Rotten to the Core?
How America’s Political Decay Accelerated During the Trump Era
This weekend’s vanquishing of incumbent Argentinian President Cristina Fernández de Kirchner sent a powerful signal of change to governments across the region, where populism and statist interventions have produced a decade of economic failure.
Mauricio Macri, the mayor of Buenos Aires, was able to triumph over Kirchner because even as her government claimed to be socially progressive, providing public subsidies for poor families and lowering consumer prices, it had brought Argentina to an economic standstill. Without adequate revenue to finance public investment, Kirchner’s economic model plunged Argentina into deep public debt, and the economy stopped growing. As the central government ran out of money, it defaulted on foreign obligations and printed more money, causing inflation to rise more than 25 percent annually. Not surprisingly, the policies—and mounting evidence of public corruption—generated broad resistance. Not helping were the Kirchner administration’s fights with foreign creditors, attempts to submit the independent judiciary to political demands, and alienation of labor unions, once a Peronist stronghold. Kirchner, once a popular political leader as the widow of former President Nestor Kirchner, lost her appeal in 2013, when a plebiscite defeated her bid for a constitutional reform that would have allowed her to run for a third term.
Macri promised change. He defeated Daniel Scioli, the governor of Buenos Aires province and Kirchner’s anointed successor, whose campaign was based on painting Macri as a reactionary who would deprive the poor of social benefits. That campaign backfired badly. Macri, a popular official who had created a new party, Republican Proposal, offered a modern alternative to the outworn rivalry between Peronists on the left and the Radical Party on the right. A skilled public administrator, he eventually won the backing of Radical Party centrists and dissident Peronists, such as Sergio Massa, a popular mayor who led the charge against a possible Kirchner third term. Macri campaigned for negotiation between all democratic political sectors and labor unions as a way to recover national unity and restore economic growth. And he noted his desire to bring in more foreign investment in Argentina’s energy sector, which Kirchner had limited by nationalizing Argentina’s main oil company. Macri’s victory signals that younger Argentinians are ready for centrism and pragmatism, after years of polarization.
As Argentina goes, so might go the region. For example, in the 1940s, after an early surge to the front ranks of world exporters, the wealthy Argentine economy became bogged down by policies that held back investment and squandered the country’s potential. Argentina soon saw the advent of populist politics, headed by President Juan Domingo Perón—an admirer of Mussolini—who created, with his wife Evita, the Justicialist political party, better known as Peronism, based on powerful labor unions and mass mobilizations of the poor. Ever since, leftist political movements in South America have imitated the Peronist formula of mobilizing political support by spreading out generous public subsidies while blaming the wealthy social elites for “injustices” in income distribution.
In Argentina and other countries that have followed the populist playbook, voters are starting to reject this model. Populism has created some major economic calamities in some of the region’s biggest countries, such as Argentina, Brazil, and Venezuela, leaving Latin America as an also-ran in the global economy. And voters know it. Over the next several months, many other publics will get a chance to vent their frustration at the polls.
Indeed, even before the Argentina vote, municipal elections in Bogotá saw Enrique Penalosa, an expert in urban transport, elected mayor over the candidate from a leftist coalition that had dominated Bogotá for 12 years. The issues were largely local, with crime, garbage collection, and bus services in the forefront, but Penalosa is also a strong supporter of the peace negotiations between President Enrique Santos of Colombia with the left-wing FARC guerrillas, who have been pounded by military defeats and public rejection into accepting talks. Santos has set a deadline for a peace settlement in March 2016. If that happens, the radical left in Colombia will have to give up its hopes of taking power by force of arms or by a majority of voters, who are clearly fed up with leftist radicalism in any form.
The next blow could be national legislative elections in Venezuela on December 6, in which the opposition parties hope to defeat the authoritarian populist government in a national legislative election. With handouts of cheap Venezuelan oil to Cuba and other Caribbean neighbors, former Venezuelan leader Hugo Chavez built up his country as a cornerstone of leftist politics in the region. His death coincided with a deep decline in Venezuela’s oil production, and the subsequent economic downturn brought chronic shortages in basic consumer goods, roaring inflation, and capital flight. Opinion polls show that the centrist opposition could capitalize on the public discontent and win control of the national legislature. President Nicolás Maduro, Chavez’s successor, has imprisoned leading opposition figures and has threatened to use military and militia force as necessary. He should be taken at his word, but he will face a severe backlash in Latin America if he tries to block by force a democratic protest vote against the government.
After the election in Venezuela, Peru will hold presidential elections in April 2016. Several candidates with strong democratic credentials are campaigning to succeed President Ollanta Humala. The outcome is uncertain, but Peru seems safe from political extremism. And sometime in 2016, Brazil and Chile will also hold major municipal elections that will set the stage for presidential elections in 2018. In both countries, the oppositions are mounting coalitions in the hopes of unseating the ruling governments, led by Dilma Rousseff in Brazil and Michelle Bachelet in Chile, who are both considered polarizing leftists. Brazil is suffering the worst economic recession in its modern history and Rousseff’s popularity has plunged to lower than ten percent. Bachelet’s governing coalition has already started to splinter over educational reform that increases state control of universities and tax reform that has contributed to an economic slowdown.
In short, politically speaking, Latin America might look very different in 2016 than it does in 2015. That doesn’t necessarily mean smooth sailing ahead. The region’s governments have to find a way to create inclusive growth, a formula that has eluded most countries around the world. And they have to do it under rather dire circumstances. In Argentina, the Kirchner era has left the country with massive public debt that will come due during Macri’s four-year presidential term. The government needs short-term international financing of at least $20 billion to reach a settlement with creditors and to avoid a devaluation and deeper inflation.
Latin America needs economic policies that facilitate private enterprise, the main source of productive employment, and that raise productivity in overprotected industrial sectors. In Argentina, Macri can make the right policy calls if he can get support from Argentina’s powerful labor unions and win the necessary votes in Congress. That is the kind of cooperation Macri has been preaching, but it won’t be easy. Dante Caputo, a political analyst who was foreign minister under Argentine President Raúl Alfonsín, recalls how the Radical government failed to stabilize the economy and wound up with inflation running at over 300 percent a year. Alfonsín, a champion of human rights, lost power to the Peronists in 1989. For Macri to change Argentina, Caputo told me, he would have to succeed in stabilizing the economy without the austerity policies that would alienate wage earners. “Any attempt to stabilize the economy that concentrates the costs on the social majority would be political suicide,” Caputo said. “If Macri succeeds in resolving the tensions between austerity and equity he will win a decisive battle. It will not be easy.”
For Latin America as a whole, the hour of change in Argentina and elsewhere is an opportunity to recover the momentum it has lost to Asia in the global economy. If the region, with a population of 600 million and abundant natural resources, can come out of its protectionist shell, it can make a major contribution to the recovery of sustainable growth, not only in its region but in the world. Latin American leadership on global issues, such as the environment and social equity, will also be possible if the potential of the Western Hemisphere is fully realized.