Neoliberalism and Development Failures in Latin America

Introduction: Kingstone's Critique of Neoliberalism

Peter Kingstone argues that neoliberalism has not lived up to expectations for spurring development in Latin America. Right from the outset, Kingstone acknowledges that the issue is complex and that a number of contributing factors explain this failure. His book attempts to delve into why neoliberalism has fallen short. He notes, in particular, that solutions attempted over the past few decades have not paid enough attention to the role of the state in economic development. The role of the state is critical, and the unique nature of Latin American states means that even if neoliberal strategies work well in other parts of the world, they may not work in Latin America. Neoliberalism, therefore, needs to be adapted to the conditions of Latin America rather than imposed upon the region without consideration for its particular characteristics.

The Pro-Neoliberal Counterargument

A supporter of neoliberalism would not readily concede that it has failed — or, at most, would point to anecdotal success stories. More substantively, a pro-neoliberal argument holds that the approach to economic development should not have to accommodate the dysfunctional nature of government in Latin America, because that dysfunction is itself part of the problem. From this perspective, it is not the neoliberal system that needs adjusting, but the state systems. Issues such as insufficient infrastructure, corruption, and lax enforcement of laws all contribute to the development challenges that Latin America faces, independent of the economic model applied.

The Anti-Neoliberal Perspective

Opponents of neoliberalism are less focused on the institutional obstacles to economic development. They may agree that corruption and crime are serious problems, but they are more likely to shift the blame for those problems onto the wealth-distribution failures inherent in neoliberalism itself. They argue that even when neoliberal policies grow an economy in aggregate, the resulting wealth distribution is so uneven that it inevitably sows discontent among the wider population. Without genuine buy-in from the people, neoliberal policies lack legitimacy, and the system can never truly function until it demonstrates that it can solve problems for the many — rather than simply enhancing the wealth of those who already hold power in the region.

Neoliberalism, Democracy, and Wealth Distribution

Neoliberalism is neither purely an elitist project nor a straightforward foundation for economic renewal and democratic governance. Democratic governance is not a precondition for neoliberal success; effective wealth-distribution mechanisms are. At its core, neoliberalism seeks to reduce barriers to trade and thereby improve the efficiency of an economy. If resource exploitation rates hold steady and the population remains constant, this should produce economic growth — but economic growth does not automatically translate into improved living standards.

In countries where mechanisms for redistribution are weak — that is, where taxes are low, land ownership is narrowly concentrated, and public education or healthcare barely exists — newly generated wealth tends to accumulate at the top. There is little doubt that in most countries, neoliberalism allows the rich to get richer, and only where redistribution mechanisms or underlying economic conditions are favorable can the poor realistically improve their circumstances. Yet millions have done so, indicating that when the underlying conditions are right, neoliberalism can work.

Neoliberalism does not imply democracy, however. Economic growth is related to many factors, and democracy is not necessarily one of them. The highest per-capita GDP nations are not all democracies, and long-term fast-growing nations such as China have also grown rapidly without democratic governance, yet all participate in the neoliberal economic system in some form. Democracy would, in theory, tend to produce better wealth distribution outcomes, but it is not a structural requirement of the model itself.

Conclusion: Why Neoliberalism Underperformed in Latin America

The results of neoliberalism have been below expectations in Latin America because the conditions necessary for optimal success have not existed there. The assumptions that make neoliberalism function well elsewhere simply do not hold in the Latin American context. Governments, in particular, are not playing the role they need to play in order to ensure that the benefits of increased economic activity reach ordinary people rather than being captured by foreign corporate interests and local oligarchs.

References

Kingstone, G. (2010). The Political Economy of Latin America: Reflections on Neoliberalism and Development. Taylor & Francis.