Discuss globalization, neoclassical economics and protest in Latin America.
- Comment
- Reblog
-
Subscribe
Subscribed
Already have a WordPress.com account? Log in now.
Discuss globalization, neoclassical economics and protest in Latin America.
All the bairns o' Adam 
In the last century, Latin America has dealt with much political turmoil. From the beginning of the twentieth century with American imperialism to the middle of the century with the Cold War, Latin America has been at the middle of international issues. The region has also been plagued with many internal problems like revolutions and political uprisings. Through the years, the region has been heavily affected by globalization, neoclassical economics, and protests.
Firstly, globalization has affected Latin America in many ways. While there is no exact definition of globalization, it is commonly understood to mean that countries are interdependent of one another. In the early twentieth century, Franklin Roosevelt’s Good Neighbor Policy allowed some American companies to expand their businesses into Latin American countries. Interdependence between the United States and Latin America was also increased by their fighting together in World War II. However, during the Cold War, US interference in the region became a real problem. Many Latin American countries were at some point under a military dictatorship funded by the United States. Globalization has both helped and hurt Latin America over the last hundred years.
Neoclassical economics have also had an impact on Latin America. Neoclassical economic theory presumes that the buyer has a high price they would be willing to pay for an item and the seller has a low price for which they would be willing to sell the item. According to this theory, the buyer and seller will both eventually work out a fair price. This theory usually aligns more with free market or capitalist economies. This economic theory first became common in Latin America during and after the Cold War, and it is still debated whether it helped or hurt the area. While the communist rule in the Latin American country of Cuba was harsh and suppressive, Cuba did have a higher standard of living than any of its neighbors. Neoclassical economics made a difference in the economies of Latin American countries.
Protests have affected Latin America as well. In the twentieth and twenty-first centuries, protests have become a part of the culture of the area. Protests have been used to do everything from improving standards of living to overthrowing corrupt governments. Recently, anti-government protests have broken out over South America. As the countries in the region become more unstable or totalitarian, the people have begun to fight back against their corrupt governments. In Latin America, the people commonly use protests to send a message to their governments that they have had enough.
Over the last century, globalization, neoclassical economics, and protests have had a great impact on Latin America. Both imperialism and the Cold War caused the region to be at the center of major conflicts. American interference in the area has also caused more harm than good for the countries of the region. Latin America has had more than its fair share of issues over the last century, and, though some countries seem to be stabilizing, others see no end to the problems caused by economic and political interference.
Very nice discussion.
Latin America has unfortunately always been caught in the middle of international politics, as well as been a victim of exploitation in many cases. They have been exploited through instances of globalization, and international politics. A region so rich in resources but lacking in good leadership that is ruined by rampant corruption. The game has always been controlled by the United States and Europe. Policy enacted such as Roosevelt’s good neighbor policy where American Companies could go out and exert their businesses in Latin America.
Neoclassical economics operate under the principle of rationality, and how supply/ demand will react due to consumers rationality. This plays heavily in Latin American after the cold war, and Cuba set the standard for most neighboring countries.
When it comes to protest in Latin America, I can speak for the Colombian Politics. I had the privilege of being born in such a wonderful country, and as for Colombia the voice of the people is overruled by the corruption in the government. I would venture to say that most countries in Latin America operate this way. They have such limited resources for so many people, and no real plan on how to eradicate hunger and disease. Their protesting is also not as effective because countries like the United States of America control their governments. Until the intervention on America’s side is limited then their voices will have a little bit more impact. Greater accountability in government is important as well.
http://www.investopedia.com/terms/n/neoclassical.asp
Good but brief.
Neoclassical economics is a conservative theory based on 2 main principles: wages and prices are freely flexible, and supply predicates demand. The problem with the first assumption is that often times deflation is not occurring at the same rate that wages are falling, therefore your real income is much less than your nominal income. The second assumption, in my opinion, is a copout to avoid government regulation/interference and yield a larger profit, further exploiting workers.
As demand decreases, inventories will grow/increase and the private sector will produce less. Eventually, to offset losses, employment will fall, causing income to fall. And if people are spending less, then producers will have to decrease their prices in order to turnover their inventories. Yes, as a result, costs of production will be lower. But the classical economist will say this gives them the ability to produce more at a lower price which will further incentivize spending- singlehandedly saving the economy.
In reality, many companies will not produce more if their inventories are already too large. Rather, they will keep the additional profit made from consolidating their payroll and the low costs of production, subsequently increasing the wage gap. Obviously, in the U.S., we have some government regulation such as minimum wage, price floors/ceilings, etc. To escape these regulations, along with escaping tariffs and transportation costs, many businesses will expand overseas where they can freely “invest” in a foreign economy.
Many countries in Latin America once had highly functioning socialist models of government, such as Chile, Nicaragua, Cuba, and so on. During the Cold War, the United States’ main goal was to halt the spread of communism, balancing power across the globe against the Soviet Union. Businesses, increasingly becoming intertwined with the government, wanted to halt this spread as well because it interferes with their capitalist intentions and profits. This is why people like Milton Friedman and the Chicago Boys involved themselves in foreign economies. John Foster Dulles himself was once a lawyer representing United Fruit Company, and wound up Secretary of State when Guatemala’s government “fell”.
This is when we start to see riots, human rights violations, extreme poverty, etc. Yet today, we paint these nations as barbaric revolutionaries when they fight for their rights. Then, we act as if we are helping them catch back up when we “invest” in their economies, when we’re part of the reason they’re behind at all.
Very nice
In the middle of the 20th century, many Latin American governments with newly elected socialist leaders began to attempt to redistribute land among the poor in their country. This involved buying back land sold to American companies (like the United Fruit Company) to give back to indigenous peoples who originally farmed the land. The pursuing of these socialist policies led to the United States’ intervention in Latin American politics—overthrowing democratically elected leaders for dictators friendly to U.S. economic interests. In the 1970s, when interest rates were low due to the high price of oil, Latin American countries began to borrow money for investment in development. In the 1980s, when those interest rates suddenly rebounded, Latin American countries found themselves in a horrible debt crisis. The IMF and World Bank stepped in to “help” by buying their debt and restructuring their economies along the lines of neoclassical economics.
Neoclassical economists espouse laissez-faire trade policies, low government intervention in the economy, and the principle of producing goods for which a country has a comparative advantage (Gereffi and Fonda). These policies have largely been incorporated into the IMF and World Bank’s strategies for aiding developing countries and have actually proved harmful when it comes to development in Latin America.
Laissez-faire trade policies include low tariffs and eliminate the possibility of import substitution. In Latin America, this policy has led to the failure of developing industries. New industries in Latin America did not have the technological expertise to produce goods as efficiently as older industries in other countries. To allow those industries to develop that expertise, high protectionist tariffs should be put on imports of that product from other countries to make the price of the product produced in country more appealing to consumers. The IMF and World Bank preclude this possibility, by requiring member nations to have low tariffs on imports and not allowing the subsidization of exports. Thus the possibility of developing new industries in Latin America is similarly precluded.
The principle of producing goods with a comparative advantage has also led Latin American countries away from industrialization. Latin American economies have a comparative advantage in producing raw materials. According to the principles of neoclassical economics, they should focus their production on raw materials. The problem with raw materials forming the basis of economic output for a country is that raw materials are demand inelastic goods; consumers will not buy more of these products if their price falls. This means that a country cannot increase its income by producing more raw materials; the more they produce, the more the price for the goods falls, and the country subsequently earns less income.
While the previous two policies have put Latin American economies in the hands of global markets, low government intervention in the economy has led to the privatization of necessary goods in Latin America and consequently, internal strife. Privatizing industries that provide goods such as water essentially allows monopolies to form in those industries. There’s no “free market competition” in these industries because consumers cannot really choose where they buy their water. It’s not as if each home has multiple water pipes running to it from each water company, and the homeowner can choose on any given day which company to buy their water from based on price. Monopolies in these industries lead ultimately to inflated prices for these goods, excluding poorer populations from access to necessary services. This can lead to a growing gap between the standard of living for the poor and the wealthy. In Chile for example, Pinochet privatized electricity, influenced by the policies of the Chicago boys (Yang). While the policies of privatization pursued by Pinochet dramatically grew the Chilean economy, they also dramatically increased income disparity and thus excluded some people from accessing that newly generated wealth.
Protest to these policies originates from multiple sources. The growing gap between the rich and the poor inspires resentment among those in the working class. The quick reversal of promises made in terms of investing in human infrastructure during the low interest rate period of the 1970s certainly sparked outrage. Those who still adhered to the socialist policies of the mid-20th century are also not pleased with the quick turn around. Furthermore, the indigenous peoples, whose land, if it was given back to them successfully during these socialist reforms, is now being appropriated again for the production of raw materials, are certainly not fans of the neoclassical policies being pursued by their government either.
Jay Yang, “Chile’s long and winding road”
http://web.a.ebscohost.com/ehost/detail/detail?vid=13&sid=c58c9f32-0547-4961-8be6-80f317b90774%40sessionmgr4008&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=a9h&AN=9701144235
Gary Gereffi and Stephanie Fonda “Regional Paths of Development”
http://web.a.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=16&sid=c58c9f32-0547-4961-8be6-80f317b90774%40sessionmgr4008
Excellent
Neoliberalism is an an economic theory that took hold in Latin America, mainly due to the IMF-led structural adjustment which was backed by the United States. These neoliberals, following the teachings of Freud, supported a laissez-faire version of economic liberalization. Proponents of economic liberalization usually promote policies associated with privatization, deregulation, and free trade. The ultimate goal is to decrease the government’s involvement in the economy as much as possible. It’s no wonder that the United States promoted economic liberalization in Latin America through various efforts, due to Latin America’s vulnerability to outside influences and their close proximity to the United States.
The United States promoted economic liberalization in Latin America through several programs and movements. One of these programs allowed twenty-five Chileans to study Friedman economics (those liberal principles) in the United States. This eventually resulted in the Chilean Miracle, when the boys returned to Chile, gained power through the military, and implemented laissez-faire economic policies to reorient the market in Chile. Ultimately, this resulted in a free market and society in Chile. Lastly, and most notably, they founded the School of The Americas, which is also known as the Western Hemisphere Institute for Security Cooperation. The school was founded in 1946, amidst the Cold War era, as an effort to preserve and promote free societies in Latin America which was largely underdeveloped and at risk for being involved with Russia.
As a largely underdeveloped region, Latin America was susceptible to outside influence from other nation’s promising development, stability, and a better quality of life. The U.S. recognized this, and as our “backyard”, the U.S. didn’t want to risk letting communism take hold. Communism likely would have been appealing to Latin American populations, and easily could have taken hold with a rogue dictator following the coup in Guatemala. There were scenarios where dictators did take hold, as with Peron in Argentina and Castro in Cuba. As such, the U.S. devoted resources to not allowing communism to spread and backed movements by the IMF and WTO.
Together, the U.S. and IMF supported economic reform throughout Latin America in the 80’s. These countries were emerging from years of oppression and dictatorships, and were looking for hope which is why communism was a threat, as I previously stated. The IMF offered loans, stabilization, and adjustment programs throughout the region, which appears to be a good thing as infrastructural development and higher employment often ensues. However, it left countries indebted to the IMF. The U.S. and IMF presence in the region resulted in a perpetual cycle of dependence both financially and on social assistance programs, leaving the countries unable to run their own economies without assistance and IMF presence. This ended up being a huge problem in cases like Argentina, where an economic crisis occurred in 2001 due to economic deterioration associated with the IMF’s programs.
Click to access 2222_ch1.pdf
Nice work.
When the first Europeans stepped foot onto Latin America they brought with them an extractive economy. Even after the toppling of Spanish and Portuguese regimes, the economies of Latin America are still resource dependent. Globalisation and neoclassical economics imposed by the United States have been major contributors to the instability Latin America has faced. The protests that have marked much of the history of Latin America are also indicators of US involvement that was extremely harmful and caused widespread suffering, particularly among the indigenous population.
The 1970s was a time of prosperity for OPEC, prices for oil were shooting up and these countries were flooding banks with extra cash. In response to this extra cash, banks started giving out more loans with lower interest rates. Many Latin American countries took out these loans, that had low but not fixed interest rates, to invest in their economy. By the 1980s oil prices dropped and banks hiked up their interest rates causing the Loan Crisis of the 1980s. Latin American nations were weighted down by debt and had to accept the IMF’s deal to restructure their debt in exchange for decreasing their government spending and increasing their export earnings. This meant that there would be an inadequate investment in healthcare, education, and infrastructure and that many malnourished Latin Americans would be forced to work on plantations to grow flowers for westerners to consume. This globalization had devastating effects on the peoples of Latin America.
Neoclassical economics champions market theory, it is centered around the belief that government involvement depresses the economy. The United States imposed neoclassical economics by teaching boys from Chile about neoclassical economics and sending them back to Chile, they were called the Chicago Boys. They privatized water and made it fixed price, only one company supplied water. This replaced government monopolies with private monopolies. While this increased the GDP, it widened income inequality so only the wealthiest people had an obscene amount of money and the poor delved deeper into poverty.
One of the most well-known protests occurred when the United States staged a coup in Guatemala and overthrew Jacobo Arbenz and instead put in place a dictator. Arbenz was planning on redistributing the United Fruit Company land back to its original owners, indigenous people. Guatemalans were enthusiastic about this plan and many resisted the new dictatorship. Many protested and were killed, the state was responsible for 93% of the deaths. The School of the Americas terrorists and many were responsible for genocide. They targeted protesters and anyone who stood in their way.
Latin America has suffered immensely under globalisation, neoclassical economics, and the United States support of genocide. Citizens of Latin America have long been burdened by the meddling of the United States and IMF. Latin America needs to be given time to heal so it can help its indigenous population who have been harassed for the past hundreds of years, they must also be allowed to no longer be resource dependent.
Good discussion
Latin America has been a center of conflict for years. Most of it is the fault of outside influences such as the US. It also has to do with the way colonizers chose to exploit the continent’s resources which was unsustainable. Money is often a factor in the conflict and the economies of many Latin American countries have been interfered with by global outsiders.
After Latin American countries gained independence from Spain and Portugal, agriculture dominated the economy. Once agricultural machinery became cheaper, the price of crops decreased as more were produced. This hurt the economy of Latin America due to immiserizing growth which happens when price decreases and demand stays the same. A tariff war broke out between the US and Latin America when the US attempted to help their own farmers by taxing imported grains. Industrialization began in the 1950s and started a slow growth of the economies. Countries began to borrow money from OPEC countries due to their low interest rates, but this quickly damaged the countries’ economies as the interest rate spiked when the price of oil dropped. Latin America now had to focus all of their export money on paying back loans rather than developing their economy. These events led to a crisis that the US was willing to help with. The Chicago Boys were a group of men who were sent to the US to study economics specifically neoclassical economics which was a theory that believes in nonregulation of businesses. They brought their skills back to Latin America and the economies of their home countries were fixed. One of these home countries was Chile where their GDP increased dramatically by privatizing companies. This privatization that was occurring all over Latin America led to monopolies that controlled the price of services and created distinct class identifications that led to the development of slums for people who could not afford the services.
The Chicago Boys created conflict, however, when one of them was appointed to be the minister of economy in Ecuador. Protests broke out over the decision, leading to the arrest of union leaders, protest organizers, and anyone who opposed the idea. The US played a large role in the shutdown of protests in Latin America. For example, when the Jacobo Arbenz decided to nationalize land in Guatemala, the United Fruit Company (an American company that had military backing) objected and the CIA installed a military dictatorship in Guatemala to counter protests and force their interests in Guatemala. In El Salvador, local populations along with Jesuit priests began fighting to keep their rights and were killed by Latin American officials that were trained in the United States. Thousands of people were killed across Latin America in order to shut down protests or prevent any conflict with the government. The United States trained many of the officials in a place called the “School of the Americas” which was later changed to a different name. The “school” basically trained officials in Latin America how to control their people. The US’s involvement was kept secret for many years.
Latin America now has countries with some of the largest economies in the world, but also has countries with terrible economies that are desperately behind. Globalization has benefitted some of these countries by creating low-paying jobs, but it also inhibited the growth of many economies when WTO organization made all countries open their economies on the global stage. Many Latin American economies were not mature enough for that kind of involvement and haven’t been able to keep up.
https://www.globalpolicy.org/component/content/article/168/28173.html
(Much of the information came from lecture)
Good discussion
Soon after the discovery of the New World, Latin America became a prime area for exploitation by the Spanish. After hundreds of years, the economy still hasn’t progressed past extraction, and the now independent countries are struggling to catch up to the pace of industrialized first world countries. This is in part by countries such as the U.S. who treat Latin America as a backyard for trade and spreading political ideals.
After Latin American independence, much of the land that belonged to the indigenous people was considered untitled land by the creoles who lead government. So, this land was allocated and sold to large companies such as the Standard Fruit Company and the elites. This in turn created Banana Republics in which the government sided with the elites for the purpose of extracting money, and government distrust and political oppression lead to unrest among a majority of the population. The indigenous were left to either contract labor, or moving to urban areas to find employment there. However, the urban areas were slow to industrialize, so there weren’t enough jobs for the amount of people in the area. With nowhere else to go, the poor were forced to settle for undocumented jobs such as selling homemade food on the streets or performing certain skills such as dentistry, despite being unqualified. In turn, favelas and shanty towns began to develop in these cities and an informal economy was established. Many efforts were and still are being made to turn this around, but there is the question of whether or not the efforts are actually helpful or destructive.
In the 1930’s in the midst of the Great Depression, the United States ratified the Smoot-Hawley Tariff which put import restrictions on foreign grain to increase the sales of U.S. grain. While this destroyed grain agriculture in Latin America as they were dependent upon the U.S. for trade, it inspired the idea of import substitution in the 1950’s. Latin America was facing issues with immiserizing growth, and they needed to have value added and better production in order to fix this problem. Import substitution is a slow process, but if successfully done, industry can improve and goods can become cheaper to produce and eventually be opened up to a global market. However, this was unable to happen, so Latin America was subject to foreign direct investment in automobiles, electronics, and other goods. This decreased the production of agriculture, so food prices increased and many people starved and unrest increased even further. Another idea in the 1950’s flourished and had tremendous impacts on Latin American economy. This was Neoliberalism, the idea that government should not interfere in economy. With a lack of regulation, however, the rich were able to quickly create monopolies and increase the gap between the elite and the poor. With political unrest at its peak, the people began forming unions and protesting, and police states were formed in which the military prevented ideas of socialism from gaining ground by assassinating innocent people and bulldozing shanty towns only to have new ones built elsewhere.
Latin American countries were spheres of influence post WWII, and they were a great place to impose democracy in order to prevent socialism from taking over. The Red Scare inspired the United States to impose ideals that simply would not work in Latin America, and these classic market theories only provided increased wage gaps, government distrust, and mass casualties as large groups of the poor were accused of being communist. Latin America did not have to end up like this, and in fact they were on the road to being successful industrialized countries pre-WWII. However, because decreasing socialism’s influence was more important than increasing quality of life, Latin America is suffering in the name of democracy.
https://www.britannica.com/place/Latin-America/New-order-emerging-1910-45
Excellent
Many Latin American countries have been in the news recently due to issues such as corruption, drug cartels, and political unrest. While these issues are derived from the complicated social and political history of Latin America, many of them can be attributed to neoliberal economic practices employed during the 20th century. Following World War 2, many promising young men from Latin American went to study at the Chicago School of Economics- under the direction of Milton Friedman. In Chicago, they received a world class education in neoclassical economic theory. Following their education, the men were supposed to return to their home countries and implement these economics practices. The program had some success in countries like Chile- whose economy grew significantly following the return of the “Chicago Boys” (the nickname given to the men returning from the Chicago school of economics). The “Chilean Miracle”, as it was dubbed, is an example of the positive outcome of the Chicago School of Economics. Even though the economies of Latin America benefitted from the “Chicago Boys”, there were also many downsides to the economic growth. One effect of the Chicago School was the increase of police states in Latin America along with increased social inequality. These issues pushed many Latin American countries to socialism, which would end up hurting them in the future.
The School of the Americas was founded in the United States, with the aim of combating communist forces around the globe. This would prove disastrous to Latin America, because the United States would end up arming guerilla fighters to combat socialist/communist parties in Latin America. Examples of involvement can be seen in Guatemala, Chile, Cuba, and Argentina. As a result of the School of the Americas, thousands of people died all over Latin America and many of the countries were destabilized.
Much of the protests happening in Latin America today can be attributed to economic strains from those countries. While the Chicago Boys did help bring the tenants of neoliberal economics to Latin America, much of that progress was undone in the 1980s. During the 1970s oil crisis, banks like the IMF were giving out low interest loans to combat the crisis. Many Latin American countries took the low interest loans and used them to better their countries. Once the oil crisis was over, however, the interest rates on those loans skyrocketed. Countries that accepted the loans were now riddled in irrecoverable debt. During the 1990s, the IMF helped Latin American countries settle their debt, but contingent on the fact that they would have to export natural resources. Latin American countries were also forced to decrease spending on things such as infrastructure and social programs. Drug cartels rose up and began providing for the people in Latin American in a way that their government could not. This has caused many of the current political problems facing Latin America: corruption, drug trafficking, and dictatorships.
Good discussion
Latin America has a long history of political unrest fueled by economic crisis. The region was particularly disrupted by American forces in the 70’s to prevent the region from following Cuba’s footsteps and turning to communism. When a US-backed coup put Pinochet in power in Chile and introduced neoliberal economics to the country, a massive chain of events unfolded that left the region with economic and cultural struggles that still exist today.
Pinochet employed Operation Condor, a violent and aggressive anti-leftist movement that killed as many as (if not more) 80,000 people. Operation Condor spread across Latin America and focused in on kidnapping, torturing and frequently murdering political dissidents. The CIA has no evidence that the United States supported the operation, however, the US (particularly Secretary of State Henry Kissinger) had close relations with Latin America and would have likely known about the mass killings. Even if the American government was completely unaware, they still put Pinochet in power, and Operation Condor would have likely not happened without him.
The anti-left wing sentiment instilled by leaders such as Pinochet are especially fiery in Venezuela, where opposers of the leftist government rioted against the police nearly daily earlier this year. Hugo Chavez, former president of Venezuela, led a massive and nationalist leftist movement heavily founded on opposition of the neoliberal economics brought to Latin America by Americanized leaders like the Chicago Boys and Pinochet. Venezuela has since swung far-left and citizens felt oppressed by the neglective and often abusive government.
The region’s indecisiveness between neoliberal economics and more left-wing approaches has left Latin America economically crippled. Communism does best when surrounded by communism; laissez-faire capitalism does best when surrounded by laissez-faire capitalism. With countries shifting back and forth with each regime change, trade connections were often broken, the middle class was left behind and social services for the poor suffered greatly, leaving room for massive uprisings.
The revolutionary ideals of Latin America, while romantic as they are (thanks, Madonna as Eva Peron and poorly made Che Guevara t-shirts) can not be embraced without recognizing the human rights abuses committed during such revolutions, whether the revolutions are at the hands of the government (in the case of Operation Condor) or populist civilian efforts. Human rights abuses are often disregarded in Latin America, furthering the area’s political instability.
Until the region finds one economic system and sticks with it, the corruption running through Latin American governments will never be destroyed and civilians will never find the justice they deserve. This can only happen if Latin America is left untouched by the global north, as European colonialism and American ideals put them in the situation they are in today.
http://www.aljazeera.com/indepth/opinion/2017/07/neoliberalism-latin-america-170711085354385.html
https://www.washingtonpost.com/world/the_americas/protests-sweeping-south-america-show-rising-antigovernment-anger/2017/04/15/c086c10c-1f92-11e7-bb59-a74ccaf1d02f_story.html?utm_term=.4d3175fbae27
http://www.aljazeera.com/programmes/insidestoryamericas/2013/03/2013367461442124.html
http://www.donquijote.org/culture/chile/society/people/pinochet
Well researched