Editor’s Page


The world is not becoming less complicated or dangerous. We all know about Afghanistan, the Middle East in constant crisis over the Palestine question, Pakistan and India teetering on the verge of war and President Bush brandishing a big stick at Iraq, Iran and North Korea. While the world concentrates on those issues, Latin America’s social situation goes from bad to worse and the general opinion, at least in Washington, seems to be a shrug of the shoulders.


Just to mention the outstanding cases: Colombia, the principal source of drugs in this hemisphere, has been immersed in a brutal civil war literally for decades. The majority of Peru’s and Bolivia’s populations are mired in abject poverty. Venezuela, with its comic opera general as president, is sinking in its own oil. And now even Argentina, which has at least made some headlines in the world’s media, is wallowing in economic and political chaos. Practically all of Latin America’s countries have a history of military coups, and rumors in that direction have started here again – although to me it seems an unlikely scenario given that the Argentine military establishment was so discredited by its most recent foray into power politics that they would hardly be so stupid as to take the risk again. Furthermore, it is doubtful that permission from Washington (always necessary for such adventures) would be forthcoming.


There are opinions about Latin America’s failure to develop when North America, which started at approximately the same time, also liberating itself from European colonialism, has developed so spectacularly in comparison – none of them very convincing. North America (except Mexico) was under English colonial rule, with its Protestant work ethic and democratic ideals, whereas Latin America was colonialized by Spain and Portugal with their cruel conquistadors, who came to plunder, and the Catholic missionaries to convert the natives. Or, that the United States has replaced Iberia as the colonial power in the region. All of this may or may not be relevant; the fact is that today there is a tremendous gulf, at least economically and politically, between the North and South in this hemisphere. History is interesting, but it is more important to analyze the current situation and look for solutions.


Eleven years ago, during a period of hyperinflation, the convertibility plan was put into effect in Argentina, which meant that the Argentine peso was linked at a one-to-one exchange rate with the US Dollar. This was a desperation measure meant to brake inflation, and it worked. (Inflation in this case was due to the devaluation of the local currency, in turn due to the governments need to print money in order to finance its own enormous deficitary budget.) It was like a return to the gold standard, with the US dollar replacing gold. Every peso in circulation had to be backed by a dollar in the Central Bank’s vaults. Where did all those dollars come from? At first by selling off the country’s many state-owned industries – the national airline, the postal and telephone systems, etc. Nobody wanted the railroads, which were decrepit, union-controlled and extremely costly, so they were simply abandoned. The national airline was “privatized” by being sold to Iberia, itself a state owned airline, which took less than a decade to bankrupt it, as it did with Viasa, the Venezuelan national carrier. In a way the privatization of the telephones and postal system was positive, because now the phones work and the mail gets delivered, although the rates customers pay are the most expensive in the world.


Finally, however, there was nothing left to sell, so the only way to finance convertibility was by borrowing – from the International Monetary Fund, the World Bank and private institutions. The IMF gladly poured out the money, all the while praising Argentina as one of its stellar pupils on the road to a super-capitalism diploma. Meanwhile, Argentine companies were having problems, especially with Brazil, its main trading partner and competitor. Brazil’s currency was “floating” against the dollar and thereby maintaining its real value, while Argentina’s currency held onto a distorted overvalue. The result was that Argentine industry could not compete with Brazil’s products or internal costs. Whole industries simply moved to Brazil and exported to Argentina more cheaply than they could produce here. Imports from other, more developed countries, flooded in, until the label “Industria Argentina” was as rare as snow in the desert. Obviously, this caused massive unemployment and poverty on the one hand and obscene profits by the few on the other. A friend who owned a middle sized family business considered himself one of the lucky ones to be bought out by a multinational and hired as an employee.


The burden of paying back the principle and interest on all those loans was soon only possible by taking more loans and floating bonds. At the beginning of 2001, those who were alert to economic trends realized that the bubble would soon burst and took their money out of the banks and sent it abroad. On one particular Black Friday in November there was a massive run on the banks and the government was forced to freeze all deposits. (At this writing, the freeze is still partially in effect.) It was the last straw and the “cacerolazos” (huge demonstrations in the streets made vocal by banging pots and pans) began. The police overreacted and there were many wounded and some deaths. The Minister of Economy (the father of convertibility) and the President resigned. There was no vice-president (he had already quit in disgust a year ago) and the next in line constitutionally wanted no part of the job, so after going through several provisional presidents, the congress finally named an old school Peronist to the office.


José Saramago, the portuguese winner of the Nobel Prize for literature, is sceptical about the cacerolazos. "The citizen who demands of the politicians a sense of responsiblity and morality should start with himself. Those are the necessary cacerolazos. Now when nothing which was promised has been delivered, there is a great cacerolazo in Argentina when everybody goes into the streets. But the poor maybe don't even have pots and pans. The Argentines are wondering how a country once looked upon, perhaps not exactly wiht envy, but with admiration yes, a rich country, could lose everything from one moment to another. There's a middle class in Argentina which just now discovered the poor. I wonder how long the cacerolazos will last. If the middle calss regains its well being tomorrow, will they continue thinkins about the poor? I don't think so, they'll forget."


Almost 50% of the Argentine population of 33 million now lives below the poverty line (which is a low line indeed), and includes a good part of the ex-middle class. Argentines are fleeing the country as their ancestors fled to it. Anyone with a European grandparent can obtain citizenship in the country of his or her parents’ or grandparents’ birth. So the consulates of, mostly, Spain and Italy, are besieged by applicants, with permanent lines blocks long. For the past six years, Argentina has been one of the favored countries whose citizens didn’t need visas to enter the United States as tourists. That ended last week. The “visa waiver” program was terminated overnight because so many Argentines were going to the States as tourists and disappearing into the population. Another reason is the “Triple Frontier” – Argentina, Brazil, Paraguay – in the north, which can be crossed by walking across an essentially uncontrolled border bridge. There is a large Arab community in that area, including suspected terrorist or terrorist sympathizing groups. One of the original conditions imposed by the U.S. for the visa waiver was a secure, i.e., counterfeit-proof passport. Argentina complied with this, and the passport is high-tech secure, much more so than the U.S. one. However, in order to obtain the passport, one must show a National Identity Card, which is still made out by hand and easily falsified. There have been many cases of underworld types carrying legitimate passports obtained with false Identity cards. So now the U.S. says that the card must also be made secure. Ironically, the United States has no National Identity Card – although I understand they’re talking about instituting one.


Convertibility is dead and buried and the peso is "floating", another of the IMF's demands. It now converts at 2.20 to the dollar. Argentina is in desperate need of a fresh IMF loan – one already promised before the crash. But suddenly the fund – or its most important player, Paul O’Neil, Secretary of the Treasury of the United States – is playing it cool. O’Neil makes public statements, such as: “the Argentines brought it on themselves”, or, “the Fund should stopping bailing out countries that can’t do anything for themselves and start helping private enterprise”, or, Mrs. Krueger, second in command of the IMF: “There’s no point in lending them more money now”. They seem to want to forget the role both the IMF and the U.S. played in the Argentine disaster. In Argentina such statements make the headlines and have a very negative effect on all images: of the Argentine government, the IMF and the United States.


Post-Communism extreme capitalism has failed in Latin America, in Russia, in parts of Asia, in Africa, and it will probably continue to claim victims. What to do? Marxism failed completely in the Soviet and East European experiment. But in one sense Marx was right when he predicted that the accumulation of capital will mean that the rich get richer and the poor poorer and the large enterprises will gradually absorb the smaller ones until only a few giants are left – and that was before the multinationals. In those industrialized countries of North America, Europe and Asia where capitalism seems to work, it may very well be at the cost of the rest, especially the so-called Third World. In fact, capitalism needs a third world in order to dispose of its detritus. Rudolf Steiner said a long time ago: “When people do not see the world in a spiritual way, necessarily those institutions that advance material well being will also cause an increase in egotism and therewith gradually cause need, suffering and poverty.”  Without such a spiritual world view, he went on, it wouldn’t help at all to give everyone enough to eat, for sooner or later, many will again have nothing to eat. As a profound analysis, this may well be true, and it should be given considerable thought. As far as a truly “third way” out of the social-political-economic morass, beyond capitalism and communism, well, perhaps more about that next time….


Frank Thomas Smith