Tue, Dec 30, 2003 - Page 9 News List

Latin American's failed macroeconomic dictatorships

After shaking off military dictatorships in the 1980s, Latin America is now trying to shake off dictatorships of an economic nature

By Enrique Dussel Peters

Yet the prevailing macroeconomic emphasis on controlling inflation and fiscal deficits means that a real exchange rate of the peso that was overvalued by 30 percent is simply ignored, and bank loans to the productive sector are vanishing. This year, for instance, commercial banks financed a mere 22 percent of the number of firms they backed in 1995. In short, the productive sector is being sacrificed for the sake of controlling inflation and the fiscal deficit. Pursuit of these macroeconomic goals was one the primary causes of Argentina's economic woes.

Across Latin America, a dangerous polarization has resulted. Large domestic and foreign export-driven corporations and investors are favored at the expense of the productive sector and salaries. The dictatorship of macroeconomics is neither inclined to make concessions or to learn from past experience. This can only be explained as the result of a Manichean ideology that insists on a stark choice between macroeconomic stability and chaos.

In contrast to this simplistic vision, a growing group of academics from the region's universities and businessmen, such as Carlos Slim in Mexico, have proposed the need to reform economic reform. They call for the creation of public policies that, together with private initiatives, will reorient the political economy by putting employment, real wages and regional integration at the center of a new development strategy that can be sustained well into the future.

It is already clear that it is impossible to sustain an economically viable macroeconomic policy with a crisis-ridden productive sector that fails to create jobs or to distribute income relatively equitably. Moreover, it is clear -- or should be clear from the experience of Argentina and Bolivia -- that social and political stability is impossible to achieve if something isn't done to stem the deterioration of real wages that excludes a large and growing proportion of Latin American society.

Enrique Dussel Peters, professor of economics at the Universidad Nacional Autonoma de Mexico, has published several books on the political economy of Mexico and other Latin American countries.

Copyright: Project Syndicate

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