Reaction Paper on "Neoliberalism in Latin America"

Reaction Paper 3 pages (1201 words) Sources: 2

[EXCERPT] . . . .

Neoliberalism

According to Benjamin Keen, author of A History of Latin America," neoliberalism is the "policies of privatization, austerity, and trade liberalization dictated to dependent countries by the International Monetary Fund and the World Bank as a condition for approval of investment, loans, and debt relief (1996, xi). Neoliberalism stands in opposition to Keynesian economics; one goal is to shrink the size of government and encourage direct investment from foreign countries. This political and economic philosophy has taken hold in many Latin American countries over the past few decades, with mixed results. In his article, "Neoliberalism and Democracy in Latin America: A Mixed Record," author Kurt Weyland explores in detail how neoliberalism took root in Latin America and the positives and negatives for democracy in those nations. He argues that neoliberalism has had a paradoxical effect. On the one hand it has made democracy more sustainable; on the other, it has limited the quality of democracy. Neoliberalism opened up Latin America to participation in the world economy, but this comes with its own pitfalls, including the political pressure that comes along with economic investment. When foreign countries make investments in Latin American countries -- often very large investments -- they also exert tremendous influence over the administrations that benefit from the influx of money. As Weylan writes, "tighter economic constraints limit governments' latitude and thereby restrict the effective range of democratic choice; and the weakening of parties and interest associations has depressed political participation and eroded government accountability" (p. 135).

The end result of neoliberal reform is a free-market system. While this model may seem like the ideal to those in the United States and other first-world nations, in Latin America the changeover required dismantling the established model and is dependent upon a strong leader with a concentrated core of power surrounding him. One of the earliest countries to make the difficult transition was Chile under dictator Augusto Pinochet, who made the transition with brutal force. The lesson learned seemed to be that democracy and neoliberalism didn't mix well, but, as Weylan points out, a "large number of Latin American democracies did enact drastic, painful market reforms from the late 1980s on" (p. 136). In an effort to put a stop to hyperinflation and gain economic stability, these leaders imposed strict budget austerity, cut the government workforce, gave over public entities to privatization and invited investors from around the world to participate in their economies. They also rolled back significant regulations and government controls. These "draconian" measures, as Weylan defines them, led to incredible short-term costs for many sectors of labor and business.

As mentioned earlier, the implementation of neoliberalism produced mixed results in Latin America. Weylan focuses on neoliberalism's effect on democracy in Latin America, pointing out that it has added to the survival of democracy but has eroded its quality, although he admits that his essay doesn't solve the discussion but rather provokes it.

Despite what occurred in Chile, the lesson taken from Pinochet's actions -- that democracy would be destroyed by neoliberalism -- no such thing occurred. Much of this is related to when leaders decided to enact neoliberalism. Most often it was in the midst of an economic crisis, such as hyperinflation, and was a corrective measure to stop an economy's downward spiral Notwithstanding the harsh effects of economic stabilization, the population was willing to accept the reforms for the sake of their own survival. The short-term harshness of the changeover was seen as a worthwhile trade-off for the promised stabilization. The results of these drastic reforms have had many positive effects. They have increased the… READ MORE

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