Another Lost Decade
Democracy everywhere is vulnerable to the whims of globalized capital as shown by the NYT's Juan Forero. His report details Latin America's failure to meet their publics' essential needs as the demands of capital clashes with the demands of democracy. It seems the firm Aguas del Illimani -- a subsidiary of the French firm Suez, which secured the contract to privatize Bolivia's waterworks in 1997 -- increased hookup fees to $450 when the average monthly wage in Bolivia is just $55.
The spike led to a popular revolt against the company in El Alto, Bolivia. In reaction, Bolivian President Carlos Mesa went populist, kicking out Aguas and thereby leaving the state responsible for water services. This will have a damaging effect on Bolivia for two reasons: the government will do worse running the waterworks in the short-term and investment should thin out as companies get wary of investing in a country that doesn't have their people in order. As Forero reports, this is what happened to Peru and Argentina when their people went awry on privatization, with investment slipping.
The lesson: democracy and foreign investment don't go well together.
As Cesar Gaviria, former secretary general of the Organization of American States, blandly puts it, "In the last decade, non-economic factors have become even more important in affecting investments." He adds "political risks have grown to a great degree." Decoded: the people are becoming an obstacle.
The choice seems stark: either the public asserts itself and remains poor or foregoes democracy and allows foreign investment without restriction -- a proposition that will regardless leave Latin Americans poor. Neoliberal economic reforms introduced in Latin America during the last quarter century have only produced 1.4% annual per capita growth, while growth has been non-existent during the first half of this decade according to Mark Weisbrot and David Rosnick of the Center for Economic and Policy Research.
Does it have to be this way? Probably not, but in an era of unregulated capitalism, capital will march on till it finds a suitable environment where labor and environmental standards are nonexistent and the population is sufficiently docile.
-- M. Wood
The spike led to a popular revolt against the company in El Alto, Bolivia. In reaction, Bolivian President Carlos Mesa went populist, kicking out Aguas and thereby leaving the state responsible for water services. This will have a damaging effect on Bolivia for two reasons: the government will do worse running the waterworks in the short-term and investment should thin out as companies get wary of investing in a country that doesn't have their people in order. As Forero reports, this is what happened to Peru and Argentina when their people went awry on privatization, with investment slipping.
The lesson: democracy and foreign investment don't go well together.
As Cesar Gaviria, former secretary general of the Organization of American States, blandly puts it, "In the last decade, non-economic factors have become even more important in affecting investments." He adds "political risks have grown to a great degree." Decoded: the people are becoming an obstacle.
The choice seems stark: either the public asserts itself and remains poor or foregoes democracy and allows foreign investment without restriction -- a proposition that will regardless leave Latin Americans poor. Neoliberal economic reforms introduced in Latin America during the last quarter century have only produced 1.4% annual per capita growth, while growth has been non-existent during the first half of this decade according to Mark Weisbrot and David Rosnick of the Center for Economic and Policy Research.
Does it have to be this way? Probably not, but in an era of unregulated capitalism, capital will march on till it finds a suitable environment where labor and environmental standards are nonexistent and the population is sufficiently docile.
-- M. Wood
posted by Matthew Harwood at 4:30 PM
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