riesco - latin america a new developmental welfare state

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INTERNATIONALJO U R N A L O F

SOCIAL WELFARE ISSN 1369-6866

DOI: 10.1111/j.1468-2397.2009.00643.x Int J Soc Welfare 2009:

18

: S22–S36

© 2009 UNRISDJournal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare.

Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street,

S22

Malden, MA 02148, USA

Blackwell Publishing Ltd

Latin America: a newdevelopmental welfare state

model in the making?

1

Riesco M. Latin America: a new developmental welfarestate model in the making?Int J Soc Welfare 2009: 18: S22–S36 © 2009UNRISD, Journal compilation © 2009 BlackwellPublishing Ltd and the International Journal of SocialWelfare.

Latin America is emerging from a century of trans-

formation – from a traditional agrarian to an urbanindustrial economy – where countries have takendiverse historical paths. Some have almost completed this transformation, others are taking early steps, and most are living through it. State-led transition hasfollowed two successive development strategies. Fromthe 1920s to the 1980s, state developmentalism, for themost part, successfully assumed the twin challenges of economic and social progress. In the final decades of the century, Latin American states adopted the policiesof the Washington consensus, which emphasized theimportance of business in the framework of globalization,

benefiting the affluent few. However, an unambiguousshift in direction has been taking place in LatinAmerica since the 1997 economic crisis. This articlesuggests that a new developmental welfare state modelis in the making. How will it evolve over the wider space of an increasingly integrated Latin America?

Manuel Riesco

CENDA, Santiago, Chile

Key words: Latin America, developmental

welfare state, social policy, globalization,

countries in transition

Manuel Riesco, Centro de Estudios Nacionales

de Desarrollo Alternativo (CENDA), Vergara

578, Santiago, Chile

E-mail: [email protected]

Accepted for publication September 2, 2008

Introduction

Latin America is emerging from a centuryof tectonic transformation, moving out of its traditional agrarian economy into an urbanindustrial one. The Centro Latinoamericanode Demografía (CELADE, 1996) classified the

population into four categories of demographictransition. According to this, about 10 percent of

the population are still in the early or moderatestages, 75 percent are in full transition, and 15 percent have already achieved an advanced level of transition (see Table 1).

Significantly, when other indicators wereadded to the data on population, they suggested that the classification seemed to capture not justdemographic transition, but also the degreeof overall socioeconomic development in thedifferent countries. Countries with an advanced level of transition, for example, show levelsof per capita gross domestic product (GDP)

1

This article summarizes some of the findingsof the book of the same title (edited by ManuelRiesco, 2007), which is part of the UNRISDresearch project on Social Policy in Late

Industrializers. All data in this text that are notspecifically referenced are taken from the book.



Latin America: a new developmental welfare state model

© 2009 UNRISDJournal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare

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adjusted by purchasing parity that are fivetimes higher than those observed in countrieswith early transition (see Tables 2 and 3).

On the other hand, total per capita publicsocial expenditure in the advanced group is 14times higher than in the early and moderategroups together. In the case of public expendi-ture on social security, this ratio rises, in some

cases to over 30 times (see Table 4).The region has two of the four largest

urban centers in the world, each of themapproaching nearly 20 million inhabitants,and several with over 10 million. However,over 42 percent of the total population arestill peasants, according to the most recentWorld Bank estimates (World Bank, 2004).

A single day will witness people living and working in ways that resemble almost every

social formation recorded in history. Theyrange from the highly qualified professionalsemployed by large private multinationals in

Latin America – the owner of one of whichis among the richest people in the world – toindigenous American peasants caring for their alpacas in the magnificent Andean highlandsand aboriginals in the depth of the Amazonianrainforests.

The vast majority, however, will descend bythe tens of millions, before sunrise, into packed

metros or ride for hours cramped in noisy buses that inch through the tortuous traffic incongested streets, on their way to salaried jobs somewhere in the huge factory that atypical, bustling, Latin American city has become. They will work long hours, even onSaturdays, Sundays, and fiestas de guardar

,

2

Table 1. Latin American and Caribbean countries according to groups of demographic transition, elaborated by CELADE.

Classes of demographic transition: CELADE definition Countries

Group I. Early transitionCountries with high birth rate and mortality, and a moderate natural growth of

around 2.5 percent. Countries in this group have a very young age structure,and a high dependency ratio.

Bolivia and Haiti

Group II. Moderate transitionCountries with high birth rate but moderate level of mortality. Because of this, their

natural growth rate is still high, around 3 percent. Lowering of mortality,especially during the first year, has caused a rejuvenation of the age structure,which has also resulted in a high dependency ratio.

El Salvador, Guatemala, Honduras,Nicaragua, and Paraguay

Group III. Full transitionCountries with moderate birth rates and low or moderate mortality, which

determines a moderate natural growth rate of around 2 percent. As lowering offertility is recent, the age structure is still relatively young, even though thedependency ratio has already decreased.

Brazil, Colombia, Costa Rica,Dominican Republic, Ecuador, Mexico,Panama, Peru, and Venezuela in LatinAmerica; and the Guyana, Surinam,

Trinidad, and Tobago in the Caribbean

Group IV. Advanced transitionCountries with low birth rates and low or moderate mortality rates, which translates

into low natural growth rates of around 1 percent.Two subgroups may be defined as follows:

• countries that have had low fertility and mortality for a long time (Argentina,Uruguay and, in lesser terms, Cuba) and, consequently, have growth and agestructures that are similar to developed countries;

• countries that, although having recently attained very low fertility and mortalityrates, still have higher growth rates because their population is relatively young.

Argentina, Chile, Cuba, and Uruguay inLatin America; and the Bahamas,Barbados, Guadalupe, Jamaica,Martinique, and Puerto Rico in theCaribbean

Source : CELADE, 1996; ECLAC, 2002; UNDP, 2002a; World Bank, 2002. Table taken from Riesco, 2007 (appendix tables 1–4).

2

Sundays and religious feast days, which had formerly been scrupulously respected as dayswhen peasants did not have to work. Saturday,however, was a regular working day in the

haciendas

.



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Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare

mostly in small or medium-sized private shopsand firms, increasingly in the service sector.

Moreover, their jobs are often of shortduration, and they are constantly forced tocross the porous boundaries between formal

and informal employment, with periods of unemployment in between. Excellent statisticsare available in Chile that track the individual job histories of the entire workforce, perhapsthe only undisputed positive outcome of therenowned pension system, the Administradorasde Fondos de Pensiones (AFP). Almost96.5 percent declare themselves to be salaried workers, and contribute to the pension fund as such while they are employed. However,

only 11 percent do so regularly throughout theyear. On average, two-thirds contribute less thanonce every two months, one-third less than oncein five months, and one-fifth less than once inten months.

The number of women who hold AFPaccounts – each is identified by name and a unique identification number, with mostcontributing to the pension fund in recentyears – exceeds the official Instituto Nacional

de Estadísticas (INE) estimate of the femaleworkforce by over one-third, which suggeststhat, in addition to the above-mentioned formal–informal–unemployed rotation, theyare also constantly moving in and out of theworkforce altogether (Instituto de NormalizaciónPrevisional, 2004).

Myriad colours in the many rich paths towardmodernity

Latin America seemingly presents a single faceto the outside world that is easily recognizable.However, a careful listener will distinguishthe rich variety of tonalities in the Iberic tonguesspoken by its peoples, who have traversed diversehistorical paths – huellas

and chaquiñañes

as the Andean trails are called – toward their amazingly different modernities (Draibe &Riesco, 2007b; Therborn, 1995, 1999).

The fertile Andean valleys and highlands,from Mexico to Peru and Bolivia, have harbored most of the indigenous American population

T a b l e 2 .

P o p u l a t i o n a n d G D P i n L a t i n A m e r i c a

a n d t h e C a r i b b e a n , a c c o r d i n g t o d e m

o g r a p h i c t r a n s i t i o n g r o u p s .

C l a s s e s o f d e m o g r a p h i c

t r a n s i t i o n

P o p u l a t i o n

2 0 0 5

( t h o u s a n d s

)

P o p u l a t i o n g r o w t h

( a n n u a l p e r c e n t a g e ,

2 0 0 0 – 1 0 )

G D

P ( P P P ) 2 0 0 2

( m

i l l i o n s o f

U S

d o l l a r s )

P e r c a p i t a G D P ( P

P P )

2 0 0 2 ( U S d o l l a r s

p e r i n h a b i t a n t )

P o s i t i o n i n p e r c a p i t a

G D P r a n k i n g 2 0 0 2

( 1 7 5 c o u n t r i e s )

G D

P g r o w t h

1 9

6 0 – 2 0 0 2 ( a v e r a g e

p e

r c e n t a g e p e r y e a r )

G r o u p I .

E a r l y t r a n s i t i o n

1 8 , 3

6 1

1 . 9

3 4 , 9

9 6

2 , 0

8 1

1 4 5

1 . 6

( 3 . 3 p e r c e n

t )

( 0 . 9 p e r c e n t )

G r o u p I I .

M o d e r a t e t r a n s i t i o n

3 9 , 2

9 3

2 . 3

1 3 8 , 1

0 2

4 , 1

0 9

1 1 2

3 . 6

( 7 . 1 p e r c e n

t )

( 3 . 5 p e r c e n t )

G r o u p I I I . F u l l t r a n s i t i o n

4 1 8 , 6

2 3

1 . 3

2 , 9

6 8 , 6

6 7

7 , 1

6 4

7 3

4 . 2

( 7 5 . 2 p e r c e

n t )

( 7 5 . 7 p e r c e n t )

G r o u p I V

. A d v a n c e d t r a n s i t i o n

7 9 , 9

2 6

0 . 9

7 7 9 , 4 7 8

1 0 , 2

6 2

6 1

2 . 6

( 1 4 . 4 p e r c e

n t )

( 1 9 . 9 p e r c e n t )

T o t a l : L a

t i n A m e r i c a

a n d t h e C a r i b b e a n

5 5 6 , 2

0 3

1 . 4

3 , 9

2 1 , 2

4 3

7 , 0 5 0

7 3

3 . 8

( 1 0 0 . 0 p e r c

e n t )

( 1 0 0 . 0 p e r c e n t )

P P P , p u r

c h a s i n g p o w e r p a r i t y .

S o u r c e

: C E L A D E ,

1 9 9 6 ; E C L A C ,

2 0 0 2 ; U N D P , 2 0 0 2 a ; W o r l d B a n k ,

2 0 0 2 .

T a b l e t a k e n

f r o m

R i e s c o ,

2 0 0 7 ( a p p e n d i x t a b l e s

1 – 4 ) .





S25

over the millennia, and continue to do so evento this day. Their hands forged the magni-ficence of ancient American empires, as well

as the richness of their classical colonial and

latifundia

periods. Their monuments arewitness to their greatness (Lipschutz, 1972).It seems not at all improbable that when theseregions finally complete their rapid – and sometimes painful and chaotic – transitionto contemporary times, their deep roots, richcultures, and complex structures (Anderson,1974) may perhaps also infuse the distinctiverichness of authentic American modernity.

However, that is yet to happen, perhaps somedecades into the 21st century, although someof it may already be surfacing in modernMexico (Brachet-Márquez, 2007; Sagasti,Prada & Bazán, 2007).

In the late 19th and early 20th centuries, amassive number of immigrants flooded therich shores of the Rio de la Plata. The twin citiesof Buenos Aires and Montevideo becameamong the few million-strong metropolises of

the world at that time. The railroads and armyexpanded their influence into the pampas allthe way south to Patagonia in a pincer move-

ment that virtually exterminated the scarceand nomadic indigenous population, in muchthe same way as in the North American West

around the same time. These early developershave created what is today the most advanced Latin American social formation, althoughothers are catching up quickly (Barbeito &Goldberg, 2007; Bonino, Kwon & Peyre Dutrey,2007).

Brazil is a unique case, partly because of itssheer size. It encompasses 42 percent of thesurface of Latin America, and about one-third of its GDP and population. In addition, slavery

has played a dominant role here, as it has inCuba. Over four centuries, about 40 percentof all African slaves came to Brazil. By thelast decades of the 19th century, almost allthe remaining slaves worldwide were in Cubaand Brazil (Blackburn, 1997; Draibe, 2007).

A different story may be told in the landsthat lie on the meager fringes of the ancientAmerican empires, such as Costa Rica and Chile.In the past, they were never able to sustain

anything more than peasants and very modestfeudal lords. The poor Spanish settlers established there since the 16th century formed tight-knit

Table 3. Urbanization and salaried workers in Latin America and the Caribbean, according to demographic transition groups.

Demographictransition classes

Urbanpopulation (%)

Average urbanizationrate (percentage of totalpopulation per year)

Economic activepopulation (EAP) inagriculture (per cent)

Non-farm occupationalstructure, 2000 (percentageof total occupied workforce)

1960 2005 1960–1985 1985–2000 1970 1990 Totalformalsector

Publicsector

Private firmsof over fiveworkers

Group I.Early transition

26.2 55.2 0.5 0.8 63.2 39.3 NA NA NA

Group II.Moderatetransition

33.4 50.9 0.4 0.4 58.2 43.9 39.3 10.1 29.2

Group III.Full transition

47.4 78.4 0.9 0.5 43.3 23.1 52.4 13.2 39.3

Group IV.

Advancedtransition

69.3 86.5 0.6 0.3 20.5 12.4 54.2 12.4 41.7

Total LatinAmerica andthe Caribbean

48.9 76.7 0.8 0.5 41.8 23.6 53.1 13.0 40.1

Source : CELADE, 1996; ECLAC, 2002; UNDP, 2002a; World Bank, 2002. Table taken from Riesco, 2007 (appendix tables 1–4).



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elites that, early on, built relatively strong states.After several mutations, these families even nowconstitute the core of the emergent bourgeoisie(Barahona, Güendel & Castro, 2007; Illanes &Riesco, 2007; Jocelyn-Holt, 1999).

It is interesting to note that these transitionalstages and historical patterns were not confined only to a single country; some of the larger countries contain all levels and patterns withinthemselves. Even small Ecuador resemblesthree very different countries, depending onwhether it is seen from the Pacific coast, theAndes, or the Amazonia.

The rise and pinnacle of the Latin Americandevelopmental welfare state: holding therudder through the great tectonic change

In the last century, Latin American states led the transition by implementing two successivedevelopment strategies. Although the strategiesoften conflicted with each other, they neverthe-less seemed to form part of a single process,against the backdrop of rapid socioeconomictransformation.

Starting around the mid-1920s, but especiallyafter the Great Depression of 1929, a number of states explicitly assumed the twin challengesof bringing both economic and social progressto societies that were mostly agrarian. Statedevelopmentalism sought to replicate the processset in motion in advanced countries. However,the vast masses of salaried workers and industrialentrepreneurs, whose early emergence in thelatter had powered this process, did not exist

in significant numbers in Latin America at thetime. Consequently, the state had to replacethese actors, while nurturing them at the sametime. Developmentalism shows quite impressiveachievements on both counts in many countries.

By the 1980s, many states had built basicinstitutions, infrastructure, and industries. Mostimportantly, they were remarkably active inchanging the region’s social structures. Theytaught millions of peasants how to read and

write, improved their health, and helped their massive migration to the cities. The fact thatsocial policies played an essential role in this

T a b l e 4 .

P u b l i c s o c i a l e x p e n d i t u r e i n L a t i n A m

e r i c a a n d t h e C a r i b b e a n , a c c o r d i n g t o d e m o g r a p h i c t r a n s i t i o n g r o u p s .

D e m o g r a p h i c t r a n s i t i o n c l a s s e s

P u b l i c s o c i a l e x p e n d i t u r e 2 0 0 0 – 2 0 0 1

T o t a l

E d u c a t i o n

H

e a l t h

S o c i a l s e c u r i t y

1 9 9 7 p e r

c a p i t a ( d o l l a r s )

P e r c e n t a g e

o f G D P

P e r c e n t a g e o f

p u b l i c b

u d g e t

1 9 9 7 p e r


P e r c e n t a g e

o f G D P

1

9 9 7 p e r

c

a p i t a ( d o l l a r s )

P e r c e n t a g e

o f G D P

1 9 9 7 p e r


P e r c e n t a g e

o f G D P

G r o u p s I & I I . E a r l y a n d m o d e r a t e t r a n s i t i o n

1 1 4

9 . 8

4 4 . 2

5 1

4 . 4

2 5

2 . 4

2 2

1 . 6


6 1 8

1 4 . 2

5 4 . 3

1 6 1

3 . 9

1

1 1

2 . 7

3 2 0

7 . 1

G r o u p I V


1 , 4

4 5

2 0 . 2

6 5 . 1

3 3 5

4 . 7

3

0 8

4 . 3

6 5 3

9 . 2

T o t a l : L a

t i n A m e r i c a a n d t h e C a r i b b e a n

6 8 6

1 4 . 8

5 5 . 1

1 7 5

4 . 1

1

3 0

2 . 9

3 3 8

6 . 8

S o u r c e

: C E L A D E ,

1 9 9 6 ; E C L A C ,

2 0 0 2 ; U N D P ,

2 0 0 2 a ; W o r l d B a n k ,

2 0 0 2 .

T a b l e t a k e n f r o m

R i e s c o ,

2 0 0 7 ( a p p e n d i x t a b l e s

1 – 4 ) .





S27

experience is frequently overlooked and should be stressed through the concept of develop-mentalist welfarism in Latin America (Draibe& Riesco, 2007; Kwon, 2005; UNRISD, 2003).

The block in power was led by the new

bureaucratic elites, both civil and military,who were from the middle classes, rather thanthe traditional oligarchies. They were supported by the nascent bourgeoisie and workers, and the urban poor, as well as by the peasants inthe later stages.

Developmentalism took several forms. Inmany countries, it started through progressivemilitary coups, although at least two originated in an epic revolutionary manner. Some countries

did not begin until the 1960s, or even later.Some developmental states reached their apogeeunder military rule; some, such as Brazil, werefairly conservative. In others, democratic govern-ments pursued the strategy quite relentlessly,after being primed by the military. In theremarkable case of Mexico, a civil bureaucracy,consolidated after revolution and civil war, presided throughout developmentalism in alasting alliance with entrepreneurs, peasants,

and workers. Moreover, it also led the way intothe next phase, which would become known asthe Washington consensus (Brachet-Márquez,2007; Díaz Vázquez & Carranza, 2007; Draibe,2007; Sagasti et al., 2007).

Everywhere, the states increasingly con-fronted the traditional landed elite and foreignexploiters of natural resources (Riesco, Lagos& Lima, 2005). Sometimes events turned violent, especially as developmentalism

approached its climax in the 1960s and 1970s,resulting, in some countries, in full-blownrevolutions that completely and irreversiblywiped out traditional structures within afew years. This explains the fact that thesecountries miraculously seemed to leap ahead during the following period.

The legacy of neoliberalism

In the 1980s and 1990s, states throughoutthe region adopted the policies pushed by theWashington consensus, based on a neoliberal

theoretical support. As a strategy, it was littlemore than a short list of simple rules thatemphasized the importance of a business-friendly environment and openness to globaliza-tion (Williamson, 2002). In practice, the

rules were applied unilaterally for the benefitof emergent capitalists, and especially foreigninvestors.

Often, the rules of the Washington consensusresulted in a severe dismantling of state institu-tions (Suleiman, 2003), especially within therealm of social policy, as a privatization and tariff-reduction frenzy seemed to take hold of Latin American elites. Some profited con-siderably from it – foreign multinationals

in particular, but also local capital – as theyacquired privatized state companies at a bargain. New, segmented private services, includingsocial services, were made available to thosewho could afford to pay. Most people enjoyed the flood of better quality and lower priced imported goods – except those who lost their jobs and their companies when tariffs werelowered precipitously.

A happy few, the affluent 10 percent, secured

for themselves over 40 percent of the income,while the poorest 40 percent had to get alongwith no more than 10 percent on average (seeTable 5). The inequalities in some countrieswere even more polarised, with two or threenotable positive exceptions such as CostaRica, Cuba, and Uruguay (Draibe & Riesco,2007b).

Furthermore, the dismantling of social policyaffected the middle sectors the most. They were

left largely unprotected, as their jobs became precarious and their livelihoods insecurein the face of globalization. Meanwhile, whatremained of the reduced public social spendingtargeted the extreme poor, alleviating their terrible conditions slightly, or at least keepingthem from deteriorating further.

However, the degree of unilateral imple-mentation of these reforms varied widely,depending on the type of government in place

and the timing of the reforms. A few countries pioneered the first wave of neoliberal reformsin the late 1970s and 1980s in the midst of a



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severe economic crisis, a decade or more beforeconsensus was reached in Washington.

3

Militarydictatorships, which were common in theregion around that time, imposed the reforms.These were supported by young elites (who

wanted to avenge the effects of the earlier,successful state-led reforms on their forefathers)or by threatened landed oligarchies (Therborn,1999).

A second wave was implemented in the 1990s by democratic governments that had replaced dictatorships almost everywhere (Ffrench-Davis,2002). These governments were moderate and came into power against the backdrop of anexpansion in per capita public social spending

that averaged 40 percent during the decade(UNDP, 2002b). Nevertheless, some measureof state dismantling took place, although itwas now under the influence of ‘third wave’ideologues who made damaging efforts totransform public institutions into privateservice providers (Suleiman, 2003).

The massive and rapid social transforma-tion that had been taking place in LatinAmerica under developmentalism – which

was then so effectively both stimulated and made more humane by its public social policy – continued in full swing during the neoliberal period. It even reached new heights, althoughin a rather brutal manner. Literacy, housing,and sanitation policies, on the one hand, and agrarian reform on the other, had been themain instruments of social change under developmentalism (Hobsbawm, 1995). Under the neoliberal period, they were replaced

by the violent culmination of agrarian reform processes that, instead of repositioning

latifundias

, forcefully expelled hundreds of

3

The Washington consensus emerged from a1992 meeting in Washington. Long before that,in the mid-1970s, the Pinochet regime pioneered neoliberal reforms in Chile in their most extremeversion. During the late 1970s and 1980s, brutalattempts were made to implement a ‘first wave’of reforms in Argentina, Peru, Uruguay, and several countries in Central America, notably ElSalvador.

T a b l e 5 .

H u m a n d e v e l o p m e n t a n d i n c o m e d i s t r i b u t i o n i n L a t i n A m e r i c a a n d t h e C a r i b b e a n , a c c o r d i n g t o d e m o g r a p h i c t r a n s i t i o n g r o u p s .

D e m o g r a

p h i c t r a n s i t i o n c l a s s e s

H u m a n D e v e l o p m e n t I n d e x ( H D I ) 2 0 0 1

S h a r e

o f t o t a l i n c o m e ( p e r c e n t )

R e l a t i v e p o s i t i o n i n H D I

r a

n k i n g o f 1 7 5 c o u n t r i e s

L i f e e x p e

c t a n c y

a t b i r t h (

y e a r s )

A d u l t l i t e r a c y

r a t e ( p e r c e n t )

P o o r e s t

4 0 p e r c e n t

M e d i u m

5 0 p e r c e n t

R i c h e s t

1 0 p e r c e n t

D 1 0 / D ( 1 – 4 )

( p e r c a p i t a )

G r o u p I .

E a r l y t r a n s i t i o n

1 3 2

5 6 . 2

6 8 . 5

1 0 . 1

5 0 . 8

3 9 . 3

2 5 . 0

G r o u p I I .

M o d e r a t e t r a n s i t i o n

1 1 0

6 8 . 3

7 5 . 8

1 3 . 2

4 9 . 6

3 7 . 2

2 0 . 1


6 5

7 0 . 3

8 9 . 6

1 2 . 4

4 7 . 5

4 0 . 1

2 4 . 0

G r o u p I V


4 1

7 4 . 8

9 6 . 4

1 4 . 7

4 7 . 7

3 7 . 7

1 6 . 6

T o t a l : L a

t i n A m e r i c a a n d t h e C a r i b b e a n

6 5

7 0 . 3

8 9 . 2

1 3

4 7 . 8

4 0

2 3

S o u r c e

: C E L A D E ,

1 9 9 6 ; E C L A C ,

2 0 0 2 ; U N D P , 2 0 0 2 a ; W o r l d B a n k ,

2 0 0 2 .

T a b l e t a k e n

f r o m

R i e s c o ,

2 0 0 7 ( a p p e n d i x t a b l e s

1 – 4 ) .





S29

thousands of people on to the country roads.

4

This effect was also caused by protracted civilwars, especially in Central America, whichresulted in massive peasant migration to citiesand to the USA. In addition, large economic

displacement brought about by economic crisisand globalization also played an important part.

As a result, the pace of peasant migrationdoubled toward the mid-20th century, tripled during the height of developmentalism in the1970s and 1980s, and declined only in the 1990s.However, in the countries where this processstarted later, migration is still ongoing, and probably even accelerating (Draibe, 2007;Illanes & Riesco 2007; Sagasti et al., 2007).

On the other hand, the privatization of stateenterprises, social services, and pension fundsreplaced tariffs and credit policies used bydevelopmentalism as a means to promote localcapitalists, and led to the growth of somehuge private conglomerates. In some cases,they succeeded without disbursing a pennyof their own – which they did not possess inthe first place – as functionaries in charge of privatizing public enterprises and utilities

grabbed them for themselves (Fazio, 2000).Why did the Washington consensus replace

developmentalist strategies in Latin America?An assessment of the data will probably con-tradict commonly held views. Stagnant growthwas not responsible because the developmentalist

period showed a still unparalleled record ingrowth, especially as it approached its high point. The 1980s crisis affected the extremelyneoliberal Chile the most, and pragmatic and ‘unorthodox’ Costa Rica the least. Nor was it due

to ‘big government’ because public expenditures – especially that relating to social policies – had been very low in Latin America by inter-national standards, and regulations wererather slack. It also seems difficult to blame‘populist monetary irresponsibility’ (Dornbusch& Sebastian, 1991): while developmentalismwas generally expansionary, the worst episodesof hyperinflation took place under neoliberalministers. Further, conspiracy theories critical

of the Bretton Woods institutions (BWIs) areinadequate to explain such an overarching phenomenon, in spite of the fact that the BWIsactively promoted it.

It was, perhaps, just the success of develop-mentalism in modernizing social structuresthat eventually made it not only redundant but an obstruction, especially in some of its economic aspects. It also created its owngravediggers in some of the new social

actors it helped come of age, and who nowsupport modern economic development. Thisis certainly market-based today, although notin the unilateral – and sometimes fanatically‘bourgeois anarchist’ (Hobsbawm, 1995) – manner that became fashionable among LatinAmerican elites in the neoliberal period (Draibe & Riesco, 2007b).

Another turn of the rudder?

What was characterized by The Economist

(2002), assessing Luiz Inácio Lula da Silva’sfirst election in 2002, as an ‘unambiguousshift of direction’ away from neoliberalism, had already been taking place in Latin Americasince the 1997 economic crisis. Throughoutthe region, wide, and sometimes unexpected,coalitions have sprung up and have either accessed political power in many countries,

or have come close to doing so. Neoliberalthinking is still strong, dominating academiaand holding its own among government cadres,

4

In the wake of the 1973 coup in Chile, for example, all peasants suspected of supporting

agrarian reform were forcefully expelled, and hundreds assassinated. Together with their families, they numbered in the hundreds of thousands. However, other peasants considered ‘loyal’ were, in fact, given about 40 percent of the expropriated lands in private parcels. About30 percent of the land was returned to its former owners, but in the form of relatively small

reservas

stipulated by the agrarian reform law.The rest, mainly mountains, were auctioned toforestry companies, which quickly proceeded toexpel most of the peasants living in their lands.At the same time as the expulsion, peasants weremigrating at a fast pace during the 1970s and 1980s. The migration declined only in the late1990s.



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especially in the seemingly impregnable citadelsof finance ministries and central banks. However,it has now been pushed into the defensive,and not even Right-wing parties use it in their campaigns.

A new development strategy is evolvingwhich repositions the state as a leading actor,although this time it may rely on modern civilsociety actors who came of age during thetwo previous periods. Social policy is onceagain centre stage: the new strategy explicitlyoffers a Rooseveltian New Deal (Partido dosTrabalhadores, 2003) to the massive – and precarious – urban

salariat

that is emergingin the region’s booming cities, and renews its

commitment, both to the urban poor and the peasants who continue their migration inhuge numbers, especially in some countries.Income support has been extended to wider segments of the poor. Draibe and Riesco(2007a) argue that the notion of the develop-mental welfare state (Kwon, 2005) can capturethe emerging arrangement of economic and social policy in Latin America (Draibe &Riesco, 2007a).

Although controversial, and subject to seriouscriticism from the Left, the case may be madethat Lula pioneers the new development strategyin what is by far the largest and most powerfulcountry in Latin America. Based on his Partidodos Trabalhadores (PT), a highly structured,experienced, and mass worker-based partyand movement, which has been characterized essentially as ‘non co-optable,’ Lula has managed to assemble an impressive alliance, while con-

tinuing to maintain unprecedented popular support (Draibe, 2007).

In Argentina, former President Néstor Carlos Kirchner reshuffled the Peronist party.This early urban mass worker-based party pioneered state developmentalist welfarism inLatin America during the life of General JuanPerón. In the 1990s, the government of CarlosMenem presided over a singularly corrupt – although, from other perspectives, certainly not

the worst – version of the Washington con-sensus. In the wake of the cataclysmic implosionof the Argentinean neoliberal experience in

2002, ‘Kirchnerism’ performed a surprisingleap from remote southern provincial politicsto national dominance. The government presided over the most explicit, active, coherent, and advanced formulation of the new develop-

ment strategy in practical terms. As in thecase of Lula, Kirchner’s popular supportwas overwhelming, and his wife Cristina wona landslide victory in the 2007 presidentialelection (Barbeito & Goldberg, 2007).

Even neoliberal Chile is overhauling its privatized pension

5

and education

6

systems.

5

There was clear evidence that the pension scheme

was leaving about two-thirds of the workforcewithout any effective coverage at all. This wasacknowledged by a reform approved in March 2008,which will gradually provide non-contributory

basic public pensions for up to 60 percent of older people, those with lower incomes (CENDA,2008). Polls reveal that a vast majority of activeChilean workers would go back to the old pay-as-you-go public pension system if permitted to do so. This system still pays pensions to threeout of every four senior citizens in Chile, and the amount received by its beneficiaries easilyduplicates the corresponding pensions being paid

out by the private AFP system; this differenceis even larger in the case of women (Illanes &Riesco, 2007; UNDP, 2002b). Similar situations

prompted the Argentinean and Peruvian parlia-ments to enact laws in early 2007 that allowactive workers to return to the old pay-as-you-gosystems, which were also kept in place in thosecountries. In the case of Argentina, tens of thousands flocked to change in the first day, led

by President Kirchner himself (CENDA, 2008).

6

One million secondary students took to thestreets in 2006, demanding the derogation of the

privatization laws inherited from Pinochet –

which the democratic governments had notdared, or wanted, to change. Dismantling of

public institutions and privatization resulted in areduction in the number of students in the publicsystem by over 700,000 since 1974, about a fifthof the total. This process has continued, eventhough democratic governments since 1990 havemade significant efforts to recover public educa-tional expenditure that was cut in half by thedictatorship. Since 1990, nine in every tenstudents have entered private schools that receivestate subsidies; meanwhile, the public systemcontinues to lose tens of thousands of pupilseach year. The poor quality, social segmentation, and inequity of the privatized Chilean educationalsystem – at present, half the students are in private





S31

The government of President Michelle Bachelet,and especially the president herself, is lessidentified with the ‘Washington consensus’model than her predecessors. In fact, the political situation in Chile today is fairly

fluid, and it is not at all improbable that wider protests may erupt, this time involving notonly students or the unemployed from poor

poblaciones

, but millions of salaried urbanworkers as well. Such an occurrence would certainly change the political balance of power,and may finally prompt the end of a period that will probably not outlive Pinochet whodied on December 10, 2006, for long.

All of the above events are taking place in

South American countries that are in later stages of the transition process. In Mexico – the other Latin American heavyweight, apartfrom Brazil, which accounts for one-fifth of regional GDP adjusted for purchasing power parity (PPP) (Draibe & Riesco, 2007b) – thePartido de la Revolución Democrática (PRD),led by Andrés Manuel Lopez Obrador, was onthe brink of winning in the recent elections.The PRD also explicitly proposes the replace-

ment of the neoliberal model by a modern state-led strategy.

In a different scenario, important events aretaking place in Bolivia, Nicaragua, and other

countries that are in the early or moderatestages of socioeconomic transition, as well asin Venezuela and Ecuador, both of which arein full transition. In these countries, movementsthat question the neoliberal model in a radical

manner have surged to power. While all havea common aim of changing the model, the processes are strikingly different from thosein relatively more advanced countries. Themost significant difference between the twois that the main social actors – in the case of countries in the earlier stages of transition – were peasants and the recently migrated urban poor, groups that have been reduced toa relatively small number in countries such as

Argentina or Uruguay, which attained develop-ment decades ago, and in relative newcomerssuch as Chile (Barbeito & Goldberg, 2007;Bonino et al., 2007; Illanes & Riesco, 2007).

The towering and colorful figures of presidents Hugo Chavez and Evo Morales led these processes in Venezuela and Bolivia, joined by the more recently elected PresidentsRafael Correa in Ecuador and Daniel Ortegain Nicaragua. These heads of state model them-

selves after Cuba’s former president Fidel Castro,who, despite his advanced age and recenthealth problems – not to mention the Cubanrevolutionary government’s own tribulations – is highly respected by the masses in LatinAmerica, and increasingly by its elites, as wellas by most of Latin America’s political leaders.In Peru, also a country in full transition,important movements are taking place in thesame direction (Díaz Vázquez & Carranza,

2007; Sagasti et al., 2007). Similar movementsmay erupt easily in many Latin Americancountries that are in early, moderate or fulltransition, as they already have in Paraguayin 2008. They share a popular background,the radical questioning of neoliberalism and a lively confrontation with the administrationof former US president George W. Bush thathave captured the imagination and sympathiesof a wide range of sectors, both throughout

Latin America and internationally.Theirs have not been empty words. For

example, Venezuela and Bolivia, as well as

schools and universities, and families disbursehalf of school fees overall – were so severe thatthey prompted the current student protests and overhauling of the system. Over 70 percent of Chileans believed that schools should return tothe Ministry of Education which, by the 1960s,

had built a decent national public system at alllevels of education that was also free of charge.Overall, neoliberal policies have reduced the total

proportion of students in both public and privateinstitutions in relation to the entire population,from 30 percent in 1974 at the end of thedevelopmentalist period, to 25 percent in 1990,and 27 percent in 2007. At the same time,changes in the population age pyramid have madeit possible to attain full coverage at basic and secondary levels. However, the country has fallenseriously behind at the tertiary level, wherecoverage is still 32 percent, half of those of neighboring Argentina and Uruguay, and far lower than the 98 percent attained by theRepublic of Korea.



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Ecuador, have successfully renegotiated with powerful foreign companies for a fairer redistribution of the large revenues from oiland gas. This has resulted in billions of dollarsin annual revenues being restored to their

rightful owners: the citizens of the countriesthat own these rich mineral resources and areentitled to the significant ground rent theygenerate. By contrast, the neoliberal-leaningChilean governments have not been able todeal effectively with a small group of mostlyLondon-listed conglomerates, which, at present,exploit over 70 percent of the country’s richcopper mines. In 2007, they reaped profits of around $20 billion, roughly the equivalent of

60 percent of the total annual budget of theChilean state, and equal to total public socialexpenditure, and paid around $6 billion intaxes (Riesco, 2008; Riesco et al., 2005).

7

A young giant in the making?

A new kind of developmental welfare state modelseems to be in the making in Latin America.Unlike 20th-century developmentalism, now

the state is assuming a strategic and regulatoryrole, relying on emergent private enterprisefor most economic matters. Its design is based on the models of Western Europe and other advanced regions in the 20th century.This is not surprising, because the new socialstructure also bears a strong resemblance tothose existing in Europe at the time. Its stated purpose could be worded in what the United

Nations Research Institute for Social Develop-ment (UNRISD) calls the construction of developmental, democratic and socially inclusivesocieties (Mkandawire, 2001).

However, the new relevant questions may

be: will the emerging strategy remain confined within the national borders of the differentcountries, or will it evolve over the wider space of an increasingly integrated LatinAmerica? If so, what might be the role of regional social policy in this construction?

The magnitude of the challenges facing arapidly modernizing Latin America exceedsthe dimensions of its present republics – even in the case of the largest.

8

It seems that

strategies designed to achieve a certain minimallevel of autonomy in science and technology,energy provision, fast communication networks,and complex industries (such as informatics,aerospace, and defense), are not possible withintheir current dimensions, at least for mostcountries in Latin America. The challengeof building a modern market itself, with adegree of sovereignty that may enable it tocompete with the major players of the 21st

century, evidently requires a wider space.Latin America appears to be the natural

space for such an institutional construction.The total population of the region approached 600 million in 2007 and will reach around one billion by mid-century, on a par with theworld’s most populous countries (CELADE,

7

The remaining production, as well as over half of reserves, are still in the hands of CODELCO, thegiant state copper company inherited from thedevelopmentalist period. All mineral resourceswere nationalized by President Salvador Allendeand declared ‘inalienable’ even by the 1980 Pinochetconstitution, still in effect. However, a legislativetwist introduced by Pinochet and sustained by thedemocratic governments permitted private companiesto exploit these resources under long-term leases,without paying any royalties or even regular income taxes at all for over a decade. A smallroyalty charge was introduced in 2004 after wide

public dissatisfaction with this situation. However,the new scheme, in practice, reduced the effectivetax rate of the copper companies.

8

In modern nation building, there seems to be atendency toward achieving something thatapproximates a minimum, or optimal, dimension

of the sovereign space. During the 19th century,this dimension seems to have coincided,approximately, with the order of magnitude of the

pioneering Western European countries and, in particular, with Great Britain. During the 20thcentury, the emergence of the USA, a new leader with continental dimensions – and, in a sense, theSoviet Union – stimulated the creation of theEuropean Union. Recently strategic planners, and increasingly informed public opinion, have beenassessing the impact of the emergence of Chinaand India, which may potentially surpass theUSA (Goldman-Sachs, 2003). It seems reasonablethat this idea should be given much thought bystrategic planners in Latin America – and happily,it seems to have been, by some at least.





S33

1996). Furthermore, the population will nolonger consist largely of subservient, ignorant peasants, as it did at the turn of the 20th century,or even masses in full transition, as they aretoday. In two or three decades, at most, the

vast majority will have achieved the status of modern citizens. They will have acceptablehealth standards, full basic and secondaryeducation of reasonable quality, with largenumbers completing a tertiary level of educa-tion as well. The economic projection of the emergence of this huge concentration of qualified, commodity-producing workers willconstitute a sound base for an important market(Draibe & Riesco, 2007b). This could become

a reality if – and this is a big ‘if’ – in addition,Latin America manages to acquire some degreeof sovereign power.

The new state-led development strategy will probably only make sense over this larger, and increasingly integrated, space. However, thereare plenty of obstacles to overcome, not least of which are the large differences in socioeconomic,historical, and institutional evolution of thedifferent countries and regions. These difficulties

may not be insurmountable, especially whencompared with the complexity of unitingmyriad peoples, languages, cultures, histories,and relative levels of development during the process of building Western European nationsin the 19th century, or during the formationof the European Union.

The largest hurdle to Latin Americanintegration is the powerful gravitational pullof the huge economy of its neighbor in the

north – which also represents an immenseeconomic opportunity. In 2002, the GDP of Latin America as a whole, when adjusted by purchasing power parity (PPP), amounted to around 40 percent of the GDP of theUSA. Brazil, the largest country in the region,accounted for a third of this, which meansthat the GDP of Brazil is about 13 percent of that of the US economy (Draibe & Riesco,2007b). Even without taking other aspects of

relative state power into account, where thedifferences are even more overwhelming, itseems out of the question that the USA would

consider surrendering even a minimal degreeof its sovereignty for the benefit of buildingan integrated zone on more or less equal terms.

Surmounting these obstacles requires strongactors committed to integration. Certainly,

the most interested actor will be the emerging bourgeoisie that already concentrates all itsdirect foreign investment in neighbouringLA countries and considers that those who donot “se pasan de giles” (behave like fools), asHörst Paulman, owner of the giant Jumboretail chain once famously declared. The LatinAmerican bureaucracy, which, as a group, is by far the largest, most structured and withthe most stable employment in any country

for over a century, has been a primary actor in the region. It may also seem surprising tomany that the Latin American military, the branch of bureaucracy that is the most powerful,autonomous and strategically aware, is also perhaps one of most important actors behind national integration (CENDA, 2004).

The regional chancelleries are another partof the bureaucracy that have quite consistently been a key driving force behind the process of

national integration. Itamaraty – the Brazilianforeign office – has assumed the leading rolein this respect for decades, despite the presenceof governments of otherwise divergent politicalstances (Pinheiro Guimarães, 2007). Moreover,Brazil has influenced a large number of theregion’s professional diplomats, who have studied at the prestigious Brazilian Diplomatic Academy.In addition, Latin American representationsaround the world officially constitute and operate

as the Grupo Latinomericano (GRULAC).However visionary and powerful the above-

mentioned actors may be, integration will not be possible unless they are able to convincethe region’s new massive social force: theemerging urban salaried middle classes. Inthe present social setting of Latin Americaas a whole, and especially in countries in themore advanced phases of transition, any pro-gressive strategy – especially regional integra-

tion – must include this emerging force as a basic part of the power block required for itto succeed. How is this force to be persuaded



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to support a political alliance that may realizethis strategy?

On the other hand, it has been noted abovethat the current changes in state developmentand integration strategies follow two quite

distinctive and complementary paths. Bothshare the idea of cambiar el modelo neoliberal

(change the neoliberal model), but are quitedifferent in nature and in their socioeconomicfoundations. This difference derives mostlyfrom the presence or absence of a single group:the peasants. The term peasant is used looselyto include recent immigrants, the marginalized,and the urban poor. The integration of LatinAmerica must consider this group if it is to

succeed. This group comprises almost half of the overall population, and there is always thedanger – as tragic historical experiences haveshown – that it may become prey to separatist,nationalistic, and xenophobic sentiment.

Huge and necessary cross-border develop-mentalist projects and the need to build amodern market of 21st-century dimensionscould perhaps be enough to incite businessinto allowing frontiers to be opened to regional

trade, investment, and labor mobility. Perhapsthe strategically minded staff of the bureau-cracies in Latin America are already convinced of the need to partially cede their rather ineffec-tive national sovereignty for the benefit of sharing a more respectable regional stature. Never theless, it is less easy to convincesalaried workers if this move is not associated with their rights and with more concretemeasures of regional social policy for their

direct benefit. Furthermore, in the case of most Latin American peasants and the urban poor, regional social policy measures seemindispensable to motivate them to integrate.Once again, as in 20th-century development-alism, social policies seem to be an essentialcomponent of the state development modelthat seems to be emerging in Latin America.

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