America’s China Policy Is Not Working
The Dangers of a Broad Decoupling
ARGENTINA: THE POLITICS OF LATE INDUSTRIALIZATION
BOOKS on Latin America written ten years ago called attention to two parallel developments in the region. The major countries were industrializing, and urban-based parties were cementing their hold on national politics. It was natural to conclude that the two trends were related-that the economic dislocations of the depression and war had broken the back of the old order, leaving national policy firmly in the hands of groups identified with democracy and all-out industrialization. This was the "twilight of the tyrants" and the noonday of "the middle sectors." Recent observers are less sanguine. They see middle-class politics proceeding apace and the cities dominating the economic scene, but what (they ask) has become of all-out industrialization? Somewhere on the way from light to heavy industry, from an urban-circumscribed to a truly national market, key nations of the continent have begun to drift. While the cities swell with rural migrants escaping the static hinterland, economic growth seems mired in bogs of inflation, inefficiency and vacillating policy.
The disillusionment arises not so much from a comparison of economic performance today with that of twenty years ago as from the discrepancy between present performance and past expectations. The immediate postwar years promised so much, not only in terms of new political alignments but in terms of the tractability of economic problems. Today, when the obstacles to economic development appear to be innumerable and elusive, it is easy to forget that ten years ago we tended to assume that "takeoffs" followed automatically upon the fulfillment of a few specific preconditions, such as the achievement of an ample level of investment. Latin America appears today to be doing far better in creating demand than in supplying jobs, housing and mass-produced goods. While the economies of the region are keeping ahead of population they seem to be losing in their race with "rising expectations."
Dissatisfaction with present trends is widely apparent in Latin America: both major contestants in the Chilean election of 1964 were proponents of extensive reform; the recent reorganization of government in Uruguay was made in a mood of national emergency; and in the last round of coups the justification most frequently heard was that military rule is needed to avert economic chaos. Nowhere is the discrepancy between promise and reality more visible than in Argentina, a nation with notable advantages over her neighbors in soil, climate and developed human resources. Over the past thirty years per capita national product has increased only 45 percent or at an average annual rate of 1.5 percent. It is not that economic gains are being wiped out by the population explosion-between the last two censuses population grew at an annual rate of only 1.7 percent; adequate growth just is not occurring. Most disheartening perhaps is that in thirteen of the past thirty years the economy actually lost ground (again in per capita terms). In other words, the pace has been quite unsteady, and recently a recession has appeared every second or third year.
There are no political compensations for this disappointing economic performance. General Onganía, who came to power in last June's coup, is Argentina's eleventh chief executive in a quarter-century. Of those only three were duly elected. Over the last fifteen years national policy has been made by a succession of seven presidents, eighteen ministers of the economy, seventeen foreign ministers, sixteen ministers of the interior and fifteen ministers of war. For more than half of the past quarter-century martial law or its equivalent has been in force somewhere in the country. When the U. S. Government deplored the Onganía coup for breaking the "continuity of democratic government," it was either reaching back to the twenties or speaking of a very immediate past.
The standard American explanation for so disappointing a record has been Peronism. A typical view (here quoted from The New York Times) holds that "for at least a century Argentina was the most advanced and prosperous nation in Latin America. It lost its way in the Perón era and is still groping and floundering about. The natural wealth, the brains, the ability are still there, but unharnessed because of political sickness." According to this analysis, Perón so unbalanced the economy and so embittered politics that this wealthy, resourceful, etc., nation still lies under a cloud, some ten years after his overthrow. The explanation is typically American in that it reflects the economic determinism we so often apply to the Third World. If a country possesses sufficient economic resources and enough trained manpower, we can imagine no major obstacle to its rapid development. Hence, if development is stalled, the cause must be fortuitous- in this case, the accident of bad leadership. Perhaps it is because our own political institutions and ideology have changed so gradually and so continuously-in short, have adapted themselves so successfully-that we relegate such matters to a realm of second importance in analyzing the processes of change elsewhere.
On separate occasions both the President and the Secretary of State have compared the Alliance for Progress to the New Deal. But the New Deal pursued social and economic reforms within the context of existing political institutions, and in a society which already was highly integrated and fully industrialized. The problems confronting Latin America, if they have anything in common with U. S. experience, are more nearly analogous to those we faced in the last half of the nineteenth century, when the question of which groups would have tenure to take the economy in which direction was resolved, and all-out industrialization begun. It was an era initiated by marked political change, with new groups dominant in politics, new emphases in ideology, and radical transformations in institutions. Similar changes may be necessary before Latin American nations can fully industrialize. Americans may resist the suggestion that a period which includes the Civil War has relevance for other societies; slavery, after all, was a social question peculiar to a relatively few nations. But where has major economic transformation not been accompanied by "social questions" that severely test existing institutions?
Peronism grew out of Argentina's first decade of industrialization. It presided over a second in which industrial expansion met mounting obstacles. Argentina has just completed a third decade in which the Peronists have been out of power, but many of the obstacles have remained. It hardly seems reasonable to blame capricious leadership or a particular political faction for the country's continued failure to achieve sustained economic growth and political stability. Actually, Argentina's difficulties lie in the political responses she initially made to the requirements of industrialization, and these responses may be pertinent to other cases of "late industrialization;" that is, they may appear in other nations which, having entered the twentieth century as exporters of primary products, are trying to convert to industry under politically more difficult and technically more complex circumstances than applied in an earlier era.
What are the political requirements of industrialization? Many might be listed, but two stand out as primary. First, groups that identify their own interests with industrialization must shape national policy. Second, the rest of society must be persuaded to accept this distribution of power as well as the sacrifices which industrialization entails in the initial stages of capital formation.
Like most American nations, the United States began its independent existence as an adjunct to more developed economies abroad. Its cities were clearing houses for the export of agricultural products and for the import of manufactured goods. The cities gradually added simple manufacturing to their commercial role, so that by mid-century the United States had a dual economy: semi-industrial and somewhat self-contained in the north, agricultural and export-oriented in the south-a bifurcation like that in many Latin American countries today. It is not necessary to subscribe to an economic interpretation of the causes of the Civil War to suggest that its chief effect was to remove from national policy-making the one group most likely to have obstructed the further expansion of industry. Not only were the southern planters read out of national politics, but the ideology of freedom, revived in the conflict over emancipation and free soil, was used to retard the formation of new challenges from labor and small farmers. The freedoms emphasized in the 1880s were property rights and free association. They were used against unionization and state regulation. Similarly, the equality emphasized was less the political and social egalitarianism of Jackson's day and more the "equality of opportunity" of Horatio Alger, which justified the low wages and high profits that made rapid capital formation possible. Those on top earned their position; those on the bottom could also rise. In this way, the United States met the two political requirements of industrialization: power for the entrepreneurs and a suitable justification for the rest.
In contrast, Argentine entrepreneurs have never been able to shape national policy as did our industrial capitalists. The political influence of the agrarian sector was not abruptly cut off as it was by our Civil War, and remains a factor today. As for organized labor, it acquired political influence simultaneously with the earliest industrialization. Many of the industries which first took root in Argentina were owned by foreigners or by recent immigrants who exerted little influence over public policy. The first non-aristocratic governments represented commercial interests (linked to the export economy) and the professions. Neither this early middle class nor the rural élite had strong reasons for curtailing unionization in industry. As a consequence, when native industrialists began to exert influence over policy in the late thirties, they met the countervailing influence of the unions, already nationally organized in the C.G.T. From its inception, therefore, the era of industrialization in Argentina has known a degree of political pluralism not found in the America of Jay Gould and Andrew Carnegie. Argentine entrepreneurs formed but one of several pressure groups to which politicians were attuned: to be successful, they had to build coalitions encompassing a number of diverse groups.
Turning to the second political requirement of industrialization-popular justification, which we shall call ideology-we find Argentina at no less of a disadvantage. As the American case suggests, an ideology of industrialization must serve a number of purposes simultaneously. It must justify rejection of the old order and commitment to a new one, while maintaining the public's trust in the political leadership. To industrialize, Argentina had to reject her traditional export economy that had relegated her to a condition of dependence on nations which were already industrialized. This meant rejecting a half-century of leadership by capable, anglophilic leaders, and of finding a substitute for their conception of modernization through borrowing. To do this, Argentines resurrected a still older tradition: the emphasis on sovereignty that accompanied the break with Spain. National independence was proclaimed a major justification for industrialization. The difficulty was and is, of course, that preoccupation with economic sovereignty makes industrialization more arduous, since the process requires inputs of investment and recent technology which may not be sufficiently available at home.
Argentines might have accepted the sacrifices implicit in industrialization without foreign investment if there had not been another theme interwoven in their ideology-the tradition of mass consumption which grew out of their early prosperity. Given the fact that organized labor appeared at the inception of industrialization, it is doubtful that the distributive issue could long have been ignored in any case. But the easy success of the export economy fed expectations of grandeur for the nation and of well- being for the citizenry which could not be sustained during the industrial transformation. Perón exploited the dissatisfaction of the workers by describing industrialization in terms of more jobs, better pay and greater availability of consumer goods, and he implied that these could be obtained without sacrifices. Today many talk of necessary sacrifices to advance economic development, but few are willing to make them.
Many of the differences between the American and Argentine patterns seem to be associated with changes in the world environment, allowing one to speak of "early" and "late" industrialization. Approximately fifty years separate the moment when, in each country, the contribution of manufacturing to the national product surpassed that of agriculture, but Argentina at that moment (in 1935) was considerably more modernized than the United States (in 1885). Only 15 percent of the U. S. population then lived in cities of 100,000 or more, while in Argentina the comparable figure was almost three times as large. In an already industrialized world, an export economy can be highly productive as long as its markets are strong. (Imagine the antebellum South with mechanical cotton-pickers and chemical sprays, purchased with northern capital.) Thus Argentina could afford large cities with high levels of consumption, generating middle-class politics. But the effects of this trade-based modernization may make industrial changeover more difficult when it comes. Middle-class attitudes toward industry are ambivalent; curtailment of consumption, even of luxuries, is resisted. Also, international standards of human necessities have risen continuously in this century. Governments cannot ignore the welfare of their populations to the degree possible even fifty years ago.
Late industrialization is often accompanied by more foreign involvement than early industrialization. To compete with existing economies, even in local markets, the newcomer must adopt the latest technology, which is elaborate and expensive, entailing imports of foreign capital and technicians. Whatever its economic benefits, this foreign component can be a source of irrationality and tension in the political sphere, particularly where nations are highly politicized. In Argentina mass politicization accompanied modernization, thus preceding industrialization by two decades. To the unsophisticated voter, nationalist slogans are more appealing than intricate lessons in the need to coöperate with foreign investors. This is particularly true when, in justifying the need to industrialize, leaders criticize the dependence inherent in the export economy. How is the public to distinguish the "bad" foreign investment which made Argentina a prisoner of markets controlled by more powerful nations from the "good" foreign investment that will aid industrialization and independence?
The differences just enumerated are too skeletal to give much sense of the Argentine pattern of industrialization; we must reintegrate these observations into the narrative of recent Argentine history. The successful exploitation of the country's resources, begun in the 1880s, was the work of foreign capital (mostly British) teamed with a native agrarian élite known to Argentines as "the oligarchy." These paternalistic but capable modernizers saw an impressive future for their country in the development of an export economy relying on advanced nations for capital and durable goods and paying for these by exporting the wheat, wool and meat which Argentina can advantageously produce. Geography, in placing the pampas next to the port and administrative center of Buenos Aires, coöperated in the realization of the dream. Although rural landowners, the oligarchs resided in the metropolis and fostered urban expansion. Much of their export earnings, and of the foreign capital their organizational skills attracted, filtered down to the quarter of the nation's population already urbanized by the turn of the century (cities of twenty thousand or more). "Lateness" directly helped, in that the technology developed in the first industrial revolution (steamships, combines, railroads and finally refrigeration), purchased with foreign capital and manned by European immigrants, made the export sector highly productive. With an optimism not uncharacteristic of a late Victorian society, Argentines pinned their hopes on the specialized role assigned to them in the world economy.
In time the dream soured. Falling prices on the world market, flights of foreign capital, a decelerating capacity to export due to rising home consumption-these and other problems which Argentina had experienced struck simultaneously during the depression, and with such severity as to call into question the continuing viability of the export economy. In the first of what was to become an accelerating cycle of military coups (at intervals of first thirteen, then twelve, seven and finally four years), the oligarchs resumed the full governmental control which they had relinquished a decade before to the urban middle class. Argentine historians refer to the thirties as the "infamous decade," largely because of the electoral frauds perpetuated by an élite which valued middle-class coöperation enough to utilize democratic forms, but cherished power at this juncture even more. This was not their only discrepancy, however. While ostensibly maintaining the export economy and market mechanisms, they actually initiated many of the trends toward industrialization and state economic controls commonly associated with Perón. That they did so reluctantly, under the pressure of world events, can be seen in their hesitation to recognize their innovations. No one spoke of the resulting industrialization as the dawn of a new day; it was merely "diversification" of the existing economy. Not until the war added new insecurities to those remaining from the depression did government spokesmen seize on industrialization as Argentina's salvation.
The populace grew more politicized between the wars, as a politically apathetic generation of immigrants gave way to native sons, and as rural peons streamed into the cities in search of better jobs. By the outbreak of the Second World War, half the adult males were voting in national elections, whereas 15 years earlier less than a third had voted, and 25 years earlier, less than a tenth. Given the export economy's painfully visible dependence on foreign nations, not to mention the climate of world opinion in the thirties, it is not surprising that appeals to this ever enlarging public should be colored by nationalism. The oligarchs, unable to champion their recent innovations, had to answer for having "sold out" the country to foreign interests. What made these charges hard to refute was that they came not only from the urban left but from elements of the traditional right, particularly in those provinces that had not benefited from the pampas-based economy. Earlier, the oligarchs had disarmed their nationalist critics by opposing the United States in hemispheric meetings and by granting few concessions to U. S. businessmen. This, another Peronist tendency that antedates Perón, could be afforded in the days when the principal markets and capital sources were European. As industrialization proceeded, however, American capital became more attractive and, with the coming of the war, American weapons too. Rather than abandon hemispheric independence, the sovereignty-conscious military turned to industrialization-and momentarily to Germany-as an alternative source of armaments, precisely at the time when elements of the oligarchy were seeking closer ties with U. S. investors. This defection of the military from the oligarchs' coalition made possible the emergence of a new coalition of military, labor and native industrialists which, in contrast to what had gone before, was overly committed to industrialization and a closed economy.
The military junta which seized power in 1943 found that the quest for autarchy was not sufficient motive to enlist support for industrialization. This was especially true after the fall of the Axis had discredited military régimes. Among the officers in the junta, Perón was alone in cultivating labor's support through a broader definition of industrial goals. He linked the international vulnerability felt by various classes of Argentine society to the internal vulnerability experienced by the workers, particularly recent migrants from the interior. With the oligarchy serving as whipping boy in each case, Perón championed industrialization as the corrective for both lack of sovereignty and inequality in the distribution of wealth. When in 1945 the régime needed additional political support, the other officers accepted this coalition with labor and the omnibus ideology of industrialization that we associate with Peronism. As demonstrated by the popular majority which Perón received in the essentially free election following this realignment of political forces, the ideology had national appeal.
Because of the prosperity generated by Argentine trade during and immediately after the war, Perón was able for a brief time to pursue simultaneously the three goals of industrialization, independence and distributive justice. In these salad days of his régime he confidently told another Latin American president that "there is nothing more elastic than the economy." Foreign exchange accumulated during the war was spent nationalizing foreign holdings, such as the by-then decrepit British railroads. Government policies stimulated light consumer-goods industries which, with wage increases, contributed to an immediate rise in the workers' standard of living. Agriculture, identified with the oligarchy, was permitted to decay, leading to a decline in exports. On balance, the industrial expansion of the late forties increased the goods and services available to the public without accumulating new capital, replacing necessary imports or generating new exports.
Sustained industrial expansion requires increased inputs of machinery, fuel and component products. Since the bulk of these items still had to be imported, the collapse of the only sector able to earn foreign exchange- agriculture-brought the expansion to a halt in the early fifties, aided, it is true, by drought. Perón fell at a time when the economy had regained its momentum. Both the improvement and his fall are related to his late conversion to sounder economic policies. The brief success of the "elastic" years, however, had so reinforced the ideology of industrialization that the public would not accept less than simultaneous advances on all fronts, and Perón, trying to hold his coalition together, was in no position to explode his own myths.
The 1946-47 level of per capita national production was not regained in any consecutive two-year period until 1960-61. One might have thought that this postwar stagnation would have undermined the ideology of industrialization, much as the depression destroyed faith in the export economy. But for most Argentines, the dream of painless industrialization lives on. Few groups will countenance threats to sovereignty, real or imagined, or curbs on domestic consumption, even when presented as necessary for restoring full economic growth. The measures suggested by economists and tried by the braver politicians, such as oil franchises leased to foreign firms or meatless days to boost exports, are rejected by the public. In many instances a self-fulfilling prophecy operates, whereby attempts to instigate economic reforms are construed by the public as evidence that the government is beholden to a single class or to foreign influences; the public refuses to coöperate and the reform falters, confirming the initial judgment that the policy was not a good one. Argentine society is neither simple enough nor sufficiently organized for effective coercion; without the compliance of housewives, retailers, taxpayers, businessmen and union leaders, the government can do very little.
Attempts have been made to break through this combination of economic mythology and political cynicism. Frondizi challenged the ideology of industrialization by concocting a counter-ideology of "development" (desarrollismo) which called for sacrifices in the present to generate growth assuring independence and high mass consumption in the future. In practice, however, the workers felt that they were being singled out to make the sacrifice. Since Frondizi could not persuade the military to permit the Peronists access to policy-making, labor did not accept the new ideology. Illia tried a different tack. Coming to power after more than a year of thinly disguised military rule in which intramilitary conflicts erupted into open violence, Illia stressed the primacy of constitutional norms. Though maximizing political stability ("A government exists; take care of it" was one of his party's slogans), he believed that once the cycle of coup and countercoup was broken, the economy would mend itself. By simply ignoring crises, Illia set a postwar record for uncoerced calm. And the economy did in fact appear to regain momentum; per capita product rose 6 percent in both 1964 and 1965. Whether this vindicates Illia's diagnosis is difficult to say, however, for these were also years of exceptionally good harvests,
Illia often had to buy political peace with economic coin: wage and price increases, tolerance of inefficiency in state-owned enterprises. The result was an inflation reaching 30 percent per year, which, despite the underlying prosperity, deeply troubled many Argentines. A Gallup poll taken in Buenos Aires in late 1964 showed the rising cost of living to be the answer most frequently given to the question: "What are the nation's most serious problems?" The same poll showed that while most citizens found the Illia administration "okay," they also found it undynamic-an attitude captured by cartoonists who pictured the president as a tortoise. It was obvious that pressing national problems, like inflation and the reorganization of the railroads that ran a $400 million deficit in 1966, were not being tackled. Under Frondizi Argentines had policy innovations and perpetual political crises; under Illia political stability but few innovations. By mid-1966 they were ready for innovation again. As the newsweekly Primera Plana stated after the military seized power and announced "its decision to reconstruct Argentina," few regretted the passing of a government "whose antiquated, pastoral and partisan vision of national problems was turning back the clock." What subsequently has troubled many Argentines is how long it has taken the new régime to elaborate the reforms which, at the time of the coup, it said were essential.
Too many citizens and friends of Argentina still view its problems in technocratic terms. Given the underlying political premises, a military government is not likely to provide a solution to basic problems, certainly not in the short run.
Argentina is a country with many political currencies, that is, many different resources that can be converted into power at the highest level of policy-making. In the United States one can exert influence through wealth, prestige, "connections," riots, etc., but to determine policy one must be able to determine who the policy-makers shall be, and here only one currency serves: votes and acceptance by the specialists in votes, the political parties. In Argentina, however, military action (if the officers are sufficiently united) or mass demonstrations and strikes (if on a large enough scale) can determine policy as effectively as votes. General Onganía is not Argentina's General Eisenhower; he is her General MacArthur, and the relative success of the two men is instructive. The military provides an alternative road to power for those élites which have little popular following, hence few votes. An Argentine president, if he receives a vote of no confidence from any group able to invoke the support of the military, faces the alternatives of reversing his policy or being ousted.
Under these conditions, political stability requires that key groups concur on policy-or a president so skillful in managing coalitions that he makes them think they concur. For much of the Peronist decade, both conditions obtained. Having both labor and the military in his coalition gave Perón an unbeatable combination, votes and violence, and while Eva lived he managed his coalition with considerable skill. The post-Perón predicament is how to find a set of policies that are as capable of attracting broad support but more realistic than Perón's ideology of industrialization. Well-fed and militarily secure, Argentina lacks the obvious goads to unity and sacrifice.
The only solution appears to be to establish a single political currency based on the vote, and this means bringing the Peronists out of the wilderness. They have more votes than any other group and, as they represent the social stratum with the least education and the narrowest economic margin, they are probably the most suspicious of postponed goals. Whether Peronist leaders are now prepared to abandon their previous ideology of industrialization for something more realistic is difficult to say. Having artificially been consigned to the role of permanent opposition, they have had no motive for wanting to disabuse their following of its myths. It seems probable, however, that if assured the full use of their votes, at least one major faction of Peronist leadership would give up defending the past and prove responsible in making policy proposals.
The rub is that, so far, the military refuse any solution which would give Peronists a major role in government. They are faced, then, with the choice between no solution (i.e. things as they are) and inventing their own. General Onganía, who five years ago crushed the kind of military solution he is now trying to implement, obviously has been converted to the second alternative. His analysis of the problem is that political wheeling and dealing has prevented civilian governments from implementing the "obvious" solutions to the country's ills. What is needed, he believes, is nonpartisan leadership (which the military can offer) coupled with the neutral advice of economists. Apparently the generals are deceived by the ease with which they can seize power. Ruling by decree, they can make policy, undiluted by the compromises inherent in coalitions, but can they implement it? Only by regimenting society in some degree can one rule by fiat-unless, of course, the society is primitive, which Argentina's is not. Yet the Onganía junta favors no such regimentation, and one doubts that its business allies would coöperate with it if it did. General Onganía wants to be less "statist" than Illia, less "totalitarian" than Perón and yet rule without compromises.
It is hardly surprising, therefore, that six months after coming to power the junta increasingly resembles its civilian predecessors. Like them, it is dependent on the compliance of various groups for implementing policies, and the price they extract for their coöperation often has the effect of neutralizing those policies. For example, the junta delayed and moderated its proposal for reorganizing the railroads so as not to alienate the unions that can obstruct implementation. Similarly, Onganía has shuffled his top personnel, replacing some of the original "nonpartisans" with more experienced men that have the confidence of the business community. Like previous governments, this one is learning that there is little neutral advice and that measures taken to increase the government's support in one sector of society weaken it in another.
One advantage of a military régime over a civilian government would seem to be that it does not have to worry about being deposed. But since officers inside the junta learn political realities at a faster rate than their compatriots back in the barracks, coups by one military faction against another are a common feature of military rule in Argentina. Already there are rumors that Onganía has been given a deadline by which time he must produce results or be replaced. If the present régime does not demonstrate an effectiveness so far unseen, it may be supplanted by a more Nasserist group of officers, or some face-saving formula may be devised for returning "the mess" to the civilians. In general, however, one can say that attempts to impose a solution on Argentina must be costly if they are not to be futile-that is, costly in terms of regimentation-or futile if they avoid being costly.