Third Conquest of 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
p159
Immediately after his arrival [in Iraq] (and before handing the
reins to old Contra hand John Negroponte), L. Paul Bremer, America's
proconsul during what was hoped would be the consolidation stage
of the occupation, imposed a package of economic reforms that
institutionalized corporate power. He eliminated or lowered tariffs
to no more than 5 percent, reduced the top personal income and
corporate tax rate to a flat 15 percent, curtailed the right of
labor to organize and strike, removed restrictions on foreign
corporate ownership, allowed foreign businesses unlimited repatriation
of profits, laid off public-sector employees, and privatized state
industries. The U.S. occupation has imposed on Iraq a massive
state intervention on behalf of multinationals, insured by U.S.
taxpayers and subsidized by the U.S. defense budget.
p160
Bremer's "Iraqi Order 81" even prohibited Iraqi farmers
from saving heirloom seeds from one year to the next; obliging
them to buy them anew each season from corporations like Monsanto
and Dow Chemical ...
p160
... the promotion of capitalism has long been a concern of American
foreign policy, yet the kind of capitalism advanced by the Bush
Doctrine is innovative, at least in its arrogant disregard for
the lessons of history. It is a militarized and moralized version
that under the banner of free trade, free markets, and free enterprise
often makes its money through naked dispossession. It was in Latin
America where this brutal new global economy was initially installed,
beginning in the 1970s, resulting in what could be called the
region's "third conquest"-the first being led by Spanish
conquistadores, the second by American corporations starting in
the nineteenth century, and the last by multinational banks, the
U.S. Treasury Department, and the International Monetary Fund.
p169
In the late 1960s, the Chicago' Boys [Milton Friedman / University
of Chicago] had drawn up the platform of Allende's nationalist
opponent in the 1970 election, which included many of the proposals
that would eventually be implemented under Pinochet. But Allende
won, so Chile had to wait.
p170
A month after [Milton] Friedman's visit, the Chilean junta announced
that inflation would be stopped "at any cost." The regime
cut government spending 27 percent, practically shuttered the
national mint, and set fire to bundles of escudos. The state divested
from the banking system and deregulated finance, including interest
rates. It slashed import tariffs, freed prices on over two thousand
products, and removed restrictions on foreign investment. Pinochet
pulled Chile out of a number of alliances with neighboring countries
intended to promote regional industrialization, turning his own
country into a gateway for the introduction of cheap goods into
Latin America. Tens of thousands of public workers lost their
jobs as the government auctioned off, in what amounted to a spectacular
transfer of wealth to the private sector, over four hundred state
industries. Multinationals were not only granted the right to
repatriate 100 percent of their profits but given guaranteed exchange
rates to help them do so. In order to build investor confidence,
the escudo was fixed to the dollar. Within four years, nearly
30 percent of all property expropriated not just under Allende
but under a previous Alliance for Progress land reform was returned
to previous owners. New laws treated labor like any other "free"
commodity; sweeping away four decades of progressive union legislation.
Health care was privatized, as was the public pension fund.
GNP plummeted 13 percent, industrial production
fell 28 percent, and purchasing power collapsed to 40 percent
of its 1970 level. One national business after another went bankrupt.
Unemployment soared.
Yet by 1978 the economy rebounded, expanding
32 percent between 1978 and 1981. Though salary levels remained
close to 20 percent below what they were a decade earlier, per
capita income began to climb again. Perhaps even a better indicator
of progress, torture and extrajudicial executions began to taper
off. With hindsight, however, it is now clear that the Chicago
economists, despite the credit they received for three years of
economic growth, set Chile on the road to near collapse. The rebound
of the economy was a function of the liberalization of the financial
system and massive foreign investment. That investment, it turns
out, led to a speculative binge, monopolization of the banking
system, and heavy borrowing. The deluge of foreign capital did
allow the fixed exchange rate to be maintained for a short period.
But sharp increases in private debt-rising from $2 billion in
1978 to over $14 billion in 1982-put unsustainable pressure on
Chile's currency. Pegged as it was to the appreciating U.S. dollar,
the value of the escudo was kept artificially high, leading to
a flood of cheap imports. While consumers took advantage of liberalized
credit to purchase T\Ts, cars, and other high-ticket items, savings
shrank, debt increased, exports fell, and the trade deficit ballooned.
In 1982 the economy fell apart. Copper
prices plummeted, accelerating Chile's balance of trade deficit.
GDP plunged 15 percent, while industrial production rapidly contracted.
Bankruptcies tripled and unemployment hit 30 percent.
p176
The Reagan revolution's initial social base had deep chauvinist
root led as it was by activists who saw themselves as opposed
not on y to the East Coast corporate elites who dominated the
Republican Party, internationalists like Henry Kissinger and Nelson
Rockefeller, but to the political liberalism of the Democratic
Party. It is hard to imagine a group more removed from the cosmopolitan
CEOs who sat around the mainstream corporate Business Roundtable
than the evangelical Christian capitalists who organized the Council
on National Policy. The Council's members included Pat Robertson,
Bob Jones, president of Bob Jones University, founder of Christian
Reconstruction Rousas John Rushdoony, Amway's Richard DeVos, John
Bircher Nelson Bunker Hunt, conservative philanthropist Joseph
Coors, right-wing direct-mail tactician Richard Viguerie, "Onion
King" Othal Brand, ex-Ku Klux Klan leader Richard Schoff,
and Sun Myung Moon publisher James Whalen. The two confederacies
clashed not only over trade issues, with the latter tending toward
protectionism and the former toward free trade, but over values.
The members of the Council on National Policy saw themselves as
deeply grounded in America, and they condemned the lack of patriotism
on the part of the internationalists, who would sell out America
to the Russians if it meant higher corporate profits. The differences
between the two groups revealed themselves in such campaigns as
the 1986 boycott of Chevron, organized by Pat Robertson and other
Christian capitalists and activists to protest the multinational
petroleum company deal with Angola's Marxist government to begin
oil production. Organizers of the boycott even distributed Wanted
flyers that accused Chevron's CEO, George Keller, of providing
"aid and comfort" to "America's Soviet Enemy in
Cuban-Occupied Angola."
Such campaigns did not mean that Christian
capitalists were isolationists. On the contrary, their anti-Communism
made them ardent expansionists. Much of the financial and moral
support for Reagan's military buildup and renewed international
aggression, for example, came from a network of unabashedly conservative
and evangelical entrepreneurs...
... At the time of his boycott of Chevron,
Pat Robertson, for example, had been working closely with Angola's
anti-Communist rebels, parlaying his close connections with African
dictators into vast forestry and diamond-mining holdings for his
African Development Corporation.
The militarists on the front lines of
the conflicts in Central America and other third-world hot spots,
such as Oliver North and John Singlaub, were ideologically and
politically affiliated not with the corporations that commanded
the heights of world capitalism but with traditional protectionists
and the new evangelical entrepreneurs who organized the Council
for National Policy, of which both North and Singlaub were members.
Yet an alliance with some of Latin America's most violent avengers,
such as El Salvador's Roberto D'Aubuisson, placed them in the
vanguard of trade liberalization, for the elimination of Latin
American nationalists was a necessary step in the advancement
of open markets. At a Washington dinner sponsored by a phalanx
of right-wing organizations in honor of D'Aubuisson-responsible
for the murder of thousands of Salvadorans-one cadre complained
that "death squads have a very negative connotation"
that was preventing the laureled executioner from getting "across
his message of free enterprise, anticommunism, freedom of exports
and imports."
p178
The death of New Deal liberalism came in 1973, when the United
States was hit by the twin blows of sharply rising oil prices
and a seventeen-month recession, described by political scientists
Thomas Ferguson and Joel Rogers as "the longest and deepest
economic downturn the United States had experienced since the
great Depression." The contraction led to a sharpened sense
of class consciousness and unity of action among corporate leaders-many
of whom had previously supported the New Deal coalition but now
rapidly increased their funding of conservative political action
committees, advocacy advertising, ad hoc lobbying groups, and
rightwing policy and legal think tanks dedicated to the dismantling
of economic regulations and social entitlements. The number of
probusiness political action committees jumped from 248 in 1974
to 1,100 in 1978. The Olin, Smith Richardson, and Scaife funds,
representing chemical, pharmaceutical, and petrochemical interests,
paid scholars and journalists to produce, as corporate activist
William E. Simon, Nixon's undersecretary of the Treasury, put
it, "books, books, and more books" to rejoin the "relationship
between political and economic liberty"
... As part of this backlash, opinion
and policy makers set their sights on third-world economic nationalism,
which was increasingly identified as an obstacle to economic recovery.
America, wrote retired general Maxwell Taylor in 1974, was threatened
by a "turbulent and disorderly" third world. "As
the leading affluent 'have' power," he said, "we may
expect to have to fight for our national valuables against envious
'have-nots.'" Carter's secretary of defense, Harold Brown,
made the connection between domestic revival and overseas expansion
explicit. "The particular manner in which our economy has
expanded," he said, "means that we have come to depend
to no small degree on imports, exports and the earnings from overseas
investments for our material well-being. But now U.S. dependence
was threatened, as a number of countries, such as Cuba and, briefly,
Chile, tried to pull out of America's orbit, while others threw
up obstacles to foreign investment. Between 1970 and 1980, for
example, the number of state-owned industries in Brazil and Mexico
increased from just over three hundred to more than a thousand.
With détente offering no relief
from the crunch generated by increased global competition and
a third world hostile to U.S. capital investment, the Forbes 500
knights of the Business Roundtable made their peace with the renascent
right and set out to retake the third world. Putting aside their
qualms about a potential inflationary risk, non-defense industry
CEOs joined in the call for a renewed arms buildup. Executive
officers from corporations that used to be squarely in the Democratic
camp began to work closely with rightwing think tanks and policy
institutes such as the American Enterprise Institute and the Heritage
Foundation, which promoted both a dramatic expansion of America's
military might abroad and the shredding of the New Deal at home.
Some businesses and intellectuals from
the multilateral wing of corporate America offered tepid dissent
to Reagan's aggressive foreign policy. But increasingly, the cosmopolitans
and the chauvinists came together over the need to project American
power, broadly into the third world and especially into Latin
America. Even David Rockefeller, an arch-internationalist and
the bête noire of the conservative right, got on the bandwagon.
A week after Reagan's 1980 victory, he toured Chile, Argentina,
Brazil, and Paraguay to reassure the generals that, unlike Carter,
the new president "will deal with the world as it is"
and not as it should be, promising them that the United States
would soon restore full diplomatic and military relations with
them no matter what their record on human rights.
By the early 1980s, then, America had
undergone a rapid transformation in the class and political relations
that defined how it acted in the world. The previous decade's
protracted recession both weakened and provoked the northeastern
establishment-the internationalist core of the New Deal coalition
and the liberal wing of the Republican Party. At the same time,
the economic base of the New Right began to expand, as steep rises
in commodity prices emboldened agricultural, mineral, and independent
oil interests in the South and the West, bringing them together
with manufacturers demanding protection, defense contractors,
an emerging network of Christian capitalists, and a steady flow
of corporate defectors from the Democratic Party. A number of
these conservative constituencies, particularly those from the
South and Southwest, could draw on their ties with fundamentalists
and right-wing populist movements to back up their free-market
and foreign policy initiatives with grassroots power and theological
justification. As economic internationalists joined with militarists
and Christian capitalists to defeat world Bolshevism, avenge Vietnam,
and push for open markets, the restoration of America's global
military power and the restoration of laissez-faire capitalism
were increasingly understood to be indistinguishable goals. This
fusion of the goals of corporate America with the passion and
ideas of a nationalist backlash created a perfect storm of resurgent
American expansionism-an expansionism that would force on the
rest of the world the kind of economic regime first institutionalized
in Chile.
p182
Reagan's policies halted and then began the reversal of what some
economists had identified as a dangerous trend-namely, the democratization
of wealth brought about by union power, a progressive corporate
and personal tax code, education spending, low unemployment, and
social welfare programs. Over the course of the previous three
decades, the amount of income claimed by the nation's top 1 percentile
dropped from 16 to 8 percent .50 Reagan's tax cuts and increased
defense spending reversed this process, creating permanent budget
shortfalls and slowing bleeding New Deal and Great Society programs.
When unsustainable deficits compelled Reagan to raise revenues,
he did so by largely shifting the burden to payroll taxes, which
only helped to further weaken support for government programs-understandably
so since real wages had begun to decline for many working-class
families. Tight money led to rising unemployment and to the gutting
of organized labor's bargaining power. Automatic cost-of-living
salary increases, job security, and guaranteed pensions were thereby
consigned to the ash heap of history. Corporations began the scuttling
of America's industrial base, moving production to the Southwest
and overseas.
In the international realm, high U.S.
interest rates forced European governments anxious to stem the
flight of capital to the dollar to respond in kind. They even
compelled French president François Mitterrand to turn,
according to Reagan's NSC international economics adviser, "full
circle" and impose "severe austerity measures,"
thus ending France's experiment in democratic socialism-and what
at the time was the chief ideological challenge to Reaganomics
in the developed world. Similar monetary pressure also helped
bring conservative governments to power in West Germany and Japan.
In the third world, the global recession
overwhelmed national governments. Even before the "Volcker
shock," third-world loans were increasingly directed not
at capital investment and infrastructure but at papering over
growing deficits. Since 1973, rising energy costs had broken the
budgets and trade accounts of developing countries, forcing them
to borrow more and more money-which London and New York banks,
engorged with petrodollars, were only too happy to lend (the percentage
of foreign earnings in the thirteen largest U.S. banks increased
from just under 19 to nearly 50 percent between 1970 and 1976).
Between 1973 and 1980, third-world debt
grew from $130 to $474 billion. With poor nations already staggering
under such a debt load, rising U.S. interest rates and an appreciating
U.S. dollar turned out to be a deathblow to even the mildest kind
of third-world development strategy, as advocated by Alliance
for Progress types. Since both third-world debt and currency reserves
were denominated in American dollars, for every point the U.S.
Fed raised its rate, $2.5 billion was added to the interest of
outstanding loans; for every 20 percent the dollar appreciated,
another 20 percent was added to the balance. And as interest payments
on loans increased by over 50 percent between 1980 and 1982, the
recession greatly reduced first-world demand for third-world products,
with commodity prices falling nearly 30 percent from 1981 to 1982.
While devastating for the people who lived
in the countries involved, the crisis was seen as a "blessing,"
as William Ryrie, executive vice president of the International
Finance Corporation, put it, for America's financial and political
leaders. The "debt crisis afforded an unparalleled opportunity;"
wrote Jerome Levinson, a former official of the Inter-American
Development Bank, that allowed the U.S. Treasury to achieve "the
structural reforms favored by the Reagan Administration,"
which included a "commitment on the part of the debtor countries
to reduce the role of the public sector as a vehicle for economic
and social development and rely more on market forces and private
enterprises."" As interest payments on thirdworld debt
soared-growing between 1970 and 1987 from less than $3 billion
to over $36 billion-governments, starting first in Latin America,
yielded to the IMFs demand to emulate the Chilean example. In
exchange for refinancing, they cut subsidies, lowered tariffs,
slashed social spending, sold off national industries, and devalued
their currencies.
Henry Nau, Reagan's NSC adviser for international
trade, described the global crisis provoked by Volcker's austerity
program not as an unfortunate consequence of the induced recession
but as an intended effect, one that reflected a "coherent
analysis and attack on the major economic ills" of the 1970s.58
With the United States losing its edge in the postwar system of
industrial capitalism to European, Japanese, and third-world producers,
Reaganomics dispensed with the competitive challenge by changing
the rules of the game. Abandoning America's postwar promise to
act as a global stabilizer, Reagan used monetary policy as a club
to assert America's national interest on the world stage, institutionalizing
an international system of financial and speculative capitalism
that allowed the United States to maintain its primacy even as
its industrial base was eroding.
p185
Reagan unveiled the outline of this new system at the International
Meeting on Cooperation and Development, held in Cancun, Mexico,
in late 1981.
... Compelled by the debt crisis, one
country after another implemented a program that was the mirror
opposite of what was called for in the nonaligned movement's program
for a New International Economic Order. They slashed taxes, drastically
devalued their currencies, lowered the minimum wage, exempted
foreign companies from labor and environmental laws, cut spending
on health care, education, and other social services, did away
with regulations, smashed unions, passed legislation that allowed
up to 100 percent repatriations of profits, cut subsidies designed
to protect national manufacturing, freed interest rates, and privatized
state industries and public utilities. Rather than fostering unified
efforts to set commodity prices and force fairer terms on the
industrialized world, as poor countries were just beginning to
do, the debt crisis forced a race to the bottom to attract foreign
capital. It was every nation for itself.
In Latin America, the sale of state enterprises
was one of t e largest transfers of wealth in world history. In
the second half of the nineteenth century and early part of the
twentieth, Latin America experienced what some historians have
described as a "second conquest." The first was, of
course, the plundering of American gold and silver by the Spanish
and Portuguese. The second entailed the initial phase of U.S.
corporate expansion, as extractive firms like United Fruit Company,
Standard Oil, and Phelps Dodge turned to the region as a source
of raw materials and agricultural products, coming to control
most of the continent's railroads, electric companies, ports,
mines, and oil fields. "When the trumpet blared everything
on earth was prepared," wrote the Chilean poet Pablo Neruda,
capturing the Job-like scope of this dispossession, "and
Jehovah distributed the world to Coca-Cola Inc., Anaconda, Ford
Motor and other entities."
The third conquest, beginning full scale
in the early 1980s, was no less epic. Railroads, postal service,
roads, factories, telephone services, schools, hospitals, prisons,
garbage collection services, water, broadcast frequencies, pension
systems, electric, television, and telephone companies were sold
off-often not to the highest but to the best-connected bidders.
In Chile, everything from "kindergartens to cemeteries and
community swimming pools were put out for bid." Between 1985
and 1992, over two thousand government industries were sold off
throughout Latin America. Much of this property passed into the
hands of either multinational corporations or Latin America's
"superbillionaires," a new class that had taken advantage
the dismantling of the state to grow spectacularly rich.
p193
In the United States, the idea of free trade-or neoliberalism
- had gained broad bipartisan support among America's political
and economic leaders, who helped extend the model inaugurated
in Latin America to Eastern Europe and the rest of the third world.
Desperate to regain the favor of the capital-intensive, outward-oriented
industries that had been the heart of the Democratic New Deal
coalition, Bill Clinton made "globalization" the centerpiece
of his foreign policy, signing more than three hundred trade agreements,
ratifying the North American Free Trade Agreement and the World
Trade Organization, and committing his administration to "open
other nations' markets." Clinton talked about trying to strike
a just balance between the demands of private enterprise and demands
that development take place in an equitable manner, similar to
Truman four decades earlier. Yet his much hyped environmental
and labor side accords to treaties like NAFTA, which promised
to humanize free trade, had little teeth matched up against the
protections afforded to property and corporate rights. In Latin
America, the main effect of all this new international commercial
jurisprudence was to ratify-and make nearly impossible to reverse-the
dispossession that took place during the previous two Republican
administrations.
Clinton had the good fortune to inherit
a "largely pacified third world," and so he was able
to use an earlier language of political liberalism and multilateral
cooperation to sell free trade. But he, along with other leaders
of the Democratic Party, had converted from New Deal principles
to embrace both free-market absolutism and American militarism.
His administration, therefore, served as a bridge between Reagan's
resurgent nationalism and George ~ W Bush's revolutionary imperialism.
Empire's
Workshop
Home Page