8 - La Pesadilla Neoliberal: Why East Asia Did Not Experience a “Neo-liberal Nightmare” While Latin America Did?

Summary

INTRODUCTION

Most economists in East Asia would probably be surprised to hear Latin American policymakers refer to export-oriented policy strategies as la pesadilla neoliberal (the neo-liberal nightmare). This may be surprising in East Asia where export-oriented policy reforms resulted in high rates of economic growth that lifted entire societies out of poverty and generally lowered (or did not significantly raise) inequality. However, during its period of export orientation, Latin American economies saw much lower rates of economic growth and poverty alleviation, while inequality remained stagnant or, in some instances, grew.

When Latin Americans couple these weak results with a number of financial crises and fiscal austerity packages often associated with macroeconomic reforms, many conclude that neo-liberalism and the Washington Consensus are indeed a “nightmare”. Therefore, since the late 1990s, Latin American politics has seen a decisive shift toward more left-leaning leaders. Beginning with Hugo Chavez's election in Venezuela in 1998, the onset of the new millennium has seen left-wing leaders take office in Argentina, Bolivia, Brazil, Chile, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Peru, and Uruguay, while in Mexico left-wing leaders became major opposition candidates in recent elections. Indeed, two types of leftist movements have emerged in Latin America in recent years. A more liberal left (social democratic), which have embraced market-friendly policies in, for example, Brazil, Chile, and Uruguay; and a radical left, characterized by populism, expanded public expenditures and greater intervention in the economy in, for example, Bolivia, Ecuador, and Venezuela (Castañeda 2006; Weyland 2009; Edwards 2010; Madrid 2010).

However, it is this latter group that is gaining momentum in the region. This is highlighted most predominantly by the creation of the ALBA, the Bolivarian Alliance for the Peoples of Our America (Alianza Bolivariana para los Pueblos de Nuestra América), an international neo-socialist organization with a growing membership that includes Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Grenada, Nicaragua, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Venezuela. It is ALBA countries, in particular, that represent an anti-trade paradigm that embrace import-substitution, large government and limited labour market mobility. That is, the antithesis of export-oriented reforms, as experienced in East Asia.