The new argument between the heterodox and orthodox focused on how “globalization” could be harnessed to national growth and made to work for all classes via appropriate distributive mechanisms.
Coming out of the crises and breakdown of neo-liberalism at the turn of the century, the state emerged with a stronger and more active role in the economy, particularly with regard to regulating overseas financial flows. Several regimes increased the state’s role in revenue sharing with foreign MNC that is: (Brazil, Bolivia, and Venezuela). Others partially or wholly nationalized a few troubled enterprises that is: (Venezuela, Bolivia, and Argentina.)
Still others paid off their debt to the IMF, in order to end its “supervision” over fiscal and macro-economic policy for instance in (Brazil and Argentina). Most states adopted economic stimulus policies to reactivate the economy, reduce unemployment and accommodate some of the social demands of labor. All governments adopted policies designed to maximize income and revenues from the rising prices of commodities, by investing in and promoting the exploitation of agro-mineral production.
To cushion against future external economic shocks, the states adopted conservative fiscal policies, accumulating budget surpluses and increasing foreign reserves.
Not withstanding the expansion of the state’s role and its timely intervention to maximize benefits from world demand, it remains a subordinate partner to private capital. Even in Venezuela where several important industries were nationalized, state enterprises accounts for less than 10% of the GNP.
Equally important the state and economy, public and private, is subordinate to a global “colonial division of labor” in which Latin America, exports agro-mineral products and imports finished goods. The emphasis on extractive industries, encourages large scale foreign investments, while stable, orderly, fiscal balance sheets, large scale foreign reserves and relatively high interest rates attracts financial capital.
The appearance of a strong state, however, is belied by several historical and structural factors. While some regimes purged a few of the top military and police officials from the previous dictatorships, there was not institutional transformation, including the process of recruitment, training and political reorientation. Moreover all governments continue to collaborate with and join in military exercises and training missions with US military advisory programs, with a notorious history of being the “schools of the coup-makers.” Equally dangerous to state stability, the new development strategy depends on and promotes business elites, who in the past sought out military officials and fomented coups, when and if they felt their profits or interests, were threatened.
The current stability of the Latin American states rests in part on potentially volatile commodity prices and demand, military institutions with many carryovers from the past and too many links to Washington coup-masters and a private sector willing to abide by the rules of democratic capitalism, as long as they continue to exercise hegemony over the society and economy.
By force of circumstances, namely the economic crises of neo-liberalism, the new “post neo-liberal” regimes adopted a series of populist measures to ameliorate poverty, reduce unemployment and reactivate the economy. All of these changes meant active state intervention to rectify the failures of the ‘market’, while seeking to secure the interests of the capitalist class.
These measures were accompanied by a strong dosage of anti-neo-liberal rhetoric to accommodate popular rage against the inequities of the system.
In some cases these changes were accompanied by a vague reference to “socialism” without central planning, public ownership or worker management. The trajectory of regimes pursuing the heterodox type company instead of orthodox type economy began with populist welfare measures, which were gradually diluted over time as social pressures and unemployment diminished and re-activization took hold. By the end of the decade, the post neo-liberal regimes turned more and more toward “developmental modernization”. The latter approach was driven by a high powered campaign to maximize private, especially foreign investment, especially in the high growth export sectors.
The reordering of the post-neo-liberal state stopped well short of anything beyond replacing “neo-liberal” technocrats with others more attuned to the new heterodox leadership. For the most part, efforts were made for greater flexible accommodation of domestic and foreign social partners via conciliation of ‘moderate’ trade union and social movement leaders and the business elite.
The crises of neo-liberalism generated a variety of political outcomes; with the possible exception of Venezuela, the popular revolts which took place in the immediate aftermath of the crises all led to capitalist outcomes, albeit sharply divergent ones.
For the majority of Latin American states it meant a sharp increase in state intervention, even temporary takeovers of bankrupt or near bankrupt banks to save depositors and investors: a kind of “statism” by capitalist invitation (or obligation).
The new statism became the bases for the emergence of 21st century capitalism. In historical perspective, statism, was from the beginning,a necessary first step toward the reactivation of capitalism. The apparently radical “first steps” were in fact the end game of the popular rebellions of the turn of the decade. Over time, especially with the economic recovery and the commodity boom, capitalism experienced a take off by the middle of the decade. Heterodox capitalism began to shed some of its distinctively several welfarist features in favor of a straight developmentalist perspective. Technocrats emphasized large scale long term foreign investments and “economic modernization.” This meant public-private investments in infrastructure, to accelerate the movement of commodities to world markets.
The sustained growth of the heterodox model put an end to the radical debate on globalization, by adopting it with a vengeance. The new argument between the heterodox and orthodox focused on how “globalization” could be harnessed to national growth and made to work for all classes via appropriate distributive mechanisms. In other words, the heterodox capitalists argued that greater global integration would deepen and increase the wealth available for social welfare. With the advent of adverse global conditions during the crises of 2009, intensified competition and a temporary decline in prices, the heterodox policymakers argued that global conditions prohibited increased social spending and wage and salary increases. With rapid economic recovery and the rapid rise in commodity prices by mid 2010, wage and salary tensions increased.
If the impetus for the onset of the new heterodox regimes was the crises of neo-liberalism, the subsequent economic success of the heterodox regimes set in motion the dynamic growth of powerful business interests seeking to refashion a more conservative rightist political configuration.
The latter would reduce the wage and social welfare cost of the export sector. In effect the success of capitalist heterodoxy and its trajectory toward high growth based on large scale capital inflows has set in motion a shift to the right, including right wing political alternatives.
While important differences still persist between heterodox and orthodox roads to capitalism, the tendency is for these to diminish. The orthodox faced by the world recession resorted to greater state intervention to prop up the economy while the heterodox increased their pursuit of greater market shares by broadening their appeals to international investors.
Clearly identifying the ‘dynamic’ road to 21st century capitalist development is problematic and the outcome uncertain. The question of whether the commodity boom is part of a long or short cycle may be a determining factor in shaping the possibilities for the reappearance of authentic 21st century socialism and globalization.
(By James Petras, who is a former Professor of Sociology at Binghamton University; Veterans Today)