This is the second in a series of articles that use extracts from Oxford Professor, Edwin Williamson’s The Penguin History of Latin America, to help international investors today learn from the region’s past…
Latin American nationalism underwent a transformation after the Second World War, when the US finally replaced Great Britain as the supreme global power. Having defeated the Axis countries, and finding itself in a cold war with the Soviet Union, the USA was concerned to consolidate its spheres of influence and spread its liberal-democratic values abroad. In Latin America it disapproved of dictatorships, but it also, as elsewhere, feared communist influence (membership of Latin American communist parties had increased fivefold overall during the war).
In 1948, therefore, the USA was instrumental in founding the Organisation of American States with the aim of promoting regional co-operation and protecting member countries against external aggression. In the early 1950s the USA concluded mutual defence pacts with several Latin American governments (as it had done with West European states) in order to bring Latin America into the structure of worldwide strategic defence against the growing international power of the Soviet Union. These pacts were an extension into the cold war of the military alliances established during the recent world conflict; US armaments, military training and economic aid for Latin American industrialisation were exchanged for raw materials and geopolitical loyalty.
For their part, Latin American governments in the post-war years were anxious to show democratic credentials in order to maintain the flow of US loans and investments which they needed to finance import-substituting industrialisation (ISI). The aim of this nationalist economic policy was to build the capacity to manufacture at home the industrial products which would otherwise have to be imported from the developed world in exchange for raw commodities.
So, in pursuit of US aid and investment, Communist parties were banned or excluded from power; dictators put away their fascistic trappings and held elections. In Chile the Radical government suddenly outlawed the Communist Party, its recent partner in a Popular Front which held power throughout the 1940s. Getúlio Vargas in Brazil, Fulgencio Batista in Cuba and Juan Domingo Perón in Argentina all turned to the ballot box. Despite the fact that nationalism had emerged as a reaction to the classic liberalism of the creole elites, nationalist governments now tried to reach an accommodation with the more egalitarian democratic liberalism championed by the USA. Meanwhile, the USA offered financial and technical assistance despite its professed disapproval of state intervention in the economy.
How did Latin American democracies compensate for the lack of a genuine political consensus to support them? Governments had recourse to the practices of traditional societies: patronage and clientelism, though adapted as necessary to the conditions of developing economies. Political scientists have called this phenomenon ‘natural corporatism’, because even though attempts in the 1930s and 1940s to institutionalise a fully-fledged corporate state had largely failed, the nominally democratic post-war states continued to try to reconcile rival interest-groups by co-opting their leaders into a system of mutual bargaining for privileges and benefits.
“Where once the Iberian monarchies had been the supreme source of favours in their American dominions, now the developmental state could act as the central dispenser of patronage… “
The extension of the state’s activities through ISI facilitated this process. Where once the Iberian monarchies had been the supreme source of favours in their American dominions, now the developmental state could act as the Central dispenser of patronage, offering concessions, licences and subsidies in return for political co-operation. State intervention in the economy brought forth new webs of intereses – businessmen, industrialists, professional associations, trade unions – whose welfare often depended on the decisions taken by bureaucrats and politicians. The object of these interest-groups, therefore, was to influence public policy so as to extract the best deal for themselves in the distribution of the national income. The government, in turn, would seek to appease as many intereses as it could so as to weave them into a fabric of favours and rewards that might keep the social order from breaking down.
Elections were just one of the means by which aspiring clienteles tried to assert their claim to patronage from the state. Others might include various forms of threatening behaviour such as strikes, demonstrations and even riots. For instance, after the serious student rioting that shook Mexico City in 1968, state spending on universities rose sharply and the government adopted a markedly left-wing rhetoric so as to defuse the threat of further trouble from that quarter.
Natural corporatism tended to encourage populism, the phenomenon whereby a politician tries to win power by courting mass popularity with sweeping promises of benefits and concessions to large interest-groups, usually drawn from the lower classes. Populist leaders lack a coherent programme for social change or economic reform, but try to manipulate the existing system in order to lavish favours on underprivileged sectors in return for their support. One of the most successful populist leaders in Latin America was Eva Perón, who won idolatrous devotion from the urban masses of Argentina in the late 1940s and early 1950s, particularly after she established a semi-state charitable foundation, to which businessmen and other interest groups were invited to contribute funds.
Natural corporatism was, then, the means by which historically weak states tried to buy off disorder and maintain a tolerable degree of stability in order to conduct their industrial revolutions. But from the late 1950s, as ISI in the advanced countries moved into the ‘hard’ phase of developing capital-intensive heavy industry, the soaring rates of inflation and unemployment made social conflict between intereses increasingly hard to remedy through patronage or co-option. The Peronist unions in Argentina proved impossible to woo back into an electoral system run by Radical governments. Getúlio Vargas’s democratic government in Brazil was destroyed by irresolvable conflicts between the demands for higher wages from the labour unions and the anti-inflationary measures advocated by industrialists and exporters. And in the 1960s Chilean democracy showed dangerous cracks, as parties of the right, centre and left sought to pull the economy in different directions.
The great political problem for Latin American governments from the 1950s through to the 1960s was how to control inflation without sacrificing social welfare. Since political authority tended not to coincide with economic power, the corporatist largesse of the state had its limits: democratic governments proved unable to take effective control of the export-economy and were too weak to remove the inefficiencies and injustices of the vast haciendas by redistributing land. In these circumstances the effect of natural corporatism was to increase the strong inflationary pressures which industrialisation itself generated. And so democratic governments were torn between the high spending required to improve living standards and the anti-inflation programmes needed to stop the rise in prices which fuelled wage demands and undermined the earning power of exports.
“But after the Cuban Revolution reformism was challenged by a revolutionary socialist nationalism that advocated the destruction of the capitalist economy as the only way of integrating political and economic power in a strong, legitimate state .. “
Despite the extensive influence of the USA in the post-war years, political debate was still dominated by nationalist themes. Until 1959 this nationalism was mostly reformist in outlook, seeking to extend the powers of the state over the economy without destroying economic pluralism. But, after the Cuban Revolution, reformism was challenged by a revolutionary socialist nationalism that advocated the destruction of the capitalist economy as the only way of integrating political and economic power in a strong, legitimate state capable of pursuing balanced industrial development.
The desire for a strong state was not confined to the revolutionary left. By the 1970s, traditional export elites, seeing their interests threatened as much by inflation as by economic nationalists, often looked to military intervention for a release from the turbulence of electoral politics. For, as in the inter-war years, it was still the armed forces which, in the last resort, held a veto on the conduct of government, regardless of the façade of liberal democracy that had been established in many countries in order to attract the Yankee dollar.