Globalisation Discourse in Latin America: from Neo-Liberalism to Post-Modern Imperialism

Douglas Pacheco

Introduction

The process of globalisation is, according to many observers, widespread and its trajectory well defined. The dominant discourses accompanying this process have become equally pervasive. A key claim is that as the world economy becomes more integrated the nation-state capacity to manage the national economy decreases. Even though this interpretation has been challenged by some¹ , the ascendancy of neoliberal policy makers in the US and Western Europe has meant that subaltern economies are now subject to ‘free trade’ policy prescriptions, supply side economics and monetarism. Under these circumstances, the process of globalisation promotes the subordination of weaker economies, the people working within them and the integration of elites on a global scale.

This is most evident in Latin America. Unlike their South East Asian counterparts, Latin American governments, in their modernisation drive, have surrendered control of their economies to transnational capital. From import substitution, protection and export oriented policies that underpinned the interventionist nation building strategies of the 60s and 70s, Latin American elites, under the auspices of US policy makers, now advocate free trade policies, minimal state intervention and reliance on the notion of ‘comparative advantage’. These policies have often been accompanied by the use of a triumphal globalisation discourse which justifies the need to open up market spaces for foreign capital. The overall effect is to position local elites in favourable terms with their foreign counterparts at the expense of workers, consumers and communities.

The following critique of globalisation discourses in Latin America traces the development of the neoliberalist doctrine, questions the validity of its claims and looks at some of the responses to increasing socioeconomic crisis in the region. It assumes that the US is the process of moving from modern imperialism to a phase that I shall call postmodern imperialism.

Neoliberalism in Latin America

Narratives that document the process of global economic integration are numerous and from different theoretical traditions. The dominant globalisation discourse is, however based on neoliberal assumptions about free trade, the role of the state on the economy and a blind faith on the redistributive capacity of the market. The revival of these ideas comes at a time when the 1980s world recession and the incipient debt crisis provided the US and Western European dominated IMF and World Bank a favourable context in which to force the deregulation and privatisation of Third World economies.²

The conservative response to the 70s economic crises called for a reduction of the state, an idea that went in direct contrast to the Keynesian compromise so prevalent in the three decades after WWII. The neoliberal emphasis on free trade and market forces resulted in the relocation of industrial capital (but not its control) to regions outside Western Europe, Japan and North America. This followed the rise of capital and financial market transactions as a proportion of profit making spearheaded by the deregulation of the banking and financial sector.

Since then many economic functions have been removed from state control and regulation has been relaxed. For an imperial state like the US, whose economic and security interests go beyond the national or even regional, this shift is crucial because it justifies a long tradition of MNC interventions in the internal affairs of subaltern economies. In other words, the private sector now assumes stronger roles in activities like macroeconomic management which were previously carried out mainly by the state. This is of great concern to those who argue that private companies are less accountable, in a climate of increasing deregulation, to a constituency of voters.³ This relative independence allows them to directly influence national policy making in areas like finance and banking.

What is the effect of an increasingly powerful and autonomous private financial sector in the way that dominant discourses on globalisation are constructed? This question is addressed specifically in relation to US capital in Latin America: The way in which globalisation is constructed celebrates a pseudo efficiency that privileges trade over production and the intervention of oligopolies to the intervention of the state.⁴ These ideas, most times formulated in US finance houses, universities, research centers, think tanks and government agencies with the aim of achieving development and progress, in actual fact create more social and economic problems than they solve. The reason for this is that these ideas are formulated within a context of unequal power relationships that have both historical and economic roots.

Despite the untold effects of neoliberalist economic policies writers like Kennichi Ohmae argue that globalisation and economic deregulation is the best way out of economic stagnation. As director of Mckinsey Consulting in Japan, Ohmae supports the idea of a ‘borderless world’. This neoliberal utopia is based on high technology, free flows of information and most importantly, the death of the nation state where market economics reign supreme.⁵ Unfortunately he has found sympathisers in Latin America. The Peruvian novelist Vargas Llosa, for example, believes that the reason that countries in South East Asia achieved major industrial growth is because they embraced market liberalism. This assertion completely ignores the levels of state intervention in the running of these economies and the favourable terms in which they trade with the US.⁶

Another concept running parallel to the infallibility of neoliberalist policies is that reduced government involvement in the economy results in less corruption. Even though corruption is rampant in the Latin American government sector, greater private sector involvement in the economy does not guarantee any changes. To the contrary, according to Guillermo O’Donnell, the exact opposite can occur. He argues that bureaucratic authoritarianism facilitates private sector elite incorporation into the existing power structure.⁷

Building on the idea that the discourses of globalisation are embedded in the relationship that exists between US ‘experts’ and Latin American enthusiasts (like most technocrats) it is easy to understand why there is a tendency to normalise the needs of the dominant. The use of these discourses encourages political and economic elites adopt neoliberal values as solutions to local problems and as a way of being integrated in favourable terms into the global economy.

These shifts can best be analysed within the concept of the postmodern imperial state. This stage in the development of the imperial state is characterised by the ever increasing weakness in state power and the growing domination of the private sector in what has, until very recently, been regarded as ‘state matters’. To best illustrate this nascent shift it is necessary to look at two instances of US intervention. The first one reflects the more traditional approach while the second example is more indicative of the postmodern phase of American imperialism.

The application of the World Health Organisation landmark International Code of Marketing of Breast Milk Substitutes standard which demands labelling of these products in order to protect unaware consumers. A section of the code says: "...neither the container nor the label should have pictures of infants, nor should they have other pictures or text which may idealise the use of infant formula." The Guatemalam government tried to implement this standard but it encountered unforeseen problems:

Since 1983 the Guatemalan Law regulating information on infant feeding and the marketing of infant feeding products has been in place. Recognizing the international code to be a minimum standard, the [1983] Decree is more comprehensive than the international code. Of interest is the directive’s inclusion of the following:

The Ministry of Public Health is charged with the responsibility of ensuring that the public receives information on the feeding of children for their first two years of life. All information must state that breast milk is the best food for children under two years; none may have photos or other representations of children under two years; and none may show images of health professionals or symbols that suggest that products within the scope are recommended by health authorities.

When in 1992 Gerber applied to have its new ‘step by step’ products introduced into the Guatemalan market, it was requested by the Food and Drug Registration and Control Division to comply with the Guatemalan labelling laws. What Gerber refused to do:

• delete the baby face
• add the words, "Breast milk is the best for baby"
• omit references to their Information Service
• and indicate the age of introduction of the food into the baby’s diet.

All requests were legitimate under the national marketing standard. These labelling requests were supported by the National Breast-feeding Promotion Committee (CONAPLAM). Gerber, in spite of the standard stalled and asked for an injunction against the labelling requirements, claiming that its products were not covered by the marketing law and refused to make the labelling changes. After further consultations with Gerber, the Ministry of Health, CONAPLAM and Food Regulation officials, the Prosecutor General declared the Gerber request for an injunction unacceptable. Guatemala’s Food Regulation and Control continued its resolve for acceptable labelling. Gerber continued to stonewall, and after unsuccessful attempts to ‘fund’ activities of CONAPLAM, brought in the US State Department. Guatemala was threatened with withdrawal of Most Favoured Nation trading status for violating ‘trademark’ agreements.

In the end Guatemala’s Supreme Court of Justice decided in favour of Gerber Company. The court decided that the Guatemalan law only applied to locally produced complementary foods. Gerber imports its products so it was exempt from the law.⁸

Although this episode illustrates the strength of the US government in commercial and trade matters, the option that is increasingly being used bypasses the US government altogether and focuses on applying pressure directly to the government concerned. A good example of companies using this alternative are US finance houses which have spearheaded this trend by providing policy prescriptions beyond economic matters.

Unlike Gerber, finance companies like Goldman Sachs, Salomon Brothers and the Chase Manhattan did not use the leverage of the US government when their interest in Mexico were threatened by the 1995 Zapatista uprising in the southern state of Chiapas. Instead they went directly to the local officials. As Cockburn and Silverstein argue:

In the cold war, a worried banker would ventilate his fears to the Treasury Department or the National Security Council. Corporate concerns would normally be answered with the dispatch of troops or the activation of the CIA. In the Mexico crisis, the state still serves as the guarantor of last resort, but the ordering personnel are drawn from the corporate world. When the Mexican presidential candidate Luis Colosio was assassinated last March, Fidelity’s fund manager, Robert Citrone, felt it imperative that Mexico reassure foreign investors by propping up the peso.⁹

Citrone did not waste time in contacting the State Department. Instead, he rang up authorities at Mexico’s Central Bank to offer his advise. Days later, with the peso falling, Fidelity and other US investment firms cut back purchases of short term Mexican treasury certificates, ravaging stock prices and pushing up interest rates. Mexican authorities soon took steps to bolster the peso.

The postmodern nature of US imperialism requires a postmodern, non centralised response. Since the early 80s one major social trend in Latin America has been the mobilisation of peoples into grassroots organisation that seek to reverse the effects of rampant capitalism.

Resistance to Neoliberalism

Despite the prevailing force of neoliberalism in Latin America, resistance to it is growing in ways other than the revolutionary options of the 60s, 70s and 80s. Since the early 80s, but especially in the 90s, the surge of resistance options based on social movements has become an important feature of the political landscape. The rise of social movement in the continent is strongly connected with the nature of the dominant economic forces. The decisions that private companies make affect the lives of, sometimes, millions of people who find themselves increasingly without recourse to state intervention. This situation calls for the mobilisation of those affected to form grassroots organisations that can confront private companies. One implication of this shift is that it is no longer imperative for a political party representing the masses to take over the state in order to respond to capital. Socio-political change is increasingly orchestrated by social or environmental groups on particular issues that might cut across the class divide. ¹⁰ Even armed struggles like that of the Zapatistas in Mexico do not seek the overthrow of the state but rather demand the implementation of institutional mechanisms that will put the Maya people in a comparable position to the rest of the Mexican population. Unlike the parochial nature of political parties some grassroots organisations’ concerns go beyond the local realm. For instance, many non-government organisations with links in the United States and elsewhere have called for the application of stricter environmental and labour standards in the Maquilladora zones of northern Mexico.

These are but a couple of examples from a variety of responses that social movements throughout the continent have made to the dominant neoliberal economic paradigm and the accompanying postmodern imperial order. It remains to be seen if the new social movements combined with traditional political organisations have the strength to reverse or ameliorate the effects of neoliberalism in Latin America.

Endnotes

1. The most recent is Hirst, P. and Thompson, G. Globalizacion in Question, Polity, Cambridge, 1996.

2. Berger, M. "The end of the ‘Third World’?", Third World Quarterly, Vol. 15, No. 2, 1994, p. 265.

3. See for example Barnet, R., Cavanagh, J., Global Dreams: Imperial Corporations and the New World Order, Touchstone, New York, 1994.

4. Feijoo, J. "Critica del Modelo Neoliberal" in Gomez, J. (ed), Neoliberalismo y Globalizacion, Memoria, San Salvador, 1996, pp. 71-73.

5. Good Guru Guide, The Economist, December 25th 1993-January 7th 1994, p. 20.

6. Berger, M. "The end of the ‘Third World’?", p. 266.

7. Berger, M. Under Northern Eyes: Latin American Studies and U.S. Hegemony in the Americas 1898-1990, University of Indiana Press, Bloomington, 1995, pp. 198-199.

8. ‘The Gerber Baby- Trademark or Con Artist’, Infant Feeding Action Coalition (INFACT) Newsletter, Winter, 1996 in web:tdrop in cdp:reg.guatemala

9. Cockburn, A. and Silverstein, K., ‘War and Peso’, New Stateman and Society, 24 February 1995, p.20.

10. Castaneda, J., Utopia Unarmed: The Latin American Left After the Cold War, Vintage Books, New York, 1993, p. 234.

Bibliography

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Berger, M. "The end of the ‘Third World’?", Third World Quarterly, Vol. 15, No. 2, 1994.

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Author Note

Douglas Pacheco is a PhD student at Griffith University, Australia.