13.5: Globalization and Neoliberalism

Latin America provides a good example of how the shift from colonialism to neoliberalism has been disseminated through and exacerbated by globalization. By the beginning of the twentieth century, the Latin American colonies’ independence from Spain and Portugal was secure, but the relations of power that prevailed during the colonial period had largely been replicated with local elites controlling the means of production. During this period, citizens individually and collectively endeavored to establish a new national identity. Despite nominal commitments to democracy throughout the region, patron/client relationships functioned as the primary political mechanism. Internal divisions ran deep in many Latin American countries, with the supporters (or clients) of rival elites periodically drawn into violent contests for rule on behalf of their patrons. In the last decade of the 1800s and the first decade of the 1900s, people in Latin America began to question the right of the elites to rule, as well as the hidden costs of modernization. Peasant uprisings, like the one that took place at Canudus in Brazil in 1896, were evidence of the shifting political framework. People also saw the imperialistic tendencies of the U.S. as a negative force of modernization which they hoped to avoid. Together, this led to a situation in which people in Latin America sought a national identity that resonated with their sense of self.

During this same period there was a slight but significant change in the economic structure of the region. The economy was still based on exports of agriculture and natural resources like minerals, and the profits remained in the hands of the elite. What was new, however, was the introduction and modest growth of manufacturing in the cities, which created new job opportunities. Economic diversification led to a more complex class structure and an emerging middle class. Unfortunately, this period of relative prosperity and stability soon ended. Because of the plentiful natural resources and the captive labor source “available” for exploitation in Latin America, wealthy landowners were able to undersell their European competitors on agricultural products and provide “exotic” minerals. The privileged position of Latin American landowner compared to European farmers led to widespread poverty among farmers in Europe, which led to out-migration and political instability in Europe. As locally born Latin American peasants migrated from the countryside to the cities and the cities filled with European immigrants, the landowning elite began to lose control, or at least the kind of power they used to hold over the farmers who worked their land and had no other work options.

While city living provided certain opportunities, it also introduced new challenges. In the city, for instance, people rarely had access to land for subsistence agriculture. This made them far more vulnerable to economic fluctuations, and the vulnerability of city living necessitated the adoption of new political philosophies. Urban poverty and desperation created a climate in which many people found socialist philosophies appealing, starting as early as the 1920s in some places like Brazil. Initially, union leaders and European immigrants who spread socialist ideas among the urban poor were punished by the state and often deported. Eventually such repressive tactics proved insufficient to curtail the swelling disruptions caused by strikes and related actions by the unions. Faced with a new political reality, the elite co-opted the public rhetoric of the urban masses. Realizing the need to cast themselves as allies to the urban workforce, the elites ushered in a period of modest reform with more protection for workers.

During this period, and as an extension of their work-related activism, the middle class also clamored for expansions of the social services provided by the state. Pressure from the middle class for more social services for citizens unfortunately played into growing xenophobia (fear of foreigners) resulting from the immigration of so many foreigners and faulty ideas about racial superiority communicated through a growing discourse of nationalism. In some places, the elites aligned with the middle classes if they saw it as politically advantageous. In other places, however, elites resisted incorporating the middle classes into the ruling structure and the elites’ power ultimately was wrested away though military coups. While emerging leaders from the middle class continued relying on the export economic model, they directed a greater percentage of the profits back into social programs. Only after the stock market crash of the 1930s—and the resulting global recession—did those in power start to question the export model.

In the early part of the 1900s, Latin American countries largely supported free trade because they believed they had a competitive advantage. They believed that by producing the products their country/region was best suited to produce they would prosper on the world market. However, changing world circumstances meant that Latin American countries soon lost their advantage; average family size in industrialized countries began to decrease, lowering demand for Latin American commodities. When other countries with similar climates and topography began to grow the same crops, a global oversupply of agricultural products led to lower prices and worsened the decline of Latin America’s financial status in the world market.

This economic downturn was amplified by the loss of British hegemony after World War II. Before the war, Great Britain and Latin America had enjoyed a stable exchange relationship with Latin America sending agricultural goods to Great Britain and the British sending manufactured goods to Latin America. As the U.S. rose in global power, Americans looked to Latin America as a new market for U.S. manufactured goods. In contrast to Great Britain though, the U.S. did not need to import Latin American agricultural goods because the U.S. produced enough of its own, production that was further protected by high import tariffs. Even if a consumer wanted to buy Latin American commodities, the commodities would be more expensive than domestic ones—even if actual costs were lower. Overall, Latin America sold its agricultural goods to Europe, including Great Britain, but Latin American exporters had to accept lower prices than ever before.

The United States’ economic strategy toward Latin America was different than Great Britain’s had been. For those commodities that could not be produced in the U.S., like bananas, U.S. companies went to Latin America so they could directly control the means of production. Although these commodities were grown and/or produced in Latin America, the profits were taken by foreign companies rather than local ones. This same process also happened with mining interests like tin and copper; U.S. companies purchased the mines in order to extract as much profit as possible. American companies were in a position to exploit the natural resources of these countries because the U.S. had the financial capital local communities lacked and the technological expertise needed to sustain these industries. This pattern curtailed the rate of economic growth throughout Latin America as well as in other regions where similar patterns developed.

The late 1920s through the 1950s saw many Latin American countries turning to nationalism—often through force—as both a cultural movement and an economic strategy. The middle classes were in a favor of curtailing the export economy that had been preferred by the elites, but did not have the political clout to win elections. Indeed, their agenda was regularly blocked by the elites who used their influence (i.e. with their clients) to press their interests, especially in the rural areas. With time, however, middle class men increasingly came to occupy military officer positions and used their newfound authority to put nationalist leaders in the presidencies. Nationalists argued that an over-dependence on agriculture had led to Latin America’s vulnerable position in the international economy and called for a build-up of industry. They hoped to start producing the goods that they had been importing from the U.S. and Europe. Their goal: industrial self-sufficiency.

The state was instrumental in this economic reorganization, both helping people buy local goods and discouraging them from buying foreign goods. Doing this was far from as easy as it may sound. The state imposed high duties on goods destined for the export market in order to entice producers to sell their goods at home. At the same time, the state imposed high tariffs on the imports they wanted to replace with local products. With time (and struggle) these measures had their intended effects, making the locally produced goods comparatively more affordable—and therefore appealing—to local consumers.

As already noted, developing factories required capital and technological expertise from abroad, which in turn made the goods produced much more expensive. To help people afford such expensive goods, the state printed more money, generating massive inflation. (In some places this inflation would eventually reach 2,000 percent!) The combination of chronic inflation with high foreign debt emerged as an enduring problem in Latin America and other parts of the Global South. Countries crippled by high inflation and debt have turned to international institutions like the IMF and WB for relief and while the intentions may be good, borrowing money from these global institutions always comes with strings attached. When a country accepts a loan from the IMF or the WB, for instance, they must agree to a number of conditions such as privatizing state enterprises (see the case study on Bolivia’s water crisis, below) and cutting spending on social services like healthcare and education. Borrowing countries are also required to adopt a number of policies intended to encourage free trade, such as the reduction or elimination of tariffs on imported goods and subsidies for domestically produced goods. Policies are put into place to encourage foreign investment. Transnational corporations have now reached the point that many of them rival nations in terms of revenue. In fact, as of 2009, “forty-four of the world’s hundred largest economies are corporations.”^[36] It is an understatement to note that the policies forced on countries by lenders are often disruptive—if not entirely destructive—of locally preferred lifeways and preferences. Although the IMF and WB measures are intended to spark economic growth, the populace often winds up suffering in the wake of these changes. Colonialism has given way to a neocolonialism in which economic force achieves what used to require military force with transnational corporations benefiting from the exploitation of poorer nations.

Case Study: Privatization and Bolivia’s Water Crisis

In 2000, Bolivians in the city of Cochabamba took to the streets to protest the exploitative practices of a transnational company that had won the right to provide water services in the city.^[37] Anti-globalization activists celebrated this victory of mostly poor mestizo and indigenous people over capitalist giants, but the situation on the ground today is more complicated.

Water is one of the most essential elements on this planet. So how is it that a foreign company was given the right to determine who would have access to Bolivian water supplies and what the water would cost? The answer serves to highlight the fact that many former colonies like Bolivia have existed in a perpetual state of subordination to global superpowers. When Bolivia was a colony, Spain claimed the silver and other precious commodities that could be extracted from Bolivia’s landscape, but after Bolivia became independent structural adjustment policies mandated by the International Monetary Fund and World Bank paved the way for foreign companies to plunder the country’s natural resources. In other words, colonial style relationships have been replicated in a global system that forces impoverished countries to sell resources to satisfy creditors; “resource extraction is facilitated by debt relations.”^[38]

Like many countries in the Global South, Bolivia is deep in debt. A failed program of social reforms, coupled with government corruption, was worsened by a severe drought affecting Bolivian agriculture. In order to pay its debts in the 1980s, Bolivia agreed to structural adjustments mandated by the conditions of the country’s World Bank and International Monetary Fund loans. One of the mandates of these loans was privatization of state-run enterprises like the water system. Proponents of privatizing such resources argue that the efficiency associated with for-profit businesses will also serve to conserve precious natural resources. Some have gone so far as to suggest that increases in water prices would help customers better grasp the preciousness of water and thereby encourage conservation. Of course, if customers conserve water too much the company managing water delivery will fail to make a profit, thus initiating a dangerous cycle. When companies anticipate that they will not see a return on their investment in infrastructure, they simply refuse to extend services to certain areas of the community.

What made the privatization of water in Bolivia so disastrous for the people of urban areas like Cochabamba was the rapid population growth they experienced starting in the latter half of the twentieth century (growth that continues in the present). Population pressures layered on top of the scarcity of water in the Bolivian natural environment makes access to potable water a perennial concern. Migration to urban areas was hastened by many different factors including land reform, privatization of mines and resultant layoffs, and severe droughts. This influx of migrants put pressure on urban infrastructure. To make matters worse, climate change led to a decline in the amount of surface water available. In 2015, Lake Poopó, the second largest lake in Bolivia, went dry and researchers are doubtful it will ever fully recover (see Figure 13.5.1).^[39]

Figure \(\PageIndex{1}\): A fishing boat is stranded on the shrinking Lake Poopó, 2006.

In Cochabamba, organizing began in late 1999. Community members formed an organization called Coordinator for the Defense of Water and for Life, which was run using a direct form of democracy wherein everyone had an equal voice. This was empowering for peasants who were accustomed to being silenced and ignored in a centuries-old social hierarchy. This organization, in contrast, coordinated actions that cut across ethnic and class lines. As the situation came to a head, activists blockaded the roads in and out of the city and riot police were brought in from the capital. After several days of confrontations between the people and the military, local activists ousted the transnational company and reclaimed their water source.

Despite local’s reclaiming control, however, they still lacked the infrastructure needed to effectively deliver what was once again “their” water. This forced them to look to international donors for assistance, which could recreate the very situation against which they so recently fought. Access to increasingly scarce water supplies is a growing problem. For example, plans to seize surface water from lakes creates conflicts with rural peasants who depend on these water sources for agricultural purposes. Unfortunately, such problems have emerged in many other places as well (such as throughout Africa and the Middle East), and are increasing in prevalence and severity amidst ongoing climate change. The question of whether or not water is a human right remains one that is heatedly debated by activists, CEOs, and others. (See a discussion of the position taken by Nestlé Chairman Peter Brabeck, who argues for the privatization of water, a position clearly at odds with the position taken by the United Nations General Assembly which, in 2010, recognized water and sanitation as human rights.)

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NOTES

36. Steger, Globalization, 54. ↵
37. This case study is based on the work of Nicole Fabricant and Kathryn Hicks, “Bolivia's Next Water War: Historicizing the Struggles over Access to Water Resources in the Twenty-First Century” Radical History Review 116 (2013): 130-45. ↵
38. Ibid., 131. ↵

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Adapted From

"Globalization" by Lauren Miller Griffith, Texas Tech University, and Jonathan S. Marion, University of Arkansas. In Perspectives: An Open Invitation to Cultural Anthropology, 2nd Edition, Society for Anthropology in Community Colleges, 2020, under CC BY-NC 4.0.