Friday, 24 January 2014

LATIN AMERICA: Economic Prospects for 2014 and Beyond

The world-wide monetarist policy intended to strengthen the value of hard currencies, especially the euro, has resulted in pressures on economies to lower public debt by adopting austerity measures. No country is free of this pressure, because of the inter-dependent nature of money and trade transactions impacting the entire world system. The question is the degree to which the IMF-style monetarist road has impacted poorer nations and the lower and middle classes around the world. Clearly, we have empirical evidence that the wealthy are doing just fine and that capital concentration has risen sharply amid the economic downturn of 2008-present. Hedge funds benefited even from the crisis-ridden countries at the expense of the middle class and workers taking a hit on their wages and benefits.

After a number of southern and eastern European countries underwent formal and informal austerity that resulted in high level of unemployment and a drop in living standards, in 2014 it appears that Latin America maybe next in line to take a big hit from the global trend of monetarism and austerity; policies that result in wealth concentration and transfer of wealth from the poorer countries to the richer where there is safety. Not just Argentina that has been struggling with its own economic troubles ever since it opted to remove the IMF from the picture and try its luck on its own since 2001, but even Brazil, Latin American economic miracle, has been showing signs that it will be facing monetary pressures and possibly resort to fiscal austerity.

Brazil has been critical of IMF-EU austerity policies imposed on the debtor nations in the last three years, but it now finds itself facing pressure from hard currencies countries to lower debt and strengthen their currencies that have been losing value. The result of this road to austerity entails further socioeconomic polarization and transfer of wealth from the lower and middle classes to the hands of the few domestic and international capitalists. Similarly, monetary inflation has touched Venezuela that has relied on oil to keep its economy going, and even Chile that has the most pro-West and most diversified trade policy in Latin America.

Venezuela's efforts under the late Hugo Chavez to create a regional trade bloc that would act as a buffer zone protecting it from the US and EU have not worked. Thirty-three Latin countries signed the “declaration of Caracas” to create the Community of Latin American and Caribbean States as an economic and political bloc that excludes the U.S. and Canada.While in theory the Chavez-inspired bloc looks good on paper, the reality is the dominant global economies, especially US and EU, have the trading and investment power to influence the course of Latin American economic future, just as they influence the economic future of most of the world.

More than anything, Latin Americans fear that they may not be that far away from the fate of Greece that has been the poster child of how austerity can destroy a country's political stability, social fabric and economic prospects.  Latin Americans have a long experience with their creditors making borrowing expensive and bankrupting them just as their prospects begin to look promising. The debt cycle in Latin America has been a way of life from the late 19th century until the 1980s. They also know that debt crises are a way for foreign and domestic capitalists to lower asset values, including labor costs, and to transfer wealth from the region to the US and Europe.

Latin Americans who have studied the history of debt crises also know that in the aftermath of global economic contractions, there is retrenchment that takes place, and that means capital transfer from the periphery to the metropolis. This in addition to the fact that monetary inflation in the debtor nations necessarily means that those with liquid assets will transfer them to areas with hard currencies.

The question in 2014 is whether Latin America is about to undergo another massive transfer of capital owing to monetary inflation, followed by austerity, with all of the economic, social and political consequences of what that entails. One sign so far of danger ahead is the weakened currency values, owing partly to weakened GDP growth in Asia and EU hit hard by austerity. The IMF has been advising the Latin republics to reduce public debt and undergo general fiscal restructuring, combined with further privatization programs. The austerity apologists backing IMF monetarism for Latin America argue that Argentina has done a very poor job in managing its economy by refusing the Fund's advice in 2001 and going on its own. Given that extreme poverty in 2001 stood at 11.6% and below poverty line at 35.6%, while in 6.5% in 2012 - caveat: estimates dependent on the source and they do vary.

The world economic outlook for the year is better at the start of 2014than it was six months ago, but only because markets have been rising owed to massive capital concentration. The ILO warned that world unemployment will continue to rise, despite the so-called economic recovery in the US. Economic outlook for Latin America does not look as promising today as it did a year ago, despite the regional growth forecast at 2.8% and probably much lower if austerity measures go into force. The outlook remains unchanged for the larger republics, except for Venezuela and Brazil that will experience contraction. 

Brazil is too big and its trade and investment policy too diversified for the US to intervene as it used to via the CIA destabilizing the regime and installing one of its own choosing. The best that can be done is to exert influence through IMF, World Bank, other inter-American organizations and through banks and multinational corporations. Because Brazil's economy is so large and diversified, it is not in the interest or ability of the US to impose austerity and destabilize the country merely because it wishes greater role in the country's economy. Venezuela, Ecuador, Bolivia, and Nicaragua are all governed by anti-US regimes and would fight all IMF-style monetarist and austerity policies that would create havoc socially, economically and politically.

Inflation has hit Venezuela hard, but not as bad the rest of Latin America. The IMF-EU-US pressure to adopt monetarism/austerity would ease inflation, but it would entail the following: 1. much slower economic growth; 2. even greater external borrowing to service existing debt; 3. capital flight; 4. lower living standards as prices for everything from food to utilities will rise; 5. sharp cuts in health and education; 6. weakened labor movement and middle class. This is not to say that life has been easy for the people of Argentina in the past dozen years trying to make it outside the confines of IMF austerity. It is true that inflation, shortages of many products, uncertainty owing to the isolation the country feels because its creditors refuse to accept a haircut of the debt, and domestic and foreign investors that refuse to put money in the country because they demand IMF-style austerity under a low inflation regime that favors capital.

Modest inflation actually redistributes income downward toward the lower classes, while austerity and monetarism entail income concentration toward the wealthy social groups. If Latin American governments resist the pressures to adopt formal or informal austerity, 2015 will probably be a much year year for the region, while if they opt for IMF-style currency devaluation and fiscal reform they can expect a two-to-four year period of contraction. The lessons learned from southern Europe, if not from their own past experience with the IMF must be to resist the monumental pressures from banks, multinationals and the US and EU to go the route of Greece, Portugal and Spain. Continuing along the path of regional economic cooperation and national capitalism to the degree possible is far more beneficial for the vast majority of the people than austerity and monetarism.

Finally, the people of Latin America who have a long history with IMF-style austerity measures resulting in increased poverty and military dictatorships must ask themselves if the people of Argentina, at least the majority of the people, are better off today than they would have been if the government had permitted the IMF to inject its doses of monetarism, fiscal austerity, downward pressure on wages and salaries, weaker labor laws and a weaken national economy aimed at exporting instead of serving the domestic market. Without trying to minimize the suffering of the people in Argentina, the question is whether they would have been better off under IMF. In case they are unsure, let note that Greece has 60% youth unemployment and 28% overall official unemployment, with some economists advising the ministry of finance that it may not be a bad idea for young people entering the workforce to accept either whatever wage the employer offers or no wage at all for year! Such are the results of IMF-style austerity!

Tuesday, 21 January 2014


Pope Francis has grabbed headlines because conservatives of all sorts, from economic and political to cultural and religious, fear that this Latin American Pope may be a bit too left, and all because he has criticized materialism and greed in the world we live. I am convinced that if Jesus Christ were to return, the same people, institutions and media expressing concerns about Pope Francis moving closer to Socialism would have the same concerns about the founder to Christianity that has elements of collectivism and human-center values within it, instead of materialistic values.

Pope Francis asked the fundamental  question about the root of ills in society and the answer he gave was inequality, an answer that terrifies the handful of wealthy people who own most of the assets on this planet, while the vast majority struggle to survive. If the Pope delivered a message of "spiritual" equality as a right for all people, then the wealthy elites, the media, politicians and pundits acting as apologists for the wealthy would not have a problem. But crossing over from spiritual equality into material one poses a major threat to the status quo. Now that Communism is no more, here comes a Pope who dares to interpret the word of Christ literally and dares to apply it to the realities of peoples' lives.

Pope Francis is actually taking the Vatican and by extension the Catholic Church to its popular base that has been diminishing partly because of scandals, but also because of the increasing secularization of society that deems religion anachronistic in the age of space travel when there are scientific explanations for everything. The Papacy's history in the last fifty years is not particularly a shining example of purity and spirituality, but rather an institution serving political purposes that are arch-conservative, an institution mired in sexual scandals without end, an institution with all kinds of banking-money scandals linking it to corrupt politicians and even to the mafia. For Pope Francis to take over and reach beyond the traditional elites that the Vatican has been interested represents a common sense move imbedded in the instinct for survival and competition with other institutionalized religions.

Pope Francis has deliberately decided to sideline the conservative leaders of the Catholic church, including US bishops historically reactionary and opposed to social justice, largely because the decadence and corruption of the institutions rests with the conservative elements of the Church hiding behind the veil of respectability. That Pope Francis recognizes the decadence of society rests in the hierarchy of the institution, in the hierarchy of the political and financial world and media is a testament to his pragmatism, not Socialism as critics have insisted. Although he insists that he has no political ideology, he is clearly against the concentration of wealth and rise in poverty, for he too knows that a tiny percentage of the world's population owns the lion's share of wealth, while one-third of the planet's people linger in abject poverty.

It is absurd that the Catholic Church has the power to transform the politics of any nation, though it is equally absurd for politicians to go against a strong religious institution. With 1.2 billion faithful behind it, of which 78 million are Americans, the Papacy is a powerful institution but under the leadership of Pope Francis it is only expressing the concerns about the decadence and injustices of capitalism that people already know. Catholics live in the real world and see what is happening around their neighborhood as well as around the planet, where human life has no value but money is the new God to worship.

American talk-radio show hosts known for their extreme right-wing propaganda have devoted a great deal of their work to defame Pope Francis as a Marxist, merely because he speaks of human-centered values, instead of capital-centered ones; because the Pope warns against the hypocrisy of clergy in a manner not that different from Martin Luther 500 years ago; because he argues that the Church is not the walls of the cathedral or its clergy, but the people and their daily needs. Is there any doubt that the critics of Pope Francis would crucify Jesus Christ because he too would dare question the unjust institutions of our time?

Besides attacking the injustices of the political economy and social structure, Pope Francis has also tackled the controversial issues of women's rights and sexual orientation. Conservatives, preferring to live secret lives of hypocrisy while openly advocating rigid restrictions on woman's right to choose and sexual orientation, are upset that Pope Francis has addressed abortion and gays by deviating from the traditional condemnatory position of the church. Preferring to have scandals involving clergy swept under the rug and to turn a blind eye to the reality of abortion, conservatives question where the "populist Pope" is headed when he goes out of his way to reexamine the church's position on such issues while embracing the prostitutes, prisoners, the poor and even non-Catholics as though they were human! In short, conservatives are confused why Pope Francis is acting in the manner Christianity calls him to act. Why deviate from a centuries-long tradition of popes aligned with dictators, the very wealthy, the corrupt elites for interested in having the masses remain docile under the cross.

Conservatives detest that Pope Francis has been apologetic for the institution that has a very long history of scandals that have been well publicized, and even the United Nations has acknowledged as legitimate concerns when it comes to children. That the Vatican has agreed there is no excuse for child abuse is one thing, but that it has called for an even stronger UN is offensive to conservatives that see the UN as an evil international organization trying to protect the rights of defenseless people around the world. Not only did Pope Francis admit that there are too many scandals to mention and that they have been very costly in terms of money and reputation, he has actually sided with the critics that the institution must change. The critics, including UN, favor greater respect for children, human rights, and interfaith cooperation; all of these things that are an anathema to conservatives, especially to Americans who want to make sure that religion is a tool for keeping the masses docile and accepting of the existing social structure and political economy, instead of questioning it.

Pope Francis is hardly a Socialist, no matter what variety of Socialism one chooses from the earliest traces of it in the 16th century to the present. This is a pope who did not take over to change the social structure of society, the political regime or the economy, but to extend a helping hand of compassion to the masses that needed most. Instead of fronting for the elites that have been using the Catholic Church as a tool to maintain and strengthen the existing institutional structure of society, the new pope is trying to clean up the decadence of the institution he inherited so that it has some semblance to what Christianity teaches. Critics who insist he is a dangerous Socialist are merely disappointed that Pope Francis is not following in the same corrupt and elitist tradition of previous popes. Why all the right-wing propaganda about the head of the Catholic Church, a historically right wing institution? The answer is fear that this institution is adding its voice to the critics of a societal structure that is systemically decadent, protecting the privileges of the very few at the expense of the many.

Tuesday, 14 January 2014


The phenomenon of globalization and the tendency toward nihilism on the part of many people around the world is a subject that has received some attention in recent writings, largely in academic circles. Because ordinary citizens feel that their voices do not matter, because they see that only the political and socioeconomic elites have a say in what happens to the destiny of a society, some become fatalistic and nihilistic. This group rejects that there is anything citizens can do to change society for the better of all people, or even the majority; they feel that those who enjoy power have always determined the destiny of the rest and nothing changes in this respect, despite the advent of modern means of mass communication.

The sense of helplessness and powerlessness forces some not only toward nihilism, but toward the belief that "free will" is itself an illusion for the ordinary person and a reality only for those exercising political, economic and social influence. The more radical nihilists believe that being a nihilist is itself not a choice, but rather something that the institutional structures impose upon the masses in order to reduce them into docile instead of active sociopolitical role.

Originally introduced during the French Revolution by German philosopher Friedrich Heinrich Jacobi, the concept of nihilism deals with the individual's state of mind as the dominant societal institutions shape it through experience. In this respect, nihilism, by rejecting or at least redefining socialization, morality, faith, ideology, has been of interest to those in social sciences and humanities and it became part of political groups from the 19th century to the present. Just in case the reader misinterprets the concept of nihilism and associates it with relativism, or even worse, "just do your thing", or "decorate your home the way you feel", far from it. This is about exercise of human will and rejection of institutional forces that shape the human being into a commodity, affording it value accordingly.
There is no contradiction between nihilism and activism as history has shown in 19th century Russia, and 20th century Italy, France, and Spain to mention a few countries where nihilists have been immersed in class consciousness. Second, there are varieties of nihilism from Anarchist to Apocalyptic and Existential. After Greek sophists were the first to establish the ideological foundations of nihilism, 19th century Russian and European intellectuals and activists constructed varieties of nihilist ideologies to express discontent with the status quo and at the same time offer a vision for the future. There are indeed varieties of nihilism from Bakunin and Nietzsche to modern-day “Apocalyptic Nihilism” that may be a definition to which many in the western world understand when they use or encounter the term. There is of course Nietzsche’s rejection of the ABSOLUTE and thus the implied absence of values other than ‘power’, and Sartre’s definition that human freedom is in essence negative from which creativity stems. 

In every historical epoch society’s social order in general and hegemonic elites specifically are determined by the political economy. From the late Middle Ages until the last Absolutist monarch in Russia, European kings used ‘Divine Right Principle’ to rule on behalf of spiritual and temporal lords, to the detriment of serfs, workers, and the middle class. Resting on the Enlightenment (Locke and Rousseau) the French Revolution introduced ideology as the basis of representative (of the bourgeois elites) government; a development that would have a far-reaching influence in most of the world throughout the 19th and 20th centuries until the Bolshevik Revolution that used ideology to exclude former elites and justify regime theoretically representing the working class. 

Whether ideology has been used by bourgeois hegemonic elites to justify conformity to a political economy and institutional conformity essentially designed to perpetuate the social order or whether by Marxian elites to justify forging of a new social order, ideology has been dynamic. Lenin had to modify Marxism to conform to Russia’s pre-industrial social conditions, and then he had to modify his own ideology against the reality of serious problems the country was facing during and after the Civil War. Similarly, F. D. Roosevelt had to redefine the ideology on which American political economy and all institutions were based against the reality of the Great Depression. Oblivious to the needs of the population, Stalin and the elites backing him used ideology as a vehicle to justify ruling like Ivan the Terrible. 

In China, Confucianism served the emperors well for centuries in a society that was fairly self-contained, until self-containment in the age of imperialism entailed the decline of China and the imperial system. Again we see that stagnation resulted from the failure of rulers to reject Confucian ideology and embrace reality of change. Ideology under Mao moved society forward, given he inherited chaos that the war lords and imperialists had left behind. After trying the Great Leap forward and Cultural Revolution, Mao embraced d├ętente and opened China to integration with the West. China as one-party state directs a capitalist economy and is no longer committed to the ideology of the 1940s, or 1950s, or 1960s. In the post-Cold War era of the 1990s and throughout the first decade of this century business elites were greatly elevated in stature. However, a series of market and economic crises since WWII have shaken popular confidence in the propaganda business elites have been using to perpetuate the existing system and their privileged positions. 

Why does the early 21st century feel like the new "Age of Anxiety", in a sense a repeat of the interwar era right after the First World War and amid the Great Depression when people were losing faith in bourgeois institutions and the rationalism of the Enlightenment on which society was built? Why does the following quotation from the Erich Maria Remarque, All Quiet on the Western Front, (1929) have such a strong message to deliver to the youth of our time?

"I am young, I am twenty years old; yet I know nothing of life but despair, death, fear, and fatuous superficiality cast over an abyss of sorrow. I see how peoples are set against one another, and in silence, unknowingly, foolishly, obediently, innocently slay one another. I see that the keenest brains of the world invent weapons and words to make it yet more refined and enduring. And all men of my age, here and over there, throughout the whole world see these things; all my generation is experiencing these things with me. What would our fathers do if we suddenly stood up and came before them and proffered our account?"

Is Western Civilization experiencing a new Age of Anxiety because globalization under neoliberal policies has devastated middle class society and its institutions? Is nihilism the only thing that makes sense until society finds its way back to a more harmonious, socially just and creative path?