In a New York Times op-ed, Jorge Castañeda, Mexico’s foreign minister from 2000 to 2003, offered a few broad “lessons” to Latin America’s left governments. He accused them of not saving enough during good times and of failing to address corruption. Implicitly, he accused Ecuador and of course Venezuela, one of the international media’s favourite targets for vilification, of succumbing to “authoritarian temptations.” He says they “muzzled the press, stacked the judiciary, harassed opposition leaders and tampered with electoral systems.”
He says nothing about several violent coup attempts against left governments over the past fifteen years in Venezuela (2002), Haiti (2004), Bolivia (2008), Honduras (2009), and Ecuador (2010). The coups in Honduras and Haiti were successful and the consequences continue to plague those countries. Haiti’s coup was actually perpetrated by U.S. troops who kidnapped President Jean Bertrand Aristide. The coup in Honduras succeeded in no small part due the perfidy of Hillary Clinton. A right-wing “parliamentary coup” that ousted President Fernando Lugo in Paraguay in 2012 was also successful. The coup in Venezuela succeeded for two days before it was defeated. The coup attempt in Ecuador nearly took the life of President Rafael Correa.
The “authoritarian abuses“ denounced in newspapers like the New York Times were, in reality, mostly justifiable measures taken to prevent coups and protect democracy. For example, a powerful weapon in the hands of right-wing putschists in Latin America has always been the private media. That is being dramatically illustrated in Brazil at the moment. Blunting that weapon by expanding state media and using regulatory measures (which all governments have) is decried as “muzzling the press”. The allegation will seem valid if you accept the right of unelected billionaires to dominate public debate and incite coups against elected governments. Even if you don’t accept such a vile premise, you might still believe the allegation if you “inform” yourself about Latin America by casually reading the corporate press at any end of the political spectrum.
It is always worth recalling that the liberal New York Times editors cheered the 2002 coup in Venezuela with even more enthusiasm than the Bush administration (which was also openly pleased and had funded many of the perpetrators). Very recently, in a widely circulated interview with Obama in the Atlantic, Jeffrey Goldberg casually referred to Hugo Chavez as “the late anti-American Venezuelan dictator.”
Thanks to years of wretched one-sided journalism, most readers will not know enough to gasp at the ignorance or willful dishonesty of Goldberg’s remark. Before assessing the lessons that Castañeda offered the Latin American left, let’s mention a few crucial lessons for people outside the region. First, don’t trust the establishment media to get the most basic facts right. Second, any serious discussion of left governments in Latin America must account for the relentless efforts of the United States and its allies to get rid of those governments.
Arguably, Ecuador’s example best refutes Castañeda’s claim that “no one saved up for the inevitable rainy day” and especially his contention that left governments were “lucky” to have benefitted from a commodity boom. He doesn’t explain why voters gave so many left governments the chance to benefit from the allegedly transformative commodity boom. The chart below explains why voters gave them that chance.
Beginning in about 1980, a shift to what are called neoliberal economic policies brought a very prolonged economic disaster to the region. Neoliberalism is a menu of policies such as privatizing state owned companies, cutting taxes on the rich, slashing public spending among other policies known to stuff the pockets of the wealthy. The policies have also been known as the “Washington Consensus” because the United States used its muscle to impose them. They proved so harmful that they eventually caused Washington and its local allies to lose considerable influence in many countries. An updated chart above would show Latin America’s per capita growth rate to be 1.8 percent in the 2000-2014 period. Clearly, moving away from neoliberalism brought recovery.
So how “lucky” was Ecuadorian president Rafael Correa when he first took office in 2007? In 2008 the price of oil, which provided about 60 percent of Ecuador’s export earnings, collapsed by 75 percent thanks to a global recession whose epicenter was the United States where a massive housing bubble burst. The global recession and its aftermath also cut remittances from Ecuadoreans living and working abroad – millions of refugees from the neoliberal era who ended up throwing a lifeline to families back home. Remittances accounted for 6.6 percent of Ecuador’s GDP in 2007 but plummeted to 2.4 percent by 2014 as economies abroad went through deep recessions followed by weak recoveries.
The costs of production in Ecuador’s oil fields have also risen significantly since 1971 when its oil industry first took off. The population is now almost three times larger. So even during a few years when oil prices were over $100 per barrel, before a second huge and sustained price collapse hit Correa’s government in 2014, the government’s inflation adjusted oil revenue per capita - accounting for production costs - was lower than it was in the 1970s and mid-1980s. The average price of oil during Correa’s time in office, accounting for these factors, is actually a bit below the average for the 1971-2014 period.
By contrast, Correa’s government increased tax revenues from 10 percent of GDP in 2006 (the year he was first elected) to 13.4 percent by 2012, mainly by clamping down on various forms of evasion by the rich. In real per capita terms, tax revenues have more than doubled over that period. Discarding neoliberal policies was way more important than any “commodity boom.” Incidentally, clamping down on tax evasion was also a major victory against corruption of both the legalized and illegal variety.
Correa’s government has made unprecedented investments in roads, education, and health care. It is finalizing the construction of eight hydroelectric plants and it has built multi-purpose dams to prevent the flooding of agricultural lands. Poverty has been cut in half since Correa was elected and the investments mentioned above lay the foundation for long term development. Investments improve the country’s productive capacity – its ability to generate wealth and diversify in the long term. The hydroelectric plants, which are already entering into operation, will make Ecuador a net exporter of electricity. That alone is a significant step towards diversification away from extractive industries that has been made in a very short time.
To use an analogy, a person who invests in obtaining a trade or academic credentials will generally have better long term economic prospects than somebody who decides to “save for a rainy day” by not investing in any kind of post-secondary education or training. Of course people can make unwise – even disastrous – decisions about which trade or academic credentials to pursue. Others – with exceptional luck or ability - can do very well without any kind of formal training or credentials. However, it is obvious which general approach is the most sensible.
Castañeda’s “save for a rainy day advice” offers a path toward continued under development. Dressed up as prudence, it’s an attempt to revive the ruinous orthodoxies from which the region has largely rid itself in recent years. Powerful interests work very hard to promote those orthodoxies, not only in Latin America but within developed countries. People everywhere can benefit from learning the real lessons of Latin America’s recent history.