Globalization's Showpiece,

Iraq Is Not Arabic for Latin America

excerpted from the book

Empire's Workshop

Latin America, the United States, and the Rise of the New Imperialism

by Greg Grandin

Metropolitan/Owl, 2006, paper

Even before the attacks on the World Trade Center and the Pentagon had fulfilled the wishes of the neocons, who just a year earlier had dreamed of a "catastrophic and catalyzing event," a "new Pearl Harbor" that would galvanize American values, all of the ideas that would justify Bush's march on Baghdad had come to prevail and not just, it should be added, in the Republican Party but broadly throughout the bipartisan foreign policy establishment. What Bush did in the wake of 9/11 was to harness the force of American revanchism, accelerated by the anger generated by the attacks, and to link it to the "messianic idealism" that had long played a role in propelling America outward.' "I was lifted up by a wave of vengeance and testosterone and anger, I could feel it," is how George W. Bush described the passions that after 9/11 raised him from a candidate promising a "humble" foreign policy to a president who wanted to "rid the world of evil" and build "free and open societies on every continent."

At the beginning of the twenty-first century, wealth inequality in Latin America was at an all-time high, with three decades of IMF diktats doing little to provide better health care, education, or nutrition. In fact, stacked up against the previous developmental model, the new economic regime heralded by Milton Friedman and his colleagues and imposed by Reagan and his successors failed miserably. Taking Latin America as a whole, between 1947 and 1973-the heyday of state developmentalism-per capita income rose 73 percent in real wages. In contrast, between 1980 and l998-the heyday of free-market fundamentalism-median per capita income stagnated at 0 percent.' By the end of the 1960s, 11 percent of Latin Americans were destitute, defined as those who live on today's equivalent of two dollars a day. By 1996, the total number of destitute grew to a full third of the population. That's 165 million people.' As of 2005, 221 million lived below the poverty level, an increase of over 20 million in just a decade. Additional burdens were placed on the poor as governments, starting in the 1980s, shifted their revenue base from progressive income tax on wealth and profit to either sales or the equivalent of payroll taxes.

In terms of specific countries, Argentina and Mexico both followed IMF and U.S. Treasury Department guidelines nearly to the letter, lowering inflation, reducing the gap between spending and income, deregulating the financial sector, privatizing state industries and services, and liberalizing trade. And both went to great pains to ensure a stable fiscal environment to attract investment. In 1991, Argentina took monetary policy out of the hands of politicians, setting up a currency board that all but replaced the peso with the dollar and ceded financial sovereignty to Alan Greenspan, Paul Volcker's successor at the Federal Reserve. In 1988, Mexico began to dismantle the large public sector that had emerged out of the Mexican Revolution. It once again tethered its fortunes to the United States through trade negotiations that would eventually yield the 1992 NAFTA accord.'°

As expected, shock therapy produced prolonged recessions, wrenchingly high unemployment, and dramatic reductions in social services. In Argentina, the industrial labor force contracted by a third. Poverty increased, made worse by the shredding of what was one of Latin America's most reliable social safety nets." But shock therapy also eventually led to lower inflation rates and to economic growth that made it seem, to some, that the pain was worth it. The early 1990s were boom years, and Argentina and Mexico's economies expanded at a steady clip. Billions poured into the two nations, either in the form of new loans (to cover persistent trade deficits) or as private capital to take advantage of the opportunities offered by financial deregulation and privatization. Mexico loosened environmental and labor laws along its northern border to turn the region into a vast assembly zone for medium- to high-technology products, where workers pieced together parts manufactured elsewhere for export to the U.S. market. Maquiladoras, as these reprocessing plants are called, today employ over a million Mexicans and bring in more than $10 billion in foreign exchange. For its part, Argentina sold much of its industrial plant and nearly 100 percent of its banks to foreign corporations.

Mexico was the first to give, buckling under the weight of one too many high-interest, short-term dollar-denominated bonds issued to cover a trade deficit that was spiraling out of control and to prop up an overvalued peso. On December 18, 1994, after well-connected Mexicans converted billions of pesos into dollars, the government devalued, and then devalued again. The banking system began to melt down as capital fled. It was saved from complete collapse by a last-minute $50 billion loan brokered by Clinton and Greenspan that, according to conservative economist Lawrence Kudlow, was in effect a "bailout of U.S. banks, brokerage firms, pension funds and insurance companies" that had heavily invested in Mexico." Clinton could have saved on transaction fees and deposited the money directly into Wall Street's coffers.

'Washington's rescue stabilized the peso and allowed the economy to recover, yet structural problems remained, including high rates of nonproductive speculative investment, declining wages in proportion to growth, and staggering levels of poverty. Most disruptive, the importation of cheap goods decimated domestic manufacturing and small-scale farming, which could not compete with U.S. agro-industry. Half a million peasants were driven off their land, as cheap corn flooded the market." And since NAFTA compelled the state to slash food subsidies, "free trade" actually increased the cost of meeting basic nutritional requirements. While Mexican officials insisted that the peasant sector was doomed anyway-a self-fulfilling prophecy since the state directed meager resources to sustain it-the NAFTA model provided no mechanisms to incorporate displaced peasants into the new global economy, except pushing them to travel north to supply cheap labor to service the American economy.

Then it was Argentina's turn. For those who insisted on blaming the disappointment of neoliberalism not on the theory itself but on the failure of Latin American politicians to implement it correctly, Argentina, as old Committee of Santa Fe hand Roger Fontaine put it in 1996, provided "a clear example of how it can be accomplished.

And what an example it was, ushering in, according to one observer, the "worst peacetime economic collapse in recorded history." Since the Argentine peso was pegged to the dollar, deficit spending to expand the economy was off limits. The only way to grow was to bring in foreign currency, through privatization, investments, loans, or trade earnings. But by the mid-1990s, there was very little left to privatize, foreign investment was mostly short-term speculation, while an overvalued dollar worsened balance-of-trade accounts. That left borrowing and more borrowing. But with the country in recession since 1998, Argentina, despite ever more draconian cuts in social services, found it impossible to pay its debt. In 2002, the country defaulted, scrapped its currency board, and devalued the peso. The number of those living below the poverty line rose to 58 percent of the population-twenty-one million people, ten million of whom were totally destitute.

For its part, Brazil, comprising a third of Latin America's population and generating a third of the continent's GDP, escaped some of the harshest experiences of its neighbors. Brazil's economic might was largely due to the success of the state-developmentalist model the free-market program was intent on dismantling, which despite generating chronic inflation and high external debt greatly expanded the country's industrial base. Consequently, Brazil proved more reluctant to dance to the IMF's tune. Notwithstanding significant privatization, the state remained heavily involved in the economy, retaining control of 40 percent of its financial sector. And despite years of dictatorship followed by civilian presidents implementing neoliberal prescriptions, the country never launched an all-out assault on the power of organized labor as did Chile and Argentina. Financial crisis hit in 1998, precipitated by the Asian meltdown, yet it was nowhere near as brutal as what occurred elsewhere in Latin America. Because it retained considerable financial autonomy from the U.S. Treasury-Brazil was not "dollarized" to the degree Argentina and Mexico were-it had more latitude to devalue without provoking a run on its banks.

And what of desperately poor Bolivia? By 1985, with inflation spiraling out of control at an annual percentage rate of 23,000, the country, unable to meet the interest on its debt, prostrated itself before the IMF. In exchange for divesting from the public sector and for submitting to shock therapy, the government was allowed to reschedule its debt payments and take out new loans. Inflation fell and the economy stabilized and even grew, but poverty rose to inhumane levels, engulfing 97 percent of the rural countryside. Cheap imported food hammered the peasantry, which began to suffer from high levels of malnutrition and infectious diseases, while low-priced manufactures led to the shuttering of over a hundred factories. Unions were busted and labor protections eviscerated, contributing to rising unemployment and longer work weeks for those lucky enough to hold on to their jobs.

After a decade of celebrated growth, in 2002 three million Chileans-one in five-were living in poverty, with 83 percent of the population reporting that their lot had not improved under democratic rule. One indication that the Chilean model was coming up short was that its privatized pension plan not only failed to provide dignified pensions for many retirees but, as the New York Times recently reported, was unable to match the annuities Chileans would have received if the system had remained in government hands.

Much of the success Chile did enjoy actually stemmed from breaking with free-market dogma. After the economic collapse of 1983, Pinochet opted for a more pragmatic economic strategy, one that assertively used the state to promote exports and made liberal use of regulatory laws still on the books, including some enacted by the vilified Allende government. Chile imposed a number of restrictions, including financial penalties, on the currency market, buffering its economy from the market panics that plagued its neighbors."

Washington spent roughly ten billion dollars in Nicaragua and El Salvador throughout the wars of the 1980s yet refused to take responsibility for postwar reconstruction. Instead, it delegated the jobs of demobilizing combatants and enacting political and judicial reform to the United Nations. 'While the United States financed some of these efforts, it quickly turned its attentions elsewhere, mostly to Colombia and the war on drugs. To this day, Washington's involvement in Central America has remained largely limited to issues of illegal immigration and drug trafficking, with few steps taken to fulfill Reagan's thunderous pledges of democracy and development other than the promotion of a Central American Free Trade Agreement.

What has become of the region now that Washington has moved on? Political terror has certainly abated. Nicaragua, Guatemala, and El Salvador are all nominally constitutional democracies, holding
regularly scheduled elections. Yet the devastation that began a quarter century ago has actually accelerated.

... 60 percent of the inhabitants of Nicaragua, Guatemala, Honduras, and El Salvador-roughly 20,000,000 people-live below the poverty level, a situation that has grown worse since the wars ended. In Guatemala, almost six million people survive on less than two dollars a day. After Haiti, Nicaragua is the poorest country in the hemisphere. In Guatemala, there are thirty-eight deaths for every thousand live births-a rate more than five times greater than that of the United States. At the same time, wealth inequality is at an all time high. Privileged elites live in garrison communities, with private heavily armed security guards protecting them from the constant threat of kidnapping for ransom. In the countryside, hunger, infectious disease, and malnutrition are endemic and starvation has become common. Environmental degradation-deforestation, soil erosion, poisoned water, and polluted air-has reached crisis proportions. Panama fares no better, plagued as it is by corruption, violence, high unemployment, and severe malnutrition. The country, has the "fourth-worst distribution of wealth in the world," with the "average poor Panamanian mak[ingl 40 times less than the average rich Panamanian."

UNICEF estimates that thirteen children die every minute in the third world as a result of moneys being siphoned off from social services to finance debt.

... it is Colombia that lies at the heart of the crisis in the Andes. The country annually produces an estimated six hundred tons of cocaine and heroin for the U.S. market, while its four-decade-long stalemated civil war kills as many as eight thousand people a year. With taxes collected from coca producers, the Marxist Revolutionary Armed Forces of Colombia fields tens of thousands of foot soldiers; right-wing paramilitary armies, funded by wealthy planters and large drug traffickers and closely tied to the military, operate with near impunity. Reform politicians and political activists not directly involved in the war are executed with brutal regularity. Over four thousand unionists have been assassinated since the late 1980s. Added to these figures are over eighty daily killings related to common crime, giving Colombia the world's highest murder rate. The country also has the world's third-highest internally displaced population, as rural violence drives hundreds of thousands of migrants into contested territory, urban shantytowns, or adjacent countries.

... Since 1989, when George H. W. Bush first militarized the on drugs," U.S. troops have steadily expanded their presence in the Andes, establishing airfields and training centers to work with Colombian, Bolivian, Ecuadorian, and Peruvian security forces on fumigation and interdiction maneuvers. Southcom provides radar and intelligence assistance to Andean militaries, while U.S. agents instruct national police forces and intelligence agencies in counternarcotics operations.

... none of the 3.3 billion dollars earmarked for Colombia is supposed to go to the country infamous death squads. But as in Central America in the 1980s, the distinction between the official armed forces and paramilitary vigilantes is nominal. Death squads are organized and funded by drug traffickers and large landowners who enjoy close relations with military officers. And just as the United States first urged the Colombian military in the 1960s to create shadowy paramilitary groups that could operate outside of an established chain of military command, the Pentagon in the early 1990s again advised the Colombian armed forces to create a "more efficient and effective" intelligence network by keeping their operations "covert" and "compartmentalized" and by not putting orders "in writing. One such intelligence unit has been accused of killing labor activists, community leaders, and journalists. And evoking memories of the clandestine operation that illegally supplied arms to the Contras, two U.S. Special Forces officers were arrested by Colombian police in Bogota in 2005 for supplying over thirty-six thousand rounds of ammunition to a paramilitary group.

The war on drugs has not decreased narcotic production and trafficking, any more than the global war on terror has decreased global terror. But it has served to quietly project the United States' military presence beyond Central America and the Caribbean into South America at a time when new political movements are openly challenging Washington's authority and contesting U.S. corporate control of the continent's natural resources.

Over the course of nearly two hundred years, o broad arcs of hostility have defined U.S.-Latin American relations. One began in the early nineteenth century, with the first stirrings of the American empire. Marked by decades of nearly continuous warfare, this bout of conflict finally came to an end in the early 1930s, when Washington renounced the right to engage in unilateral armed intervention. The second round began in full with the CIA's 1954 Guatemalan coup and was characterized by dirty wars, death squads' covert operations, and political disappearances-all carried out in supposed defense of liberal democracy against Communist tyranny. This round ended when the Cold War ended, as Latin American nationalists and democrats, spent from the bloodletting, accommodated themselves to the free-trade order promoted by Washington.

Today, the United States and Latin America stand at the threshold of a third period of conflict, as Washington promotes an economic model that produces not development and stability but desolation and crisis. As such, the United States is once again relying on hard power to protect its interests and guard against the resurgence of a new, continent-wide democratic left.

... Elliott Abrams-the man who in the 1980s so twisted the concept of human rights that it could justify the homicidal activities of the Contras and the Salvadoran military - being appointed by Bush to lead a global crusade for democracy. There was Dick Cheney in the vice presidential debate telling the electorate that El Salvador, with 50 percent of its population below the poverty level, was a model for what his administration hoped to achieve in Iraq. 'William Kristol, editor of the conservative Weekly Standard, showed up on TV to hail Central America as an "amazing success story." Responding to accusations that John Negroponte involvement in the cover-up of hundreds of executions while he was ambassador to Honduras made him unfit to serve as intelligence czar, the National Review praised Reagan policy in Central and South America as a "spectacularly successful fight to introduce and sustain Western political norms in the region."

Joshua Muravchik
"Military conquest has often proved to be an effective means of implanting democracy.

Michael Ledeen
"The best democracy program ever invented is the U.S. Army."'

... Reagan's wars in Central America created an affinity between neoconservatives and Christian evangelicals: both came to share a crisis-ridden view of the world and a sense that America was in decline. But they also shared a belief that decline could be reversed through a restoration of moral clarity and authority and a recognition that evil existed in the world. Along with militarists and conservative intellectuals, the religious right has long nurtured a suspicion of America's ruling elites and the multilateral institutions that trespass on national sovereignty. Yet their experience in the 1980s has drawn them nearer to the strange optimism of the neocons regarding the capacity of American power to mend the world. For some the lodestar may be Winston Churchill, for others Jesus Christ, but today a broad consensus prevails among the most passionate constituents of the conservative movement as to the righteousness of American power and its place in the unfolding of history. Thus, when Pat Robertson suggested in the summer of 2005 that Washington preemptively assassinate Hugo Chavez before U.S. relations with Venezuela worsened, he was merely taking to a logical conclusion the principles elaborated in Bush's 2002 National Security Strategy.

... America's privileged position within the world's global financial system-dependent as it is on the maintenance of political primacy in order to continue to prop up a deeply indebted economy-demands an aggressive foreign policy. On this fact, neither major political party disagrees. But the need for the New Right to maintain a constant level of mobilization to hold its coalition together-especially since the domestic goals of many of its constituencies are unattainable-could push this aggression to an even more dangerous extreme.

The component elements of the new revolutionary imperialism reinforce each other, creating ever more crises that call for ever more intervention. America's imposition of free-trade absolutism produces throughout the world perpetual instability - thus justifying the need for an imperial power to impose order. "Hard Wilsonianism"-that odd mix of unapologetic violence and blinding idealism (that) motivates neocons ...

... Such violence will generate more anger, more "extremism," which, sooner or later, will need to be met with more repression. At home, the refusal of either major political party to develop an alternative to unbridled free trade, along with the success of the Republican Party in redistributing wealth upward through tax cuts and the gutting of social entitlements, propels economic insecurity, leading to domestic discontent that can only be contained through constant mobilization against a shapeless, and thus perpetual, enemy.

a Bush staffer
"We're an empire now, and when we act, we create our own reality."

The resurgence of the Latin American left described in Empire c Workshop has continued apace. Since its publication, Brazilians reelected Luiz Inácio Lula da Silva by a large margin, as Venezuelans did Hugo Chavez. Michelle Bachelet, a single mother and socialist, won a third term for Chile's center-left Concertación coalition. In Ecuador, Rafael Correa, an economist and close ally of Hugo Chavez who ran on a pledge to renegotiate, and possibly even default on, his country's "illegitimate debt" became president. We've even seen the return of Sandinista Daniel Ortega as leader of Nicaragua. Though Ortega has declared himself a free-trade Christian, there are still worthy grassroots social movements within the Sandinista coalition, and its victory could begin to thaw Washington's glacial grip on Central America. Elsewhere in countries ruled by governments more closely aligned with the U.S., like Mexico, Peru, and Colombia, militant social movements are fighting for land reform, indigenous rights, local control of resources, and humane development, continuing Latin America's role as the vanguard of the global anti-corporate social justice movement.

Despite differences in manner, Latin American governments have committed themselves to a common agenda of economic diversification, regional integration, and development policies that spur not just growth but equality. Earlier this year, the Montevideo-based Latin American Integration Association reported that trade among its twelve member nations had grown 110 percent since 2003, a much faster pace than had been predicted. Added to this is rapidly expanding trade with Europe and Asia, particularly China, which has helped the region gain considerable autonomy from U.S. markets. The same Asian investment that allowed Argentina's Nestor Kirchner to broker his 30-cents-on-the-dollar refinancing of his country' foreign debt has also helped Bolivia and Venezuela renegotiate favorable contracts with multinational energy companies.

With financial independence comes political freedom. Over the last couple of years, governments from across the political spectrum have demonstrated a steadfast unwillingness to enlist in Washington's "war on terror." They have rejected Pentagon efforts to subordinate their militaries to U.S. command; opposed the invasion of Iraq; refused to elect the U.S.-backed candidate to the OAS; declined to pass a law which would have exempted the U.S. from the International Criminal Court; and rebuffed calls to isolate Venezuela. This kind of dissent was unthinkable before 2001.

Over the last year, Washington has had some success in preventing leftists and nationalists from coming to power, in Peru, for instance, and in Mexico. But notwithstanding the outcome of specific votes, and despite the very real conflicts of interest among Latin American nations, the centrifugal forces pushing the region out of Lie U.S.'s orbit will continue.

Unlike after WWII, when a confident corporate class threw its backing behind New Deal political liberalism at home and at least some reform capitalism abroad, the financiers of today's Democratic Party are too deeply invested in war production and speculative capital and too intensely committed to keeping the third world open. They will not brook any sustained attempt to restructure the global economy in a more equitable direction.

Across the continent, political movements have emerged from decades of unrelenting state terror underwritten by imperial patronage to creatively and effectively oppose first corporate-driven neoliberalism and then a renewed U.S. militarism. Through exemplary courage, perseverance, and organizational skill, Latin American activists have provided a beacon of hope on an otherwise bleak global landscape. They have multiple agendas and objectives, yet they share a common set of values: human dignity, local autonomy, a vision of individual freedom rooted in collective solidarity, and a notion of democracy defined not simply by proceduralism or individual rights but by economic equity. It is they who are the world's true "democracy promoters" and who are fighting the real war on terror, and offering lessons to us all.

Empire's Workshop

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