Latin America, a region that was dominated primarily by the Spanish through the colonial project, has been unable to generate economic growth and has been subjected by a wide variety of social and political concerns. Through my experiences in the Dominican Republic; I had noticed the widespread presence of transnational companies whilst economic and social conditions were unfavourable. This imbalance is a result of the implementation of the neoliberal development model which has been supported by organizations such as the World Bank, the International Monetary Fund and the United States. Through an examination of the political effects, economic effects and the emergence of alternate development models in opposition to the neoliberal model, it will become evident that neoliberalism has caused economic growth to stagnate and social equalities to deteriorate within Latin America since its implementation in the 1980s.
Originating from the University of Chicago, the neoliberal economic theory has been implemented across Latin America delivering adverse economic effects (Bresnahan 2003:3). This model of development primarily advocates the establishment of a national economy that is driven by the market(Bresnahan 2003:4). To accomplish this, the model removes the government from economic decision making. Moreover, it promotes the breakdown of trade barriers so that transnational companies and other corporations are able to invest in Latin American countries (ibid:4). Government roles in funding state social programs have been diminished under the neoliberal model as many of the services such as healthcare and education, have been privatized or have decreased financial support. Under the neoliberal model, the primary objectives of the model are to improve equity, increase wealth amongst the poor, create a more democratic society through the free market and have economic growth based on an export focused development strategy (ibid:8). In regards to how the model is implemented and adopted by Latin American governments, there are a variety of approaches Western nations such as the United States have undertaken to ensure that the model is accepted. This includes military intervention as seen in Chile as the CIA backed a military coup in September 1973 which saw Augusto Pinochet rise to power (ibid:3). Another means in which the model is implemented is in regards to the power relations Latin America shares with Western Nations(Harris 2002:139). Latin American nations have a need to borrow money in order to sustain domestic economies. Borrowing of the money is usually facilitated by the International Monetary fund and the World Bank which impose Structural Adjustment Programmes that are aimed to open a free market economy in the target nation (Harris 2002:141). Ultimately, the neoliberal economic model is aimed at bringing global capitalism into third world nations that have otherwise rejected or dismissed their openness to free market economics. This policy in the Latin American context has caused the corruption of many political systems within the region.
Since the implementation of neoliberal economic policy within Latin America, political independence and democracy within the region has been thwarted. This has been a direct consequence of the expansion of neoliberal economic policy(Harris 2002:140). Government focus on the people has shifted in regions where the model was implemented; to focus on ensuring transnational corporations are able to enter the country's economic market (Harris 2002:142). This is further facilitated by the upper classes of these nations who help transnational companies expand within the nation through investment (Harris 2002:146). This shift is best exemplified through the Chilean model. Prior to the implementation of the neoliberal model, Chile under the democratically elected President Salvador Allende, was experiencing economic growth (Bresnahan 2003:10). This was a result of his economic policies which consisted of the nationalization of industries such as copper mining and the collectivization of various other resources (Bresnahan 2003:8). In contrast, the rise of Augusto Pinochet led to the deterioration of the political system within the country. He began to implement the neoliberal development strategy that was promoted by the United States government. The deterioration of the nation's economic industries led to the Chilean government's removal from social programs and the institution of state terror to coerce the opposition and left wing opponents (Bresnahan 2003:4). As a result, Augusto Pinochet was able to institute an authoritarian dictatorship over Chile (2). In reference what neoliberalism claims to achieve; within the Chilean model, Augusto Pinochet's rule had created a country that was subjugated to oppression from the government rather than creating an open and democratic society. The erosion of democracy within Latin American states has caused economic development to stagnate. Political and economic decisions in countries that have a neoliberal model are dominated by the ruling parties and upper classes whilst the lower classes of society are marginalized (Harris 2002:139). It is apparent that economic development without political freedom is impracticable as the needs of the people are being superseded by the goals of the transnational corporations entering the country. Although neoliberalism has caused the removal of several classes from the political system; proponents of the ideology suggest that the neoliberal model has provided benefits for the region's political development in global political economy.
Neoliberalists advocate that the ideology has provided a means to which Latin American countries can participate in the global political economy. Resulting from the implementation of the neoliberal model, many nations within Latin America have been brought into the global economy. Accordingly, these nations have been able to have a greater voice in international trade agreements (Maxwell 1999:60). This is evident through the Free Trade Area of the Americas which is a trade association that removes trade barriers to international trade (Harris 2002:137). Moreover, the association provides a forum where member nations can voice their economic concerns and plan trade agreements with other member nations (Harris 2002:137). While these associations such as FTAA help further implement the neoliberal model, the reforms have led to an increase of centralized authoritarian governments across Latin America (ibid:138). With the withdrawal of state funding from key social programs in health care and education, the peasant classes have mobilized in opposition to government armed forces. This is most evident in Mexico at the beginning of 1994. With unfavourable economic conditions amongst Mexico's indigenous Chiapas population, there was a large portion of the population that rose up against the Mexican government's entry into NAFTA and their implementation of neoliberal economic policy (Maxwell 1999:60). It is apparent that the social and political injustice caused by the implementation of the neoliberal economic model has led many to rise in opposition to it. The model's political drawback of excluding the lower classes of the region has led to widespread opposition to its adoption as economic development. Moreover, as a result of the political implications caused by Latin America's entrance into global capitalism, economic development within the country has been minimal.
The neoliberal economic model has led to the erosion of domestic markets within Latin America. With the removal of economic trade barriers a form of dependency has been created amongst many nations in Latin America (Rubotoom 1966:118). The region relies heavily on export sales to the United States. Many Latin American nations are dependent on the export of a single commodity to major trading partners which is primarily the United States due to its proximity (Raby 2008:2). For instance, under the Chilean model of neoliberalism; the country had become dependent on the export of agricultural goods (Bresnahan 2003:8). This had resulted in a lack of diversification in other industries. Moreover, economic growth is further dependent on the world economic market. Due to the United States being the primary trading partner for Latin American countries, a decrease in demand for Chilean agricultural goods would yield economic losses (ibid:8). Accordingly, the reliance on export led development has not resulted in economic growth. Since the implementation of the neoliberal development model, between 1980 and 1990 trading decreased from 6%-3% (Robinson 1999:113). This decrease in trading has also led to the decline in per capita income. Between 1980 and 1990 the per capita income within the region dropped by 11% (Robinson 1999:118). Moreover, further studies indicate that per capita income has reverted to what they were in the mid 1970s (ibid:118). The decline in per capita income has caused widespread unemployment and gaps between the rich and the poor (ibid:118). Through the implementation of the neoliberal development model, little has been done to improve poverty conditions and increase equity amongst the populations. This is resulting from the shift in government attitude caused by the neoliberal model. The focus on providing economic possibilities for transnational companies overrides the focus on the people resulting in unequal economic development across Latin America. Supporters of neoliberalism argue that there have been increased benefits to Latin American economies and social need such as education and health care.
As the neoliberal model is further adopted in Latin America, advocates of the model suggest that in certain countries in the region, growth has been exhibited. This growth is resulting from the participation of various countries in global capitalism. For example, in Brazil and Mexico, growth had increased an average of 6% while other countries in the region such as Guatemala, Honduras and Nicaragua were facing high inflation (Edwards 2008:126). Moreover, the export led economic growth has led to the increase of exports by 22% between 1983 and 1985 when the neoliberal model was first being implemented in Latin America as a whole (Robinson 1999:113). By the 1980s, the region was exporting roughly $219 billion dollars worth of goods. Although export has increased, the value of the goods being exported decreased during the 1980s and 1990s (Robinson 1999:113). Research states that the value of the goods exported decreased by 9.9% between 1992 and 1994 (ibid:113). This decrease in value results from the regions participation in global capitalism. This led to instances such as the debt crisis which was caused by Latin America's inability to repay its loans taken from the International Monetary Fund and World Bank (Edwards 2008:130). This is evident in Argentina where economic conditions worsened as a result (Edwards 2008:130). Due to the debt crisis, the region was unable to sustain export driven development or generate growth as other nations withdrew any investments they had as there was no assurance that they would generate profits. In regards to poverty, there was an improvement, the increase in poverty decreased by 5% from 48.3% to 40.5% which was the level of estimated poverty in Latin America (Huber and Solt 2004:152). Although this decrease seems significant resulting from the neoliberal economic policy, it is evident that the neoliberal reforms have created poverty rather than reduce it over time. This further substantiates the inability for the neoliberal model to create economic growth amongst the lower classes of the region. The decrease in government funding for social spending in neoliberal confirms the model further deepens poverty in the region. Latin America's involvement within global capitalism has led to many economic growth problems. Moreover, it has led to many countries within the region to institute an alternate form of economic development.
As a result of the political and economic problems caused by the neoliberal model, the emergence of an alternate development model has been widespread. The model has been replaced by a development strategy that involves state interventionism (Raby 2008:1). Likewise; this model derives from the widespread desire in the region to be politically and economically independent and to ensure that there is a level of social justice within (Rabby 2008:1). Venezuela is a primary example of how state interventionism has replaced the neoliberal development model. Prior to the election of Hugo Chavez in 1999, the state was primarily operated in a free market as many Latin American states. However, this changed when Chavez was elected President. He instituted a new constitution which reformed the political and economic institutions within Venezuela (ibid:2). The government now took an active role in investing in the country's development and social programs. This included social initiatives such as healthcare and education and developing the nation's infrastructure (ibid:3). Unlike the Chilean Model of Neoliberalism which consisted of the privatization of the country's industries, Chavez actively pursued the nationalization of key industries including the oil industry which now generates more than half of the country's wealth (ibid:3). Moreover, the county is actively participating in a third world movement through the formation of the Bolivarian Alliance for the people of the Americas (ibid:4). This is a free trade organization involving seven other Latin American countries. It advocates that member countries should be utilizing national and local sources for development rather than primarily focusing on other nations in the global economic market (ibid:5). Furthermore it combines social justice values and ecological sustainability initiatives within its development model (ibid:5). This development model results from movements within the poor and peasant classes because neoliberal economic policies have generated high poverty levels amongst those classes (Robinson 1999:115). Since the implementation of the alternate development model in Venezuela, poverty levels have decreased and economic growth has occurred as a result of the nationalization of key commodity industries (Rabby 2008:6). It is because of this, leaders such as Hugo Chavez are able to gain so much support (Rabby 2008:6). It also has led to first world nations fearing a return of socialism and anti-imperialist sentiment amongst the Latin American region (ibid:.6). It is apparent that this alternate form of has developed economic and social growth that has occurred under the neoliberal model. Moreover, it has provided a means to reduce poverty levels and income inequalities unlike the neoliberal model. Though this alternate model of development caused by the inability of the neoliberal model to achieve its goal in creating economic growth, it fails to provide a widespread change across the region.
Leftwing movements within the region have been limited to a variety of socio-economic reasons. The ability to implement alternative development models is limited due to the region's involvement within the global capital system. After the cold war, it was widely perceived by Latin American states that global capitalism was necessary to create economic growth (Harris 2002:140). Moreover country's such as Cuba which has implemented a development model that rejects the neoliberal model and favours economic policies formed by the state, heavily relied on trade with the Soviet Union in order to maintain economic growth and development (ibid:140). Following the collapse of the Soviet Union in 1991, Cuba needed to find ways in which to participate in the global capitalist system in order to sustain economic growth (ibid:140). In these examples, it is clear that the implementation of policies that are contrary to the existing structure of global capitalism are hard to pursue without having economic loses. Additionally, the neoliberal model instituted in most Latin American countries continues to exist as economic progress has become heavily reliant on the economic structures created under this model. As such, the structure of the neoliberal model has caused barriers to alternate development models as exhibited in Venezuela and Cuba.
The neoliberal economic model has led to adverse effects in Latin American economies. This is characterized by the inability of the model to generate economic and social benefits to the region. Furthermore, resulting from the implementation of the neoliberal model, the region has been forced to enter global markets which have begun to dictate economic growth based on the change in economic gains and losses within the first world. Political problems resulting from this model have also led to social issues as the government shift in focus from helping the population in terms of funding social programs such as health care and education to that of a reduced spending policy while opening up the market freedom in favour of the transnational corporations. As a result of this shift in focus, alternate development models have begun to be advocated for by the lower classes of many Latin American countries. However, the capacity of to implement other development models has been limited due to the increased participation in the global economy and the dependency on the United States for economic trade. Therefore, it is evident that as long as western nations continue to back the implementation of the neoliberal model of development in Latin America, the region will continue to experience stagnant economic growth and worsening social conditions.
