Year 501 (36 page)

It is recognized that “economic miracles” have some attendant flaws. Discussing “Menem's Miracle” in Argentina, British correspondent John Simpson notes that “The miracle is not perfect.” There are “unpleasant signs of corruption,” “large sections of the middle class have sunk without trace” while “the new entrepreneurs and the old rich” happily shop in the “expensive shops,” and there is substantial poverty. Unconstrained by the conventional reserve, James Petras and Pablo Pozzi fill in a few of the details. Since the onset of “Menem's Miracle” in 1989, “Neo-liberal private pillage has set up a system where individual wealth depends on public decay and economic regression,” with some 40 percent of the economically active population unemployed or underemployed, proliferating shanty towns, factories closed and not replaced by new enterprises, exploitation of the state as “an instrument for personal enrichment and private pillage,” reduction of expenditures for health, education and welfare to all time lows, negative growth rates, decreasing yearly rate of investment, and declining real wages. By now, over 60 percent of the 12 million inhabitants of Buenos Aires are not connected to the sewer system, one reason for the return of diseases that had been eradicated decades ago. The “speculative economy, reinforced by a neo-liberal economic policy, which impoverishes most of the population while destroying Argentina's internal market and productive capacity, and scarce resources has generated a Hobbesian world, a savage struggle to survive while the elite continue to reap windfall profits.” The “privileged minority whose wealth, level of consumption and standard of living have flourished” are enthusiastic about the neoliberal policies. “Menem's miracle” also includes “privatization,” the new shibboleth, but with a twist: thus the government sold the state telephone monopoly to Spanish and Italian state corporations, and the national airline to the Spanish government airline Iberia, so that “management is merely transferred from Argentine to Spanish and Italian bureaucrats,” David Felix observes.
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In short, an “economic miracle,” in the technical sense.

The proper deployment of these ideas is also illustrated in the case of Mexico, where another gratifying “economic miracle” is in process, though “‘Economic Miracle' Has Yet to Reach Mexico's Poorest,” a front-page headline reads, followed by the familiar story. Elsewhere we learn that wages are at their lowest level in history, having dropped 60 percent under the neoliberal policies of the 1980s (National Autonomous University (UNAM) Institute of Economic Research and other economists); that half of all newborns in Mexico City have lead levels in their blood high enough to impair neurological and motor-physical development; and that nutritional levels have sharply declined. GDP has risen since 1987, UNAM economists observe, “but this larger production of wealth advanced in one direction, contrary to the gradual impoverishing of millions of Mexicans,” concentrating “in the hands of businessmen.” The 1990 census reports that 60 percent of households were unable to cover basic needs. Despite the growth of maquila production (foreign-owned, export-oriented), “the industrial sector employs fewer people now than it did a decade ago,” economist David Barkin writes, and labor's participation in personal income declined from 36 percent in the mid-'70s to 23 percent in 1992 while rewards for the rich and to foreign investors are “fabulous,” developments that have “aroused the admiration of the international press.”

Attempting to entice foreign investors, the Mexican Secretary of Commerce stressed the sharp decline of the price of labor in Mexico, from $1.38 per hour in 1982 to $0.45 in 1990, an appealing prospect for GM, Ford, Zenith, and other foreign corporations, along with the useful absence of effective environmental restrictions. The wage level is ensured by brutal government repression of labor, with the participation of corrupt union leaders linked closely to the one-party state. The 1980s have been a particularly dim era in that respect. Typical is the experience of Ford workers at one major plant. In 1987, Dan LaBotz observes in a study of labor rights in Mexico, “the company fired the entire work force, eliminated the union contract, and then rehired the workers at a far inferior salary. When the workers attempted to win the right to democratic union elections, and to fight for their legally mandated benefits, they were subjected to beatings, kidnappings, and murder blatantly conducted through collusion between the Ford Motor Company” and officials of the union run by the always-ruling party. These are little-discussed but critical features of the North American Free Trade Agreement (NAFTA), crafted so as to guarantee optimal conditions for profit, whatever the human cost may be.

Foreign debt is increasing, along with the trade deficit, electoral fraud, government repression to bar labor organizing or critical public commentary (murder of several journalists a year makes the message clearer still), and torture that is “endemic” according to Amnesty International. As NAFTA is currently designed “most Mexicans will become irrelevant,” Barkin predicts in a review of the crisis that has resulted from “more than 35 years of
successful
capitalist development” oriented to the needs of domestic wealth and foreign capital. But foreign investors are happy, as is the business-professional sector that benefits. Mexico is therefore put forth by Secretary of State James Baker as “a model” for reform in Eastern Europe and the Third World, an authentic “economic miracle.”
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Lead headlines herald the good news: “A Breath of Fresh Economic Air Brings Change to Latin America,” though we also learn that “Latin Debt Load Keeps Climbing Despite Accords” (Nathaniel Nash,
NYT
). Another reads: “South Americans Find Economic Reform Has Initial Social Costs, People Say the New Wealth Is Slow to Trickle Down” (Thomas Kamm,
WSJ
). Just hang in there; all will be well. As usual, we do not learn that the famed “trickle down” policies have, in the past, produced a tiny trickle indeed, though read closely, the current reports indicate why the same can be expected this time around. The indicators look fine from Washington and Europe, Kamm reports, but they conceal rapid concentration of wealth, increased poverty including “critical poverty,” declining real wages, and the other usual concomitants of “miracles.” Former Brazilian President José Sarney writes that “in all countries” of Latin America, the foreign banks and other usual beneficiaries reap their rewards, “and what's left is unemployment, slave wages, and terrible social indicators.” “The rich continue to get richer, the gap between them and the middle and lower classes widen,” and none of the policies that are so promising “have been able to wipe out poverty” (Nash), a curious and unexpected failure to achieve their goal, we are to understand.
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The most phenomenal success story of all is Chile, with its “prospering free-market economy generated by Gen. August Pinochet” (Nash). That is an established truth, repeated everywhere. True, Pinochet was tough, but the “economic miracle” carried out by his Chicago Boys from 1974 to 1989 is there for all to see. To see, if they do not look too closely.

Pinochet's “miracle” turned into the “Chilean catastrophe” in under a decade, David Felix writes; virtually the entire banking system was taken over by the government in an attempt to salvage the economy, leading some to describe the transition from Allende to Pinochet as “a transition from utopian to scientific socialism, since the means of production are ending up in the hands of the state” (Felix), or “the Chicago Road to socialism.” The militantly anti-socialist London
Economist Intelligence Unit
wrote that “the believer in free markets, President Pinochet, had a more comprehensive grip on the ‘controlling heights of the economy' than President Allende had dared dream of.” The government-controlled portion of the economy in 1983 was comparable to the Allende years after the state took over failing enterprises, which it sold off at bargain rates to the private sector when they were resuscitated, along with efficient and profitable public enterprises that were generating 25 percent of the government's revenues, Joseph Collins and John Lear note. Multinational corporations did very nicely in the process, gaining control over large parts of the Chilean economy. Citing Chilean economists, James Petras and Steve Vieux report that “an estimated $600 million in subsidies were provided to purchasers in the 1986-1987 wave of privatizations,” including “efficiently run, surplus-producing operations”; the operation is expected to reduce government surplus by $100 to $165 million during 1990-1995.

Until 1980, Chile's GDP per capita did not approach the 1972 (Allende) level, and investment was still below the late 1960s while unemployment was far higher. Per capita health care was more than halved from 1973 to 1985, setting off explosive growth in poverty-related diseases such as typhoid and viral hepatitis. Since 1973, consumption dropped 30 percent for the poorest 20 percent in Santiago and increased 15 percent for the top 20 percent. Private hospitals proudly display their high-tech equipment for the rich, while public ones offer mothers an appointment months away and medicines they cannot afford. College education, free for everyone under Allende, is now for the more privileged; and they will not be exposed to the “subversives” who have been purged, but offered “sociology, political science, and economics courses...more like religious instruction in the revealed truth of free markets and the red peril” (Tina Rosenberg), as in Brazil under the generals, or other places that come to mind. Macroeconomic statistics in the Pinochet years are generally below those for the preceding two decades; the average GNP growth from 1974-1979 was just over half that of 1961-1971, while per capita GNP fell 6.4 percent and per capita consumption 23 percent from 1972-1987. The capital city of Santiago is now “among the most polluted cities in the world,” Nathaniel Nash observes, thanks to the free market Friedmanite model with its slogan “Produce, produce, produce,” come what may—what we denounce as the “Stalinist model” when there are points to be scored thereby. What “came” was “the daunting cost of cleaning up,...and the daunting cost of not cleaning up” in a country with “some of the world's dirtiest factories,” no regulations, severe pollution of water supplies, and general environmental ruin with much-feared consequences for the health of the population.

And thanks to the miracle, along with a little US help in “making the economy scream” under the Allende government, the proportion of the population that fell below the poverty line (minimum income required for basic food and housing) increased from 20 percent to 44.4 percent from 1970 to 1987.

“Not much of a miracle,” Edward Herman comments.
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In the bad old days, according to the doctrinal truths of 1992, our Latin American wards didn't listen to our sage counsel. Now, however, with the worldwide victory of economic liberalism and free trade, they understand, at last, the wisdom of our words. The chorus of self-adulation is untroubled by the usual problems, such as the fact that we never followed that model ourselves, nor did any other country that has developed except when it conferred advantage; and that contrary to the doctrine, Latin America quite commonly did follow our advice, as the review of Brazil illustrates. It is hardly the only case. The Kennedy-Johnson Alliance for Progress is another. One of its most highly touted success stories was Somoza's Nicaragua. The catastrophic “miracle” provided a popular base for the Sandinista revolution in 1979. The most respected Nicaraguan economist during the US war against Nicaragua was Francisco Mayorga, who became economic Czar under the US-backed UNO government (soon to be dispatched to oblivion when the recovery policies he initiated to much US acclaim proved an utter failure). During his day in the sun, the media and others who hailed Mayorga were careful to ignore his major scholarly work. This interesting 1986 study examined the failure of the “monetarist paradigm” that had been advocated and enthusiastically backed by the US, which left the economy “on the verge of collapse” by 1978, perhaps unresurrectable, Mayorga argued, no matter what economic policies had been pursued, even without the immense costs of US terror and economic warfare.
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Blithely ignoring all relevant facts (and crucially, the unmentionable US contribution), Latin America specialists in the press now inform us that “To the commercial pioneers of the post-Sandinista era, Nicaragua is ripe for a comeback after a decade of revolutionary mismanagement and two years of fiscal rehabilitation under President Violeta Chamorro” (Pamela Constable). True, businessmen still see problems, Constable notes: “the continuing threat of violence from labor unions” and armed factions in the countryside, and “the unresolved status of property” confiscated by the Sandinistas. But the “commercial pioneers” are optimistic. Particularly cheerful are private bankers and their clients. The Sandinistas nationalized banks “and began channeling state loans to farmers, rural cooperatives and small industry high-risk sectors,” Tim Johnson writes in the
Miami Herald
. But, thankfully, such misbehavior is now over, and “the public is beginning to demand a lot more services from their banks,” a private banker comments.

“The public” does not include the campesinos whose march against hunger was reported in the Mexican press a few days later, or the huge number of unemployed, or the children sniffing glue, or the semi-human figures celebrating the victory of capitalism and democracy while scavenging in the Managua garbage dump.