Rise of Socialism in Latin America

By Michael Greaney, first published by www.helium.com; re-posting authorized by author.

After the fall of communism and the dissolution of the Soviet Union in the final years of the 20th century, capitalist pundits loudly proclaimed the “victory” of capitalism. From the presidency of Ronald Reagan to the pontificate of Pope John Paul II and his issuance of the encyclical “Centesimus Annus” on the 100th anniversary of Leo XIII’s “Rerum Novarum” (“On Labor and Capital”), not to mention the economic reforms that seemed to be taking place in Central and South America, even China, everything seemed set for the coming of the capitalist millennium.

It didn’t take too long, however, for the backlash to begin - or at least something perceived as a backlash. As noted in a Time magazine article of 4/11/07, “Latin America’s resurgent left has been a firebrand when it comes to battling poverty, promoting indigenous rights or bashing the U.S.” The question, however, is how real is this perception? American commentators, especially in the self-centered media, have developed a talent for misunderstanding people in other countries as well as Americans.

Costa Rica Minister Otton Solis

As a case in point, during the recent election in Costa Rica, former Minister of Planning Otton Solis was labeled “leftist,” although he was a firm supporter of private property rights for ordinary people and advocated privatizing many of the State-owned enterprises (“Defending the State, Empowering the People: An Interview with Otton Solis,” The Multinational Monitor, September, 1996). As Minister of Planning for Costa Rica in the 1980s, he initiated a project to develop Employee Stock Ownership Plan or “ESOP” legislation under a USAID contract. For this, Time magazine characterized Solis as a socialist-supported leftist in a 3/8/06 article.

Nevertheless, there is cause for concern. Many Caribbean countries have maintained diplomatic and cultural ties with Cuba. Increasingly, noting that the electorate is evidently fed up with the growing disparities in wealth that increasingly characterize world economies, candidates for public office throughout Latin America have promised increases in State-funded benefits to secure election. With the growth in China’s economic and financial clout, newly-elected leftist heads of State have established closer political and economic ties with China, causing Washington to take a closer look at the situation (Hispanic Vista, 5/21/06).

Still, this may be due more to China’s increased economic strength and the declining position of the United States than to the usual suspicion with which many in Latin America regard “the Colossus of the North.” Yes, Cuba’s Fidel Castro and Venezuela’s Hugo Chavez have gained a lot of ground in places like leftist Bolivia and even “conservative” Columbia, but have a somewhat more equivocal position in places like Argentina, Chile, and Brazil, which have also elected left-leaning heads of State. These countries clearly seek to maintain friendly relations with the United States. (Havana Journal, 6/11/06)

Rise of socialism understandable

The election of socialists to high office in Central and South America, while puzzling to capitalist cheerleaders, is perfectly understandable - and is due in large measure to the sort of reforms pushed by the United States that do little to address critical underlying problems. The electoral revolution was further assisted by the fact that, all things considered, there is very little difference between capitalism and socialism as far as the ordinary person is concerned. Both rely on the wage system as the primary means by which the bulk of the population gains its income. Both concentrate ownership of the means of production: capitalism in the hands of a small private elite, socialism in the hands of a relatively small bureaucratic elite. Both (despite all the rhetoric to the contrary) view the individual ordinary worker as fungible, something that can be replaced when worn out, increases in cost, or a reasonable and cost-efficient substitute becomes available.

Driven to desperation by the failure of one system, people switch to the other. They little realize that the basic problem is not the honesty or the corruption of the people running the system, the objective (and non-existent) advantages of one system over the other, or anything except the fact that in neither system are ordinary people empowered with direct and significant ownership of the means of production. As Daniel Webster stated in 1820, “power naturally and necessarily follows property”. Whether capitalism or socialism, then, ordinary people are left powerless because they lack property in the means of production.

Pendulum swing between capitalism and socialism

Humanity will probably never achieve the “perfect” economic system where all drudgery work is eliminated and everyone is free to do the work he or she loves. It becomes imperative, however, for transforming economies - whether capitalist to socialist or vice versa - indeed all the nations of the world, to implement effective programs of expanded ownership of productive assets. The alternative is a pendulum swing between capitalism and socialism (or their various permutations), where any period of stability merely serves as preparation for the next “reform.”

Nowhere is this more evident than in Central and South America, where over the past five years there has been a significant backlash against free market reforms. As noted, much of this may have been the result of well-intentioned, but misdirected efforts on the part of the United States. American foreign aid may have helped to pave the way for many of the Marxist revolutions and expropriations of privately owned enterprises that occurred throughout Asia, Africa, and Latin America since World War II, and the misdirected efforts to reorient the economies along more free market lines.

Handouts do not deliver justice

Handouts by themselves do not deliver justice, nor do they create a more just social order. Because the underlying corrupt system remains in place without any power going to ordinary people, the influx of foreign development funds usually increased the already-wide gap between the rich and the poor. This only succeeded in alienating the people such efforts were intended to help. It also magnified the obvious difference between the rich and the poor: that the rich derive their incomes from the ownership of capital, while the poor lack effective access to capital ownership.

Handouts and the subsequent disparities between the rich and the poor created the perfect political and social conditions for a return to socialism. Like military aid, foreign aid that does not reform the basic flaws in the system is at best a temporary expedient. It may be useful for buying time to attack the social and economic causes that lead to revolution, but by itself does nothing to restructure the system. By not providing the poor in Latin America with the means to become partners in free enterprise growth, the United States wasted resources and lives to no good purpose.

Socialism has the advantage of making people equally miserable

Unless the assumptions and basic approach underlying American foreign policy in Central and South America are changed, the ordinary people of Latin America can only expect more of the same. Socialism at least has the advantage of making most people equally miserable, the ugly vice of envy keeping the extravagances of the powerful under wraps or at least under control.

There is, however, hope. In 1986 the broadly bipartisan Presidential Task Force on Project Economic Justice appointed by President Reagan detailed a proposal to deliver justice to the people of the Caribbean and Central America by sponsoring a program of widespread direct ownership of the means of production. The plan is still viable, and remains financially and politically feasible.

Project Economic Justice

Project Economic Justice was based on “four pillars” of an economically just society:

1) Limited economic role for the State,
2) Free and open markets,
3) Restoration of the rights of private property, particularly in corporate equity, and (what most reform proposals omit)
4) Widespread direct ownership of the means of production.

A similar program called “capital homesteading for every citizen” (from the book of the same title) has been developed for use in the United States, itself plagued by an increasing gap between the rich and the poor, declining heavy industry, and the flight of jobs and capital to other countries. Basic economic laws and institutions largely determine who had access to own the wealth-producing technology, rentable space, critical infrastructure, and other assets of our free enterprise system in the past. This, however, leaves unanswered the question as to who will own and receive the growth profits when new and more productive capital assets are added to the existing capital pie?

Capital homesteading

Answering this critical question, capital homesteading provides a comprehensive blueprint for real change. The reforms would radically simplify and reform tax, money, and credit systems throughout the Americas. This would level the playing field so that every man, woman, and child would have the same access as the wealthiest people to accumulate a meaningful income-producing ownership stake in the future growth of the western hemisphere.

As President Reagan stated in his speech to the members of the Presidential Task Force on Project Economic Justice on August 3, 1987, “I’ve long believed one of the mainsprings of our own liberty has been the widespread ownership of property among our people and the expectation that anyone’s child, even from the humblest of families, could grow up to own a business or corporation”.

The means to establish and maintain economic and social justice throughout the Americas exists. All it requires is leaders with vision to seize the opportunity.

The selected video is a conversation between Harold Channer and Paula Gloria, with Norman Kurland on the phone, explaining Capital Homesteading and related topics (concerning binary economics).