[Fresh Ink] Chomsky Views Latin American Unity & the Bailout

[Richard Menec]

http://www.zmag.org/znet/viewArticle/18958

ZMagazine                 September 30, 2008

VII Social Summit for the Latin American & Caribbean Unity

By Noam Chomsky

CARACAS

During the past decade, Latin America has become the most exciting region of
the world. The dynamic has very largely flowed from right where you are
meeting, in Caracas, with the election of a leftist president dedicated to
using Venezuela's rich resources for the benefit of the population rather
than for wealth and privilege at home and abroad, and to promote the
regional integration that is so desperately needed as a prerequisite for
independence, for democracy, and for meaningful development. The initiatives
taken in Venezuela have had a significant impact throughout the
subcontinent, what has now come to be called "the pink tide." The impact is
revealed within the individual countries, most recently Paraguay, and in the
regional institutions that are in the process of formation. Among these are
the Banco del Sur, an initiative that was endorsed here in Caracas a year
ago by Nobel laureate in economics Joseph Stiglitz; and the ALBA, the
Bolivarian Alternative for Latin America and the Caribbean, which might
prove to be a true dawn if its initial promise can be realized.

The ALBA is often described as an alternative to the US-sponsored "Free
Trade Area of the Americas," though the terms are misleading. It should be
understood to be an independent development, not an alternative. And,
furthermore, the so-called "free trade agreements" have only a limited
relation to free trade, or even to trade in any serious sense of that term;
and they are certainly not agreements, at least if people are part of their
countries. A more accurate term would be "investor-rights arrangements,"
designed by multinational corporations and banks and the powerful states
that cater to their interests, established mostly in secret, without public
participation or awareness. That is why the US executive regularly calls for
"fast-track authority" for these agreements - essentially, Kremlin-style
authority.

Another regional organization that is beginning to take shape is UNASUR, the
Union of South American Nations. This continental bloc, modeled on the
European Union, aims to establish a South American parliament in Cochabamba,
a fitting site for the UNASUR parliament. Cochabamba was not well known
internationally before the water wars of 2000. But in that year events in
Cochabamba became an inspiration for people throughout the world who are
concerned with freedom and justice, as a result of the courageous and
successful struggle against privatization of water, which awakened
international solidarity and was a fine and encouraging demonstration of
what can be achieved by committed activism.

The aftermath has been even more remarkable. Inspired in part by
developments in Venezuela, Bolivia has forged an impressive path to true
democratization in the hemisphere, with large-scale popular initiatives and
meaningful participation of the organized majority of the population in
establishing a government and shaping its programs on issues of great
importance and popular concern, an ideal that is rarely approached
elsewhere, surely not in the Colossus of the North, despite much inflated
rhetoric by doctrinal managers.

Much the same had been true 15 years earlier in Haiti, the only country in
the hemisphere that surpasses Bolivia in poverty - and like Bolivia, was the
source of much of the wealth of Europe, later the United States. In 1990,
Haiti's first free election took place. It was taken for granted in the West
that the US candidate, a former World Bank official who monopolized
resources, would easily win. No one was paying attention to the extensive
grass-roots organizing in the slums and hills, which swept into power the
populist priest Jean-Bertrand Aristide. Washington turned at once to
undermining the feared and hated democratic government. It took only a few
months for a US-backed military coup to reverse this stunning victory for
democracy, and to place in power a regime that terrorized the population
with the direct support of the US government, first under president Bush I,
then Clinton. Washington finally permitted the elected president to return,
but only on the condition that he adhere to harsh neoliberal rules that were
guaranteed to crush what remained of the economy, as they did. And in 2004,
the traditional torturers of Haiti, France and the US, joined to remove the
elected president from office once again, launching a new regime of terror,
though the people remain unvanquished, and the popular struggle continues
despite extreme adversity.

All of this is familiar in Latin America, not least in Bolivia, the scene of
today's most intense and dangerous confrontation between popular democracy
and traditional US-backed elites. Archaeologists are now discovering that
before the European conquest, Bolivia had a wealthy, sophisticated and
complex society - to quote their words, "one of the largest, strangest, and
most ecologically rich artificial environments on the face of the planet,
with causeways and canals, spacious and formal towns and considerable
wealth," creating a landscape that was "one of humankind's greatest works of
art, a masterpiece." And of course Bolivia's vast mineral wealth enriched
Spain and indirectly northern Europe, contributing massively to its economic
and cultural development, including the industrial and scientific
revolutions.  Then followed a bitter history of imperial savagery with the
crucial connivance of rapacious domestic elites, factors that are very much
alive today.

Sixty years ago, US planners regarded Bolivia and Guatemala as the greatest
threats to its domination of the hemisphere. In both cases, Washington
succeeded in overthrowing the popular governments, but in different ways. In
Guatemala, Washington resorted to the standard technique of violence,
installing one of the world's most brutal and vicious regimes, which
extended its criminality to virtual genocide in the highlands during
Reagan's murderous terrorist wars of the 1980s - and we might bear in mind
that these horrendous atrocities were carried out under the guise of a "war
on terror," a war that was re-declared by George Bush in September
2001, not declared, a revealing distinction when we recall the
implementation of Reagan's "war on terror" and its grim human consequences.

In Guatemala, the Eisenhower administration overcame the threat of democracy
and independent development by violence.   In Bolivia, it achieved much the
same results by exploiting Bolivia's economic dependence on the US,
particularly for processing Bolivia's tin exports. Latin America scholar
Stephen Zunes points out that "At a critical point in the nation's effort to
become more self-sufficient [in the early 1950s], the U.S. government forced
Bolivia to use its scarce capital not for its own development, but to
compensate the former mine owners and repay its foreign debts."

The economic policies forced on Bolivia in those years were a precursor of
the structural adjustment programs imposed on the continent thirty years
later, under the terms of the neoliberal "Washington consensus," which has
generally had disastrous effects wherever its strictures have been observed.
By now, the victims of neoliberal market fundamentalism are coming to
include the rich countries, where the curse of financial liberalization is
bringing about the worst financial crisis since the Great Depression of the
1930s and leading to massive state intervention in a desperate effort to
rescue collapsing financial institutions.

We should note that this is a regular feature of contemporary state
capitalism, though the scale today is unprecedented. A study by two
well-known international economists 15 years ago found that at least twenty
companies in the top Fortune 100 would not have survived if they had not
been saved by their respective governments, and that many of the rest gained
substantially by demanding that governments "socialise their losses." Such
government intervention "has been the rule rather than the exception over
the past two centuries," they conclude from a detailed analysis. [Ruigrok
and von Tulder]

We might also take note of the striking similarity between the structural
adjustment programs imposed on the weak by the International Monetary Fund,
and the huge financial bailout that is on the front pages today in the
North. The US executive-director of the IMF, adopt  ing an image from the
Mafia, described the institution as "the credit community's enforcer." Under
the rules of the Western-run international economy, investors make loans to
third world tyrannies, and since the loans carry considerable risk, make
enormous profits.   Suppose the borrower defaults. In a capitalist economy,
the lenders would incur the loss. But really existing capitalism functions
quite differently. If the borrowers cannot pay the debts, then the IMF steps
in to guarantee that lenders and investors are protected. The debt is
transferred to the poor population of the debtor country, who never borrowed
the money in the first place and gained little if anything from it. That is
called "structural adjustment." And taxpayers in the rich country, who also
gained nothing from the loans, sustain the IMF through their taxes. These
doctrines do not derive from economic theory; they merely reflect the
distribution of decision-making power.

The designers of the international economy sternly demand that the poor
accept market discipline, but they ensure that they themselves are protected
from its ravages, a useful arrangement that goes back to the origins of
modern industrial capitalism, and played a large role in dividing the world
into rich and poor societies, the first and third worlds.

This wonderful anti-market system designed by self- proclaimed market
enthusiasts is now being implemented in the United States, to deal with the
very ominous crisis of financial markets. In general, markets have
well-known inefficiencies. One is that transactions do not take into account
the effect on others who are not party to the transaction. These so-called
"externalities" can be huge. That is particularly so in the case of
financial institutions. Their task is to take risks, and if well-managed, to
ensure that potential losses to themselves will be covered. To themselves.
Under capitalist rules, it is not their business to consider the cost to
others if their practices lead to financial crisis, as they regularly do. In
economists' terms, risk is underpriced, because systemic risk is not priced
into decisions. That leads to repeated crisis, naturally. At that point, we
turn to the IMF solution. The costs are transferred to the public, which had
nothing to do with the risky choices but is now compelled to pay the costs -
in the US, perhaps mounting to about $1 trillion right now.   And of course
the public has no voice in determining these outcomes, any more than poor
peasants have a voice in being subjected to cruel structural adjustment
programs.

A basic principle of modern state capitalism is that cost and risk are
socialized, while profit is privatized. That principle extends far beyond
financial institutions. Much the same is true for the entire advanced
economy, which relies extensively on the dynamic state sector for
innovation, for basic research and development, for procurement when
purchasers are unavailable, for direct bail-outs, and in numerous other
ways. These mechanisms are the domestic counterpart of imperial and
neocolonial hegemony, formalized in World Trade Organization rules and the
misleadingly named "free trade agreements."

Financial liberalization has effects well beyond the economy. It has long
been understood that it is a powerful weapon against democracy Free capital
movement creates what some international economists have called a "virtual
parliament" of investors and lenders, who can closely monitor government
programs and "vote" against them if they are considered irrational: for the
benefit of people, rather than concentrated private power. They can "vote"
by capital flight, attacks on currencies, and other devices offered by
financial liberalization. That is one reason why the Bretton Woods system
established by the US and UK after World War II instituted capital controls
and regulated currencies. The Great Depression and the war had aroused
powerful radical democratic currents, taking many forms, from the
anti-fascist resistance to working class organization. These pressures made
it necessary to permit social democratic policies. The Bretton Woods system
was designed in part to create a space for government action responding to
public will - for some measure of democracy, that is. John Maynard Keynes,
the British negotiator, considered the most important achievement of Bretton
Woods to be establishment of the right of governments to restrict capital
movement. In dramatic contrast, in the neoliberal phase after the breakdown
of the Bretton Woods system, the US Treasury now regards free capital
mobility as a "fundamental right," unlike such alleged "rights" as those
guaranteed by the Universal Declaration of Human Rights: health, education,
decent employment, security, and other rights that the Reagan and Bush
administrations have dismissed as "letters to Santa Claus," "preposterous,"
mere "myths."

In earlier years the public had not been much of a problem. The reasons are
reviewed by Barry Eichengreen in his standard scholarly history of the
international monetary system.   He explains that in the 19th century,
governments had not yet been "politicized by universal male suffrage and the
rise of trade unionism and parliamentary labor parties." Therefore the
severe costs imposed by the virtual parliament could be transferred to the
general population. But with the radicalization of the general public during
the Great Depression and the anti-fascist war, that luxury was no longer
available to private power and wealth. Hence in the Bretton Woods system,
"limits on capital mobility substituted for limits on democracy as a source
of insulation from market pressures." It is only necessary to add the
obvious corollary: with the dismantling of the system from the 1970s,
functioning democracy is restricted. It has therefore become necessary to
control and marginalize the public in some fashion, processes that are
particularly evident in the more business-run societies like the United
States. The management of electoral extravaganzas by the Public Relations
industry is one illustration.

The primary victims of military terror and economic strangulation are the
poor and weak, within the rich countries themselves and far more brutally in
the South. But times are changing. In Venezuela, in Bolivia, and elsewhere
there are promising efforts to bring about desperately needed structural and
institutional changes. And not surprisingly, these efforts to promote
democracy, social justice, and cultural rights are facing harsh challenges
from the traditional rulers, at home and internationally.

For the first time in half a millennium, South America is beginning to take
its fate into its own hands. There have been attempts before, but they have
been crushed by outside force, as in the cases I just mentioned and other
hideous ones too numerous and too familiar to review. But there are now
significant departures from a long and shameful history. The departures are
symbolized by the UNASUR crisis summit in Santiago just a few days ago. At
the summit, the presidents of the South American countries issued a strong
statement of support for the elected Morales government, which as you know
is under attack by the traditional rulers: privileged Europeanized elites
who bitterly oppose Bolivian democracy and social justice and, routinely,
enjoy the firm backing of the master of the hemisphere. The South American
leaders gathering at the UNASUR summit in Santiago declared "their full and
firm support for the constitutional government of President Evo Morales,
whose mandate was ratified by a big majority" -- referring, of course, to
his overwhelming victory in the recent referendum. Morales thanked UNASUR
for its support, observing that "For the first time in South America's
history, the countries of our region are deciding how to resolve our
problems, without the presence of the United States."

A matter of no slight significance.

The significance of the UNASUR support for democracy in Bolivia is
underscored by the fact that the leading media in the US refused to report
it, though editors and correspondents surely knew all about it. Ample
information was available to them on wire services.

That has been a familiar pattern. To cite just one of many examples, the
Cochabamba declaration of South American leaders in December 2006, calling
for moves towards integration on the model of the European Union, was barred
from the Free Press in the traditional ruler of the hemisphere. There are
many other cases, all illustrating the same fear among the political class
and economic centers in the US that the hemisphere is slipping from their
control.

Current developments in South America are of historic significance for the
continent and its people. It is well understood in Washington that these
developments threaten not only its domination of the hemisphere, but also
its global dominance. Control of Latin America was the earliest goal of US
foreign policy, tracing back to the earliest days of the Republic. The
United States is, I suppose, the only country that was founded as a "nascent
empire," in George Washington's words. The most libertarian of the Founding
Fathers, Thomas Jefferson, predicted that the newly liberated colonies would
drive the indigenous population "with the beasts of the forests into the
Stony Mountains," and the country will ultimately be "free of blot or
mixture," red or black (with the return of slaves to Africa after eventual
ending of slavery). And furthermore, it "will be the nest, from which all
America, North and South, is to be peopled," displacing not only the red men
but the Latin population of the South.

These aspirations were not achieved, but control of Latin America remains a
central policy goal, partly for resources and markets, but also for broader
ideological and geostrategic reasons. If the US cannot control Latin
America, it cannot expect "to achieve a successful order elsewhere in the
world," Nixon's National Security Council concluded in 1971 while
considering the paramount importance of destroying Chilean democracy.
Historian David Schmitz observes that Allende "threatened American global
interests by challenging the whole ideological basis of American Cold War
policy.  It was the threat of a successful socialist state in Chile that
could provide a model for other nations that caused concern and led to
American opposition," in fact direct participation in establishing and
maintaining the terrorist dictatorship. Henry Kissinger warned that success
for democratic socialism in Chile might have reverberations as far as
southern Europe - not because Chilean hordes would descend on Madrid and
Rome, but because success might inspire popular movements to achieve their
goals by means of parliamentary democracy, which is upheld as an abstract
value in the West, but with crucial reservations.

Even mainstream scholarship recognizes that Washington has supported
democracy if and only if it contributes to strategic and economic interests,
a policy that continues without change through all administrations, to the
present.

These pervasive concerns are the rational form of the domino theory,
sometimes more accurately called "the threat of a good example." For such
reasons, even the tiniest departure from strict obedience is regarded as an
existential threat that calls for a harsh response: peasant organizing in
remote communities of northern Laos, fishing cooperatives in Grenada, and so
on throughout the world. It is necessary to ensure that the "virus" of
successful independent development does not "spread contagion" elsewhere, in
the terminology of the highest level planners.

Such concerns have motivated US military intervention, terrorism, and
economic warfare throughout the post- World War II era, in Latin America and
throughout much of the world. These are leading features of the Cold War.
The superpower confrontation regularly provided pretexts, mostly fraudulent,
much as the junior partner in world control appealed to the threat of the
West when it crushed popular uprisings in its much narrower Eastern European
domains.

But times are changing. In Latin America, the source is primarily in moves
towards integration, which has several dimensions. One dimension of
integration is regional: moves to strengthen ties among the South American
countries of the kind I mentioned. These are now just beginning to reach to
Central America, which was so utterly devastated by Reagan's terror wars
that it had mostly stayed on the sidelines since, but is now beginning to
move. Of particular significance are recent developments in Honduras, the
classic "banana republic" and Washington's major base for its terrorist wars
in the region in the 1980s. Washington's Ambassador to Honduras, John
Negroponte, was one of the leading terrorist commanders of the period, and
accordingly was appointed head of counter-terrorist operations by the Bush
administration, a choice eliciting no comment. But here too times are
changing. President Zelaya declared that US aid does not "make us vassals"
or give Washington the right to humiliate the nation, and has improved ties
with Venezuela, joining Petrocaribe, and in July, joining the Alba as well.

Regional integration of the kind that has been slowly proceeding for several
years is a crucial prerequisite for independence, making it more difficult
for the master of the hemisphere to pick off countries one by one. For that
reason it is causing considerable distress in Washington, and is either
ignored or regularly distorted in the media and other elite commentary.

A second form of integration is global: the establishment of South-South
relations, and the diversification of markets and investment, with China a
growing and particularly significant participant in hemispheric affairs.
Again, these developments undercut Washington's ability to control what
Secretary of War Henry Stimson called "our little region over here" at the
end of World War II, when he was explaining that other regional systems must
be dismantled, while our own must be strengthened.

The third and in many ways most vital form of integration is internal. Latin
America is notorious for its extreme concentration of wealth and power, and
the lack of responsibility of privileged elites for the welfare of the
nation. It is instructive to compare Latin America with East Asia. Half a
century ago, South Korea was at the level of a poor African country. Today
it is an industrial powerhouse. And much the same is true throughout East
Asia. The contrast to Latin America is dramatic, particularly so because
Latin America has far superior natural advantages. The reasons for the
dramatic contrast are not hard to identify. For 30 years Latin America has
rigorously observed the rules of the Washington consensus, while East Asia
has largely ignored them.  Latin American elites separated themselves from
the fate of their countries, while their East Asian counterparts were
compelled to assume responsibilities. One measure is capital flight: in
Latin America, it is on the scale of the crushing debt, while in South Korea
it was so carefully controlled that it could bring the death penalty. More
generally, East Asia adopted the modes of development that had enabled the
wealthy countries to reach their current state, while Latin America adhered
to the market principles that were imposed on the colonies and largely
created the third world, blocking development.

Furthermore, needless to say, development of the East Asian style is hardly
a model to which Latin America, or any other region, should aspire. The
serious problems of developing truly democratic societies, based on popular
control of all social, economic, political and cultural institutions, and
overturning structures of hierarchy and domination in all aspects of life,
are barely even on the horizon, posing formidable and essential tasks for
the future.

These are huge problems within Latin America. They are beginning to be
addressed, though haltingly, with many internal difficulties.   And they
are, of course, arousing bitter antagonism on the part of traditional
sectors of power and privilege, again backed by the traditional master of
"our little region over here." The struggle is particularly intense and
significant right now in Bolivia, but in fact is constant in one or another
form throughout the hemisphere.

The problems of Latin America and the Caribbean have global roots, and have
to be addressed by regional and global solidarity along with internal
struggle. The growth of the social forums, first in South America, now
elsewhere, has been one of the most encouraging steps forward in recent
years. These developments may bear the seeds of the first authentic
international, heralding an era of true globalization - international
integration in the interests of people, not investors and other
concentrations of power. You are right at the heart of these dramatic
developments, an exciting opportunity, a difficult challenge, a
responsibility of historic proportions.

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