Latin American Report

Informal Sector: A Billion Dollar Lifebelt (23/5/1999)

Mexican Student Strike Broader than in 1968 (23/5/1999)

Peruvians Strike Against President's Policies (15/5/1999)

Grasping the Goods

The past decade has seen an upward redistribution of wealth in Latin America such as the continents already unequal economies had never seen.The number of Latin Americans on Forbes' list of billionaires now stands at 39, up from eight in 1991 (though down a few from just before the Mexican meltdown of 1994). Great fortunes," say the editors of Forbes Magazine, who are paid to keep track of such things, "are made in times of rapid social, technological and economic change by those who grasp the meaning of the change early on."

In Mexico, as of 1994, a group of 183,000 individuals held capital equivalent to 51% of total GNP. Their 1993 profits, reports economic historian Carlos Marichal, were greater than the sum of expenditures by the Mexican government on education, health, urban programs, ecology and water programs, and all public social investments.

While free-market acumen is lauded for the creation of so much new wealth, the state has not disappeared from the process. Those who latched on to authoritarian rule in Chile and Peru, for example, and those who "grasped the meaning" of corruption in Mexico are among the richest of the new rich. Policy makers who have "grasped the meaning" of the new labor discipline have succeeded in making the rich richer in their countries.

As labor's bargaining power is weakened by the dismantling of traditional industries, the stripping away of social guarantees, the growing practice of subcontracting and the ubiquity of "flexible" labor contracts, the percentage of national incomes that is "earned" by capital is mushrooming. Poverty in Chile, as Rosenfeld and Marre tell us, used to be synonymous with rural landlessness or urban joblessness, but the masses of the poor are no longer marginal to the national economy. They are low-paid workers, frequently full time and frequently in the formal sector. In Mexico, where nearly three quarters of all urban families cannot afford to buy a basic basket of goods, the unemployment rate is under 6%. This is one of the secrets to the creation of great wealth.

And entrepreneurs who have "grasped the meaning" of the power (and local needs) of transnational capital are also well ahead of the game. In all the countries examined in this Report, the new oligarchies are committed neither to any particular industry nor to any particular country. They have diversified holdings in finance, manufacturing, services and commerce, and are increasingly dependent on foreign capital, which has come to play a dominant role in the region, especially since the privatizations of the early 1990s. The list of millionaires and billionaires making money in Latin America is by no means limited to Latin Americans. Policy makers, backed by the new elites, are convinced that economic progress depends on foreign investment - or at least that selective enrichment does.

The drug trade is part of the general picture, and those who have grasped its meaning have done well - even while many have died young. As Daniel Lazare shows, neoliberalism has encouraged entrepreneurs to follow market signals and - in this case - to rely on the one sector in which they continue to enjoy a comparative advantage, while the very same labor discipline that has proven so helpful to "legitimate" businesses has generated thousands of recruits for the industry. At the same time, the region's freer financial markets have made it easier to repatriate drug profits and invest them in legal activities.

The new concentration of wealth has been given the imprimature of the economics profession. It has been blessed as a state of nature, against which it is not only wrong but useless to rebel. As a Chilean socialist commented to authors Rosenfeld and Marre: "The intellectual who proposes redistributive policies is treated as if he were antiquated and obsessed, proposing policies that failed in the past. The idea now is that we have to privatize everything. We have to stimulate private enterprise and hopefully we will all be entrepreneurs." Well, maybe some of us. [NACLA]