Latin America in the International System: Lecture 9 - R. James Ferguson © 2002
INTR12-221 & INTR71/72-221, The Department of International Relations, SHSS,Bond University, Queensland, Australia
The Struggle for Democracy: Chile and Argentina
1. Democracy? - What Democracy?
2. Democracy in the Context of Development
3. Chile: Problematic Socialism or Unresolved Social Needs?
4. Argentina: Military Rule and Re-democratisation
5. Democracy, Neo-Liberalism and Economic Crisis
6. Bibliography and Resources
1. Democracy? - What Democracy?
Democracy is a term regularly used in international relations, in newspapers, in political argument, and in current debates concerning globalisation. Without doubt it is indeed one of the most important concepts in the current assessment of the legitimacy of governments and the kind of prestige they have in the international system. Disguised behind all this, however, is the fact the term democracy itself is fiercely disputed and that several different types of democracy can discerned behind this one word. Nor should be assume that democracy is equivalent to 'liberal democracy', nor necessarily entirely compatible with the demands of capitalism and the current pattern of financial capitalism. We need to pause and briefly and look at this issue before we go on the assess patterns of political change in Chile, Argentina, and to a lesser degree Latin America as a whole (see Schultz 2001).
Democracy, of course, derives from the Greek word demos and literally means the rule of the people. Traditionally, it goes back to one pattern in Greek city states such as Athens and Samos, where for a time citizens (excluding slaves and women) had political power through various forms of direct representation, election officials, and the democratic jury system (see Farrar 1988; Finley 1985; Ober 1989; Sinclair 1988). In the modern period, democracies tend to be representative democracies, based largely on the election of officials into senates, congresses and parliaments (Burnheim 1985; Duncan 1983; Watson & Barbar 1990), and for much of Latin America, the election of the President. On this basis, many of these countries can be said to be procedural democracies, i.e. that have an electoral process and political system that look like a democracy.
A lot more, however, needs to be established before a country can be genuinely democratic, i.e. giving real power to the broad mass of people in fair or just way. Thus elections needed to contested with a genuine opposition and viable opposition parties, there needs to be a relatively open media, a relatively fair court system to avoid exclusion and unfair prosecution of political candidates, and the army has to be willing to accept the process and outcome of elections, even if a certain degree of political instability and unpredictable change is generated. Even under these conditions, it is possible that political elites will tend to dominate established political parties, leading to a self-serving political system in which the real needs and interests of many citizens can still be marginalised (see Llosa 2001; Coe & Wilber 1985; Di Palma 1970; Graebner 1987; Michels 1958; Miller 1987; Pateman 1970; Riley 1988; Schumpeter 1954), a problem experienced, as we have seen, to some degree even in contemporary Brazil and Mexico. This means we need to study democratic transition within its economic, cultural and developmental context.
Likewise, in modern thought, democracies should not only empower majority rule, but should also protect minority rights, human rights more generally, and individual liberties, i.e. we often speak of liberal democracies which balance these difference needs. We have already seen that in the past, various Latin American states have fallen short of these requirements even when allowing elections, e.g. Mexico's Partido Revolucionario Institutional (the Institutional Revolutionary Party, or PRI) limited the ability of a genuine opposition to form through its control of the press and its vast mobilisation of state resources (Klesner 2001 p107; Ruiz 1992, p449), while even Cuba has local elections but does not allow genuine opposition parties. Likewise, a country such as Venezuela under President Chavez has favoured a mobilisation of popular, direct participation designed to support a strongly Presidentialist system that undermines the powers of other elected officials (Ellner 2001; Levine 1999).
At a deeper level, a democratic country needs not just a democratic procedure, but a range of democratic institutions, a generally democratic culture that is willing to accept opposition and debate, and probably the beginnings of a viable civil society if it is to sustain a balanced democratic system (Nathan 1990; Nathan 1993). The good news is that over the last fifteen years democratic systems has made serious progress in many Latin American countries, e.g. Mexico, Chile and Argentina. The bad news is that the full package needed to support deeply democratic societies that are also stable has not yet been forged across the hemisphere. This can be demonstrated through a brief assessment of Chile and Argentina, drawing in some other secondary examples.
Several assumptions are often made in foreign policy on the basis of preferring democratic systems of governance. The U.S. and the European Union, in particular, are often willing to link trade and level of relationship to perceived patterns of democratisation and respect for human rights, the EU in a fairly consistent manner, the U.S. in a way often linked to its national interest and the needs of domestic politics (for U.S. policy in relation to Chile, see Hickman 1998).
These claims in favour of democracy in the international system are now partially disputed, and include: -
1) Claims that democracies are fairer (more just) societies and support human rights more effectively, but this may require certain legal and developmental conditions (Silva 1999; Rawls 1971). This may only be true if democratic leaders have control of the military and police, and so long as economic conditions do not undermine societies, e.g. a democratic Argentina and a democratic Indonesia may have fairer political systems than before, but due to economic and social crises have severe limitations in how far they can actively support and sustain political and social rights.
2) Democracies are sometimes viewed as more compatible with capitalism and market economies, itself viewed as a form of economic democracy (i.e. enhancing economic and consumer choices). From this point of view, such countries may be more likely to open their borders to trade and neo-liberal reform policies. However, democracies impose limits on elite decision making, and allow a strong critique of market capitalism, e.g. in India. Furthermore, extremely rapid economic opening may tend to destabilise new democracies and create severe social problems, e.g. increasing levels of poverty in Mexico. Simultaneous transition to market economies and democratic systems can lead to political collapse, as almost happened in Russia.
3) In a line of thought going back to Immanuel Kant's essay Perpetual Peace, 'democratic peace' theory suggests that democratic states are unlikely to go to war with each other. On this basis, an entirely democratic Latin America would also be internationally very stable. This theory, once regarded as a truism in international relations, has begun to be challenged in certain cases (see Schwartz 2002; Cederman 2001; De Mesquita 2001). States which are in transition to democracy sometimes experience high levels of nationalism, and unresolved historical claims can sometimes be brought into play politically in discontented states, e.g. in parts of the Caucasus and Yugoslavia where procedural (but otherwise very limited) democracies exist. Likewise, it is uncertain that further democratic reform in Pakistan would end its tensions with India, or that a more democratic China would automatically agree with the United States on the future role of the PRC in world affairs. Democratic states have less internal pressures or domestic benefits from adventurist wars, but may still compete with other democracies economically and diplomatically, and where real interests are at stake might clash violently. Likewise, the democratic peace theory does not deal adequately deal with revolutionary wars, nor civil wars, which are sometimes fought out over differing shades of democratic representation or national self-determination (see Schwartz 2002).
4) In general terms, democracies may allow greater rights to women and allow their fuller participation in society. In Latin America there were major social constraints to this. They included the culture of male machismo whereby 'male virtues' such as aggression, assertiveness, and protection of honour were highly prised (Skidmore & Smith 2001, p62). Furthermore, the female stereotype of marianismo (named after the Virgin Mary) tended to exalt notions of propriety, humility, sacrifice, and the role of mothers, thereby also presenting a certain social barrier (Skidmore & Smith 2001, p63). However, female suffrage came somewhat late to Latin America, with most states giving women the vote between 1929 and 1961 (Skidmore & Smith 2001, p64). Since this time, however, women have taken on major political roles, as leaders, activists in community organisations, and as those willing to protest crimes conducted by the military, e.g. in Chile and Argentina.
2. Democracy in the Context of Development
To understand the broad pattern of political development in Latin America, it is necessary to briefly position it against the national and economic development of these countries. Ongoing social, economic, and political changes are to some degree linked: -
If we are to understand modern Latin America it must be placed in the context of global economic expansion, beginning with the Conquest of the sixteenth century. Within this system, Latin America has occupied an essentially subordinate or "peripheral" position, pursuing economic paths that have been largely shaped by the industrial powers of Europe and the United States. These economic developments have brought about transitions in the social order and class structure, and these changes in turn have crucially affected political change. We thus being with a set of simplified causal relationships: economic changes produce social changes which furnish the context for political change. (Skidmore & Smith 2001, p42)
This means, that it is possible in very general terms to correlate patterns of economic development, social change, and political outcomes: -
Table 1 Patterns of Change in Latin America (adapted from Skidmore & Smith 2001, Table 2-1, p62)
Typical Political Outcome
Start of import export growth
Modernisation of elite, commercial sector, professionals
Oligarchic democracy or integrating dictatorship
Appearance of middle class, working class
Formation of elite,
growing working class
1960s - 1980s
Stagnation in import
political & class
1980s - 2001
& gradual recovery
ation of middle &
Certain patterns of political authority had developed in Latin America had developed from the 19th century: either landowners and social elites that keep control of government and create a limited 'oligarchic democracy' (as in Chile), or a tendency for dictator or strongman, often from the army, to seize control in the name of law and order, as the Porfirio Díaz regime in Mexico (Skidmore & Smith 2001, p46). However, through the early 20th century, labour groups and workers begin to able to organise, influence exports, and to claim a greater share in political and economic power, sometimes leading to partial reform, but in other cases to political conflict. In particular, urban, professional middle-class interest in liberal reform (Skidmore & Smith 2001, p51) does not always extend to effective rural reform for peasants (Kay 1999).
Through the 1960s and 70s import substitution strategies did not lead to sustained economic growth, and this combined with increased unemployed and political crises led to the forceful intervention of the military which ran repressive regimes, e.g. Brazil 1964, Argentina 1966, and Chile 1973 (Skidmore & Smith 2001, p56). In turn, these regimes created 'bureaucratic-authoritarian' states designed to clamp down on dissent, restore economic growth, and consolidate cooperate with international economic forces and transnational corporations (Skidmore & Smith 2001, p57). At the same time, many of these countries increased their borrowing and debt, e.g. Latin American debt rose from $27 billion in 1970 to $231 billion by 1980 (Skidmore & Smith 2001, p58). This led in the 1980s to a debt crisis in most of these countries, with high levels of debt servicing, and in many cases the intervention of the IMF (International Monetary Fund) to help these countries but only under stringent conditions of structural adjustment. This locked many of these countries more firmly into the global economy, but also reduced their ability to maintain social services and developmental programs (see Brown 1999).
3. Chile: Problematic Socialism or Unresolved Social Needs?
Chile from the 19th century developed a relatively strong economy based on agriculture, nitrates, silver and copper mining, and in the 1990s emerged as a diversified free market economy (Hudson 1994). A small elite managed to run a 'oligarchic democracy' based on control of the political system, at first through the Conservative Party, then via the influence of 'strongman' Diego Portales through the 1830s (Skidmore & Smith 2001, p107). By the later part of the century, however, this elite wished to continue effective government but avoid the rise of dictators: this led to the new Constitution of 1871 which stopped presents from serving two consecutive terms, and improved the power of Congress to hold government ministers accountable. The period of 1861-1891 this came to known as the period of the Liberal Republic, but economic problems in the later 19th century led to creation of the Radical Party (1863) and the Democratic Party (1887) which articulated 'mass demands' for workers rights, free education, and a more open and democratic political system (Skidmore & Smith 2001, p113). In general, Chile seemed to have strong political credentials: -
Chile, after Uruguay, traditionally has been one of South America's best educated and most stable and politically sophisticated nations. Chile enjoyed constitutional and democratic government for most of its history as a republic, particularly after the adoption of the 1833 constitution. After a period of quasi-dictatorial rule in the 1920s and early 1930s, Chile developed a reputation for stable democratic government. Like Uruguayans, Chileans have benefited from state-run universities, welfare institutions, and, beginning in 1952, a national health system. (Hudson 1994).
In general terms, the Constitution of Chile was inspired by that of the United States, while after 1833 Chile decided not to follow a federal model (Hudson 1994).
Improvements in copper mining, the strong reliance on copper exports through the 20th century, the issue of foreign control (largely U.S. ownership) of copper companies, and the development of unionised workers, first in the nitrate mining of the north, then in other mining areas, helped create a volatile mix of economic dependence and political grievance (Skidmore & Smith 2001, pp110-111).
Chile: Selected Political Timeline 1540-1994 (based on Hudson 1994)
1540 Pedro de Valdivia conquers Chile.
Feb. 12, 1541 Valdivia founds Santiago.
1603 First army-like force, or militia, established in Chile.
1759-96 Bourbon reforms give Chile greater independence from Viceroyalty of Peru.
Sept. 18, 1810 Criollo leaders of Santiago declare independence from Spain.
Oct. 2, 1814 The Reconquest Spanish troops from Peru reconquer Chile at Battle of Rancagua.
Feb. 12, 1817 Troops led by Bernardo O'Higgins Riquelme, father of Chile, and General José de San Martín defeat Spanish in Battle of Chacabuco.
1817 O'Higgins (1817-23) becomes supreme director of Chile.
April 5, 1818 Chile wins formal independence after San Martín defeats last large Spanish force in Battle of Maipú.
August 1818 First provisional constitution approved in plebiscite.
1818-30 Period of civil wars.
April 17, 1830 Liberals defeated by Conservatives at Battle of Lircay.
1830-61 Period of Conservative rule.
1830-37 "Portalian State" initiated by businessman Diego Portales Palazuelos, who dominates politics.
1833 New Portalian constitution implemented.
1836-39 Chile wages war against Peru-Bolivia Confederation.
January 1839 Chile wins war by defeating Peruvian fleet at Casma and Bolivian Army at Yungay.
1861-91 Period of Liberal rule.
1879-83 Chile wages war against Bolivia and Peru in War of the Pacific.
1883 Chile seals victory with Treaty of Ancón.
1891 Civil war pits supporters of President José Manuel Balmaceda Fernández against Congress, which wins.
1891-1925 Period of Parliamentary Republic.
1925 Chile's second major constitution approved.
Sept. 4, 1970 Popular Unity's Salvador Allende Gossens wins presidential election.
Sept. 11, 1973 Military led by General Augusto Pinochet Ugarte overthrows Allende government.
Sept. 1973-90 Period of military rule under General Pinochet.
1980 New military-designed constitution is approved in a plebiscite.
1988 Plebiscite held on Pinochet rule.
1990 Transition to democracy begins with presidency of Patricio Aylwin Azócar.
March 11, 1994 Aylwin is succeeded by Eduardo Frei Ruiz-Tagle
In spite of some political opening by the elite, this relatively peaceful political system received a rude shock in the civil war of 1891. In part this was driven by President Balmaceda's desire 'to increase government intervention in the economy' in order 'to pay for the building of new railways, roads, and urban infrastructure' (Skidmore & Smith 2001, p113-114). It was also a conflict over Congressional verses Presidential powers, with the efforts of the President to select his successor being blocked. Conservative financial and mining interests also opposed the president's reforms, with the President being defeated in a bloody civil war from which a Parliamentary Republic emerged (Skidmore & Smith 2001, p114). This democracy, though not widely based, did have a strong Congress which could limit presidential power, though Congress in turn tended to be dominated by landed elites (Hudson 1994).
Instability emerged again in 1921 when President Alessandri tried to push through labour and welfare reforms opposed by conservatives: the military intervened to end the deadlock in 1924, with the army taking on a major role. From 1925 this led to emergence of Colonel Carlos Ibãnez as a strongman who was elected president by Congress in 1927 and maintained power down to 1931, jailing opposition elements and suspending civil liberties (Skidmore & Smith 2001, pp116-117). This indicated that the military was willing to play a role in managing the state, with interventions occurring in 1891, 1924, 1925, 1932 and 1973 (Hudson 1994). However, from 1932 down to 1973 Chile was able to maintain a mass democracy with widely divergent parties competing for power, making its system somewhat similar to West European rather than Latin American systems (Hudson 1994).
In the post-World War II period party politics became extremely active and fiercely contested, with an active and relatively well informed electorate: 80% of registered voters turned out for elections (Skidmore & Smith 2001, p121). Indeed, by this period political parties had 'policitized schools, unions, professional associations, the media, and virtually all other components of national life.' (Hudson 1994). From 1952 the strongman General Carlos Ibãnez returned to the scene, was elected and sought to cure the problems financial problems by turning the IMF, but soon found this path extremely unpopular with the unions and with a range of leftist parties (Skidmore & Smith 2001, p121). From 1958 President Jorge Alessandri also pursued conservative economic policies designed to avoid inflation, but in the end was unable to gain more revenues from the largely foreign owned copper companies, incensing nationalists and leftist alike (Skidmore & Smith 2001, p123). In part this explains the victory of the Christian Democratic party's candidate Eduardo Frei in 1958, who came forward as a centrist candidate, in part winning support from the rightist parties (and gaining CIA election funding) as a way of heading the policies of the left (Skidmore & Smith 2001, p124). President Frei also tried to solve the problem of gaining more for the national budget from Chile's main resource, copper mining. His plan for the Chilean government to buy into part ownership of the mines to secure 51% of ownership and then invest in expanded processing facilities was controversial, with left verses right debating the value of this approach to Chile (for differing interpretations, see Skidmore & Smith 2001, p125; Hudson 1994). Land reform policies were also carried out slowly, and did not meet popular expectations.
This history helps explain the strong boost received by the Communists and Socialists alliance (UP, Unidad Popular) in the 1970 elections and the 36.3% victory for their presidential candidate, Salvador Allende, more than his opponents (Skidmore & Smith 2001, p126). Allende then proceeded towards strongly socialist policies based on his electoral victory, including a prices freeze, an increase in wages, nationalisation of the coal and steel industries, nationalisation of the main foreign copper firms, and of 60% of the private banks (Skidmore & Smith 2001, p127; Hudson 1994). Almost 500 firms would be nationalised (Hudson 1994). Workers often took the initiative, occupying the offices of foreign firms such as ITT and Ford until they were nationalised - this led to a partial financial blockade by the U.S., as well as the withholding of loans from the World Bank, the Inter-American Development Bank, and the U.S. Export-Import Bank (Skidmore & Smith 2001, p127. For the debate on the level of U.S. involvement in 'destabilising' Allende's government, see Hitchens 2001; Komisar 1999). The economy was soon dislocated, with depressed exports earnings and emerging economic chaos brought on by a combination of external pressures and internal problems. By mid-1972 massive stream demonstrations for and against Allende were being staged, including strikes by copper workers and truck-owners who were negatively affected by the economic slow down (Skidmore & Smith 2001, p130). Political violence began to increase. The 1973 congressional elections did not solve this conflict in that Allende's Popular Unity party secured 43% of the vote, enough to avoid impeachment and to continue the political stalemate (Hudson 1994).
In this context, the Chilean army began to mobilise. General Augusto Pinochet led a well-organised coup that began on 11 September 1973, leading to a mass rocket attack (from aircraft jets) on the presidential palace in the heart of Santiago, where President Allende had chosen to make his last stand. He died, either in fighting or by committing suicide in order to avoid capture (for differing views, see Hudson 1994). Scattered resistance to the army was followed by widespread oppression and large number of arrests of leftists. Some 2,000 may have died, and thereafter many went missing in a campaign to depoliticise society (Skidmore & Smith 2001, p131). The later National Commission on Truth and Reconciliation (the Rettig Commission) could document the deaths of some 2,115 Chileans, while thousands of others were imprisoned or tortured (Hudson 1994). Other sources suggest that in total up to 40,000 people were detained at various times, and 9,000 were exiled and some 4,000 killed (Komisar 1999). The Allende government, though democratically elected, was destabilised by a vigorous political culture in which there was little comprise, an overly ambitious socialist program, and the onset of economic crisis. The intervention of the military under an ambitious and autocratic leader sealed the fate this experiment in socialistic democracy. The 'bloody coup seemed incongruously violent for a country of Chile's democratic and civil traditions' (Hudson 1994). In retrospect, the coupe was a failure in deep civil support for peaceful power sharing on all sides: -
Many analysts would concur that there was ample blame to go around. In the view of many Chileans, groups at all point on the political spectrum helped destroy the democratic order by being too ideological and too intransigent. Many observers agree that a minority president facing adamant domestic and foreign opposition was extremely unlikely to be able to uphold democracy and create socialism at the same time. (Hudson 1994).
The Pinochet regime soon moved to establish military government, removed opponents, stopped political activity, controlled the media, and launched a strongly guided neo-liberal trade policy designed to boost exports, following the ideas put forward by 'the Chicago boys', economists trained in the free trade agenda (Hudson 1994). Major trading partners include the European Union, US, Japan and Brazil, while foreign debt declined in relation to GDP through the early 1990s (Hudson 1994). Direct military rule ran from 1974 till 1979, then was extended through a plebiscite in 1978 and then a second plebiscite in 1980 (both suspect in terms of competitive freedoms) approved a new constitution. This constitution gave Pinochet sweeping executive powers from 1980 down through 1990, but in 1988 the Pinochet opted for a another plebiscite aimed an extension of his rule for a further 8 years. The election was held partly in response to international pressures (Hickman 1998), partly because the military assumed that the improved economy of Chile would allow them to win the election fairly easily.
However, this underestimated the effective mobilisation and strategies of a broad centre and left coalition that had emerged over the previous decade. Thus, many Chileans were reminded of the atrocities of the military coupe by the Arpilleras, the protesting women who wove traditional tapestries protesting the loss of their children spouses (Skidmore & Smith 2001, p132). The Catholic Church had also moved to condemn the human rights atrocities of the regime and to support reform (Hudson 1994). From 1983, in spite of oppressive clamp downs, massive protests were made publicly, lead in part by labour leaders (Hudson 1994). Likewise, the coalition of party used the strategies of social surveys, public relations campaigns, and community networking to mobilise a large part of the electorate, including those living in shantytowns (Paley 2001). This campaign also involved volunteer consultants on the election, including Chilean and U.S. volunteers, some from the National Democratic Institute for International Affairs (Paley 2001). A record 92% of the voting age-group actually registered to vote (Hudson 1994). When the opposition was for a short time allowed to advertise on television, it used positive messages appealing to unity, harmony, and a democratic Chile (Hudson 1994). The opposition also promised to continue the broad economic policies that had boosted growth, as well as promising an improved social welfare net (Paley 2001). Thus the fourteen party coalition (the Concertación) won with a decisive 'no' vote (55%) against Pinochet (who received a 43% vote for continuation of his rule). Badly shaken and surprised, Pinochet accepted the vote against him (Hudson 1994), perhaps because segments of the elite had begun to be unsettled by his continued autocratic style in decision making.
This did not lead to an immediate return to full democracy. The 1980 constitution still allowed a role for Pinochet as head of the armed forces (to be continued down till 1998), and with a number of appointed senators in congress, it also tended to favour conservative politics, although a large number of constitutional reforms, leading to a more open system, were approved in mid-1989 (Hudson 1994). Presidential elections in 1989 put the Christian Democratic leader Patricio Aylwin into power, supporting a centre and centre-left style government. Aylwin attempted to cautiously prosecute military offices for human rights abuses, but with the help of rightist elements in Congress this was not generally successful (Hudson 1994). In 1993, the Christian Democrats once again won the elections, with Eduardo Frei becoming president. Chile during this period had strong economic growth (circa 6.7% growth in GDP), foreign debt was reduced, foreign investment came into the country, and poverty was reduced (Drake 2000) but the gap between rich and poor remained (Skidmore & Smith 2001, p135-136).
A certain fragility remains in the democracy of Chile. Amnesty laws had meant that the military had not been brought to trial for the events of the 1970s, while Pinochet, even when he stepped down from being the chief of the army, remained a Senator-for-Life and thus escaped prosecution as a state official. He along with a small number of non-elected, designated senators (nine in number), also tip the Congress in the direction of limiting radical legislation (Skidmore & Smith 2001, p136; Hudson 1994).
This issue was deeply inflamed when Pinochet was arrested during an October 1998 visit to London, on the basis of a Spanish judicial request (supported by Switzerland and France) that he stand trial for human rights abuses against Spanish citizens within Chile (Brody 1999). President Frei, afraid of political turmoil at home, supported the claim of diplomatic immunity (in the basis of being a Senator), and argued that Pinochet was not mentally fit to face a long trial. (Skidmore & Smith 2001, p136). The decision by a the High Court for England and Wales that Pinochet could not be prosecuted for his actions while head of state was soon overturned by the House of Lords, which argued that immunity on this basis could not be sustained (Brody 1999). Within Chile, a large number of people felt that a trial in Europe would infringe the sovereignty and rights of Chile, while an equal number would have liked to seem him tried within Chile (Dorfman 1999). For a time, the Chilean ambassador was withdrawn from Madrid (Brody 1999). The very divisiveness of this issue showed how shallow reconciliation had been within Chile, and how the decision of Pinochet still affected political life. Thus Ariel Dorfman can speak of the 'sham reconciliation' that has sought to ignore the events of the 1970s and 1980s (Dorfman 1999). Britain in the end decided that Pinochet was not fit to stand trial, and he was returned to Chile. It will be interesting to see if the laws he himself passed, such as the 1978 amnesty law, and the position of Senator-for-Life, will be able to continue to protect him in future (Dorfman 1999; Brody 1999).
This debate occurred as presidential elections occurred within Chile. In a runoff election in January 2000, Ricardo Lagos, a socialist candidate, won the elections. The election, like others in Chilean history, was a competition between the right and the centre-left, with the centre and Christian Democrats playing a crucial role as to who would win (Drake 2000). His opponent, Joaquín Lavín, was a pragmatic rightist who adopted a more popularist style that earned him a such sizeable vote (47.52% to Lagos' 47.96%) that they had to go through a second run-off round, with Lagos winning with 51.3% on the second ballot (Drake 2000). The socialism of Lagos, moreover, was moderate, attuned to the needs of fitting into the global economy, and sought consensus and reconciliation rather than confrontation with right wing. In some ways it fits in with the type of modern social democratic parties, e.g. the type of middle ground staked out by Britain Tony Blair (Drake 2000). In general, the political values of Chilean parties had tried to turn towards the middle ground and consensus (Paley 2001), but this could be undermined if the past and its perpetrators, and how they should be treated, can be used in a divisive way. A certain disenchantment with the political system also needs to be avoided, e.g. in 1997 congressional elections, up to 40% of voters annulled or left blank ballots, or did not attends polls (Paley 2001).
Efforts were made to deal with the Pinochet under the Lagos government by passing the issue on to the judiciary: -
Prosecuting Judge Juan Guzman accumulated charges and in August, Chile's Supreme Court confirmed by a 16-4 vote an Appeals Court decision stripping Pinochet of immunity from prosecution, thus opening up the possibility of a trial. In December, Guzman issued an indictment and order for the general's house arrest, but this was struck down on a technicality - Pinochet had not been interviewed as required under Chilean law (Bearman 2001, p72).
We can thus ask, is 'Chile entering the new century as an "untrammelled democracy . . . ?" (Drake 2000). The current government offers both continuity in general policies, but also has a major challenge: -
It also offered Chile the opportunity to experience a Socialist presidency that promised to avoid confrontation and economic turmoil. The outcome confronted Lagos with the challenge of both modulating and meeting his supporters expectations, especially pent-up hopes from leftists (Drake 2000).
However, we should note that the current stability in part has been achieved by a certain convergence between the main parties, a relatively strong economy, and the ability to avoid a head-on conflict over the Allende and Pinochet legacies (Reuss 2001). Certain features of the democracy remain unusual: the lack of control over campaign funds (Drake 2000), the appointed senators, and the implicit recognition that the army does have a special political role in the nation, in part through the National Security Counsel - the Cosena, the fact that the President cannot directly dismiss military commanders (Hudson 1994), as well as retaining a certain degree of immunity, even if this is not invoked. Efforts have been made to reform these areas through 2000-2001, with moves to constitutionally remove unelected senators and to ensure presidential/civil control of the military (Bearman 2001, p72), but progress has been slow.
It should also be noted that after political reforms Chile joined the Rio Group (of 18 Latin American Countries) in 1990, playing 'an active role in promoting democracy within the inter-American system' (Hudson 1994; see further Atkins 1999). Chile was also active in the Latin American Free Trade Association (LAFTA), the Organisation of American States (OAS), and the United Nations (Hudson 1994), and later on negotiated fairly open trade relations with the U.S. and with Mercosur. Chile thus has a progressive foreign policy, even as it deals with political legacies at home.
4. Argentina: Military Rule and Re-democratisation
Argentina declared independence in 1816 and managed to back this with effective resistance against Spain during the 1820s. However, the future direction of the country economically and politically soon led to conflict: -
The competing groups came from different regions. Once faction was made up of the "unitarians," mainly from the province (and city) of Buenos Aires. They wanted to nationalize the port city of Buenos Aires: strip it of its autonomy, then make it into a base from which to reduce provincial barriers to trade and thereby open the entire country to international commerce.
The second group were the "federalists," who were from the interior. They agreed on the need to nationalize the city of Buenos Aires because they wanted the city's customs receipts distributed to all the provinces. At the same time, they wanted to maintain provincial autonomy, especially the ability to levy interprovincial tariffs and this protect local industries.
The third group were also called the "federalists," but they were of a very different kind: they were from the province of Buenos Aires and opposed nationalization of the port city of Buenos Aires, since that would mean loss of their province's existing monopoly over the city's customs revenues. They also wanted free trade. (Skidmore & Smith 2001, pp68-69)
These issues would cause conflict down through the 1830s and 1840s, with the dictator Juan Manuel de Rosas rising to subdue regional caudillos, leading to a strong federalist country dominated from Buenos Aires (Skidmore & Smith 2001, p69). From 1853 Argentina adopted a constitution based on that of the United States, with a two house congress and a president elected via an electoral college. However, problem of an overly strong and wealthy Buenos Aires, and different cultures and conditions of the urban and rural sectors would continue to be one of the features of Argentina through the 20th century (for an account of the culture of Cordoba, Argentina's second biggest city, see Florine 1998). Likewise, the role of the military and political 'strong men' would undermine many of the features of this democratic system. Organised urban labour would also be key political actors through much of the twentieth century.
Argentina built its economic strength during 1880-1914 on exporting beef and agricultural products to 'the North Atlantic industrial world' (Skidmore & Smith 2001, p70). Immigration from southern Europe (especially Spain and Italy) and investment (at first mainly from Britain, followed by France and Germany) would help develop the country, and also 'give Argentina a distinctly European quality, with the resulting tension among the Argentines as their real national identity', as well as discounting in the large measure the influence of the Indian and the gaucho (the horsemen of the pampas) in national life (Skidmore & Smith 2001, pp70-73, though the gaucho would become an important literary image, e.g. in Ricardo Rojas' poem Martín Fierro). During the 19th century and first half of the 20th century Argentina was one of the fastest growing economies in the world and through 1945 the peso was a one of the strongest currencies in the world backed by huge gold reserves (Falcoff 2000). For a time, its GDP per capita was higher than European countries (Carlin 2002), and it was viewed as an emerging power within South America. Some general decline in this economy over the last five decades has been postulated as due to public sector inefficiencies created under the regime of General Peron (1946-55), decline in agricultural exports as the European Union became more self-sufficient, and loss of markets after the collapse of the Soviet Union, which was a major importer of cereals (Falcoff 2000). At a social level, it is possible that a certain 'get-rich-quick' mentality may have permeated the aspirations of many Argentines, leading later on to intensified political and economic instability (Carlin 2002).
Argentina - Selected Political Timeline 1916-2000 (based on BBC 2002)
1916 - Hipolito Yrigoyen of the Radical party is elected president. He introduces a minimum
wage to counter the effects of inflation.
1930 - A coup involving all services of the Argentine armed forces and led by General Uriburu.
1932 - Civilian rule is restored.
1939 - Outbreak of World War II. Argentina proclaims its neutrality, even after 1942
1943 - Military regime seizes power. One of its leading figures is Colonel Juan Peron.
1944 - Argentina breaks diplomatic relations with Japan and Germany and declares war on
them in 1945.
1946 - Peron wins elections for the presidency. He had promised workers higher
wages and social security. His wife, Eva Peron ('Evita'), is put in charge of labour relations.
1949 - A new constitution strengthens the power of the president. Regime opponents are subsequently imprisoned, independent newspapers are suppressed.
1951 - Peron is re-elected president with a huge majority.
1952 - Peron's wife dies of cancer. Peron's support begins to decline.
1955 June - An attempted coup by the Argentine navy is crushed as the army remains loyal to Peron.
1955 September -Coup by all three branches of the armed forces succeeds after three days of fighting, during which thousands are killed. Peron resigns and takes refuge on a Paraguayan gunboat. He subsequently goes into exile in Paraguay, and later in Spain. The federal constitution of 1853, based on that of the United States, is restored.
1966 - Military rule is imposed again with a coup led by General Juan Carlos Ongania.
1973 - The Peronist party wins elections in March. Hector Campora is inaugurated president. Argentina is wracked by terrorist violence. Peron returns to Buenos Aires in June. Campora resigns and Peron becomes president in September.
1974 - Peron dies in July. His third wife, Maria, succeeds him. Terrorism from right and left escalates,
leaving hundreds dead. There are strikes, demonstrations and high inflation.
1975 - Inflation rises to more than 300%.
1976 - A military junta under General Jorge Videla seizes power. Parliament is dissolved. Opponents of the regime are rounded up in the 'Dirty War', which is to see thousands of people 'disappear'.
1981 - General Leopoldo Galtieri heads the military regime.
1982 April - Argentine forces occupy the British-held Falkland Islands, which Argentina calls Islas Malvinas and over which it had long claimed sovereignty. The United Kingdom dispatches a force to re-take the islands, which it does in June. More than 700 Argentines are killed in the fighting. Galtieri is replaced by General Reynaldo Bignone.
1983 - Argentina returns to civilian rule. Raul Alfonsin becomes president. Argentina begins to investigate the 'Dirty War' and charge former military leaders with human rights abuses. Inflation is running at more than 900%.
1989 - Carlos Menem of the Peronist party is elected president. He imposes an economic austerity programme.
1992 - Argentina introduces a new currency, the peso, which is pegged to the US dollar.
1995 - Menem is re-elected.
1997 - A judge in Spain issues orders for the arrest of former Argentine military officers on charges of participating in the kidnapping and killing of Spanish citizens during the 'Dirty War'. Argentine amnesty laws protect the accused.
1998 - Argentine judges order arrests in connection with the abduction of hundreds of babies from women detained during the 'Dirty War'.
1999 - Fernando de la Rua of the centre-left Alianza opposition coalition wins the presidency, inherits 114 billion-dollar public debt.
2000 - Strikes and fuel tax protests. Beef exports slump after an outbreak of foot-and-mouth disease. Soya exports suffer from concerns over the use of genetically modified varieties. The IMF grants Argentina an aid package of nearly 40 billion dollars.
From 1918, Argentina, when economic problems hit the lower classes, suffered from strikes and the formation of ultra-right paramilitary organisations, leading to political violence and somewhat unstable governments (Skidmore & Smith 2001, p82). Argentina's somewhat difficult experiment with 20th century democracy began to unravel in 1930, when a 'coalition of military officers and civilian aristocrats' set up a provisional regime, with relatively unstable civilian governments being restored from 1932 onwards (Skidmore & Smith 2001, pp82-85). From the 1940s Argentina's political culture began to turn in a particular direction: elements in the military sought to stay out of the World War, and at the same time revamp the political system, including the dissolution of Congress. Workers, in turn, were highly organised and highly literate, but lacked 'effective political representation' (Skidmore & Smith 2001, p85). The stage seemed set for another round of political confrontation.
At this stage, Juan Perón, a Colonel who had been part of GOU, (Grupa Obra de Unificación, dissident officers who wanted a stronger political role), entered the political scene from 1943, first as a secretary of labor, from which he began to build political support among industrialised workers (Florine 1998: Skidmore & Smith 2001, p86). He won the 1946 elections with a 54% majority, and thereafter moved to position the government as arbiter of all social disputes, and to set up a state-guided capitalist system. Thus, for example, he would sometimes encourage strikes so that the government could be seen to settle them (Skidmore & Smith 2001, p87). He also moved to buy out foreign interests in the Argentine economy (British in the railways, the U.S.-controlled ITT, and French in the docks), and in July 1947 declared that Argentina had paid of its entire foreign debt (Skidmore & Smith 2001, p87).
Moreover, Perón's popularity was greatly aided by his charismatic wife, Evita, who set up social foundations that helped the poor. She soon had her own following and as viewed almost as a kind of saint. Her death from cancer would greatly undermine Juan Perón's popularity. Indeed, with the 1951 change of the constitution, and his re-election with 67% of the vote, he went one to create the Peronist party, whose Tribunal of Party Discipline was the beginnings of a much more authoritarian state system (Skidmore & Smith 2001, p87). Peron had based his rule partly on pragmatic economic returns, but also on a notion of corporatist stability that tried to embrace both the unions and the military. Peron established a comprehensive propaganda campaign that included elements of personality cult and Argentine nationalism (see Foss 2000).
The Peron regime cast a certain spell over the national aspirations of many Argentines, leading to the later survival of Peronist political parties (Sweeney 2002): -
The reason that Juan Domingo Perón and his wife Evita came to power . . ., remained there for ten year and have never left the hearts of at least half the Argentinian population is that they offered to make true the Argentine Dream. Vote for us, went their message, and all of you - every single one of you - will win the Lottery. And indeed, for a while, Argentina, brimming with beef and grain, reaped a post-Second World War peace dividend. (Carlin 2002).
However, emerging problems in the economy, an increasingly arbitrary rule, and opposition from parts of the military emerged from 1954, with the military finally ousting Peron in September 1955. He went first to Paraguay, then to Spain, where he bided his time.
The following governments did not achieve stability. After the elections of 1957 and 1958, President Frondizi attempted a developmentalist model based on boosting agriculture and exports, with extensive state intervention in the economy. In the end, however, Frondizi had to turn to the IMF to help stabilise the economy, as well as being subject to pressure on his policies from the military (Skidmore & Smith 2001, p91). Instability in the economy led to strikes, and increasing support for Peronist parties after 1962. The military intervened in the electoral process in 1962 and 1963, and eventually staged a military coup in 1966, thereby taking direct control of the government and setting up a 'bureaucratic-authoritarian' state (Skidmore & Smith 2001, p93). The military under General Juan Carlos Onganía sought to crush opponents, control and split labour organisations, and mobilised technocrats and foreign investors to improve the economy. But the result was another wave of intensified violence: -
There was also a shocking rise in political violence, such as clandestine torture and execution by the military government and kidnapping and assassination by the revolutionary left. The Onganía coup began in violence and all normal legal guarantees were suspended. The labour policy soon came to depend on coercion. This had happened before, but now there was a difference. The left decided to reply with its own violence. Splinter revolutionary groups sprang up, kidnapping prominent businessmen and ransoming them for huge sums. (Skidmore & Smith 2001, p95)
Later military leaders only partially stabilised this situation, and by General Alejandro Lanusse announced that Perón would be allowed to return. Elections were held, with the Peronists first being led by the 'stand-in' figure of Héctor Cámpora, who was elected President in 1973 but soon stands down in favour of Perón. The Peronists moved to try to create a 'grand bargain' between the main elements of Argentine society, called the 'Social Compact', though the government soon turned against the radical left. Whether this social compact could have lasted is not known, since Perón died in 1974. His wife Isabel tried to continue his policies, but she lacked both the intelligence and charisma of Evita. With the economy in shock through the mid-1970s, and soon Argentina once again had to turn to help from the IMF.
No one was surprised when another military coup occured in 1976. Thereafter General Jorge Rafael Videla led a 'Dirty War' which sought to purge all political opponents and subversives. Perhaps between 10,000 and 20,000 people were killed, with up to 10,000 simply 'disappeared', becoming the desaparecidos (Skidmore & Smith 2001, p97). The military penetrated all levels of society, controlling the media, disbanding the main unions, and controlling the economy. Partly in order to boost the popularity of this repressive government, in 1982 General Leopoldo Galtieri urged a nationalist war to take the Malvinas (Falkland) Islands from the UK. Although the islands were seized for a short time, Britain, surprisingly launched a large military expedition, and bested both the Argentine navy and land forces in a bloody campaign (see Aldea & Darnel 2002). The Argentine air force performed well, but soon found itself short of the main missiles it needed to threaten British ships. Likewise, Galtieri may have hoped for the implicit support of the U.S., or at least its tolerance, but in this it was wrong, while most of the Organization of American states voted in opposition to the Argentine attack.
When the Argentine forces had to surrender, this led to the end the military government. Massive patriotic protests turned into anti-military mobilisation. Civilian rule was returned in 1983, but had to face numerous problems including high levels of inflation, the problem of the disappeared, the problem of whether the military could be prosecuted (several generals were convicted but those less than of general rank were not), the long-term security of Argentina, and the issue of huge levels of foreign debt. In 1989, the Peronists party won under the leadership of Carlos Menem, who began an austerity program, restructuring of debt, and privation program that for a time improved the national economy. President Menem also made it clear that he had no wish to tackle the army head on: he issued pardons for minor revolts, and then, amid considerable controversy, decided that 'there would be no continuing sentences or prosecutions for human-rights offenses committed in the dirty war' (Skidmore & Smith 2001, p104). The mothers of the disappeared, however, continued protests through the 1990s in which they demanded an explanation of where those they had lost had gone.
Economic growth, IMF structural adjustment, foreign-policy alignment with the U.S. (including a rebuffed effort to join NATO), cooperation with Brazil and Mercosur were key elements of Menem's policies (McSherry 2000; Skidmore & Smith 2001, p106). However, issues of corruption, ongoing joblessness (for mobilisation of the unemployed, see Petras 2002), a growing gap between rich and poor (called 'savage capitalism', see McSherry 2000), fears over the continued security role of the army which had been widened under incremental constitutional reforms (see McSherry 2000), and a downturn in the economy in 1999, showed the limits of both economic and political reform (see Hudson 1999). Thus: -
In the late 1990s Argentina was engulfed in a social crisis and a crisis of legitimacy of the neoliberal state. Democratic procedures provided an escape valve in 1999 voters were expected to vote out the Peronists and vote in a social-democratic party alliance that called for promoting human rights and 'humanizing" the neoliberal model. But Argentina remained subject to the requirements of international financial organizations and global financial markets. In essence, the type of state demanded by international actors was distinct from the type of state demanded by the Argentine population (McSherry 2000).
This led to the election of Fernando de la Rúa of the centre-left Alianza opposition coalition in 1999. Inheriting high levels of foreign debt, a lack of confidence in the banking system, a public distrust of the political system, Argentina would soon again be plunged into renewed social crisis. We can see, then, the Argentine political system has swung back and forth under different social and economic pressures. Even though 're-democritisation' was successful, it needed a strong economic base (and solid financial management) from which all could benefit. In this context, we need to turn to the broader context of democracy within pattern of regional development and globalisation.
5. Democracy, Neo-Liberalism and Economic Crisis
As we have seen, it is not enough to simply have elections to guarantee a stable democracy. The background conditions, economic and cultural, that sustain democratic processes and ensure that they are respected also need to be in place. Further, even a true democracy, when undergoing conditions of economic turmoil, will be unable to meet the needs and interests of the citizens it is supposed to represent and support. Under such conditions, it will be very hard for even elected governments to retain legitimacy.
We can see this most clearly in the case of Argentina (which we explored briefly in lecture 2). In part, the problems of Argentina were based on an overly strong currency (tied to the U.S. dollar), the slightly earlier de-linking of the Brazilian currency to the dollar, and to problems in maintaining strong agricultural exports. However, in large measure, the financial governance of the country (both in terms of national governments and international governance) failed to avert a combined economic and political crisis. In large measure, many ordinary Argentines do not trust their governments and leaders, in spite of the return to civilian rule, leading to a lack of confidence in measures taken to stabilise the economy. Corruption has also been a major problem, operating apparently at all levels.
Argentina - Selected Political Timeline 2001 - February 2002 (based on BBC 2002)
2001 March - President de la Rua forms a government of national unity and appoints three finance ministers in as many weeks as cabinet resignations and protests greet planned austerity measures.
2001 July - Much of the country is brought to a standstill by a general strike in protest against proposed government spending cuts. Country's credit ratings slip.
2001 October - The opposition Peronists take control of parliament in Congressional elections.
2001 December - Economy Minister Cavallo announces sweeping restrictions to halt an
exodus of bank deposits.
2001 December - The IMF announces it won't disburse $1.3 billion in aid for the month,
pushing Argentina closer to the brink of default.
2001 13 December - Much of Argentina grinds to a halt due to a 24-hour general strike by public workers protesting against new government curbs on bank withdrawals, a delay in pension payouts and other economic measures.
2001 20 December - President Fernando de la Rua resigns after widespread street protests and rioting leave at least 25 people dead.
2001 23 December - Adolfo Rodriguez Saa named new interim president, says Argentina will suspend foreign debt payments. Fresh protests in anger over Rodriguez Saa's appointment of officials seen as corrupt and his decision to maintain unpopular banking curbs.
2001 30 December - Rodriguez Saa resigns, citing a lack of support within his own party.
2002 1 January - Congress elects Peronist Senator Eduardo Duhalde as president for the remaining two years of de la Rua's term. Within days the government devalues the peso, ending 10 years of parity with the US dollar.
2002 February - The peso is allowed to float freely for the first time in a decade.
The current crisis involved a fear that the value of the currency (the Argentine peso) would plummet, a run on banks as funds were withdrawn, and an inept government response to limit cash withdrawals of $1000 per month (simply averting the crisis in the banking system to a wider political crisis). Though this was designed to stop the collapse of banks, and rolling bankruptcies as debts were called in from firms who had made loans (Faiola 2002), this stop-gap measure probably intensified the crisis. This hurt the poor and the small business of the informal economy most, while credit, cheque and other transfers were not limited (Catan & Lapper 2001b). The crisis was predictable since Argentina had undergone recession, had 18% unemployment, and high interests rates (Financial Times 2001). Furthermore, on two occasions it had secured major funding from the IMF to restructure loans and support its currency; a $40 billion package negotiated in 2000, and a further $8 billion in August 2001, though it must be noted that the IMF refused to put through its $1.3 billion payment due in December, thereby deepening the crisis (Catan & Lapper 2001b). Furthermore, then President Fernando de la Rua had proved inept in his economic policies, which switched track several times and led to a voter approval rating drop from 70% in December 1999 down to 4.5% in December 2001 (Catan & Lapper 2001b). At present, this crisis has not led to regional contagion of other money markets (Crooks 2001; Ostrovsky 2001). However, it soon appeared that the country would have to abandon its one-to-one peg to the dollar, to devalue its currency, change the structure or abandon its currency board, and there are fears that it might be unable to restructure its loans and thereby default on its $130 of public debt (Strategic Comments 2002; for different estimates, see Catan & Lapper 2001; Altman 2002). The IMF and the U.S. has suggested that no bailout would occur unless there is serious financial reform, probably including restructuring of debt and removing the currency board approach (Spiegal 2001). Analysts rightly suggested that the 1:1 dollar peg would have to be discarded, and that a year later the peso might drop to 50% of its former value (Crooks 2001), something that would be good for exporters but damage those relying on savings, set incomes, or needing to import goods.
The impact soon emerged through February 2002, with depositors losing up to 40% of their savings as the peso devaluation hit: -
Before devaluation, when the government guaranteed that one peso was worth $1, most Argentine business loans, home mortgages and bank deposits were denominated in dollars. Under the government's "pesofication" program, most businesses and workers who borrowed dollars from banks and whose income is in pesos were getting a break by being allowed to repay their loans in the same amount of pesos as they owed before.
The measure helped spare thousands of Argentine debtors, but in return the banks demanded that Argentines with deposits in dollars had to pay a price, too. Depositors were barred from withdrawing their dollars and instead have effectively been forced to convert their dollar savings into devalued pesos at a fixed, below-market exchange rate - or risk having them turned into government bonds of even more dubious value that take up to 10 years to mature. (Faiola 2002; the loans involved in the one-to-one ratio were those up to $100,000, see Strategic Comments 2002).
In late December 2001, the president of the Senate, Ramon Puerta, took over as provisional president, but many thought new elections might be needed to establish a president strong enough to cope with the crisis, though constitutionally an interrum president might be able to serve out the term (Catan & Lapper 2001; Lapper & Catan 2001). Soon after this another interrum government under Adolfo Rodgriguez Saa collapsed, with a total of five presidents in two weeks trying to stem the crisis, leading to the eventual selection of Eduardo Duhalde, a power-broker in the 'populist wing of the Peronist Party' (with a strong base of support in Buenos Aires province) as president on January 1, 2002 (New India Express 2002; Strategic Comments 2002). Clashes on the street over the December 2001 period had been severe, with 28 people dead, that Duhalde even spoke of the risk of 'civil war' (Strategic Comments 2002). Duhalde has been described as 'pragmatic and not guided by a strong ideology', and he 'is unlikely to be the protectionist, fiscal profligate depicted in the foreign press, although he will favour some attempts at an active industrial policy and state intervention' (Strategic Comments 2002).
By early January Argentina had defaulted on its loans, and was undergoing continued political instability. The economic crisis was so severe that IMF officials once against discussed the idea of allowing some kind of bankruptcy-reorganisation procedures (run through an international tribunal) for Argentina and countries in similar situations (Altman 2002). The Argentine peso was devalued by over a third, the law holding parity to the dollar was dropped (Straits Times 2002), and once again there was on private saving and withdrawals from banks. By the 9th January 2002 discussions were under way with the IMF in order to secure the US$15 billion in aid that the country needs to survive and restructure, with one sticking point being whether the IMF would require the elimination of the budget deficit as part of its conditions (Straits Times 2002). Through the 12th of January the peso had dropped to 1.80 to the US dollar, though for official business and exports the exchange rate had been set at 1.40, large account withdrawals had been blocked, and street demonstrations continued (Goni & Denny 2002). At the very least, the Argentine economy may continue to contract, at least by 7%, in the coming the coming year, according to rather optimistic estimates (Newsroom 2002). In the long run, 'the cost of recapitalising the financial system will have to be shared between the banks, depositors and tax payers' (Strategic Comments 2002), but will also need support from the international community and from international financial institutions, especially if they wish to support the future of a democratic Argentina.
There are likely to be flow-on effects to those who have invested or loaned to Argentina and its companies, with Spanish companies and Eurozone Banks most damaged (Financial Times 2001b), though the long term impact on Mercosur and trade partners such as Brazil remains to be seen. Spanish companies and banks in particular had been involved in buying up privatised elements of the nationalised companies, e.g. in telecommunications, and are thus directly affected by the crisis in Argentina. From February 2002 it has been estimated that up to 100 of the 200 top firms in the country may fail or need to merge in future months (Faiola 2002). Carlos Menem, who remains chairman of the Peronists but does not have very good relations with President Duhalde (Strategic Comments 2002), has already suggested that he will return to politics to contest the presidency in 2003. There have also been some feared that continued chaos could lead to a return of military government, but this seems unlikely so long as officers are covered by amnesties (Strategic Comments 2002) and are unwilling to take responsibility for a deeply troubled financial system. In general terms, it should be noted that many countries in the region, in spite of increasing GDP over the long-term, remain vulnerable to international financial flows and to the pressures of economic globalisation.
These factors have pointed to a deep institutional crisis within Argentina: -
While elections are generally free and fair and the country has a thriving free press, democracy has yet to be consolidated. The political system has been undermined by corruption and abuses, giving rise to a deep-seated distrust of politicians, courts and institutions. For many, the country's difficulties can be simply explained in terms of the venality of its leaders. The poor example set by the elite is cited as a reason for the high level of tax evasion, itself an important factor in the crisis in the public finances. Disillusionment cuts across parties: at mid-term congressional elections in October 2001, one-quarter of the electorate failed to carry out their legal duty to vote, while of those who did, just over one-fifth spoilt their ballots. (Strategic Comments 2002)
What this suggests that in the broader context that there needs to be a stronger commitment both to democracy (including real notions of liberty) as well as to the conditions of broadly based growth, both in terms of international policies as well as policies within Latin American countries (see Llosa 2001). Without this support, there will be a tendency to trade off support for democracy in terms of a narrow "neo-liberalism" that is more concerned with an economic dogma that supports short term gains for particular groups in the international economic system (Llosa 2001). There are lessons to be learned from Chile and Argentina. Democratisation remains an ongoing struggle to achieve political fairness and economic stability (McSherry 2000). Simple re-democratisation is not enough to build stable communities.
6. Bibliography and Resources
NDI (National Democratic Institute for International Affairs) Access Democracy has a useful search engine with documents monitoring elections, democracy and human rights, including page on Latin America, at
A useful specialised news service can be found in the Latin American Newsletters Newsroom, with update coverage from Latin America at http://www.latinnews.com/newsroom.htm
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WILLIAMSON, Edwin The Penguin History of Latin America, Harmondsworth, Penguin, 1992
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ALTMAN, Daniel "Is Bankruptcy an Option for Argentina?", Straits Times, 8 January 2001, p15
BARCZAK, Monica "Representation by Consultation? The Rise of Direct Democracy in Latin America", Latin American Politics and Society, 43 no. 3, 2001, pp37-59 [Internet Access via Bond University Library Databases]
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Financial Times, "Peso Devaluation Will Hit Multinationals", 2001b, p5
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Copyright R. James Ferguson 2002
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