Democracy in Latin America: Between Hope and Despair

Chapter 4: Toward A New Strategy Of Development

CHAPTER 4 TOWARD A NEW STRATEGY OF DEVELOPMENT In our recent history, one could say that there are at least three basic approaches to economic development in Latin America: neoliberalism, neopopulism , and what we have referred to in the case of the Concertación governments (1990–2010) in Chile as “growth with equity.” More than a model, we prefer to speak of a “strategy” of development in order to emphasize the large dose of pragmatism in our own approach to economics—related to what former President Patricio Aylwin has labeled “la política de lo posible” (the politics—and the economics, one could say—of the possible). This is consistent with Albert Hirschman ’s possibilism and his warnings against the phenomena of ideological inflation and structural determinism, which have been so pervasive in Latin America. In this chapter, I analyze how we arrived at the Washington Consensus of the 1990s, including a critical approach to it. In the next chapter , I will analyze the emergence of neopopulism, first on the right (with Carlos Menem and Alberto Fujimori), and later on the left (with Hugo Chávez, Evo Morales, and Rafael Correa)—in the latter case, as a response to the neoliberal approach of the Washington Consensus. I argue that the apparent dilemma of neoliberalism versus neopopulism is a false 107 one in Latin America, and that the reality is much more complex, giving rise to diverse alternatives and strategies. These are “Hirschmanian” moments, if I may be allowed the expression. “If the Great Depression and the Second World War finally crippled the export-led growth model, the debt crisis of the 1980s ended the inward-looking phase” (Bulmer-Thomas 2003, 401). The latter strategy was replaced by a new one—though not necessarily a new model— based on external openness and trade liberalization, in a process of gradual but sustained integration into the global economy. Responses to external shocks and the debt crisis of the 1980s led to “a profound shift in development strategy, away from state-led, inward-oriented models of growth toward emphasis on the market, private ownership, and greater openness to trade and foreign investment” (Haggard and Kaufman 1995, 3). The recurring foreign shocks of the 1970s (the oil crisis), 1980s (the debt crisis), and 1990s (the Tequila Crisis and Asian financial crisis) exposed the structural deficiencies of the model of import substitution industrialization (ISI), which had been in effect since the 1940s. This revelation led to a new strategy of development. The shortcomings, insu fficiencies, and mistakes of the policies surrounding ISI were already apparent by the 1950s and 1960s. The foreign crises of the 1970s, 1980s, and 1990s confirmed the vulnerability of Latin American economies in the face of external shocks, putting a new emphasis on macroeconomic stability. Furthermore, these crises confirmed the impossibility of a development strategy based on inward-oriented growth in the new era of globalization. Some authors have claimed that this new model corresponds to one belonging to a “neoliberal order” (Ffrench-Davis 2005; Ocampo 2007) or to a “neoliberal democracy” (Drake 2009). I will argue here that the process is actually much more complex, rich, and diverse than this label suggests. I hold that this process is still in the “decantation” phase and that it has transitioned from a highly ideological stage (represented by the experiment of the Chicago Boys under Pinochet and the economic reforms of the Washington Consensus, all of which are certainly neoliberal) to a more pragmatic stage in the 2000s, which Javier Santiso (2006) has called a “political economy of the possible,” referring to countries such as Brazil, Chile, and Mexico. In contrast to the broad consensus estab108 DEMOCRACY IN LATIN AMERICA lished around state-led ISI, the recent process of insertion into the global economy is surrounded by an intense ideological debate, which has intensified further in the wake of the financial and international economic crisis of 2008 to 2009. Having concluded the process of transition to democracy, Latin America (excluding Cuba) remains in the process of consolidation of this new development strategy, which focuses principally on external openness, export effort, and outward-oriented growth. Latin America’s arduous trajectory from the 1970s to the 1990s was marked by political and economic crises, cycles of booms and busts, devastating external shocks, policies of economic adjustment promoted by international financial institutions, and somewhat successful attempts to carry out economic reforms in various...