The Pink Tide Consumes Itself

9/12/07 Salon Blanco: Banco del Sur.

A decade ago the far left was exhibiting a certain triumphalism. They may have become irrelevant in the West and lost their shining star in the East, but a new hope had emerged for them in Latin America. Following the crash of the ‘90s socialists of various shades had come to power in Ecuador, Bolivia, Argentina, Brazil, and most prominently in Venezuela. This was the so called Pink Tide, flooding Latin America to drown economic liberalism.

Of course, when economic liberalism goes political liberalism is rarely far behind. All of the pink tide countries have seen corruption become rife as government officials given absolute power do what people with absolute power do.  Argentina, Bolivia, Ecuador and especially Venezuela have also developed a habit of political repression, whether assaulting and imprisoning journalists and oppositionists, arbitrarily seizing assets, censoring criticism or covering up official statistics that paint their regimes in a bad light. So what, said the far left, they’re standing up for the worker!

This blasé triumphalism is far less in evidence now. The commodity boom that had hidden the extent of the damage done by the pink tide is no more, and so it has begun to recede.

Argentina had inflation rates safely above 25% and likely around 40% for the last few years, cooking the books to make it appear lower, and a stagnant economy creaking under the weight of heavy-handed state programmes. These circumstances gave a shock win to the centrist Mauricio Macri, who has set about untangling the web of corruption, bringing transparency to official affairs and beginning to control inflation.

Brazil is undergoing a recession that has already wiped out a decade of growth, with a ballooning deficit driven by a bloated public sector, experiencing growing inflation while much of its political class is implicated in gross corruption scandals; the popular President Lula da Silva, for instance, was found to have embezzled millions from the state oil company. Its immense potential is being squandered. The discontent this engenders has yet to bring a new force to power, it has provided the win in the sails of President Dilma Rousseff’s impeachment for showering political allies with ‘stimulus’ money. It may take many years for a serious new direction to be embarked on, but there are no longer any illusions that the current path is the right one.

Corruption, hyperinflation and shortages of basic goods have led Venezuela, too, to reject Chavismo. This can be seen in the landslide win for the parliamentary opposition. Unfortunately the Maduro regime and its cronies in the judiciary have effectively stripped their parliament of its powers while Chavez’ policies are shored up by even greater censorship, repression and state-mandated slave labour. This doubling down on Chavismo will do nothing to cure Venezuela of its woes, so bad that starving civilians allowed over the border with Columbia cried when they saw food, but will drive it further down the road to being a failed state.

Ecuador and Bolivia, repressive as they are, have been less effected only because they are less Marxist in practice than rhetoric: their vaunted nationalisation of foreign gas and oil production was in fact a nationalisation of the controlling share of profits made by foreign companies. Both are fairly laissez-faire towards the informal and semi-informal sectors that account for most of the employment and economic activity in their nations. Both have expanded international trade and restrained government budgets. The natural gas boom has also helped, especially in Bolivia where natural gas accounts for 45% of exports.

Even the supposed successes of the pink tide are much less than they seem. Economically liberal countries like Peru, Colombia, Mexico and Chile have not only been growing strongly and without regular shortages, but they have been similarly effective at driving down poverty (see fig 1) and all without trampling roughshod over the rule of law, experiencing hyperinflation or pressing their people into serfdom. Illustrative of this is the difference in GDP per capita growth between oil-rich Venezuela and resource-poor Chile (see fig 2). Note too that Chile has seen poverty plummet from 50% to less than 11% since 1975.

Figure 1

Fig 1. Poverty reduction in Latin America

Figure 2

Fig 2. GDP per capita growth in Chile and Venezuela

To put it another way, the pink tide savaged half a continent in return for nothing. The far left will never admit they were wrong: so long as the strongmen are shaking their fists at ‘neoliberalism’, the suffering of Latin Americans doesn’t much matter, and can probably be written off with inane conspiracy theories involving American economic sabotage. Fortunately the far left is also powerless. Recovering from the pink tide will be like recovering from a drug addiction: it will take years, it will be difficult, but it will be worth it, and it will give recovering countries the chance to reclaim the immense potential they’ve previously missed out on. Now that the pink tide is dying, the recovery can begin: that is a cause for celebration.

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