Year 501 Copyright © 1993 by Noam Chomsky. Published by South End Press.
Chapter 7: World Orders Old and New: Latin America Segment 14/17
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9. Some Tools of the Trade

The doctrine of "change of course" is only one of the devices that must be mastered by those who hope to attain respectability and prestige; several others have been mentioned, and we turn to other handy procedures below. The preceding discussion has touched upon a more subtle array of notions that are essential for the aspiring intellectual: "economic miracle," "American success story," "free market triumph," etc. These are elusive, and require a bit of care.

The term "economic miracle" refers to a complex of nice macroeconomic statistics, great profits for foreign investors, and a life of luxury for local elites; and, in the small print, increasing misery for the general population, quite typically. It is no wonder that these miracles are so admired by commentators in the press and elsewhere. As long as the façade remains in place, such societies are "American success stories" and "triumphs of capitalism and the free market." But when it collapses, the very same examples turn into a demonstration of the dread pitfalls of statism, socialism, Marxism-Leninism, and other sins.

The Brazilian case illustrates the doctrinal pattern. Gerald Haines was not alone in celebrating the triumph of capitalism and American know-how in Brazil, though his timing -- 1989 -- was a bit off. The brilliant achievements of the Generals and their right-thinking technocratic advisers made Brazil "the Latin American darling of the international business community," Business Latin America reported in 1972. Arthur Burns, Chairman of the Federal Reserve, was full of praise for Delfim's "miraculous" work. As the "Chicago boys" were invited in by another collection of fascist killers after the overthrow of Allende in Chile a year later, Chicago school economist Arnold Harberger held up Brazil "as the exemplar of a glowing future under economic liberalism," David Felix recalls. A few years later, in a 1980 interview, he was to applaud Pinochet's successes under the same model: "Santiago has never looked better. Consumer goods from all over the world are readily available at cheap prices"; there are even jobs for people with the right qualifications, like police torturers. True, real wages had collapsed, but the real value of imports was up 38 percent by 1980, thanks to the increase of 276 percent in luxury goods while capital imports fell sharply. Foreign debt skyrocketed (to be paid off later by the poor), and unions and peasant movements had been crushed in a wave of terror. But the rich were doing just fine; everything was on course in Chile, as in Brazil, thanks to proper application of economic theory.

By the early '80s, the Brazilian economy was spinning towards disaster, and the tune changed. Brazil was dropped from the list of "neo-liberal successes," Felix observed in 1986, though some had not heard the message. In a 1989 discussion of the Brazilian military regime, Harvard Government professor Frances Hagopian, like Haines, still admired "the impressive extent to which the military succeeded in its economic objectives," while expressing doubts as to whether this "extraordinary economic success" really required the repression and torture.37

While the "economic miracle" was churning merrily along, Brazil's achievements were heralded as a demonstration of the marvels of free-market capitalism, the happy result of American guidance and kind assistance. After the collapse, Brazil demonstrates the failure to follow US advice and the sound principles of economic liberalism. Brazil's plight is attributed to its state socialist deviation from economic orthodoxy. We thus derive yet another proof of the superiority of capitalism and the free market. To account for Brazil's sorry state, we may now invoke the very measures that brought about the "free market triumph" while it was still possible to be dazzled by the "economic miracle": the indefinite wage controls instituted by the much-praised neoliberal economist Delfim, the state corporations established to overcome the severe recession caused by monetarist strategies and to prevent a complete takeover of the economy by foreign corporations, and the import-substitution strategy that kept the economy afloat in the mid-1980s.

It all goes to show, once again, how supple an instrument ideology can be, in well-trained hands.

A great sigh of relief accompanied the victory in 1989 of the attractive representative of the Brazilian elite, Fernando Collor de Mello, in an election in which the two candidates could actually be distinguished without a microscope, the other being the labor leader Luís Inácio da Silva ("Lula"). With "the playing field levelled" by Collor's huge financial resources and clear warnings by those who own the country that they would sink it down the tube if the elections came out the wrong way, Collor was able to eke out a victory. There was great enthusiasm in the doctrinal institutions as he set forth on the approved neoliberal path, with expectations for yet another "success story for American-style capitalism." Briefly, however. The economy fell from 3.3 percent growth in 1989 to -4.6 percent in 1990. Per capita income fell by 6 percent from 1990 to 1992 as production continued to decline, health spending was cut by 33 percent, education spending sank further, and the tax burden on wage earners rose 60 percent. By mid-1992, James Brooke reports, "Mr. Collor's failed economic policies" were "feeding national discontent." And to top it off, Collor was facing impeachment after exposure of a corruption scandal that also set new records.38

As in the case of Brazil, "success stories of capitalism and democracy" achieve this status irrespective of the means employed. The import substitution strategy that saved Brazil from utter ruin was also an essential component of the "economic miracles" of the Pacific Rim. These miracles came into being under harsh authoritarian regimes that intervened massively in economic planning and kept tight control (by terror if necessary, as at Kwangju), not only of labor, as is the norm, but of capital as well (see chapter 4.2). The achievements of the NICs, constituting an "economic miracle," thereby illustrate the virtues of democracy and the free market. Thus the New York Times cites South Korea, Taiwan, Singapore, and Hong Kong to teach the lesson that "as an economic mechanism, democracy demonstrably works." And democratic socialist Dennis Wrong writes admiringly of the "striking capitalist successes" of the same grand democracies "under capitalist economies free from control by rickety authoritarian governments" -- correct, in that the authoritarian state capitalist governments were efficient, powerful, and interventionist, not "rickety" (in contrast, he explains, Cuba, Nicaragua, and other officially designated enemies demonstrate the failure of Marxist-Leninist dogma, no other factor in their travail being detectable to the properly blinkered eye). Washington Quarterly editor Brad Roberts writes that "Nondemocratic governments have on the whole shown themselves incapable of providing the framework necessary for economic adaptation...," thinking perhaps of the NICs, or in earlier years, Hitler Germany -- though in this case, we have to ask just what he means by "democratic," given his faith in "the US commitment to democracy abroad" and to the "protection of human rights," particularly in the 1980s.39

It is recognized that "economic miracles" have some attendant flaws. Discussing "Menem's Miracle" in Argentina, British correspondent John Simpson notes that "The miracle is not perfect." There are "unpleasant signs of corruption," "large sections of the middle class have sunk without trace" while "the new entrepeneurs and the old rich" happily shop in the "expensive shops," and there is substantial poverty. Unconstrained by the conventional reserve, James Petras and Pablo Pozzi fill in a few of the details. Since the onset of "Menem's Miracle" in 1989, "Neo-liberal private pillage has set up a system where individual wealth depends on public decay and economic regression," with some 40 percent of the economically active population unemployed or underemployed, proliferating shantytowns, factories closed and not replaced by new enterprises, exploitation of the state as "an instrument for personal enrichment and private pillage," reduction of expenditures for health, education and welfare to all time lows, negative growth rates, decreasing yearly rate of investment, and declining real wages. By now, over 60 percent of the 12 million inhabitants of Buenos Aires are not connected to the sewer system, one reason for the return of diseases that had been eradicated decades ago. The "speculative economy, reinforced by a neo-liberal economic policy, which impoverishes most of the population while destroying Argentina's internal market and productive capacity, and scarce resources has generated a Hobbesian world, a savage struggle to survive while the elite continue to reap windfall profits." The "privileged minority whose wealth, level of consumption and standard of living have flourished" are enthusiastic about the neoliberal policies. "Menem's miracle" also includes "privatization," the new shibboleth, but with a twist: thus the government sold the state telephone monopoly to Spanish and Italian state corporations, and the national airline to the Spanish government airline Iberia, so that "management is merely transferred from Argentine to Spanish and Italian bureaucrats," David Felix observes.40

In short, an "economic miracle," in the technical sense.


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37 Skidmore, Evans, Felix, op. cit. Hagopian, review of Skidmore, Politics, Fletcher Forum, Summer 1989. Chile, Herman, Real Terror Network, 189f. (citing Harberger interview, Norman Gall, Forbes, March 31, 1980).

38 James Petras and Steve Vieux, "Myths and Realities: Latin America's Free Markets," Monthly Review, May 1992; update, ms, SUNY Binghamton. CIIR, Brazil. Brooke, NYT, Aug. 28, 1992.

39 James Markham, NYT Week in Review, Sept. 25, 1988; Wrong, Dissent, Spring 1989. Roberts, "Democracy and World Order," Fletcher Forum, Summer 1991.

40 Simpson, Spectator, March 21, 1992; Petras and Pozzi, Against the Current, March/April 1992; Felix, "Reflections on Privatizing and Rolling Back the Latin American State," ms., Washington University, July 1991.