Bariloche meeting on Socio-Economic Inequity in Latin America 

On 26-28 May 2006, Pugwash held meeting no. 319 in San Carlos de Bariloche, Argentina.

Third Pugwash Workshop on Socio-Economic Inequity in Latin America: In search of Equity with Development

Workshop Report by Darío D’Atri  and Walter Scheuer (available in Spanish)

The Third Regional Workshop “Towards the Solution of Economic Iniquity and its Social Consequences in Latin America” was held in San Carlos de Bariloche, Argentina, from May 26 to 28, 2006, within the framework of a Pugwash Study Group. This workshop continued the work begun at the two previous workshops of the same name, held in 2003 and 2004. It covered 7 sessions on the subjects listed in Appendix I at the end of this report.

Like the previous workshops, this one was organized by Grupo Bariloche para Ciencia y Asuntos Mundiales (Grupo BACyAM) and held thanks to the generous support of Pugwash Conferences on Science and World Affairs, the Subsecretary for Science, Technology and  Development of the Ministry for Production of the Province of Rio Negro and the following businesses located in Bariloche: Centro del Copiado, Hayland Travel, Aerolíneas Argentinas (Bariloche branch) and Aerolínea LAN Argentina (Bariloche branch).

The workshop was attended by 19 participants, including one Brazilian, one Chilean, one Spaniard with extensive experience in Latin American affairs, one Peruvian, one Venezuelan and 14 Argentines, all specialists in different socio-economic and scientific-technological disciplines. Appendix II at the end of this report provides a mini curriculum vitae for each of them.

The meeting was held in memoriam of Joseph Rotblat, Nobel Peace Prize 1995 and co-founder of Pugwash Conferences on Science and World Affairs, who died on August 31, 2005. Like thousands of other people around the world, the organizers of this workshop feel that the name Joseph Rotblat is a synonym of dignity, unlimited dedication to the cause of world peace, uncompromising intellectual honesty, lucidity, modesty, leadership, and many other qualities. In his memory, Karen Hallberg, as member of the BACyAM Groupremarked:

“We are holding this meeting in memoriam of Sir Joseph Rotblat, one of the founders of the Pugwash Conferences and a man of Science and Peace. Jo was born in Warsaw in 1908 and died in London in 2005 after a life fully committed to nuclear disarmament and the social responsibility of science.

The crossroads in his life came up while he was one of the physicists working on the Manhattan Project at Los Alamos (USA). When it was clear during WWII, that the Germans would not be able to make an atomic bomb, he was the only scientist who decided to quit the project based on moral reasons. On that occasion he said: I knew a little bit more than other people about what was going on. So I knew that it would begin an arms race and that the hydrogen bomb would come in. And then, for the first time I became worried about the whole future of mankind.

Since then his life was devoted to raise awareness of the consequences of scientific research and the social implications of technological developments, especially the enormous risk of nuclear weapons.

Together with several of the most prominent scientists of that time, in 1955 he signed the Russell-Einstein Manifesto which was the founding document of the Pugwash Conferences for Science and World Affairs. Its last paragraph reads: There lies before us, if we choose, continual progress in happiness, knowledge, and wisdom. Shall we, instead, choose death, because we cannot forget our quarrels? We appeal as human beings to human beings: remember your humanity, and forget the rest. If you can do so, the way lies open to a new Paradise; if you cannot, there lies before you the risk of universal death.

Ever since the first Pugwash conference held in 1957, Jo has been its moral and executive leader, which led the Nobel Committee to award him, together with the Pugwash Conferences, the 1995 Nobel Peace Prize <for their efforts to diminish the part played by nuclear arms in international politics and, in the long run, to eliminate such arms>.

We hold this workshop in his memory with the conviction that the ideal of a peaceful world can only be achieved if it is based on the principle of equity and justice for all humankind.”

Within the framework of the workshop, the activities carried out for the general public and followed by extensive debate were (i) a round table on “Prospects of political-economic models in Latin America, in the face of the new center-left forces taking power”, with the participation of Aldo Ferrer, Jorge Katz, Bernardo Kosacoff, Francisco Sagasti and Beinusz Szmukler and (ii) a meeting on “The new Latin American political map as from the governments of Chávez, Kirchner, Lula and Morales”, with former congressman Mario Cafiero and Enrique Vila Planes as speakers.[1] The first of these events was attended by about 140 people, and the second by about 90 people.

Introduction

The following text presents an overview of the issues dealt with during the workshop. The text does not reflect the personal opinions of the authors, but simply presents the issues that were discussed, the different points of view expressed and the proposals made. However, the way it was done and the final product are the exclusive responsibility of the authors. Further information about Pugwash Conferences on Science and World Affairs, the Study Group, the First and Second Regional Workshops, the Grupo BACyAM and the papers discussed during the workshop itself, as well as those contributed by people who were invited but unable to attend due to previous commitments, may be viewed at www.bacyam.com.ar.

The Third Regional Pugwash Workshop “Towards the Solution of Economic Iniquity and its Social Consequences in Latin America” was held with one main objective: to work out a list of concrete proposals to complement the previous stages of diagnosis of the economic, social and institutional situation in Latin America (Regional Pugwash Workshops 1 and 2, held in Bariloche), and to provide viable, valid alternatives and paths towards solutions, in the face of the critical and daily worsening scenario of iniquity and deficient income distribution that permeates the region.

The Final Report does not focus too much on the discussions regarding the changes which have occurred in many Latin American countries between 2002 and 2006, along with major processe of economic growth. It aims, rather, to offer a compendium of the interpretations and proposals presented by different participants with regard to the core of the debate: how to tackle the problem of iniquity.

Finally, a list of the suggested solutions is given. These are recipes which, far from embodying a complete strategy for tackling iniquity, aim to provide examples of possible actions that could be taken by governments, political parties, NGOs and other social and institutional organizations.

1. The blame and the ills

The fact that the three discussion workshops on socio-economic iniquity in Latin America organized by Grupo BACyAM coincided historically with the downfall of the Washington Consensus and the neo-liberal policies applied in the region during the 1990s, focused the debates on the profound social and economic change brought on during democratic times by the consolidation of unbalanced, unfair patterns of wealth distribution.

The categorical diagnosis that was the outcome of the two previously held workshops is already known: during the 1990s, in most of the countries of the region arose a situation characterized by the failure of the ideal of “wealth trickling down”; too much confidence in the disciplinary role of the market; slower growth, with fiscal crisis and increasing external deficit; a drop in productive investment; weakening of the innovation system (foreign outsourcing or elimination of the capacity for generating technology at various levels); funding cuts and privatization of health and education; labour reforms that weakened the relations between capital and work in favor of capital; dismantling of the State; consolidation of oligopolic economies; disinvestment in infrastructure and national financial systems at the service of the concentration of wealth.

At the same time, the analysis carried out during the discussions held in Bariloche included a special point of attention regarding the “institutional problem”, i.e. the political and juridical framework in which it was possible to consolidate “pro-market reforms”, which currently, in some countries of the region, are undergoing thorough modifications whereas, in most of them, partial modifications which imply an intent by the government to moderate the mandates coming from the market are being implemented. In this regard it was pointed out that that institutional framework, defined largely by processes which concentrate decision-taking in the Executive Powers, or even by direct, discretional control of the Legislative and Judicial Powers, is essential in explaining why processes of concentration and socio-economic iniquity which were formerly unthinkable have developed in such a short span of time, with most of them becoming structural.

The rapid concentration of wealth, it was said, came hand in hand with the access to power during the 90s of governments that were easily influenced by the doctrines summed up by the Washington Consensus. However, for this to happen, there had to be changes in the historical workings of the Latin American democracies, with an imbalance of power in favor of the executive organs and the uncritical support of the Legislative and Judicial Powers, functional to the neo-liberal or neo-conservative reforms.

Nevertheless, the participants in the latest meeting in Bariloche made a clear distinction between the time of the outcome of the nineties’ crisis, back in 2001 and 2002, and the current geopolitical situation in the major Latin American countries. Most of them are undergoing ambiguous political processes, although in most cases they include, with varying intensity, some attempts to revert the main economic, juridical and political lines that were consolidated during the nineties.

One of the key issues debated was the association between governability and viability and fiscal balance. During the 90s, the loss of governability was directly associated to the fiscal crisis. In contrast, for the last 3 or 4 years, the opposite has happened – there has been an increase in governability along with the recovery of economic command as a result of a healthy fiscal situation.

Far from a clear optmistic view, but certainly not as pessimistically as reflected by the Final Report on the First Workshop (Bariloche 2003), the participants in the Third Workshop placed most of the blame or responsibility on the governments of the region, as to smoothing the trend of blaming only the Washington Consensus and external conditioning for all the ills affecting Latin America.

2. New diagnosis – reserved and hopeful

As stated above, the debates in the framework of the Third Pugwash Regional Workshop focused on producing a list of recommendations that could be observed by governments and private institutions. This list arose from the prior analysis of current macroeconomic contexts of the Latin American economies. These economies show a clear trend towards primary production, in accordance with biased investments, which are low anyway, aimed at limiting Latin America to the role of provider of raw materials.

During the analysis, when the macroeconomic factors conditioning iniquity were broken down, the group focused its attention on Argentina. This may have been partly due to the fact that the meeting was being held in Argentina, but the main reason was Argentina’s sorry record of increasing iniquity since the mid-70s. It was pointed out that the difference between the wealthiest 10% of the population and the poorest 10% increased from 12 times in 1974 to 47 times in 2001 and 31 times in May 2006. It was stressed that this figure – which is but one of the scores of indicators outlining the complex scenario risen as a consequence of the inequitable distribution of wealth – is scandalous to any external observer of social reality in Latin America. However, it was stated that this is merely a sample of the immediate, direct consequences of the mid-70s decision to abandon the incipient “welfare state” models and replace them with economic and institutional formats characterized by the State not taking charge of responsibilities, unrestricted trade liberalization and lack of long-term policies for economic growth accompanied by equitable development.

Moreover, it is not surprising that participants felt the need to do something about the huge black hole of social injustice, consolidated from the mid-70s, when each State, in its own time and following different patterns, entered into a process of continuous dismantlement, leaving aside its role in the economy, as well as its duty of ruling among sectors, and ignoring the most basic forms of social support and organization. Participants consequently included suggestions focusing explicitly on this issue.

Now, five years after the beginning of the end of the most controversial phase of the Washington Consensus, the professionals at the meeting in Bariloche found most of the main countries in Latin America and the Caribbean having populist center-left governments. To varying degrees, these governments seem to have common axes in policies that attempt to re-found the presence of the State by establishing criteria to moderate or assuage the harshest effects of the rule of market laws. Nevertheless, it was noted, these attempts are usually permeated with authoritarian decision-taking which, encouraged by the present fiscal circumstances of plentiful funding, aim more at consolidating clientelistic political models, which tend to repeat patterns of inequality and concentration of power, rather than fight against them. In practice, it was said, governments like those of Brazil, Argentina or Venezuela, which used very different models for overcoming the crisis and putting an end to the neo-liberalism of the 1990s, have allocated a large part of the surplus resources to setting up programs of social welfare for the millions of inhabitants who live below the poverty and indigence lines, but they have advanced very little in implementing strategies for the sustained development of their economies.

The Pugwash regional workshops organized by Grupo BACyAM noted a situation that implies a substantial change in the position of these governments compared to what happened up to the seventies. The macroeconomic balance promoted by the Washington Consensus as the philosopher’s stone of the new economy, but which is in fact a rule of thumb in the oldest of economy books, is a prior condition which even the most populist or leftwing of current governments no longer deny.

Moreover, it was noted that fortunately, there is currently an awareness of the existence of a central problem consisting in the inefficiency of resource allocation. During the 90s in Latin America, public expenditure rose by 40%, in spite of which poverty and inequality increased. This points to the overbearing need for reform both of the State and of civil institutions, in order to enable more efficient resource allocation.

In addition, it was highlighted that because it is not realistic to think of models for the wealth distribution without macroeconomic sustainability, Latin America should try to work out the answer to whether or not its comfortable macro situation is a bubble, and consequently, whether to keep current surplus as anti-cyclic funds, or to use it to generate more fair socio-economic conditions, or whether to seek a reasonable balance between the two alternatives. In this regard, it was pointed out that if over the next three or four years, Latin America does not take advantage of its current greater power of negotiation and movement provided by its comfortable macroeconomic situation, it runs the risk of losing the chance to launch programs for technological and scientific development, educational reform, tax reform, and reform of the relations with foreign investors.

From a strategic standpoint, in political terms, it was said that growth is unsustainable without a rapid process of redistributive investment to attend to the urgent needs of large sectors of society that do not have time to wait for processes of economic growth to become consolidated. Social inclusion is a tool for sustaining development and growth.

3. A window of opportunities

Beyond a certain pessimistic vision issuing from the diagnosis regarding the extent to which indicators of socio-economic iniquity in Latin America have worsened, the overall tone of the debates at the Third Pugwash Regional Workshop was one of expectation, as a result of what its participants called a “window of opportunities” at which the region stands.

There are unprecedented situations of fiscal surplus due to increasing prices of raw materials, complemented by national contexts in which lessons have been learnt from the financial crises of the 90s regarding the risks of economies being too open to financial capital and with a too overvalued currency.

At the same time, the current prevalent social consensus in Latin America, which rejects the negative social and economic changes caused by the sudden withdrawal of the State, creates a political atmosphere that encourages governors to take increasingly pragmatic decisions. This has a twofold consequence, which has both a positive and a negative side. On the one hand, Latin American governors seem to be more independent than they were 10 years ago regarding the policies inspired by orders from the International Monetary Fund, for example. On the other hand, decision-taking has become more markedly centered on the Executive Powers, leaving aside consensus and the role of political opposition.

The sum of these factors seems to create a potential scenario for change and transformation, even if it requires starting up a process of political consensus, which is not one of the strong points of many of the populist, center-left governments.

At the same time, taken as a whole, the governments in the region are acting in response to urgent situations, which seem to hide a dangerous inclination to consider the current international economic boom as a permanent scenario. At the Bariloche meeting, a warning was issued regarding the risks involved for Latin America in the event of an abrupt change of these circumstances (high commodity prices and interest rates that are still low), which could give rise to a crisis like the one that occurred in Latin America in 1982.

From a structural standpoint, most governments have not yet learned to consider what might happen in the long term. Although they are aware of the changes that are beginning to become consolidated in the productive structures of their national economies, they do little or nothing to direct those transformations towards sustainable growth with equitable development.

4. Proposals for action against iniquity suggested at the Third Pugwash Regional Workshop

In accordance with its agreed upon agenda, the debates at the Third Workshop produced an extensive set of proposals regarding the economic, social, institutional, and juridical profile of Latin America. The suggestions are based on a realistic view of the possibility of putting them into practice. Although some of them may sound as idealistic, they aim to generate viable structural changes which, let us acknowledge, are only beginning to arise in the minds of idealists.

The following is a summary of those proposals:

• To adopt a criterion of “macroeconomy for equitable development”, in contrast to a “macroeconomy for stability and for paying the foreign debt”, as a starting point for developing socio-economic programs which, within a frame of sustainable macro balance, aim at redistributing income and achieving social equity.
• To re-establish the essential role of the State as coordinator of this model of social organization,  as provider of public goods and as regulator of fair, democratic labor and labor union relations, since without a “coordinating State” the preceding proposal is not feasible: allocating resources and determining priorities cannot be left in the hands of the market.
• To implement the development of socio-economic programs within a framework of international insertion, giving priority to fair, inclusive local growth, and avoiding the use of internationally successful models without first carefully adapting them to the range of local conditions.
• To apply juridical principles of equity and proportionality, particularly when implementing the necessary tax reforms, in order to make the tax collecting systems more efficient and fairer. This should include as a priority the introduction of both a tax on financial income and a system for controlling capital movement.
• To drop the erroneous assumption that social and economic iniquity can be countered by means of policies that promote a culture of assistentialism, since this type of policy degrades the dignity of the people and keeps them in a permanent “under age” situation in their standing as citizens. On the contrarory, to generate policies addressed to extensively include popular sectors of Latin American society, enabling them to take active part in designing programs, projects, productive units and mechanisms aimed at helping them overcome their situations of social exclusion.
• To encourage governments to promote processes for regional and international insertion, particularly Mercosur and the South American Union, based on conditions and strategies to guarantee fair trade among countries, the support and/or developing of programs for sustainable economic growth and the care of the environment. In particular, to priorize the development of internal potentials, whether national or Latin American (aiming at “being self-sufficient”).
• To speed up the elimination of mechanisms that condition national and regional policies through international financial organizations and globalized business enterprises, as well as to prevent the appearance or consolidation of new conditioning factors related to patents, trade, technology transfer and others.
• To denounce bilateral agreements that the USA wants different countries in the region to sign as a shortcut due to the failure of FTAA, because these agreements work against the balanced development of the region and hinder or ultimately block the horizontal relations between countries in the region.
• To allocate a large proportion of the greater resources obtained through tax reform to financing equitable redistribution programs. These programs should consider changing aberrant aspects of tax structures and of costs of services, which both benefit members of higher and middle social levels, to the disadvantage of the poorer ones.
• To recreate the role of the State to generate conditions that promote domestic savings, which, in Argentina, give rise to 90 % of capital accumulation (compared to 10 % generated from foreign investments). This would enable credit to be provided to SMEs and companies that are unable to access private financing systems, including credit management at subsidized rates for developing productive units.
• To set as targets for the economic programs, models of international insertion aiming at drastically increasing exportations per inhabitant. This implies: to redesign production models; to establish value chains; etc., and, in particular, to retrieve local cultural values in order to increase the basis of the exporting potential of Latin American nations; to introduce State policies aiming at increasing the added value of exports; and to improve and/or to develop public institutions appropriate for the establishment of a unified Latin American exporting system.
• To create the conditions of systemic competitiveness to generate the framework for a growth strategy.
• To promote the knowledge about the root and logic of foreign debts as a conditioning factor for Latin American societies, because there is a vested interest in hiding this knowledge from society.
• To use the juridical aspects of the foreign debt as the most efficient political tool for mobilization and struggle in order to eliminate foreign debt, which conditions socio-economic development in Latin America.
• To include the issue of foreign debts as a subject at all public universities in the region.
• To develop social plans to enable access to minimum packages of “meritorious goods and services”, which are a universal priority, such as potable water, education, electricity, justice, health, urban sanitation, safety and housing. Meritorious goods and services cannot be managed using market criteria if there is to be social equity.
• To introduce in the debate on social and economic iniquity in Latin America the situation of native peoples, both regarding the state of exclusion they live in and because of the different viewpoints they have for tackling issues such as that of social equity. In terms of sustainable development, it is essential to appreciate the excelling standpoints that most native peoples have for overcoming issues such as environmental disputes, thanks to their different understanding of the use of natural resources, private property, cooperative work, etc.
• To encourage greater compliance with the division of powers, in order to moderate extreme  presidentialism by increasing the role of the Legislative and Judicial Powers and reducing the weight of emergency decrees or their equivalents.
• To recognize that the verticalism of the Executive Powers in most of Latin American countries, and the subordination of the Legislative and Judicial Powers, are caused mainly by the repetition, within their sphere of influence, of power structures intrinsic to the traditional patterns of political parties. These traditional patterns should be thoroughly improved by eliminating “blanket” ballots, redefining the way in which parties are funded, introducing mechanisms for effective citizen participation in defining each party’s government program, etc.
• To devise measures to ensure that judges at every instance have, at the highest level that can be demanded for their position, appropriate qualifications, honesty, sensitiveness to social issues, knowledge about the socio-economic, cultural and political situation of the area in which they act, as well as a strong, proven identification with national legislation and international agreements on human rights.
• To integrate the organs in charge of selecting judges and the external control of the Judicial Power in such a way as to prevent them from being dominated by political or economic power or by the judicial corporation.
• To set up a regional Latin American judicial institution, perhaps as successor of the Inter-American Commission of Human Rights, in order to enable a greater, speedier instrumentation of justice.
• To suppress the administrative instance in the Organization of American States for regional judicial procedures, in order to facilitate and accelerate the access of cases to the Inter-American Court.
• To promote better quality in the communication generated by governments regarding the actions of the different powers, and to implement measures to prevent the means by which those actions are made known from becoming a prize and punishment mechanism for the media, according to their political and ideological profile.
• To modify, in countries where it might be necessary, property laws governing the media, in order to revert and/or prevent media concentration and the ultimate subordination of information in media in the less developed regions.
• To foster democratic access to media ownership (cooperatives, radio stations and other means of community communication, etc.).
• To radically improve the quality of high schools in Latin American countries, in order to break the current vicious circle, in which only the high classes who are able to pay for good private high schools are able to gain access to the best universities, which are public.
• To make political, economic and social ruling elites realize that there is a direct relationship between local scientific and technological knowledge and the socio-economic development of nations.
• To rise to the status of State policy, all those policies aimed at promoting scientific and technological research in Latin American countries, in order to prevent successive governments from changing them. In particular, to encourage large international private companies to transfer their investments in research and development from their headquarters to the Latin American branches, in order to take advantage of the lower costs and at the same time, encourage local scientific and technological growth.
• To encourage the creation of technical and university courses connected to productive processes, such as technical careers, engineering and similar curricula.
• To set up patronage schemes for scientific and technological development, similar to those already existing for cultural activities, based on tax benefits for those who make contributions.
• To plan the creation and gradual development of an integrated Latin American system for science, technology and innovation in order to, without diminishing existing or future national systems, aim at a high quality level and gradually even out the scientific, technological and innovative capacities among the countries in the region, initially focusing their activities on a few specific fields.

 

 

 

Appendix  I:  Agenda

Opening session:
a. Evolution of the neo-conservative model: crisis of the “Consensus of Washington”
b. Analysis and perspectives of economic models in view of the arrival to power of center-left forces in Latin American countries.

First session:
Comparative analysis of different economy legislations being applied in developed nations vs. those being applied in Latin America, including international regulations about commerce and patents. Particularly, effects on the scientific and technological fields.

Second session:
Brief diagnosis – with emphasis in the identification of specific factors, negative and positive – regarding some questions of socio economic iniquities in Latin America: present situation in areas of income distribution, unemployment and justice.

Third session:
Concrete and viable proposals aimed at reverting the conditions described above regarding questions of socio economic iniquities in Latin American in areas of income distribution, unemployment and justice.

Fourth session:
Concrete and viable proposals geared to introduce or modify in Latin American countries rules/proceedings/regulations to improve the level of their institutions, particularly the capabilities of their members, the fairness of their procedures and the efficiency in their functions.               

Fifth session (a):
Concrete and viable proposals of ways to enhance the adoption or improvement of measures appropriate to reduce levels of corruption and political patronage in Latin America.  

Fifth session (b):
Concrete and viable proposals of ways to enhance in Latin America the development of transparent and well informed grass-roots organizations and of communication channels between citizens and government.

[1] Appendix II provides a brief curriculum vitae of each member of the round table and of E. Vila Planes.

Participant List