Democracy or Neoliberalism?
Atilio A. Boron
In the 1980's, a wave of democratization
swept through Latin America, igniting a wide-ranging debate on the nature and
promise of democracy.1
This debate was especially welcome in a region with a long authoritarian history.
Political authoritarianism in Latin America traces to the colonial heritage
and a dependent form of capitalist development based largely on latifundia and
servitude and not, as in the United States, on the political impulses of free
farmers. Indeed, in nearly two centuries of independent political life, Latin
America has not experienced a single political revolution culminating in the
implantation of a democratic regime. In Mexico between 1910 and 1917, Guatemala
in 1944, and Bolivia in 1952, the overriding concern of the revolution was capitalism,
not democracy.
|
|
Though television
creates a vicarious and
illusory integration,
the rich and poor
increasingly live in
socially, culturally,
economically,
and ecologically
separate worlds.
| Reinforced by an historically unprecedented,
worldwide democratic thrust, the democratic reform movement in the 1980's
partially overcame the burdensome legacies of this traumatic history. But
even at the level of democratic thought, the victory was limited. Faced
with the democratic flood, as well as the failure of "really existing
socialisms" and the inability of social democracy to transcend capitalism,
a significant section of the political class in Latin America-including
the left-rushed to embrace a procedural understanding of democracy. That
understanding, whose intellectual provenance traces to Joseph Schumpeter's
Capitalism, Socialism, and Democracy,2
identifies democracy exclusively with a choice of government through electoral
competition, and the struggle for democracy with the establishment of rules
of electoral competition. What falls outside the proceduralist vision are
the values of social justice and equality traditionally associated with
democracy.
|
Procedural conceptions of democracy imply a radical departure
from the Western political tradition, from Plato to Marx and Tocqueville.
In the introductory chapter to Democracy in America, Tocqueville portrays
the epic nature of democratization with these moving words:
This whole book has been written under the impulse of a kind
of religious dread inspired by the contemplation of this irresistible revolution
advancing century by century over every obstacle and even now going forward
amid the ruins it has itself created.3
If we take Tocqueville's language seriously, the proceduralist
view of democracy presents us with a puzzle: How could such a simple, reasonable
political program ever have aroused fierce passions and dogged resistance-revolutions
and counter-revolutions, protracted popular struggles and brutal repression?
Was all this drama-after all, the drama of the West since Periclean Athens-
the product of a simple malentendú? Why was it so much easier to abolish
Brazilian slavery, and an Empire that rested on slave labor, than to democratize
Brazilian capitalism?
Perhaps because democracy is, after all, something more than
an innocent procedural arrangement.4
That "something more" - the sources of the "religious dread"
that Tocqueville refers to - might be captured by a substantive conception
of democracy, comprising four principal features:
(a) Democracy requires a set of institutions that organize
a fair contest for power and have sufficient strength to enforce its outcome,
even against the protests of the losers. As Adam Przeworski has put it, democracy
institutionalizes uncertainty in that no party, class, or stratum is assured
of success by the very structure of the political process;5
(b) It requires a basic, though historically variable, level
of material well-being for all;
(c) Democracy rests on the assumption that citizens are treated
as equals, thus allowing for the full development of absolutely unique individuals
and the endless plurality of expressions of social life;
(d) It provides for the effective enjoyment of freedom by
the citizenry by protecting basic liberties and, beyond such formal entitlements
(which are already inscribed in many dead-letter Latin American constitutions),
providing a distribution of material and symbolic resources that enables all
to make effective use of their liberties.
In practical terms, of course, democratic capitalisms, even
the most developed ones, barely meet these standards. But what difference-apart
from the sheer failure to live up to the democratic promise-does this shortfall
make?
Democracy and Neoliberalism
Economic crises, rebellious militaries, despotic plutocracies,
and interventionist American embassies have all played crucial roles in the
long history of political instability and military coups in Latin America:
Every democratic step forward has carried with it a threat of authoritarian
regression. Now the major threat to democracy is much subtler, more internal,
perhaps more formidable: a potential loss of citizen confidence in democracy
itself.
In systems with universal suffrage, the right to participate
in choosing the government confers on citizens an aura of dignity and public
respect. But when elected governments break the "representative covenant"
and show complete indifference to the sufferings of citizens, when democracy
is downgraded to an abstract set of rules and deprived of meaning for much
of the citizenry, many will be inclined to regard democracy as a sham, to
lose confidence in and withdraw their support for electoral institutions.
The outcome of such disenchantment depends, of course, on the breadth and
longevity of democratic disrepute. If just a few always believe that democracy
is a sham, or if many occasionally think that, the outcome is not likely to
be too severe. The worrisome case is when many people persistently believe
that democracy is a sham. Even then, the consequences depend upon how many
the "many" are, their organization and capacities for collective
action, and, of course, the country-specific capacity to absorb popular disenchantment.
Still, public confidence matters. Whereas autocracies operate
relatively independently from their subject's ideas and sentiments, democratic
stability requires popular legitimacy. For this reason, public opinion data
in several Latin American countries are a source of serious concern. Dissatisfaction
with democracy now ranges from 40 percent in Peru and Bolivia to 59 percent
in Brazil and 62 percent in Colombia.6
What explains this loss of confidence? Chile's former president
Patricio Aylwin suggested an answer when he said that in his own country,
the most pressing issue confronting democracy is to redress the current "social
debt." As Aylwin's remark indicates, the new democratic institutions
have disappointed citizen expectations. That's because most citizens are not
Schumpeterian proceduralists; they do not think that democracy is simply a
system of rules of electoral competition. They expect democracy to provide
essential goods and services and thereby to make a positive difference in
their lives. In short, they expect something of substance from democracy.
But the emergence of democratic process in Latin America coincided with the
adoption of neoliberal economic reforms. And because those reforms have been
disastrous for ordinary citizens, nothing of substance has emerged.
The essentials of neoliberal economic reform are well-known:
monetary stabilization, economic liberalization, balanced budgets, deregulation,
privatization, downsizing of the state, and free rein to market forces. So,
too, is the dominance of neoliberalism in Latin American political-economic
debate. But the ideological accomplishments of neoliberalism far exceed its
modest economic achievements, which in any case have imposed an enormous social
cost.
Consider the case of Chile, commonly cited as the paradigm
of neoliberal success. By 1988, after fifteen years of economic restructuring,
per capita income and real wages of workers were not much higher than in 1973,
notwithstanding an average unemployment rate of 15 percent between 1975 and
1985 (with a peak of 30 percent in 1983). Between 1970 and 1987 the poverty
rate increased from 17 percent to 38 percent, and in 1990 the per capita consumption
in Chile was still below its 1980 level.7
After celebrating the "important gains" experienced by urban minimum
wages in Chile between 1990 and 1992, a recent report from the United Nations'
Economic Commission for Latin America (ECLA) concludes that they have now
recovered the purchasing power they had achieved . . . in 1980! 8
Not that all Chileans have been standing still: Between 1979 and 1988 the
richest decile increased its earnings from 36.2 percent to 46.8 percent of
national income, while the bottom half declined from 20.4 percent to 16.8
percent.9
In Mexico, more than a decade of orthodox adjustment has
produced manifest social and economic involution. According to official Mexican
data, per capita national income fell 12.4 percent between 1980 and 1990,
despite the triumphalist rhetoric used by PRI governments to "sell"
their conversion to neoliberalism.10
Between 1982 and 1988 real wages dropped 40 percent, and have remained close
to their 1988 level ever since. While the unemployment rate - traditionally
high in Mexico-increased, per capita consumption dropped 7 percent between
1980 and 1990.11
According to Castañeda, "when in 1992 the Mexican government publicized
the first statistical accounts of income distribution in 15 years the data
were terrifying."12
Still, it took an insurrection in Chiapas, two political assassinations, a
huge trade deficit, and the collapse of the peso to make local elites and
their advisors realize that neoliberal policies were not working. And when
they did, President Ernesto Zedillo proposed a new emergency package that
was bound to impose further hardships on the poor. Government officials anticipated
a 32 percent drop in the purchasing power of salaries, bringing additional
suffering and deprivation to most Mexicans.13
Neoliberal reforms, in short, have not produced self-sustained
growth, a more equitable income distribution, or a fair society. Nor should
that be a surprise. As 50 years of Western European experience clearly shows,
and as more recent experience in East Asia sharply underscores, capitalist
development requires an appropriate mix of public policies, and this means
a state endowed with sufficient capacity for market intervention and regulation.14
Indeed, it is worth recalling that Chile's own economic restructuring-rather
unimpressive compared with East Asia or China-has kept the strategic copper
industry in government's hands. Nationalized during the Allende years, state-owned
copper firms account for about 50 percent of Chilean export revenues. Moreover,
this revenue goes directly to the fiscal treasury-not, as in Argentina, Brazil,
and most Latin American economies, to the pockets of private businessmen-thus
strengthening public finances and state capacity. In 1995 the state-owned
Corporación del Cobre transferred $1.8 billion (US dollars) to the
fiscal treasury, a figure far greater than the taxes paid by all private firms
in Chile.15
Putting aside the particulars of copper, the size of the
Chilean state (measured by the ratio of public expenditures to GDP) grew continuously
in the last decade, as did state regulation of financial markets. So Chilean
economic restructuring is hardly a compelling example of neoliberal policies,
and the economy would arguably be in vastly worse shape had it not been for
these sharp departures from the neoliberal project. Yet all these "peculiarities"
of the Chilean model have apparently passed unnoticed at the World Bank. In
a recent official document-which includes a section on "Chile as a Model"-the
World Bank's Chief Economist Sebastián Edwards fails to mention these
disturbing facts even in a modest footnote.16
The results of "free-market fundamentalism" extend
throughout the region, and are not at all confined to Chile and Mexico, the
countries once advertised as "success" stories. Neoliberal policies
have vastly increased the numbers of the poor and "extremely poor,"
and widened the gulf separating rich and poor. According to a recent report
from ECLA:
Poverty is the greatest challenge for the economies of Latin
America and the Caribbean. Between 1980 and 1990 it worsened as a result of
the crisis and the adjustment policies, wiping out most of the progress in
poverty reduction achieved during the 1960's and 1970's. Recent estimates
place the number of poor at the beginning of this decade, depending on the
definition of poverty, somewhere between 130 and 196 million. . . . Recession
and adjustment in the eighties also increased income inequality in most of
the region. In the countries with the most highly concentrated income distribution,
the richest 10 percent of the households receive 40 percent of the total income.17
By thus augmenting economic inequality, neoliberal policies
have simultaneously magnified the bargaining power of a handful of privileged
collective actors, whose demands are heard at the upper echelons of the government
and central bureaucracy, undermined the material foundations of citizenship
by fostering a demobilized, disorganized, depoliticized, often submissive
populace, and weakened the capacity of the state to redress this corrosive
imbalance.
A Sovereign State?
Latin American neoliberalism bears significant responsibility,
then, for the loss of citizen confidence in democracy. That loss of confidence
has been further exacerbated by two features of Latin American political economy
that impose further limits on state capacity: the persistence of the "tax
veto" still successfully wielded by capitalists throughout Latin America,
and the effects of economic globalization.
Tax Veto
The Latin American rich refuse to pay taxes. They react with
anger and contempt when governments try to tax their properties, profits,
and earnings, and regard even modest taxes on private boats, airplanes, sports
cars, and summer homes as communist confiscations.
This "tax veto," an aberrant social and economic
tradition dating back to colonial times, has periodically created unbearable
pressures on the state budget. Given the resulting rigidities on the revenue
side of state budgets, policy-makers routinely try to "solve" fiscal
troubles by cutting expenditures or, when possible, raising new indirect and
socially regressive taxes. In either case, the burden rests on the shoulders
of workers and the poor. In Argentina, a World Bank study indicated that,
in the late 1980's, the richest 10 percent of the population was paying 27
percent of its total income in taxes, while the poorest 10 percent of the
population paid 29.3 percent of its earnings. Unfortunately, in this matter
at least, the "structural reform" launched by Menem in the 1990's
only served to make things worse.18
With the 1980's debt crisis, the chronic underfinancing of
the state in Latin America became a source of major and urgent national and
international concern. To repay an ever-growing external debt, heavily indebted
countries need to run a budgetary surplus. Therefore, amidst the severe crisis
of the 1980's, Latin American states reinforced the recessive trends of the
economy with a pro-cyclical fiscal policy that further depressed the purchasing
power of large sections of the population, reduced middle class incomes, and
generated-in accordance with fashionable "supply-side" theories-new
"tax incentives" to the rich. Harsh cuts in social expenditures
and public spending became cornerstones of the neoliberal blueprint, justified
by the need to "keep the numbers in the black" and reduce allegedly
oversized states.
But the fiscal troubles of Latin American states are caused
by the chronic inability of governments to collect taxes from the wealthy,
not by overgrown expenses. While World Bank research reveals the extreme regressiveness
of Latin American tax systems, Bank leadership exhorts our governments to
attract private investment by reducing the "tax burden." But the
tax burden (as a percent of GDP and excluding social security contributions)
of the more developed countries of Latin America is roughly 17 percent while
in the OECD countries this proportion is 37.5 percent. Even more striking
are the tax rates on capital gains and profits, which average 14 percent of
GDP in OECD countries, while running at 4 percent in Brazil, 3 percent in
Argentina, Chile, and Uruguay, and 1 percent in Bolivia.19
Latin American governments that were strong enough to dismantle and/or sell
large-and sometimes very efficient-public enterprises at bargain prices, and
that have shut down governmental agencies, terminated social programs, privatized
all kinds of public services, destroyed labor unions, slashed public budgets,
and overwhelmed public resistance to these policies, appear surprisingly frail
when faced with the task of organizing an equitable and progressive tax regime.
The outbreak of the debt crisis in Latin America thus hastened
the relentless dismantling of the state apparatuses and the disorderly retreat
of governments from policy-areas in which their contribution had been very
positive and important for large sections of the popular classes. If these
countries fail to break the back of the "tax veto," reconstructed
Latin American capitalism will increasingly resemble corrupt and mafia-ridden
"free-market" Russia, rather than Switzerland or Austria-hardly
fertile soil for democratic consolidation.
Globalization
Economic globalization only made things worse. Coupled with
the "tax veto," globalization-to simplify a complex but familiar
story-radically weakened national states, reduced their administrative and
decision-making capacities, undermined the quality of governance, and increased
vulnerability in front of an increasingly complex domestic and international
environment. The new Latin American democracies surrendered important margins
of national sovereignty and self-determination, de facto, and sometimes transferred
formal decision-making powers in sensitive areas to transnational firms and
international financial institutions and/or foreign governments under the
guise of commercial agreements, "conditionalities," and "country
risk" evaluations. This enfeeblement has produced a profound distortion
in political preferences: Governments in the region are, in the first instance,
responsive to the interests of foreign governments and creditors and key sections
of international capital and its "watchdogs" (the World Bank and
International Monetary Fund); then they respond to domestic "market forces,"
a euphemism for big capital and firms, local or foreign, operating in our
markets; ordinary citizens come last.
It is difficult to conceive of a stable democracy that has
not achieved a minimum threshold of national sovereignty, sufficient to make
autonomous decisions with important distributional impact. Given the formidable
reach of globalization, and the role of external debt in reinforcing financial
dependence, a democracy sitting on a weak state increasingly deprived of decisional
autonomy is likely to decay.
State enfeeblement and globalization, then, have hardly been
neutral in their distributional impact. Local capitalists and their metropolitan
partners have gained in several ways from the dramatic "downsizing"
of the old developmental state. First, they substantially reinforced their
economic predominance by drastically reducing public control of markets, and
undermining the consistency and scope of public policy. Today, Latin American
societies have become highly "privatized": The state has retreated
to minimal functions, and previously collective goods-health, nutrition, education,
housing, occupational training-have become individual problems whose solution
must be found in the market. The name of the game is the survival of the fittest;
the rest-the poor, elderly, children, the sick, the homeless, the unemployed
and unemployable-can be the new clients of the Red Cross and a host of other
charitable non-governmental organizations.
Second, the withering away of national states and the wholesale
privatization of state-owned enterprises and state-administered services transferred
highly profitable monopolies to capitalists, and guaranteed the repayment
of the foreign debt-contracted, as in Argentina, Brazil, Chile, and Uruguay-by
irresponsible, corrupt, and de facto military rulers. Neoliberalism supplied
the general justification for the transfer of public assets and state-owned
enterprises, paid for with public savings, even in areas considered "taboo"
and untouchable until a few years ago, such as electricity, aviation, oil,
or telecommunications.
Thirdly, these reforms have so dramatically shifted the balance
between state and market that any future government sensitive to popular demands,
or inspired by even some vague reformist vocation, will immediately realize
that it lacks some of the most elementary instruments of public policy-making
as well as the administrative cadre to carry out these tasks. That is why
one of the most urgent tasks facing Latin American societies is the reconstruction
of the state. As a former ministry of industry in Venezuela observed, by the
end of the 1990's, "Washington may encounter some surprises to the south.
Latin America, which has spent the last 10 years demolishing the state, will
spend the next 10 rebuilding it."20
Civil Society
Fragmented and heterogeneous societies, crisscrossed by profound
inequalities and cleavages of ethnicity, class, gender, and region: that is
the principal legacy of fifteen years of neoliberal hegemony. Nor is the problem
exclusive to Latin American societies. In Western Europe the social involution
resulting from the decline of the welfare state has prompted some analysts
to talk about a "two-thirds" society. And economist Richard Freeman
recently suggested in the Harvard Business Review that the United States may
be moving toward an "apartheid economy," in which "the rich
live aloof in their exclusive suburbs and expensive apartments with little
connection to the working poor in their slums."21
In the conservative capitalist societies of the late å80s and å90s, a wide
sector-roughly one third of the population-has been progressively excluded
from the benefits of material progress, doomed to become an underclass or
decaying segment of modern society, unable to be reinserted in the formal
labor markets of
advanced capitalism.22
The issue is not merely the immorality of social exclusion.
A "society" debilitated by unfettered market dynamics-and Latin
American countries are quickly approaching it-is a mere juxtaposition of radically
disparate social universes. Though it may seem paradoxical, slave-owning Brazil
and colonial Mexico were far more socially integrated than their late twentieth
century capitalist successors. In those pre-capitalist systems, class exploitation
demanded forms of sociability, structural integration, and inter-class relationships
that are largely absent in contemporary Brazil or Mexico. Though antagonistic,
the fazendeiro and slave, like the landowner and indigenous peasant, belonged
to the same society. Their conflicts developed within a single social and
economic structure, unified by exploitative bonds of slavery and servitude
and a host of other social relations. At the end of the twentieth century,
Latin America is more profoundly divided. The "winners"
in this game of capitalist restructuring seek refuge in exclusive residential
districts, protected by sophisticated surveillance systems and small armies
of security guards. Their children attend private schools and bi-lingual institutes,
and then graduate to American colleges and universities. Their doctors live
in Houston and Miami; their entertainers in New York, London, and Paris. Their
wealth is highly diversified, global in scope: Physical contact with a member
of the laboring masses is increasingly improbable. What economic and social
relationship can exist between this fin de siecle bourgeoisie, and the "losers"-the
"wretched of the earth," the millions who sell candy, gum, and cigarettes
in the busiest intersections of our decaying cities; the fire-eaters or ragged
clowns in the downtown's sidewalks; the windshield cleaners at congested intersections;
the precarious and informal workers who live in tin and cardboard shacks,
and have no skills, no formal education, no access to medical care? As Darcy
Ribeiro once noted, marginal groups do not fight against capitalist exploitation
but struggle to become an exploitable labor force. But even that fight is
hard to win when neoliberal restructuring is destroying the state, dismantling
public education and health services, and eliminating institutions that train
people in the skills demanded in the labor market. For growing sections of
Latin American societies, class exploitation is not the most immediate problem:
Their problem is their inability to become an exploitable labor force.
Conservative thinkers answer that some more or less subtle
form of popular disenfranchisement is necessary to prevent this "underclass"
from gaining political influence and to permit "responsible" people
to conduct the business of government without interference from the rabble.
Discussing the American governability crisis of the early å70s, Samuel Huntington
wrote that the problems besieging industrialized countries were the consequence
of democracy's excesses, not capitalism's inequities.23
His thesis was wrong then; it is wrong again now. The main problem undermining
democracy and democratic governance at the end of the century is capitalism-more
precisely, the way in which capitalist production and bourgeois society have
evolved-and not the supposedly inevitable self-destructive tendencies of democracy.
Addressing these challenges will, of course, take much more
than the delicate work of political engineering: An adequate institutional
setting, a reasonable compromise between elites, improved political leadership,
and better public policies are all necessary, but insufficient. More fundamental,
structural changes are needed in capitalist societies, and to this end, a
radical program of social and economic reform. Some items on such a reform
agenda are straightforward: progressive tax reform; political restructuring
aimed at enhancing the state's capacity to regulate markets effectively, produce
decent public policies, and ensure the public goods needed for bare survival;
a deepening and strengthening of democratic institutions, thus upgrading government
responsiveness and accountability.24
Moreover, this program of fundamental structural reforms must take precedence
over such considerations as repaying illegitimate foreign debts, balancing
state budgets, or maintaining a "friendly atmosphere" for investors.
Neoliberals reject this premise. In a notorious interview
with the Chilean conservative newspaper El Mercurio during Pinochet's years,
Friedrich von Hayek asserted that, for a while, he was ready to sacrifice
democracy and political rights in exchange for a governmental program committed
to unfettered capitalist development. In the end, Hayek ventured, economic
freedoms would reassert themselves and open the door to democracy and political
liberty.
But democracy is a higher, more cherished value than free
markets and profits: Political liberty is a necessity, John Stuart Mill used
to say, whereas economic liberty is a convenience. The principal project of
reform-minded leadership in Latin America should be to make our countries
safe for democracy; given the disturbing loss of citizen confidence in democracy,
and the role of neoliberalism in producing that loss, the reform project will
need to extend well beyond electoral process and deliver on democracy's substantive
promise. If democracy is, as Tocqueville said, an "irresistible revolution
advancing century by century over every obstacle and even now going forward
amid the ruins it has itself created," surely it will not respectfully
stop at the gates of capitalism. Serious democratic reform in Latin America
will need to begin by halting the destructive impact of neoliberalism, and
will require empowering ordinary women and men to protect themselves from
the unprecedented social euthanasia brought about by the free marketeers.
