Latin America

In 2004 Haiti took the attention of the world community. With the UN making a home in the poorest country in the Americas and the fall of the leader at the time, refugees from Haiti fled on boats, across the Dominican border and through any means possible to escape the chaos of their home country. Ever since, Haitians have tried to escape a bleak future my any means possible. For those who have not left, starvation has set in to punish the people of Haiti even further.

A phenomenon in 2008 has taken place. With crops that often were staple food for many now being valued as fuel for cars and machines that do not yet exist, the world’s poor are losing their ability to be fed because there might be an environmental change. While this change may take place in 10-20 years time, the reaction of the markets are to drive the value of cash crops through the roof and produce another commodity which does more harm than good. In line with tobacco, oil, coffee and sugar, the new gold rush may be corn or sugar cane. The result is the same 9,000 strong UN force which came to help stop political violence and crime, are now shooting rubber bullets at Haitians who protest the high food prices and wish to avoid starvation. With an average wage of $2 a day, the environmental concerns of the Developed world has affected the people who care least about the issue to the greatest degree.

Some aid has come to the Haitian people. The OAS has engaged the problem and is sending food aid to the poor people of Haiti. UNICEF has also stepped in to help ease the pressure of possible starvation in the country. These band-aid solutions may not help in the long run however as the rise in fuel prices in the future may become a constant problem as biofuels start to be used. Starvation is already setting in and the only countries to use biofuels are in South America, which has not had a large effect on the world economy as crops used in Brazil, like Sugar Cane, has met production need for food as well as for fuel production. A measured policy response is required, as a shock to food prices has been created by mere talk of a future biofuel alternative without any plan to create sufficient supply and demand. An ironic turn of events is that the problems with oil and countries associated with oil production may be inherited by biofuel producing states with issues of poverty. The difference is that this does not have to be any country’s destiny, as proper planning and a rationalization of environmental and industrial policy should be measured to avoid crisis.

The hyper-reaction and narrow debate surrounding the Global Warming issue often has not had an effect on the world economy, but this first bitter economic shock to the Developing world is a clear disgrace. Countries like Haiti are paying for a theory on Global Warming that is still a very open and debatable issue. Paranoia in the Global Warming debate is driving reactionary policy in the Developed world, and being paid for by the poorest of the poor in the Americas and worldwide. The responsibility of a food shortage crisis should be assumed when creating foreign and local policies for the Developed world in the future, especially if the problems may not exist and the solutions have yet to be implemented.

A tradition has formed in economic thought since the 1960s in comparing two regions with similar levels of poverty and inequality. Both regions have traditionally been open to economic measures to promote growth and achieve the level of development of North America and Europe. Asia and Latin America are both regions which have suffered historical economic problems and large structural reforms, and in the 1960s were considered at the beginning of new forms of development. While many Asian countries set off to promote trade and investment and increase Foreign Direct Investment in their economies, Latin America sought to follow the trend started by Raul Prebisch, by raising tariffs and trade barriers and producing their own products internally and keeping investment inside their own individual economies. The independence of Latin America from the industrialized world would take its form in Import Substitution Industrialisation policy for the region. The exception to the rule in Asia was China. A Communist system left China locked into trade with other Communist countries and limited trade with the West. Upon the onset of problems between China and the Soviet Union in the 1970s, some moves towards greater trade with the West came after Nixon’s trip to open relations with China. Since then the progressive growth and eventual acceptance of China into the WTO has made China the world’s next Superpower, or at least the country that manufactures everything for the world’s current Superpower.

With economic progress came inequality. In Latin America economic success could always be measures by the percentage of people that benefitted or were lifted out of poverty by a boom in any of the Latin American economies. Boom and Bust cycles dominated Latin America well into the 1990s and beyond into Argentina’s financial collapse in 2001. This debate dominated the World Bank, as neo-liberal ideas were debated comparing Latin America’s failures to East Asia’s successes in the report on The East Asian Economic Miracle, giving credit to reduced barriers and increased trade as the reason for East Asia’s success. Dissent came from the head of the World Bank itself when Joseph Stiglitz published Rethinking the East Asian Miracle after the financial turmoil of many of the Asian Tigers at the time and clear collapse of Argentina later on. Equality was still an issue as 30-40% of Latin Americans remained in poverty, East Asia reorganized and China slowly started to rise as an economic giant.

Lessons learned from the World Bank’s debates and the past economic crisis in Latin America and Asia showed that fast growth often promotes cultures of decadence for those who benefit from it and marginalize other parts of a society which do not have the means to raise themselves out of poverty. Systemic poverty among rapid growth was often the result, and became entrenched in the society in the long run.

In an article this week in FT.com, China is advised by the author to take lessons from Brazil in dealing with inequality while managing an economic boom. Not until the late 1990’s did progressive governments in Brazil seek to challenge the country’s historical inequality while absorbing slow positive growth and attacking poverty in a country of over 170 million people. Brazil’s past reflected much of that of Latin America’s with short periods of growth followed by economic collapse which left the impoverished in Brazil in constant chaos. While China does have a large amount of savings as opposed to those nations in East Asia and Latin America in the 60s, poverty still must be challenged in China as not to create an underclass in society. Economic booms have always been used to justify economic policies, but in almost every case the boom eventually turns to bust as economic cycles often do. Past policies to absorb the gains of booms are not put into addressing social problems that are often historical and require time and money to resolve past the boom cycle. While China is not Brazil, these two giants could learn a lot from each other. Both economies are considered to be economic miracles in their own right, but stability and long term growth are only truly successful if it benefits all citizens to a greater degree over a long period of time. While poverty is a constant reality in all countries, the plague of poverty inherited or created can be helped by proper economic and social policy during times of prosperity. With proper economic policy, the trend of inequality with growth do not have to be the result of economic progress.