Neoliberalism in Latin America

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Neoliberalism in Latin America

From the 1930s until the 1980s state intervention and protection were key components of most Latin American economies. In these years many Latin American countries were used an Import-substitution industrialization based economy trying to reduce dependence on foreign imports and replacing them with domestic production. Due to the use of an Import-substitution industrialization based economy Latin American countries were forced to keep high tariffs to protect the private companies of their countries. This combined with many Latin America countries providing numerous government subsidized programs eventually led to the 1982 debt crisis. This debt crisis created a vacuum affect in Latin America with many of the countries taking on a new neoliberal economic model, and by the early 1990s John Charles Chasteen claims that almost every Latin American country was led by a president that was pro neoliberalism. This neoliberal economic model called for the slashing of tariffs as well as the reduction of removal of all nationalist-inspired subsides. Also following the neoliberal model, Latin American countries stopped the printing of money to slow inflation effectively undermining the functionality of their local markets. All of this was done so that a completely “free market” could be created. It was believed that this free market would not only help improve the economies of Latin American countries, but also create more personal freedoms for the people of Latin America. In the article “Neoliberalism, Neoclassicism and Economic Welfare”, John T. Harvey claims the complete opposite, arguing although a neoliberal economic model was created to produce conditions conducive to social provisioning or democratic problem solving, the exact opposite has occurred. Harvery states in his article, “Instead of growth, stability, and the narrowing of income gaps, we have seen stagnation, volatility, and increased inequality.” By researching neoliberalism a clear picture can be drawn. Neoliberalism created class stratification with the upper and middle class greatly benefiting from the new policies sanctioned by neoliberalism, while the poor continued to become more impoverished and unable to provide for themselves. Many historians argue that the neoliberal economic model was most beneficial for the small wealthy upper-class of Latin America as well as many upper-class business owners from other countries. The existence of a “free market” due to neoliberalism in Latin America created many opportunities for upper-class citizens to continue to become considerably wealthier. The upper-class benefit from neoliberalism in many ways but the two largest benefits come from the privatization of government subsidized programs and the lowering of tariffs. Not only did both of these policies line the pockets of the upper-class of Latin America but foreign investors as well. In order to balance their federal budget many Latin American governments privatized their government subsidized programs as well as cut federal jobs. First, the privatization of federal jobs allowed many upper-class citizens to take over these businesses and use them in their benefit to create capital. Former government projects such as constructing roads and government buildings were now being completed by companies that were owned by the upper-class. Prior to neoliberalism these jobs were paid out of the federal budget and were used as a way to lower unemployment by hiring more workers than were really needed. Now that private companies were doing the work efficiency was the most important thing leading to the loss of many jobs for the poor class of Latin America. In the article, “Neo-Liberalism in Latin America: Limits and Alternatives” Ian Roxborough argues that the immediate beneficiaries of the privatization of government subsidized programs and federal jobs, or what he calls real assets, were foreign investors and...
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