The Cold War Rages On

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Mark Weisbrot
The Guardian Unlimited, December 20, 2007

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"It is a tribute to the sophistication of the British left that they can see through the one-sided media coverage of Venezuela and Latin America."

Michael Reid paints a dismal picture of Venezuela and argues that the British left should support economic policies in Latin America that are "building on the economic reforms misleadingly known as the Washington Consensus". He has a weak argument on both counts.

Taking the "Washington Consensus" first - or neoliberalism as it is commonly called in Latin America - it is hard to imagine what would constitute economic failure if the neoliberal era in Latin America does not qualify. From 1980-2006, per capita income (or GDP) in the region has grown by about 14%. In just 20 years from 1960-1980, prior to the implementation of neoliberal reforms in most of the region, it grew by 82%.

Reid cites Brazil, Mexico, and Chile as neoliberal success stories. But Chile is the only country in the hemisphere that has grown faster since 1980 than before. Brazil has averaged about 0.5% annual growth in per capita GDP over the last 26 years, as compared to the 123% cumulative growth from 1960-1980, before neoliberal policies were adopted. Mexico has also had very slow growth (about 17% per capita GDP growth from 1980-2006) compared to 99% from 1960-1980. It has also had sluggish growth since Nafta was implemented in 1993.

It is difficult to overstate the importance of this unprecedented economic growth failure. Brazil and Mexico would have European living standards today if they had continued to grow at pre-1980 rates. This is what happened to non-neoliberal South Korea and Taiwan.

Reid also tries to argue that the Venezuelan economy and the poor have done badly under Chávez. It is important to look not only at the whole nearly nine years of the Chávez administration, but also the four and half years since the government got control of the country's most vital industry: oil. Venezuela fares better than the rest of the region by either measure, but it has done remarkably well since the government got control over the oil industry in the first quarter of 2003. The economy (real GDP) has grown by 87%, creating about 1.8m jobs (nearly three times the rate of annual job creation during the current US expansion).

Since the income share of the bottom quintile has grown during this period, the real - inflation-adjusted - income of the poor has grown considerably during this time.

Although part of this growth was recovery from the devastating oil strike of December 2002-February 2003, the vast majority of it was not. And relatively little of the overall growth is oil production. Unemployment has fallen from 19.2% to 9.3% (first half of 2007).

Reid notes the sharp decline in the poverty rate but complains that it is about what would be expected from Venezuela's growth. So what? Also, the official poverty rate does not take into account the vastly expanded access of poor people to healthcare or increased access to education.

Reid cherry-picks a couple of stats to try to deny this reality, too: "Some health indicators are worsening: government data show that the incidence of stunting and malnutrition in children rose slightly between 1999 and 2006." I could not find this statistic but if it is true, it is probably because most health indicators worsened significantly in 2002-2003, when the opposition oil strike that sought to topple the government caused a severe recession. The economy contracted by 24%, comparable to the worst years of the US great depression. But since 2003, health indicators have improved: for example, the (under one-year-old) infant mortality rate fell by 16 %; for infants between 28 days and 11 months, the decline is 35%. This is only for 2003-2005; they have almost certainly improved even more since then.

Does he expect us to believe that most Venezuelans are not getting better healthcare, when the number of primary care physicians increased from 1,600 in 1998 to more than 19,000 today (mostly in poor areas)?

Reid cites one study which argues that people did not learn to read in the government's large-scale literacy programme, but this is based on a household survey that asks a family member, "Does he/she know how to read?" It is quite possible for many hundreds of thousands of people to markedly improve their reading skills without much change in this type of data. The one study he cites showing increased income inequality, for which the underlying data is not available, is similarly inconclusive.

His assumption that the democratically elected government of Venezuela is anti-democratic, and that the opposition is democratic, is a common media myth and has been refuted any number of times.

Perhaps most ironic is Reid's charge that the left is still fighting the cold war. The opposite is true: it is the Bush administration, with help from a compliant media, that has sought to cast the new democracies in Latin America (including Venezuela, Bolivia, Ecuador, and sometimes Argentina) in a cold war framework, refusing to respect the electorate's rejection of failed economic policies, or their democratic choices generally.

It is a tribute to the sophistication of the British left that they can see through the fantastically one-sided media coverage of Venezuela and Latin America and understand the contribution that these new democracies are making to the region and the world.


Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He received his Ph.D. in economics from the University of Michigan. He is co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He is also president of Just Foreign Policy.