José Gpe. Vargas Hernández
Centro Universitario del Sur, Universidad de Guadalajara, México
THE DILEMMA OF GOVERNANCE IN LATIN AMERICA
Abstract
The last decades of the 20th century have seen the
institutions of governance in Latin American countries affected by small
macroeconomic achievements and reduced economic growth, and the development of
an extremely fragile democracy. The
implanting of the new model of neoliberal state consolidation has come at high
cost, and has not produced either the expected strengthening in the political,
economic and social spheres, or the expected gains in efficiency, equity and
freedom. This so-called economic liberalization has generated institutional
instability in the structure and functions of the state, limiting the reaches
of democracy and legality, and ensuring that the effects of the associated
managerial orientation which has transformed public administration are largely
negative. Looking forward into the 21st
century, a pessimistic prediction is
that these tendencies will continue, producing similar unstable mixes of
democratic populism and oligarchic pragmatism.
More optimistically, the Latin American states may come to see that
genuine social development is necessary for sustained economic growth, and
introduce policies to achieve that outcome.
Some measures of economic, social and political
malfunctioning
The globalization
processes surprised Latin American countries because they didn't have the
political-economic mechanisms and the necessary institutions to assimilate its
effects in such a way as to achieve social justice in the distribution of the
wealth that was created. The challenges
posed for Latin America by globalization require a further revision of the
romantic utopias that came first with the Bolivarian independence of the early
1800s and subsequently with several popular revolutions in various parts of the
region.
Whatever its
benefits, globalization clearly has perverse effects. The 100 biggest transnational companies now control 70% of world
trade, although a significant relationship does not exist between the growth of
world trade and world gross product.
The volume of the financial economy is 50 times more than that of the
real economy. Most significantly for
present purposes, the market value of the 1000 biggest companies ($US23,942,986
million) is equivalent to 11.8 times the gross internal product of all the
Latin American countries, and the market value of General Electric alone
($US520,250 million) is equivalent to the gross internal product of
Mexico. Any one of the 23 most powerful
multinationals has superior sales to what Mexico exports. Again, the value of 9,240 commercial
coalitions and acquisitions throughout the world in 1999 reached $US2,963,000
million, compared with the annual gross internal product of all the countries
of Latin America and the Caribbean calculated by the World Bank to be
$US1,769,000 million (3).
A brief survey by
Lazcano (2000) of the impact of globalization on the pattern of development in
Latin American countries identifies several other outcomes:
* economic dependence on the
exterior, particularly the United States and the European Union, has deepened;
* financial crises, devaluations
and bank rescues have concentrated the wealth in less than 10% of the
population;
* economic growth has slowed,
productive plant has been destroyed, and underemployment and unemployment have
increased;
* the northwards flow of Mexican
(and other Latin American) workers (ie to the United States) has increased;
* privileges have been granted to
foreign capital in relation to the financial system and the servicing of the
external and internal debt;
* economic integration has been
towards the outside, with economic disintegration internally;
* the possibility of a
sustainable development pattern and the range of options in economic
policy-making has been reduced.
In all these ways the social fabric of Latin American countries has been
disrupted, the income of the general population reduced, local wealth
transferred to the exterior, poverty levels expanded, and indigenous
inhabitants excluded from the social pact.
The role of the
state, and of the public sector which most directly supports and serves that
role, is central to each of the three big challenges Latin America faces as it
enters the new millennium. These
challenges affect the economic, the social and the political spheres
respectively, although of course there are many connections between them. The first is to achieve sustainable economic
growth within the market economy; the
second, to achieve fair and equal distribution of available income; and the third, to remove the obstacles that
block development of state institutions that will allow a higher degree of
democratic participation in governance.
Sadly, it seems that
the implementation of policies that reduce social inequalities enters into
conflict with the logic of capital accumulation. Thus the privatization of public enterprises and the associated
destruction of productive chains have together resulted in a growth of unemployment
and an increase in numbers below the poverty line. The lack of appropriate employment opportunities is one of the
main concerns of Latin Americans at the turn of the century (Duryea &
Székely, 1998). Not enough employment
is generated, and only a few individuals have access to well remunerated work.
The economic cycles
of Latin America in the 1990s have allowed an average growth rate of 3.2% that
has achieved little for the poorest sections of the population. The growth rate has slowed in the last few
years, and this is likely to continue into the new century due to the pressures
of globalization as described above.
Financial crises continue, making it difficult to maintain macroeconomic
stability. These negative results widen
social dissatisfaction and lead to social protest demonstrating wide dissent
against the newly adopted economic policies
The inability of
governments to overcome such problems points to the lack of appropriate governance arrangements. In some areas, the rule of government is
virtually absent, and chaotic situations have arisen marked by mass illegality
and barbarism. Governance, in terms of
the capacity of the state to solve the problems of society, is reduced to
arrangements among different political-elite groups.
Poverty and
inequality are of course not new in Latin America, and their earlier
manifestations have been explained as the result of a pattern of Iberian
colonization (Pinto & Di Fillipo, 1979).
While this doesn't explain why the former colonies of the British,
French and others in the Caribbean and Latin America also have much poverty,
Yañez (2000) discerns an Iberian institutional plot that favoured the
formation of economies with high transaction costs, ill-defined property rights
and incomplete markets where inequality and exclusion are the norm. As former Spanish President Felipe González
put it, the first challenge for the prevailing Latin American economic pattern
is to put an end to poverty, whose
continuing existence explodes the neoliberal economic model (Sosa Flores,
2000).
It is broadly
acknowledged by academics and intellectuals that the Latin American social
structure is a "pigmentocracy" whose peak is represented by the
direct descendants of the Spanish aristocrats, of tall stature and clear skin,
well educated and owners of the production factors of earth and capital. At its base are placed the direct
descendants of the indigenous population, lower in stature and with dark skin. Between these two strata is the big band of
mestizos or mixed-bloods. The Spanish
settlers used military force and the powers of the state to assure their
economic and political dominance over the lower-strata majorities (Chua, 1998:
17-18).
The persistence of
this social stratification until the present time is one of the causes of
social exclusion and it constitutes a serious problem for good governance: the dominant social stratum owns the major
corporations and the main means of production.
But the market is n:ot the source of its dominance, and so the new
competitive atmosphere of globalization could be its tomb. Equally, marketization can open up
opportunities for the disadvantaged groups that previously had no opportunity
to participate actively in the economy.
Globalization
certainly imposes pressures, but many of the sources of poverty are internal to
Latin American society: lack of
knowledge, education and science, lack of capital equipment of all types, lack
of incentives for individual action (except for those in big government or big corporations),
lack of institutions that protect people’s lives and their property, generally
absence of the “rule of law”, and often predatory governments. Public policies are needed to address all
these issues.
Latin American
countries require with urgency and with anguish a new development paradigm, and
it is most likely to come by means of alliances among public and private
sectors. Positive government is
essential, but the companies that have benefited from privatization must
participate in full measure. This new paradigm should allow and measure
increments in wealth that are not disassociated from measures of monetary
growth, population growth and debt. The
systems and practices that fail in the current hegemonic paradigm point the way
to eventual change and the instituting of the new paradigm.
The low efficiency
of public administration in the social arena in the last two decades must be
overcome. While priority was given to
macroeconomic reform, social expenditure did rise by almost 25%---but the
return on that investment was very low, due to diverse factors such as
corruption. Investment in human
capital through attention to the education and health systems has provided only
temporary relief because it has not been appropriately institutionalized: through Latin America the real expense per
capita in education and health in 1995 hardly reached the levels of 1980,
because there were no increments in the per capita income (Ocampo, 1998: p.34). The “welfare state” was never deeply entrenched
in any Latin American country, and what little of it there was is being
dismantled by the neoliberal economic model.
Existing programs to combat poverty
offer only a temporary palliative through the provision of social
security nets: they are focused on the
consequences of poverty and not its causes.
All this must be
changed. The proposal of Attanasio and
Székely (1999: p.361) for a dynamic attack on poverty involves abandoning the
focus on the family income and its distribution. The focus must instead be on the access of the poor to property,
on the better use of asset-generating revenues, and on the accumulation and use
of those assets to generate income-earning production. These investigators argue convincingly that
the process of human capital formation is decisive for the development of Latin
America and for the elimination of its poverty.
The demand for
democratic participation in Latin American countries is at the same time a
demand for transparent public administration.
In its attempt to move away from authoritarian government, it represents
a search for a way of providing the new development model with a genuine social
identity.
The monetarist and
neoliberal economic policies which have driven the changes to the Latin
American state over the last two decades hold the expectation that those
changes will make it more efficient and more effective. They have certainly made it smaller and
thinner; and the globalization
processes they are associated with reduce its sovereignty. That is the external attack; it is also being attacked from within by the
economic and political malfunctioning that results. The fact is that, despite the efforts to democratize, most of
these states continue to be strongly centralized, their governments permeated
by anti-democratic traditions and controlled by the political elites which
perpetuate existing relationships and the socio-economic and regional
inequalities (Schönwalder, 1997). In an
atmosphere of neopatrimonial clienteles, these political elites benefit from the economic inefficiency. This situation is aided by the disconnection
between the budgeting, planning and procurement systems which govern the
application of financial resources---high levels of technocracy operate
here---and evaluation of results; the
latter already shows up many limitations and deficiencies, but the evaluation
process is still in its infancy. All this
must change too if there is to be genuine political and social reform.
There has been some
reform of electoral processes. But
more than that is needed in the new century:
legitimacy of government requires that the reformers must enhance the
democratic participation of citizens in the processes of government
itself. They must be enabled to
exercise their citizen rights, to inspect and criticize the public function,
and to participate in the design of policies and programs affecting their
communities. Norms of reciprocity
between governments and citizens must be established, such as are envisaged in
Putnam’s (1993a, 1993b, 1995) nomination of institutions to develop social
capital---nets of civic commitment---such as neighbourhood associations,
cooperatives, sports clubs and mass political parties.
Even as their
capacities to make these changes have been diminished by two decades of
neoliberalism, Latin American governments are being required to alleviate the
imbalances caused by the market, to deepen the processes of economic
restructuring and to redefine property relationships (Adelman, 1998). The processes of transition to democracy
have had some successes. Thus
democratization of Latin American society recovered where it had been
eliminated, as for example in Argentina, Brazil and Guatemala, and has been
deepened where certain democratic manifestations already existed, as in
Colombia, Costa Rica, Mexico, the Dominican Republic and Venezuela. However,
the advance and consolidation of Latin American democracy will occur only when
it is thoroughly thought through and implemented as a regional strategy of
development.
One significant
analysis (Cavarozzi, 1992) leads to the conclusion that the dominant
theoretical perspective during this period saw the installation and
consolidation of the institutions of political democracy as an isolated process
separate from the main causes and effects of the transition that was taking
place. This analysis suggests that what
is now needed is to move consciousness of this political reform to central
stage, so that the continuation of authoritarian management systems is reversed
and a new womb of political-social and economic relationships constructed. The democratizing wave must not be allowed
to be blunted by recurring economic crisis.
This will involve a
recognition that the capacities of the state have been weakened to such a
degree that the military are presently increasing their activities to provide
emergency services, and that this tendency must be reversed before provision of
the full range of assistance programs required for civil society can make
headway (Franck, 1999). The military
have been called in or they have themselves volunteered, importantly to control
the explosive violence, but also to fill the vacuum left by the weakening of
the traditional state. The economic elites must be brought to support instead
the participatory democracy, which they too often perceive as a threat to their
own interests.
The main challenge
is to make the state responsible to the society, the social groups and the
citizenry in general. The society will
support a government that attends to its necessities, but it will oppose and
even rebel if these necessities are not satisfied. The globalization processes that have weakened the Latin American
state in their pursuit of modernization must be turned to support social
development. They must understand that
the political and civil conscience of those who suffer the effects of the
application of regressive economic policies will seek to find refuge in the
territorial base of democracy, and that these people need to be assisted to
develop their own autonomy and promote actions of self-management (Almeyra,
1999).
Into the 21st
century: The dilemma of governance in
Latin America
The low level of
governance in Latin America has its antecedents in the weaknesses of the
economic, social, cultural and educational policies which existed despite the
past strong presence of the authoritarian state and its governing
institutions. Sadly, as we have seen, the
new economic policies associated with the neoliberal transition of the late
20th century, which weakened that state, did nothing to remove these governance
deficits.
What is now required
is to develop a critical appreciation that the prevailing international
economic system, which mortgages the future of big sections of the population,
needs to change. Latin America cannot
effect this change alone, but it can exert much more pressure on the levers
which have designed and presently perpetuate that system if it now begins
consciously to reform its governance along the lines indicated here. The centre of this debate on governance
involves questioning the global economic pattern implemented in the last two
decades that has given dominance to the market, and recognising the imperative
need to correct the social imbalances it has generated.
Quality governance
certainly favours economic growth, but it also demands sustained social
development. Economic development needs
to be seen as a step towards a higher level of life, to be taken in the smallest
possible time and at the smallest possible cost. It is thus a means, not an end in itself. If it has any validity as a process, it must
be accompanied by social development, which involves better distribution of
income. More generally, it involves an
increase in the good of mankind, facilitating constructive coexistence of each
member of the population with every other member. Imperatives are participation in community activities and the
mutual help that insists on the validity of law and the democratic way of
life; to achieve these standards, the
horizons of education and culture must be opened and enlarged (Servitje,
1999). In these terms, the results
obtained in Latin America over the last 20 years must be seen as very
disappointing, and they point clearly to what needs to be done to improve
standards of governance in the future.
There are many
governance weaknesses to be overcome.
Why were public and private investments in Mexico in 1996 less than the
annual levels of the 1970s and 1980s?
A serious study of the Mexican case (Glen & Sumlinski, 1998; also Standard & Poor’s, 1997) points to
several main problems: official and
private corruption, the traffic of influence, the corruption and inefficiency
of judicial organs, the influence of drug cartels, deficiencies in internal
security in the form of guerilla groups operating in rural areas, violence in
the big cities. Another study (Brunetti
et al ,1998a), based on a survey
of private sector views of the governments of Central American states
(including Mexico, Costa Rica and Jamaica), sought to evaluate the
institutional quality of the various countries and located significant
obstacles to business opportunity in the rate of crime and robbery, inadequate
infrastructure, inflation, corruption and poor financing. All this points to a high degree of risk
associated with a government's capacity to establish macroeconomic stability
(cf Malvin, 1985; also Brunetti et
al, 1998b). Removing sociopolitical
uncertainty must be an important component of all efforts to reduce the burden
of these existing problems, and central to that cause must be the strengthening
of education and health programs and basic social services to support the
reduction of poverty. Such policies are
essential to modify the economic environment so that a diverse range of
individuals will be able to take advantage of opportunities to behave
entrepreneurially and contribute broadly to the combined objective of economic
growth and social development.
Is the process of
selling strategic public enterprises to the private sector likely to be
reversed? In their privatization
programs, Latin American governments have destroyed the assets of nations,
gambling on an assumed prosperity expected to come from globalization processes. Now, it would seem, a better future rests in
the possibility that the provision of social welfare and other essential
collective goods for a stable democracy may come from state actors and
institutions forging close and mutually constructive links with private actors
whose cooperation will be essential if political stability is to be achieved
and economic growth restored.
A non-partisan
strategy will be required. It must be
recognized that all will benefit from such privileged connections between the
actors of the state and those of the private sector, and this will not happen
unless and until there is developed and entrenched a theory and a policy that
stresses the importance of a sense of community identity and yet is tolerant of differences among the diverse members of
that community.
The paradox is that,
contrary to the principles of neoliberalism that postulate the free market,
democracy and individual freedom, the recent reformations of the Latin American
state have been implemented under practices of authoritarian government. Also, the interventions that have taken
place (such as those under the authoritarians Salinas in Mexico and Menem in
Argentina, dictator Pinochet in Chile or the delegate democracy of Fujimori in
Peru) have accentuated the practices of a strong presidentialism, cronyism,
corporatism and populism. The delegate
democracy is a perverse form of democratic governance, maintaining existing
iniquities. In the Latin American
states at the turn of the century, tendencies sprout toward a system of public
administration characterized by an oligarchic pragmatism that still
personalizes presidential power. However, the resurgence of populism is another
present possibility in Latin America, as in the recent case of Venezuela.
The processes of
economic liberalization do not bring the benefits expected in economic growth,
distribution of wealth or depression of poverty, and the advance of the
processes of democratization is slow.
The results appear in the tensions and social and political conflicts
which have such serious implications for governance. Moreover, in the resolution of the various conflicts, the Latin
American states are losing efficiency and effectiveness because they have fewer
resources, insufficient and inadequate means, and reduced autonomy for the
formulation and implementation of policies.
The hope for the
future is that the causes of this decline will be clearly recognised, and that governments
will turn towards the strengthening of social development and social cohesion,
which will then surely promote also the cause of economic growth. To do this, they will need to be far more
selective in choosing which components of the globalizing process they wish to
support; they will need to be stronger
in standing against components which restrict their own developmental
opportunities. A future in which these
things happen may restore for Latin Americans the dream of a democratic
Bolivarian utopia.
Notes
1. "Coronelismo" comes from the Portuguese version of the
military rank of colonel. Most of the
military officers on the winning side of the revolutionary wars in Latin
America lacked formal military education;
nonetheless, when they won, they held power over a region and controlled
most of the political, social and economic activities within it, so that the
lives of ordinary people depended on their decisions. "Caudillismo", from the Spanish word Caudillo, is a
spontaneous political leader emerging from the aristocracy---mainly descendents
of the Spanish or Portuguese conquerors---and rewarded with political power
after the various Latin American wars of independence and revolutions. Both groups exercised authoritarian power
and frequently abused ordinary people and their properties.
2. This finding needs to be
read in the light of Hopkins’s conclusions (1991, 1996).
3. Not surprisingly these relativities, being so unfavourable to Latin America, have attracted a large
literature in that region. These
comparisons drawn from eg Barros,
2000; Brito, 1999; Castillo & Romero, 1990; Contreras, 2000; Cason & Brooks, 2000; Daniels, 2000; Enriques Cabot, 2000; González Amador, 2000; Peón Solís, 1999; Rugman & Hodgetts,
1997: pp.44-45. See also EFTA,
1995.
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