. Between 1979 and 1984 interest payments on debt jumped by over 300% (Chodor 2014). To make things worse, as these economies started to stumble massive capital flight added fuel to the fire. In Venezuela capital flows worth 131.5% of total external debt flew out of the economy in the five-year period from 1979 to 1984 alone, while in Argentina and Mexico the numbers were 76.9 and 73.3%, respectively (Franko 2007). The explosion of external debt and sudden capital flight pushed these over-indebted economies into a grave economic crisis as GDP growth fell, industrial development faltered and inflation skyrocketed (reached four digit figures in Peru, Nicaragua, Brazil and Argentina). This formed the backdrop to the adoption of neoliberal policies.
Faced with this crisis of daunting proportions, defaulting countries turned to the IMF and the World Bank for assistance. As a part of loan conditionalities set forth by the multilateral institutions, defaulting economies were forced to adopt neoliberal policies in return for loans. It may be noted that the manner in which structural adjustment was imposed differed from one country to another. In countries like Chile, liberalization had already begun in the 1970s under Pinochet’s military dictatorship. For others, like Brazil, liberalization was relatively late in the sense that it followed the debt crisis of 1982. Whether imposed by the IMF or by military rulers, what was common to all these regions was that structural adjustments were essentially deflationary in nature. The logic behind this was that immediate problems facing Latin American economies stemmed from a mismatch between expenditure relative to resources. Since debt was a reflection of “too much” expenditure, it would follow—or so it was argued—that income deflation could provide a corrective to this situation by squeezing domestic demand and bringing it in line with available resources (Franko 2...