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Bolivia has experienced two decades of unprecedented popular resistance to the consequences of neoliberal policies, resulting in the resignation and flight of its president in October 2003. This unusual book uncovers the reasons and processes behind the rising opposition - mirrored in country after country in Latin America - to this currently fashionable, internationally prescribed approach to economic development. It explores the problems faced by governments in reproducing global strategies at the national level, the tensions between markets and democracy, state restructuring, citizenship and property rights. It points to the problems inherent in retaining neoliberalism as the dominant paradigm in Latin America for the foreseeable future and the unlikely prospect of it putting down real roots of approval and legitimacy.
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About the Author
Benjamin Kohl is Assistant Professor, Geography and Urban Studies, Temple University. Linda Farthing is a journalist who has specialized in Latin American affairs.
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Impasse in Bolivia
Neoliberal Hegemony and Popular Resistance
By Benjamin H. Kohl, Linda C. Farthing
Zed Books LtdCopyright © 2006 Benjamin H. Kohl and Linda C. Farthing
All rights reserved.
Neoliberal globalization: the challenge of maintaining hegemony
In June 2005, Bolivia was in an uproar as hundreds of thousands of people blockaded roads around the country, isolating the principal cities. President Carlos Mesa, in office only twenty months, decided he had no choice but to resign. On 9 June, the Bolivian Congress appointed Eduardo Rodríguez, head of the Supreme Court, to take his place. Protesters so limited access to La Paz, the seat of government since 1899, that the Congress only felt secure meeting in Sucre, the official capital. As the new president assumed office, the social movements, headed by militant neighbourhood organizations, declared a temporary truce to assess how well Rodríguez would address their two principal demands: the renationalization of gas and calls for a constitutional assembly.
Mesa had failed to deal with these concerns, and when Congress passed a hydrocarbons law on 17 May widely perceived as privileging transnational petroleum corporation over national interests, protests erupted. As Mesa stepped down, the demonstrators successfully pressured to ensure that the conservative heads of the Senate and Congress did not assume office. This effort caused the mobilization to lose steam, but as the structural conditions that led to the gas war remain unchanged, social unrest in the ongoing gas war is likely to surge again.
Just twenty months before, on 17 October 2003, 500,000 people, almost a third of the population of the major cities of La Paz and El Alto, took to the streets protesting government hydrocarbon policies. Then, President Gonzalo Sánchez de Lozada – popularly known as 'Goni' – was forced to resign and hurriedly boarded a plane for Miami. In the days before he left, the country was in the throes of the gas war that left almost seventy people dead and hundreds injured. The demonstrators, drawn from a broad coalition of social groups, vigorously opposed Goni's proposal for private firms to build a natural gas pipeline from southern Bolivia through Chile. They took to the streets with slogans demanding 'Gas for Bolivians, not for multinationals' and 'Death to neoliberalism'. When Vice-president Carlos Mesa assumed the presidency, he almost immediately announced that he would consider altering the country's twenty-year commitment to neoliberalism. The hundreds of thousands of Bolivians who drove the president from office made it clear that they would accept nothing less. World Bank and US embassy officials, however, hastily cautioned that embarking on such a course could cost Bolivia the international support it needed for economic stability. This lightly veiled threat was a warning that Bolivia, in the midst of its longest period of democratic government, could unravel into even deeper poverty and chaos.
This book places the events of October 2003 to June 2005 in the context of two decades of neoliberal globalization – policies that subordinate the broader public interest by privileging the private sector while minimizing the role of the government in production – in over 100 of the world's low- and middle-income countries (World Bank 1990, 1996, 1997; Gill 2003; Peet 2003). The Bolivian case is of special significance as it dramatically demonstrates what can occur when the construction of what Richard Peet (2003) has labelled a 'global hegemonic neoliberal regime' confronts resistance in national and local arenas. Even though national governments have largely been unable to imagine alternatives to the onerous conditions laid down by international financial institutions (IFIs) and private investors, the sacrifices neoliberalism demands from the poor majorities of the global South increasingly propel them to rebel against its premises and policies. This resistance can impinge upon government's ability to guarantee the political stability needed for private firms and markets to function (Robinson 2003; Amoore 2004; Kingsnorth 2004).
Neoliberal theorists use two central arguments to support their claims that markets, not states, should determine economic investments. First, they contend that freer markets guarantee greater economic efficiency and faster growth as private firms wrest control of the economy away from governments inherently incapable of matching the efficacy of multiple individual economic actors (Friedman 1962; Fukuyama 1992; Donaldson and Wagle 1995). Second, they insist that formal western-style democracy is the only political system that ensures what they consider the fundamental goal of the state – guaranteeing individual economic freedom, an objective they maintain is best achieved by limiting the areas of government action. Such a definition of democracy orients political participation to the voting booth; freedom, therefore, becomes complete market control in the sphere of economics and electoral participation in the sphere of politics.
Linking economic liberalization with democratization leads to the promotion of what neoliberal proponents call 'market democracy'. In this context, markets refer to minimally regulated capitalist economies in which the economic freedom of individuals is not only 'an end in itself' but also 'an indispensable means toward the achievement of political freedom' (Friedman 1962: 8). In low-income countries, neoliberal policies encompass the privatization and reduction of public services, strengthening local and national formal democratic structures, and the devolution of central state responsibilities to the local level through administrative decentralization.
Development policy-makers, especially those at institutions such as the World Bank and the International Monetary Fund (IMF), conceive free markets and democratic institutions as mutually entwined and contend that when they are combined, they lead to higher rates of growth and more stable political structures. This argument has been widely discredited by researchers, both at the theoretical and empirical level (Oxhorn and Ducatenzeiler 1998; Waisman 1999; Barrera 1999). We concur with their conclusions, and our book contributes to comprehending how liberalizing markets interact with expanding formal democratic structures. The conflation of democratic concepts with free markets, we argue, is part of an ideological project of establishing (or maintaining) a hegemonic neoliberal regime that favours the private sector over the public interest.
This book examines how neoliberalism fundamentally transforms the role of the state – both in terms of the economy and in relation to its own citizens. In instituting the important neoliberal goal of shifting the state from a key player in the economy into an arbiter of its rules (Friedman 1962: 25-32), the difficulty of developing regulatory institutions is routinely underestimated. A bureaucratic transition typically occurs, as the regulatory ability of the government lags behind economic restructuring. During this period, private entrepreneurs and public officials alike create new forms of rent-seeking to replace the corruption previously associated with government enterprise (Feigenbaum and Henig 1994; Schamis 2002).
While the connection between global economic interests and the privatization of state-owned enterprises (SOEs) is straightforward (Williamson 1993; World Bank 1996, 1997; Friedman 1999), the links between these global interests and political decentralization are not so immediately apparent. Neoliberal reformers promote decentralization both as a means of improving government efficiency and of increasing political stability in low-income countries by channelling dissent away from confrontational public protest and into a more manageable electoral process (Robinson 1996). These efforts, however, do not always yield tidy election-oriented politics, as new political openings can facilitate greater protest by impoverished majorities. Particularly given the increase in inequality that has universally accompanied neoliberal policies (Beneria 2003; Kurtz 2004), democratic reforms can threaten the ability to implement or maintain economic liberalization (Oxhorn and Ducatenzeiler 1998; Waisman 1999; Kurtz 2004).
In building a market democracy, states often face the contradictory need to maintain citizens' rights while allowing markets a free rein (Robinson 1996; Rankin 2001). Policies that simultaneously champion the civil and political rights associated with markets, private property and electoral politics frequently undermine the social rights to education, health and welfare (Ferge 1996; Garcia 1996; Roberts 1996; Turner 1997). As international institutions such as the World Trade Organization (WTO) remove barriers to capital mobility, perhaps the greatest threats to social citizenship rights come from governments increasingly awarding firms the property rights of citizens, yet requiring them to fulfil few of the responsibilities associated with citizenship (Sassen 1995; Bakan 2004).
As Bolivia has served as a social laboratory for the policies of international institutions for over twenty years, it provides an excellent case for understanding these issues. The country has often been cited as an early neoliberal success story in international development policy literature (Sachs 1987; Graham 1992). Ex-Harvard economist Jeffrey Sachs, for example, established his reputation and gained rock-star status among mainstream development economists for his role in designing Bolivia's structural adjustment programme (SAP), which was credited with reducing the country's annual inflation rate from 20,000 per cent to 9 per cent. Sachs's model became the basis for SAPs implemented by the IMF and the World Bank around the world (Sachs 1987). To minimize the associated negative social impacts, Bolivia became the first country to implement social emergency funds to create temporary jobs for thousands of workers. These programmes, too, were widely copied elsewhere (Graham 1992).
Following the Cochabamba 'water war' in 2000, Bolivia was suddenly catapaulted on to the world stage as an inspiration for opponents of neoliberal globalization as it proved that popular resistance to restructuring is possible (Finnegan 2002). Neoliberalism, which had been accepted by national governments of various political stripes as 'inevitable' or as 'common sense', is increasingly widely perceived as a form of neocolonialism. Bolivia graphically illustrates how neoliberal economic restructuring can be a principal source of political instability in developing and transition economies. The inability to maintain neoliberal hegemony at the national level has been marked by the government's steady loss of legitimacy and its growing reliance on force to maintain control. We believe that such social and political crises are the predictable result of current practices of neoliberal globalization, and that these call its long-term political viability into question.
In the remainder of this chapter we describe neoliberalism as an economic theory and then as a set of policy and programmatic practices. We draw on the concept of hegemony to discuss how, at the international level, neoliberalism functions as a hegemonic regime imposed in large part by international governance agencies and financial institutions in collusion with national elites. The contradictory interplay between markets and democracy under neoliberalism is described, as is the impact of neoliberalism on the different roles played by government. Finally, we discuss how neoliberalism provokes the growth of counter-hegemonic resistance movements.
Neoliberalism, with roots in the classical liberal political economy of Adam Smith, is based on a particular set of ideological assumptions about the relationship between the individual and the state. In classical liberal theory, written 200 years ago, the state's coercive power was interpreted as the primary threat to individual freedom. Peet, in a broad-brush definition, writes that neoliberalism 'is an entire structure of beliefs founded on right-wing, but not conservative, ideas about individual freedom, political democracy, self-regulating markets and entrepreneurship' (2003; 9). Neoliberalism changes the accepted terrain of state activity and reduces social spending as the state abdicates its formal responsibility for providing certain services and/or transfers responsibility to the private sector (Feigenbaum and Henig 1994).
While numerous scholars have contributed to the formulation of neoliberal theory, Frederick Hayek (1944), Milton Friedman (1962) and, more recently, Francis Fukuyama (1992) are generally recognized as articulating its theoretical foundations. These neoliberal theorists contend (i) that the ideal society is composed of utility-maximizing individuals with perfect information who engage in free exchanges in free market democracies; (ii) that free markets, which they also call competitive or capitalist markets, need democratic governments to operate most efficiently; and (iii) that the combination of a free market economy and a democratic government is not only more economically efficient but also socially desirable. They link personal freedom with progress and economic development, and privilege economics over politics as the primary organizing force in society. While democratic government is necessary for capitalist markets to function freely, free societies should limit the sphere of government. Hayek describes the purpose of democracy as 'essentially a means, a utilitarian device for safeguarding internal peace and individual freedom' (1944: 70).
In Hayek's seminal work, written towards the end of the Second World War, western society is seen as, 'above all, an individualist civilization' (ibid.: 14). He contends that during the 'modern period of European history the general direction of social development was one of freeing the individual from the ties which had bound him to the customary or prescribed ways in the pursuit of his ordinary activities' (ibid.: 15). This increasing economic freedom, he argues, led not only to rapid economic growth and the development of science and technology but also to 'the undesigned and unforeseen by-product of political freedom' (ibid.). Hayek equates all governmental planning with socialism (ibid.: 33–6) and maintains that, through planning, government exerts a coercive power that poses the greatest single threat to individual freedom. He argues that even minimal infringements of property rights represent a step on the Road to Serfdom, the title of his widely-cited work.
Friedman, in one of his key works, Capitalism and Freedom (1962), posits that competitive capitalism, 'as a system of economic freedom and a necessary condition for political freedom' (ibid.: 4), provides the only guarantee for a free society. As does Hayek, Friedman maintains that government regulations – whether limiting economic activities or requiring contributions to social security – deprive citizens of some 'essential part' of this freedom (ibid.: 9). He defines political freedom as 'the absence of coercion of a man by his fellow men' and suggests that '[b]y removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power' (ibid.: 15). For Friedman, government should restrict its role to that of 'rule-maker and umpire' of productive activities rather than that of participant. A market orientation serves not just to increase overall economic efficiency but also provides the more crucial function of limiting the scope of government action, thus reducing the chance that a majority can exercise tyranny over a minority.
Francis Fukuyama asserts that market-driven, western-style democracies form part of 'a coherent and directional History of mankind that will eventually lead the greater part of humanity to liberal [capitalist] democracy' (1992: xiii). He converts the fundamental goals of neoliberalism – a competitive market economy wedded to a representative democratic political system – from simply representing a superior system to marking the end goal of human development. While Hayek opposes planning because it leads to restrictions of individual freedom, Fukuyama maintains that planning limits innovation. He argues that the inferior macro-economic growth in socialist, state interventionist and social democracies explains the worldwide drift towards competitive capitalism. However, Fukuyama believes that the parallel trend towards increased formal democracy around the world cannot be understood by a causal link between economic and political freedom alone. In contrast to Friedman and Hayek, he contends that 'democracy is almost never chosen for economic reasons but rather stems from a totally non-economic drive, the struggle for recognition' (ibid.: 135). This struggle is headed by what Fukuyama calls the 'thymotic man', an individual committed to political freedom and dignity. This freedom, according to Fukuyama, can be fully experienced only in a democratic society.
Excerpted from Impasse in Bolivia by Benjamin H. Kohl, Linda C. Farthing. Copyright © 2006 Benjamin H. Kohl and Linda C. Farthing. Excerpted by permission of Zed Books Ltd.
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Table of Contents
Introduction: Entre fiestas y bloqueos (Between fiestas and blockades)
1. Neoliberal Globalization: The challenge of maintaining hegemony
2, From Francisco de Toledo to Jeffrey Sachs
3. The Neoliberal Invasion: Structural Adjustment and the New Economic Policy
4. The Neoliberal Reinvention of Bolivia: The Plan de Todos
5. Privatization Bolivian Style
6. Municipal Reform, Social Movements, and New Electoral Politics
7. The Neoliberal Wars: Water, Taxes, and Gas
8. Global Trends and Local Responses