The rising cost of an than 60% for. Tears, laughter, hugs and singing marked the moment. Then a huge economic "miracle"
banner with the words "Now I am a star.
Women of the PT" was set up on the platform.
The last day of the congress was devoted to the discussion on the current situation and tactics. Fatigue was evident on
FROM Bolivia to Argentina, from Poland to the Soviet Union, everyone's face. A row nearly broke out important governmental advisors and distinguished when a delegate read a motion calling for economists have been looking towards the "Chilean miracle"
the representative of the US embassy to be expelled from the hall. The PT's secrewhich according to them, has permitted years of economic tary for international relations defended growth and has allowed Chile to escape "the lost decade"
his presence: "When we go to the USA experienced by the Latin American subcontinent. How much we will not be asking to see small sects, it will be the State Department which interof this is true and how much is false?
ests us." Finally, the intervention of the
We reprint below an article on this subject by the Chilean stewards prevented things from going fureconomist Pedro Vuskovic which first appeared in the ther. The motion was put to the vote and the majority accepted that he stay in the
Nicaraguan journal Pensamiento Propio.
hall.
Latin American left meeting in Managua
The Latin American delegations met to consider the accords of the Sao Paolo Forum' in preparation for the Forum's third meeting which will take place in 1992 in the Nicaraguan capital Managua. This was a consensus decision among the coordinating organizations; a forum of economists will also take place within this framework in Lima in February 1992;
motions of support for the Cuban revolution and for the return of ousted President
Aristide to Haiti (see article on p. 27), as well as on the negotiations between the
FMLN and the Salvadoran government, were made public.
Around five in the afternoon, Lula took the microphone to wind up. His speech concentrated on the congress' main points. He explained that, contrary to what the media were saying, the party was more united than ever. He then went on to reflect at length on the issue of women's representation in the PT. He said that this
224 quesoon was that many had believed tha the congress, that many naa belleved thal
PEDRO VUSKOVIC
• HE Chilean economic model has been promoted as a uniquely successful one, touted as capable of sustaining dynamic growth and safeguarding macroeconomic equilibriums. Its social costs are recognized but its defenders hold that the same model will later permit these problems to be rectified.
Implemented by the military dictatorship, the model has been shrouded by such prestige that the civilian government has maintained it almost intact as the foundation of its economic policies. This plan has been promoted in international circles, leading to its reproduction in other Latin American countries. Chilean advisors - under North American inspiration — offer their services to other governments who have chosen similar policies. In doing so, they have successfully built a quasi-mythical image, as false as it is dangerous, and which obliges us to examine its true nature.
We can begin by questioning its best apparent feature — sustained and rapid economic growth. Because in fact the main argument used in support of this model is that the Chilean economy has successfully experienced relatively high levels of economic growth in contrast with the deterioration of the majority of Latin American economies.
It is true that the Chilean economy registered positive rates of growth in some years when other countries experienced set-backs. According to official figures, the growth of the GDP was around 6% in 1984, 1986, and 1987, more than 7% in 1988, and 10% in 1989
These figures, however, take on a different significance if they are looked at in a larger historical perspective. A good part of this growth in fact involved nothing more than a regaining of ground lost as a result of the very same policies; in particular, falling production of 12.9% in 1975 and 15.2% in 1982-1983.
If we look at the period of 19741989, the average annual growth rate of the Chilean economy was 3.1% while that of Latin America as a whole was 4%. Thus, far from advancing, the Chilean economy fell behind the Latin American
Another way of approaching the question is to project growth rates registered between 1960-1973 (a period covering the Allessandri, Frei, and Allende governments), and compare them with the rates attained by the GDP from 1974 until 1989.
We can conclude from this comparison — which was carried out by the engineer Jose Ibarra - that during the dictatorship there was a net loss of GDP equivalent to the value of two years of production or more than three times the accumulated foreign debt. In the last years of this period many of the principal economic indicators remained below the levels registered during the Allende years. In per person consumption barely reached 1969 levels.
There was nothing miraculous in the growth registered in the second half of the 1980's nor was there a tendency that could be sustained. In that phase of recovery, and in order to obtain these results, the dynamism started to fade and the conditions for a slowdown in economic growth started to develop
Depletion of natural resources
For example, the increase in some exports was based on the depletion of natural resources among others the extinction of certain species of marine exploitation of forests) which cannot be indefinitely prolonged and insertion into foreign markets that would not continue to grow signifi-
One of the features of economic management that had the best effects on growth was that a good part of the servic ing of the foreign debt was achieved by assets. Normal income from exports was thus not being devoted to servicing the debt, but instead the national economy was increasingly given up to foreign interests — a situation that could not con-
For these and other reasons, it was clear that this growth, which for a certain time was even spectacular, could not be sustained. In the first year of the civilian government there was an eloquent warning. The growth of the GDP in that year was only 2.1% - barely above the population growth.
This slow growth has accelerated social demands and eventually had repercussions on the balance of the economy.
Unless trends towards greater economic and inequality intensify (which in political terms means more repression), it is highly probable that financial disorder will worsen and inflationary pressures accelerate.
Even those who promote it recognize that this economic model implies significant social costs. They justify these consequences by claiming that the model eventually develops the possibilities to overcome these costs or at least generates sufficient resources to make up
But the problem is much deeper. Neoliberalism has imposed strategy characterized by the concentration of all the available resources in certain areas of the national economic system - and more precisely, in a part of society, or even in a part of urban
In these areas a modernization oriented towards exports has progressed, in a framework of bigger openings to foreign capital markets, of full control by the market, and of privatizacompanies and public services. The inevitable counterpart of this concentration is an extreme accentuation of inequality and poverty to such a point that social segregation develops.
All previous experience with this strategy indicates that underdeveloped capitalism will be preserved under the two poles of international integration essential nature of these policies in practice is the key to understanding why signs of prosperity can occur at the same time as the deterioration of the living conditions of the majority of the population. Thus the policies of the dictatorship have ended up by simultaneously providing a significant overall growth rate and the accumulation of a gigantic "social
It is difficult to exaggerate the scope
CHILE of this debt. There has been an impres sive rise in the proportion of poor and destitute: taking the level of destitution alone, the rate was 8.4% in 1969 while in 1987 it was calculated at 22.6%. The same occurred if we include wages as a total of the GDP; during a long historical phase this was around 50% (48% in 1970), rose above 60% in 1971-1972 and shrunk to less than 40% during the dictatorship (38% in 1989).
This marks a long period in which profits grew at the price of enormous losses for the workers: according to Jose Ibarra, the accumulation of these losses in terms of declining jobs and the contraction of real wages has resulted in the equivalent of 3.8 times the total of the foreign debt which appeared simultaneously with this
It is not surprising that inequality is today in Chile bigger than ever. Thus, statistical research into the distribution of income amongst social layers layers demonstrates that deep inequality is becoming a feature of daily life.
### Expansion of profits
Besides the unprecedented expansion of profits — the fundamental factor in the concentration of income - there are new privileged roles with highly inflated compensation in comparison with others: A director of the Paper and Carton manufacturing company for example, received 4.5 million pesos a month for participating in management meetings, compared to 30,000 pesos paid to a nurse in a public hospital (a 1 to 150 ratio).
The scope of the accumulated social debt and the severe change in the traditional distribution of wealth fully justify the current rise in social demands.
The promise that the economic policies would tend to "pay off" the social debt has no objective basis in real life. The 25 result is that these excesses of inequality
International Viewpoint #219 • December 23, 1991
CHILE constitutes one of the biggest challenges that confront society today.
Likewise, the response of the civilian government to popular mobilizations is unacceptable. The demands of these mobilizations are for wage adjustments which would barely compensate for what has been transferred to capital gains and other sources of privileged revenues. The satisfaction of the demands of pensioners, teacher and health workers, who have pressing needs, would represent small amounts in comparison to the sums oriented to other ends, including the military and police budgets.
Are there material possibilities to raise wages and reestablish decent conditions of life? In today's Chile the answer should be yes: a society that attained the annual equivalent of a $2,100 income per person has the potential to eliminate poverty, to guarantee basic consumption for all, to assure access to reasonable health
With this level of income it is not so much a problem of productive capacity, but of distribution of income between social layers.
Facing up to the social consequences of the model and meeting rising demands is not, in fact, simply a question of political will. The logic of the plans of the neoliberal politicians impose exceedingly tight limits as to what can be done. In practice they create irreversible situations which can only be changed if there is a fundamental change of the model itself. Surrendering national assets and inequality What occurred in Chile in 1990 clearly illustrated this dynamic. For example, the process of surrendering national assets and inequality.
The modest rhythm of growth that was registered in the GDP of that year (2.1%) allowed the raising of the gross national income by only 0.7%, since two thirds of the productive growth was transferred out of the country. This gives an idea of the scope of the compromises with foreign interests that has sustained this plan. Of what remains in Chile, 85% corresponds to capital profits and only 15% to wages.
The same difficulties appear when there is an effort to make up for the social costs of the model by taking direct compensatory measures in favor of disadvantaged groups.
One can also expect that efforts to alleviate the model's impact on the deepening of poverty through welfare will have only very limited success. Unless there are big resources available and there is a significant capacity for state intervention like in Mexico, the social welfare policies will merely give a temporary respite to problems which have deeper causes
26 inherent in neo-ineral decisis,
Thus, we see another decisive aspect of current neo-liberalism and of what will happen in the future: a rigidly logical conception that does not permit any changes, to which one can only oppose another, fundamentally different, economic, social and political strategy.
The neo-liberal strategy is based on a total opening to foreign economic interests and on using exports as practically the sole source of economic vitality. That is why economic policy is subordinate to the goal of orienting the national economy towards external markets.
Rapidly applied scientific and technological advances in developing economies have reduced advantages" traditionally recognized as belonging to the underdeveloped world. Advances in microelectronics used in the mechanization of production tend to further reduce the economic significance of wage gaps (i.e. advantages attributed to
"abundant and inexpensive labor force") for the profitability of enterpris-
To maintain competitiveness in foreign markets it is necessary to continuously reduce real wages which implies a growing outflow of the fruits of domestic labor. It is a fallacy that the economic opening to the outside world contributes to raising domestic wages: the risk is that, given the privileged position of exports, wages will continue to be slashed in order to remain competitive with foreign economies which rapidly change their labor force for higher technologies in mechanized production.
Advances in biotechnology and genetic engineering significantly reduce the other source of comparative advantages of Latin America in the world market; its rich natural resources. The developed countries rapidly increase the production of synthetic products and increasing productivity in agriculture and livestock production strengthen their capacity for self sufficiency even with relatively small
Shrinking relative advantages
The advantages tend to be limited to seasonal differences between the two hemispheres (Chile), or geographical closeness (Mexico); or to defending such advantages by selling ever cheaper the fruits of these resources, which means their devastating exploitation.
The access to foreign markets directly leads to surrendering control of exporting to foreign capital or to compromises with the latter, and indirectly to slashing trade barriers and indiscriminately opening up the economy to foreign interests. The result is a constant drainage of revenue and financial assets which are transferred out of the country instead of staying there to strengthen national capital accumulation or improve living conditions.
Paradoxically, it is claimed that the model has registered higher rates of exports than imports. In 1990 for example, Chilean exports increased by 7.6%, while imports were only up 0.6%. This "surplus" means a net transfer of national labor out of the country.
In sum, the narrowing of the export sector forces the state to continually support exporting via lower wages or the abusive exploitation of natural resources, and to indiscriminately open up the economy to the outside world at the expense of the country's natural resources. In defending this increasingly restricted exporting perspective the country ends up being absorbed into the commercial zone of the North American economy approaching thus a higher stage of the subordination of the economy to foreign interests.
This has occurred without a national debate on such a decision, which has incalculable historical implications in terms of national identity and self deter-
Current Chilean economic policy leads to a generally steady rhythm of economic barely offsetting population growth, with no foreseeable hope of recovery in the coming years. Foreign investment will not guarantee a new boost to the economy since it usually involves buying previously existing
Soon their (repatriated) profits will equal, if not surpass, the amount that the payment of the foreign debt interests would have represented. Most probably, the growth rates of the coming years will be modest, and most of the yields will be transferred out of the country.
The entrance of Chile into a free trade zone with the United States would complete a process of subordination to the North American economy, of the renunciation of the fundamental bases of national identity, all the while extremely limiting the country's capacity for self determination.
We can thus identify three levels of the consequences of the neo-liberalism applied to Chile: de-nationalization and deepening of inequality, poverty, and helplessness, which is part of a strategy of general growth regardless of social
And this is only on the material plane. The costs of the Chilean economic model are considerable on the ethical level as well: the perversion of values, the spread of individualism, a rise in personal competition and selfishness. A thin disguise of technology and modernity
The fact that this economic policy is being maintained has but one explanation: it is the sole way of preserving the privileges of capital and of its servants, under a thin disguise of technology and modernity. *
The invisible hand
OFFICIALLY, the United States is doing everything it can to restore democracy to Haiti. But behind the scenes it is a different story. Could the US be the "invisible hand that inspired the coup d'etat" to which deposed president
Father Aristide, without naming names, has referred?
ARTHUR MAHON