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Populists can be right

Jeffrey Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. His last article on Webdiary was Embracing Science. Others have been Development aid for development's sake and Who beats corruption?

by Jeffrey D Sachs

Does the rise of left-leaning governments in Latin America, particularly the election of Evo Morales as President of Bolivia, presage a shift to the hard left across the continent? Does it mark a repudiation of United States foreign policy in the region? Will it, for example, lead to a re-nationalisation of Bolivia’s vast natural gas deposits?

These are vital questions, but they miss the larger significance of the rise of someone like Morales, for he is Bolivia’s first indigenous elected head of state. His victory marks a step forward in Latin America’s overall democratisation, with positive long-term significance for economic and social development in the region.

To understand why, it is helpful to take a broad view of Latin America’s history and economic development. The societies of the Americas were forged by European conquests of indigenous populations, and by the racial and ethnic divisions that followed. Both the US and Latin America are still coming to terms with those historic divisions.

The Europeans who conquered and colonised the Americas after 1492 did not find vast empty lands, as they sometimes proclaimed, but rather lands populated by communities dating back thousands of years. A large portion of the indigenous populations quickly succumbed to diseases and hardships brought by the European colonisers, but many survived, often in dominant numbers, as in Bolivia and much of the highlands of the Andes mountain region.

Almost everywhere, these surviving indigenous populations became subservient members of European-led societies. The Europeans then brought millions of African slaves to the Americas. After emancipation in the nineteenth century, the African-American communities remained impoverished and largely bereft of political rights.

Thus, vast inequalities of power, social standing, and economic well-being were part and parcel of the forging of the Americas. Indigenous, African-American, and mestizo (mixed) communities have been fighting for their social, political, and economic rights ever since.

Democracy in Latin America has been a hard-won struggle. Even in the US, a country that fancies itself as a model of democracy, African-Americans were not truly enfranchised until the mid-1960’s. In Latin America, democracy has similarly been incomplete, unstable, and often inaccessible to indigenous, African-American, and mixed populations.

Moreover, given the vast inequalities of power and wealth in Latin America, and with a large part of the population bereft of land and education, the region has long been vulnerable to populist politics and rebellions, with leaders promising quick gains for the dispossessed by seizing property from the elites. The elites have fought back, often brutally, to protect their property. Politics has therefore often been more a violent than an electoral struggle, and property rights have often been tenuous.

A dominant pattern in both the US and Latin America has been the resistance of the dominant white communities to sharing in the financing of public investments in the “human capital” (health and education) of the black and indigenous communities. While European societies have developed social welfare states with universal access to public health and education services, elites throughout the Americas have tended to favor private-sector provision of health and education, in part reflecting white populations’ unwillingness to pay for social services for other ethnic and racial groups.

Morales’ election in Bolivia – where indigenous groups are estimated to comprise around 55% of the population and mixed-race people account for another 30% – should be viewed against this historical backdrop. Moreover, Bolivia is not alone: the shift from military rule to democratic politics in Latin America during the past 20 years is gradually, fitfully, but consistently, broadening political empowerment beyond the traditional elites and dominant ethnic groups. In Peru, for example, Alejandro Toledo is that country’s first indigenous president.

In the longer term, the spread of democracy in Latin America promises not only fairer societies, but also economically more dynamic societies, through increased public investments in health, education, and job skills. The region’s chronic under-investment in education, particularly in science and technology, is partly responsible for its economic stagnation during the past quarter-century. Unlike East Asia and India, most of Latin America did not make a breakthrough to high-technology industries, instead suffering a period of low GDP growth, debt crises, and macroeconomic instability.

This can now change, at least gradually. Bolivia would do well to follow the example of its eastern neighbor, Brazil, which has experienced a surge in educational and scientific investments since its democratisation in the 1980’s. Rising educational attainment is helping to promote more technologically sophisticated exports as well.

Of course, Morales’ election also raises many important short-term doubts and questions. Will the new government follow responsible economic policies, or will Bolivia flirt yet again with destabilising populist measures, as it has done so often in the past? Will Morales renegotiate the laws and contracts governing Bolivia’s vast natural gas reserves, as his government is rightly committed to do, in a way that does not scare away urgently needed foreign investment?

Bolivia has entered a new era of mass mobilisation of its long-suffering but now victorious indigenous communities. The short-term outlook is uncertain. In the longer run, however, it’s right to bet on the economic benefits of democratisation.

Copyright: Project Syndicate, 2006.
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Jeffrey Sachs

Is this the same Jeffrey Sachs from Harvard connections who was involved in the privatisation of Russia? Including the scandal, the allegations, the misappropriation of USAID funds, the eventual takeover by the oligarchs? Is this the same Mr Sachs now gushing about the hopes of Bolivia for social justice and fair economy etc? Surely not by the same model that cost the average Russian their savings? That crashed the ruble and enabled buy up by the mates?

This is a facinating article from 1998 about the "Harvard Boys DO Russia". Although weighty it is also very meaty and has plenty of famous players.

It is also topical as the Harvard president has just resigned, a man apparently also involved along with Schleifer, and famous as quoted for wanting to move pollution to the poorer countries using globalisation IMF money. A true economic rationalist.

One should consider that it is not an uncommon cycle for countries  to undergo huge economic dramas of credit tightening and sudden currency falls, consider UK and even more dramatically Argentina, just like Russia, where outsiders with money step in a have a buy up at sale price.

Consider what will happen here if rates jump up, the housing bubble bursts combined with China no longer having huge US markets for its products and hence not buying our raw products. A nice sale. I have no doubt we would see the likes of Mr Sachs with his cheque book, just as the Russians did. No doubt waxing lyrical about the native issues as he goes on his shopping spree.

Must be a different Prof Sachs

Angela, I'm not aware of any particularly prominent role that Sachs had in the privatisation of Russia. This is, however, the same Jeffrey Sachs who is the prime analytical mover of the Make Poverty History campaign. If you insist on seeing people one-dimensionally, you will never reach enlightenment...

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