In our previous posts we talked about how it has become common wisdom that neoliberalist transformations are taking developing countries by storm – irreversibly changing intra-state dynamics, boosting productive capacities, reducing inequality, and enhancing welfare. Instead, recent years have seen a pattern of an increase in state activity in the domestic economy. In some cases, there’s privatization and in others a populist surge of sentiment in favour of greater government involvement in the economy.
We don’t want to enter a debate about whether free-market mechanisms ought to substitute for state goods and service provisions. We are interested, however, in the politics behind this new wave or populist tendencies that manifest in the domestic economy.
Take this headline, “Greece Puts Privatization on Ice as anti-austerity wave arrives in Madrid.” Few would argue that Europe is not experiencing a resurgence in nationalism, or even hypernationalism, from Greece, Spain, Germany, to France. Is the win of Greece’s leftist and anti-EU Alexis Tsipras a trend that will further affect many of the European countries that have been told to buckle up for hard economic times ahead? Is Europe experiencing much of what Latin America went through in the 1990s with the rise of government like Venezuela’s Chavez, Brazil’s Lula, Argentina’s Kirchner, or Morales in Bolivia? What does this look like at the domestic economy level?
Consider the following, in the early 2000s, the Bolivian government privatized the national water sector in order to reap the advertised benefits and receive a one-time cash influx from the sale. It was hoped that the new private water provider would set competitive prices and widen the scope of service delivery. However, the state, looking to compensate for the revenue lost as a result of the transaction and raised water tariffs. The consumer, now subject to not only the burden of increased tariffs but also service provision costs, faced a dramatic rise in the price of an essential commodity. Affected by the sudden and seemingly unjustified price increase, citizens protested. The surge of public protests against the privatization in water lead to the ultimate reversal in privatization.
Morales campaigned on the failure of his predecessor on the issue of water privatization, saying "Water cannot be a private business because it converts it into a merchandise and thus violates human rights. Water is a resource and should be a public service," The above scenario has the potential to take place in any country pressured into privatizing a sector on which it relies heavily for revenue. But developing nations, with limited income earning sectors, are most vulnerable to the described plight as well as many others. We see an interesting trend of populist rhetoric that might just have the potential to return the pendulum to the left.
If you don’t think it is yet another trend, consider the fact that in upcoming Latin American presidential elections in El Salvador, Costa Rica, Panama, Uruguay and Bolivia, it is leftists that are the strongest contenders. Stay tuned for our next blog…