When the International Monetary Fund questions in their 2005 Annual Report why their picture-perfect neoliberal policies have failed in Bolivia, the book Impasse in Bolivia offers an explanation. The authors, Benjamin Kohl and Linda Farthing set out to explain the construction of the neoliberal state in Bolivia from 1985 to 1999, and the "difficulties that neoliberalism encounters at national and local levels when trying to establish its legitimacy in developing countries." They suggest that the Bolivian economy has been an experiment for neoliberal economists, and that its lessons are applicable globally.
In their introduction, the authors set up Bolivia, the first country to rebel against Spain, and the last to be liberated, as an example of what can happen when globalism meets resistance. Through that lens, the book contextualizes the social uprisings that have, since 2000, caught the eye of the international press as reactions to two decades of neoliberal globalization. While this is a claim that has certainly been made before, Farthing and Kohl are the first to take it on as a thesis, and to lay out an extensive body of well analyzed supporting evidence.
The term neoliberal has been a popular demonizing adjective in leftist critiques of governments for the past 20 years, often used as a blanket term to describe all perceived evils, from free trade agreements to corruption to oligarchies to unemployment and high costs of living. While Kohl and Farthing do explain how neoliberal policies can inherently lead to those ends, they begin by establishing contextual definitions of the terms neoliberal and hegemony. Their explanation of the evolution of these terms in the first chapter allows the uninitiated to gain a nuanced understanding of these often overused and under-defined words, and for the initiated to understand the specific contexts in which the authors intend to use them. This section makes the book at least theoretically accessible to the non-academic reader. Their premise is that, though neoliberal economic policies were "hegemonic," that is, viewed as common sense, inevitable and incontestable. However, their negative effects on Bolivia’s standards of living lead to social instability, leading the government to use military force to impose them, in turn showing its own failures and creating more anti-hegemonic resistance and protest.
According to the authors, global neoliberalism privileges international markets, privatizes state businesses, and reduces state services and sovereignty, while at the same time concentrating elite wealth and reinforcing poverty for the majority. While neoliberal policies supposedly go hand in hand with western style democracy, governments are often all too willing to use force to implement unpopular changes. Behind this use of force, the international finance community can always use its power by abandoning a dependent country, such as the case of Haiti.
However, Farthing and Kohl go farther than to criticize neoliberal policies for their less than impressive outcomes, but rather take the time to explain the intended goals of these policies. By systematically laying out the premises of neoliberal economists, that private enterprise are supposedly more efficient and less corrupt than state-owned enterprises and services, and that free markets coupled with western style democracy will supposedly lead to stability and economic growth, Kohl and Farthing put themselves in a convincing place to tear down these beliefs. They counter these claims with the assertion that, since the privatization and reduction of state services widens the gap between the rich and the poor, extending poverty, neoliberal policies can’t create stability, and that they certainly didn’t in Bolivia.
Bolivia before Neoliberalism
For 25 years, the World Bank has described Bolivia as a "low to middle income country," but the authors point out that Bolivia has the low human development index for Latin America, and is within the top third of the most unequal countries in the world, with the highest rates of rural poverty in the world. Even before neoliberal policies took hold, Bolivian wealth was far from equally distributed. Rural workers, 44% of the work force, produced 70% of Bolivian food, priced to sell cheaply in cities, not to benefit the farmers. Migration to cities, or migration as agricultural workers, kept families afloat, while 2/3 of urban workers were employed in small, often family-run businesses. Hazardous terrain for transport of goods, and political instability continue to frighten international investors away from Bolivia, which, until the 1990’s had no paved roads into other countries.
In the second chapter, Kohl and Farthing give a brief pre-neoliberal history of Bolivia from the 1545 discovery of the Potosí silver mines to 1985, in which they identify three themes in Bolivian history that continue today: first, the appropriation of wealth by international and national elites, which serves a minority, such as the famous case of the Potosí silver mines, subjecting the economy to the "boom and bust" roller coaster of international prices. Second, resistance by the indigenous majority, through labor, for land, rights, only gained citizenship in 1952, and third, tensions between regions and the power centers of the country, due to "incomplete geographical integration."
The authors describe these tensions as causes of instability which have led Bolivia to hold the world record of over 150 coups d’etats since it independence in 1825. Since the "liberator" Simon Bolivar set out to write Bolivia the "world’s most liberal constitution" for the "most independent nation," Bolivia has written 16 constitution and 6 reforms, and is in the process of writing a new one. Though many of these constitutions have been liberal with rights, they have seldom been enforced.
Bolivia’s resistance to the hegemony of international control of resources continued after the divisive Chaco War with Paraguay, which, according to the authors, went the farthest of any event to create a sense of Bolivian national identity. After the war, which many hold to be the creation of two completing oil companies, popular understanding of the causes of Bolivian poverty resulted in the confiscation of the property of Standard Oil in the late 1930’s, constituting the first confiscation of a US multinational corporation. The revolution of 1952, led by elite intellectuals of the MNR (Revolutionary National Movement) and supported by miners, agricultural workers and other impoverished Bolivians, slowly fell apart when the MNR took power. Changes were forced upon leaders by social movements, especially the Bolivian Workers’ Center (COB). While leaders were forced by their bases to make changes, such the redistribution of land, the changes were often enforced incompletely, if at all.
One change that was made, albeit with drastic results, was the nationalization of mines and gas industries. In 1985, 70% of the Bolivian economy was in state hands, in 158 State Owned Enterprises (SOEs) from mining to airlines to telecommunications. Mining was the largest industry, but as the price of tin, a major export, dropped, the state owned mining company COMIBOL was in trouble. Governments took profits without reinvesting in infrastructure, and international contracts were controlled by privately owned mines. By 1985, COMIBOL had lost 300 million dollars.
Farthing and Kohl establish the 1970’s as the time when new models of trade liberalization and globalization came together. The idea that International Finance Institutions could work to encourage free-trade policies and privatization of state industries came to be known as the "Washington Consensus" (20). New Economic Policies (NEPs) met with support in Latin American countries from business sectors, and from a public weary of chaos and economic crises. Support from the military and military dictatorships discouraged dissent.
Creating a Neoliberal Bolivia
In the third chapter, neoliberalism in Bolivia starts in 1985. At that time, the Bolivian economy was suffering from hyperinflation, and could no longer pay its loans. When President Paz Estenssoro won the early elections that year, it only took him three weeks to implement Latin America’s "second most neoliberal reform," Pinochet’s reforms in Chile being the first. The plan was designed for Paz Estenssoro by US economist Jeffrey Sachs, and ‘Structural Adjustment Programme'(SAP) for Bolivia was the first in the world. These plans, created by powerful nations for ‘developing’ countries make use of countries’ dependence on foreign aid as motivation for governments to implement neoliberal policies. A majority of countries to except structural adjustment plans have seen a fall in life expectancy. SAPs became the favorite tool of the IMF and other International Financial Institutions as a way to enforce neoliberalism in Latin America, Africa, Eastern Europe and beyond.
Under later president Sanchez de Lozada, the government offered new guarantees to protect foreign investment and directed 2/3 of public income to pay for debts. Debts were reorganized with "debt swaps," but where one debt shrank, another grew. "In the 1980’s, Bolivia was a net exporter of capital," the authors write. Once the party of the Revolution of 1952, the MNR now became the party of neoliberal policies.
Another characteristic of neoliberal policy pointed out by the authors is its opposition to organized labor. Farthing and Kohl describe part of the construction of neoliberal hegemony in Bolivia was the deconstruction of the Bolivian Workers’ Center (COB). Before the COB was dismantled in the 80’s it had huge organizing power. Once the New Economic Policy (NEP) was put in place, organize it did, leading to protests of teachers, transportation workers and ex-miners. In 1985, the government sent 143 strike leaders into inaccessible parts of the Amazon, and fired other organized workers. NEP policies alternately repressed, coopted and ignored labor organizations, promoting "labor flexibilization." Under the NEP, labors could be hired and fired at will, with out union protection.
When one source of funding, such a State Owned Enterprise, is taken away, others must step in. One interesting critique that Farthing and Kohl make is of NGO’s, which they describe as structures which, along with the Church, often go hand in hand with the implementation of neoliberal economic policies. When a state adopts neoliberal policies and cuts back on social services, services provided by NGOs and the Church often step in to fill the gap. NGOs help transport funding to rural areas, taking over state roles in building infrastructure and social investment. Their dependency on international donors also makes them less likely to question inequalities and economic policies. While the services they provide give necessary support, they can also serve to reduce visible impact of such policies. In general, policy makers consider NGO’s to be more "honest" and efficient, capable of setting goals to get better results than the government.
In Bolivia, the sectors of society hard hit by the new policies also had help from the booming cocaine industry. From the mid 80’s to the late 90’s, the authors point out that an equal amount of families were supported by the cocaine industry as those displaced by the New Economic Policy. The NEP legalized US dollars in the Central Bank, thus, according to Kohl and Farthing, legalizing the laundering of Cocaine profits. Remittances, money sent to Bolivia from family members living in other countries, along with smuggled contraband provided most of the funding for new jobs and capital investment.
Neoliberalism and Democracy
In chapters four and six, Kohl and Farthing take on controversial legislative changes in civil and social rights and democratic participation. They discuss President Sanchez de Lozada’s Plan de Todos and the later Law of Popular Participation, little analyzed legislations that changed both Bolivian standards of living and electoral processes, as well as concepts of citizenship and civic participation. Here the authors explain the often contradictory goals and effects of neoliberal policy. In Kohl and Farthing’s analysis, the goals of these legislations were explicitly undermined by the way they were carried out, in some cases creating programs without funding, other times cutting funding out from underneath crucial social programs. These disasters lead to civil unrest, often creating the opposite of their intended effects. Instead of creating a less corrupt, decentralized government of voting citizens, the law simply decentralized corruption, and created a new sense of participation in disenfranchised social sectors, leading to the empowerment of new indigenous social movements. The authors describe this process as the implementation of "if-then" policies in "yes-but" environments.
Though neoliberal policy makers often claim that democracy is an essential part of creating a successful neoliberal state, Farthing and Kohl use the example of Chile to disprove this idea. Bolivia’s NEP in 1986 included a new electoral law, meant to "improve democratic functioning." In effect, the law reduced minority parties, thus benefiting the top 3 majority parties. In the next election, those parties combined got less than 2/3 of the vote. It also made parties more important than unions, thus consolidating power in elite political organizations. All of these policies sought to limit the power of the state, and in so doing, to cut down on corruption and patronage, and to transfer industries to private, supposedly more efficient, companies. Farthing and Kohl question why exactly policy makers would believe that private companies would necessarily be less corrupt than state companies.
The authors also speculate as to what the definition of democracy is to a neoliberal economist, who wouldn’t want "too much democracy," as democratic initiatives can create a sense of entitlement for previously excluded groups, leading them to demand their rights as the negative effects of neoliberalism (job loss, taxes, higher cost of services) take place. Under the New Economic Policy, the lack of inclusion of indigenous sectors in tandem with the weakening of the Bolivian Worker’s Center (COB) led to the emergence of a rebellious and organized indigenous sector.
Bolivia was hailed as a great success, but an essential point that the book makes is that ‘economic success,’ as measured by International Financial Institutions, does not necessarily translate to a rise in the standards of living of the majority. While the neoliberal adjustments made in Bolivia in 1985 did control hyperinflation, they also lost over 35,000 jobs, sent wages down a third, took away job security, sent the responsibility of school funding to regional governments, and cut social services. Presidents enforced the policies by imprisoning well informed union leaders and other dissidents.
For Bolivians, perhaps the biggest symbol of these changes was the nationalization of State Owned Enterprises. Privatization plans sold off industries that formerly generated income for state run social services. In chapter five, Farthing and Kohl describe the process through which mines, gas, airlines, telecommunications and trains were sold off into private hands, often for dollars, with the promise of future investment. Even told through the steady, analytical tone of the authors, the examples are chilling. A national train system was dismantled and parts moved out of the country by a Chilean business. Airplanes were sold for dollars, and the company paid over $2,000 a month to rent an office in Miami, while it already owned an office. A British mining company went bankrupt while working in the biggest tin mine in Latin America, owing what was left of the state mining company COMIBOL over 99 million dollars.
In chapter seven, Kohl and Farthing finally arrive at the social and political outcomes of these years of neoliberal political domination: popular outcry leading to wars in the streets. They reiterate the ways in which neoliberal economic and social policies lead to the creation of a new opposition in the form of indigenous and cocalero [coca-grower] parties, most effectively in the MAS party, lead by cocalero Evo Morales. They briefly outline campesino uprisings and popular "Wars" of 2000 to 2003, including the Water War, Tax War and Gas Wars. Their conclusions link the causes of these conflicts to past economic policies and historic conflicts, placing them in a context and continuum as well as their own historical moments.
Perhaps it is due to the authors’ impeccable research and precise wording that the last chapter, entitled "Global Trends and Local Responses: Contesting Neoliberalism," falls flat after the rising tension of earlier chapters. Kohl and Farthing return to their analysis of neoliberal hegemony, and the ways in which violence fractures it and social movements contest it. Their reiteration brings closure to their argument, but they lose momentum when they argue that national resistance movements are limited in terms of their rejection of global market pressures. The solution, they claim, is a global movement that will construct an anti-neoliberal discourse, but do not specify how such a movement would be created, and what exactly it would do.
An Academic – Economic Picture of a Human Phenomenon
Though the book is certainly created with policy makers and academics in mind, it is a valuable tool for those simply seeking to gain an extensive and well-structured analysis of the International Financial Institutions’ work in ‘developing’ countries, and the unintended effects that their policies can have. However, for the non Bolivia-fanatic reader, the book may prove a challenging read. The formal structure of the chapters makes for both easy use by researchers and redundancy for the casual reader. Every section begins with an introduction of what will be proven, the chapter proves it, and the conclusion reiterates the claims made in the introduction.
Absent from the book is the human situation so eloquently pictured on the cover. Policy practices described in books such as the also recent Empire’s Workshop, by Greg Grandin, give more human faces to policy makers and victims, allowing the book to serve both academic and recreational readers. Along with their exhaustive research, the authors were surely in a position to provide more than the three illustrative anecdotes in the book, which come as colorful, if meager, relief to the reader. If repetitive passages in Impasse were replaced with more pertinent anecdotes and interviews the result would have been a more illustrative, human book. The book alludes to the human face of economic policies, but never fully illustrates them in a way that would make for wider readership and a deeper impact.
Activists looking to find a fast paced description of vibrant Bolivian social protest movements hinted at by the dynamic cover photo, may well be disappointed. In fact, Kohl and Farthing take on the more difficult, if less romantic, work of analyzing the causes of these movements, and, true to that goal, the focus of the book stays there, setting aside only one chapter for description of recent social protest movements. However, by the time that chapter in the book and Bolivian history arrives, the reader has no doubt as to why.
April Howard is an editor at www.UpsideDownWorld.org, a website uncovering activism and politics in Latin America. Email April.m.howard(at)gmail.com
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