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Of all our foreign aid programs, the one which probably excites the greatest concern currently is the Alliance for Progress, that enterprise dedicated to promoting economic and social progress in Latin America. Agricultural land reform and improvement in the conditions of rural life are prominent among the measures advocated by the Alliance. Through these it is hoped that revolutionary ferment can be channeled into evolutionary development. At this time, when the direction of the Alliance is under review, we should consider whether these measures are the ones most suitable to achieve the stated goals, or whether other measures, presently subordinated, hold greater promise for success.
A starting point for this reëvaluation could be a questioning of the relative emphasis placed on the rural and urban problems of the Latin American nations, both in the original framework of the Alliance and in the policies of those who now direct its work. The strategy of Latin American development demands that efforts be directed toward improving both sectors of national life-but which should be given priority? So far the emphasis has been on agricultural land reform and other rural improvements. To deal realistically with the economic and social problems of Latin American countries, we must critically examine the position of their cities-their relative importance to the country, rate of growth and intensity of problems-to see if they are being neglected in the formulation of Alliance policy.
In the years preceding the Alliance, Latin American nations did not come to grips with the massive problem of providing a suitable environment for their city dwellers. Very little by way of urban reform was carried out in terms of what was needed. In Bolivia, where the current urban housing shortage is estimated at 100,000, the national agency set up to build workers' homes completed only 1,000 dwellings from 1956 to 1961. In Venezuela, with an urban housing shortage of 250,000 units, the Banco Obrero, established to build housing for low- and middle-income families in the cities, from 1946 to 1960 built only 40,966 homes, many of which sold for upwards of $6,500. Brazil reports an urban housing shortage of between two and three million units; in Argentina, half a million houses are presently needed in the cities, and by 1970 it is estimated that an additional one million will be needed; 550,000 new urban homes are needed in Chile; and in Mexico the urban housing shortage is growing by 100,000 each year.
AUTHOR'S NOTE: Stephen Lefkowitz, Research Fellow at the Harvard Law School, has assisted in the preparation of this article.
What appears to be a failure to give due recognition to the urban problems of Latin America in part can be attributed to the theory of economic development that prevailed until quite recently. This thinking too often emphasized industrial development, credits and skills to the detriment of housing and municipal planning and facilities. Economic planning took precedence over physical planning; research and international loans were directed primarily toward industrial development. One reason given for this policy was that providing an adequate social infrastructure poses enormous problems and requires expenditures of commensurate size. Another was that those reforms most needed in the cities bring small annual returns in proportion to their costs. In countries that look to rapid growth through reinvestment of returns-as all underdeveloped countries do-investment in urban reform seemed too cumbersome and slow; it must wait until industry advanced. This policy was especially noticeable in the Latin American countries where "terms-of-trade" economics was dominant and led them to concentrate on developing domestic industry so that imports of manufactured goods could be reduced.
More recently, however, economists have begun to argue that economic change does not precede social change, but that both must develop together and in support of one another. This thinking has come to dominate the planning and administration of the Alliance for Progress, in which social reform receives equal place with economic reform and social progress is put on a par with industrial growth. But in redressing the prior imbalance, the Alliance may be heading toward a new and equally inadequate development policy. For while the non-economic factors of economic growth receive ample recognition, rural reform most often has claimed the high priorities- especially programs of land distribution and reforms in rural land tenure. Again urban land reform is being forced to wait.
Failure to emphasize the need for urban progress can be perceived not only in the terms of the Charter, but also in the first national development plans so far submitted as prerequisites to Alliance aid. In these three plans, prepared by Bolivia, Colombia and Chile, the problems of urban areas are either ignored or are treated as less urgent and secondary, to be solved in later, perhaps far distant, development plans. In spite of Bolivia's urban housing shortage of 100,000 units, its National Development Plan barely mentions programs designed to meet this shortage or to provide much-needed municipal facilities and planning. Colombia's plan calls for the construction of 187,000 new housing units in the period 1962-65, including both urban and rural housing; yet the country has an urban housing shortage of 280,000 with 60,000 new units needed each year just to cover expected population growth. The Ad Hoc Committee chosen to review Colombia's plan for the Alliance suggests that, "in view of the urgency of other problems," the figure for urban and administrative development be reduced. The reason given is: "Unquestionably they [urban and administrative reforms] should be carried out in line with the general progress of the country, but no basic harm will be caused by postponing some of them during the period when the program is getting under way." And, although the Chilean plan calls for a large fixed investment in housing during the period 1961-70, the expenditure will suffice only to curb the deterioration in lower-class housing that has occurred in the past few decades. No housing is planned for the many thousands of rural workers who are expected to swarm into the cities of Chile in the next decade. Instead, the Ad Hoc Committee recommends that a greater proportion of the budgeted housing investment be made in the rural sector. Admittedly, the evidence is inconclusive-only three of the many plans to be submitted have been released to the public-but already one can perceive a tendency to channel the greatest resources, at the earliest time, toward solutions for rural problems.
One underlying reason for this attitude may be the belief that rural land reform is a precondition to economic growth and that a more equal distribution of agricultural land must be made before the Latin American nations can hope to progress economically. Although this may be a plausible thesis, it is not supported by all relevant historical examples. In both England and Prussia economic development was preceded by a period in which the large landowners expropriated the holdings of peasant farmers, turning the latter into agricultural laborers. In Russia, the rapid industrialization of the last 40 years has been accompanied by an agricultural policy of consolidating small individual holdings into large collective farms. A comparison of prewar Bulgaria and Hungary-where agricultural conditions are similar-is also revealing, for the former had carried out extensive rural land reform, distributing small holdings equally, while the latter's agriculture was carried on to a great extent on very large estates. Agricultural production per acre and per unit of labor expended was higher in Hungary by some 30 percent, and, unlike Bulgaria where there was little industrial investment, profits were used by the great landowners to finance new industries which in turn absorbed surplus agricultural labor.
Much more dubious is the second major premise of those who would emphasize rural land reform: that the greatest threat to orderly development within a democratic framework is the discontent of rural, landless workers. Today the discontent of the urban masses, made less patient by the immediacy of a better life and more powerful by their concentration, holds the greater potential for plunging democratic governments into totalitarianisms of the right or of the left.
Perhaps the real cause for this misplaced emphasis stems from the belief that Latin America, like most of the underdeveloped regions of the world, is primarily a rural area. This approach is inadequate, because it ignores the facts in many Latin American nations and because it treats the problems of economic backwardness as if they were uniform throughout the world. Unlike Ghana, where perhaps 10 percent of the population is urban, or Ceylon, where the corresponding figure is 15.3 percent, the complexion of many of the more advanced Latin American countries is decidedly urban. Forty-six percent of Latin America's population lives in cities, with 25 percent concentrated in ten metropolitan areas of over one million. There is a striking urban predominance in some Latin American nations: in Argentina 67 percent of the population lives in cities (the same figure for the United States is 64 percent), with 40 percent of that nation's people located in eight cities of over 100,000; in Chile, over two-thirds; in Venezuela, over 60 percent; and in Colombia 48 percent of the population is urban. About 40 percent of the population of Uruguay lives in the capital city of Montevideo, and the metropolitan areas of Venezuela's two largest cities hold one-quarter of its people. Forty-five percent of Mexico's population is urban, and Mexico City, with over 4,800,000 people, is the second largest city in the Western Hemisphere.
The steadily increasing number of city dwellers is the most striking feature of Latin American growth; the rate of urbanization is higher than that of any other underdeveloped region in the world. While the projected figures for the Latin American countries as a whole indicate an annual increase in population of from 2.5 to 2.8 percent for the next 15 years, it is estimated that, during the same period, Latin American cities will add some 4.2 to 5 percent to their population each year. This is only an average; in some nations the urban growth rate is even faster. Venezuelan cities are growing by 7 percent annually; they will practically double their population within a decade. The disparity between the rates of growth in the cities and in the rural areas is also striking: in Chile, where between 1952 and 1960 Santiago increased its size by 38, and Valparaiso by 23 percent, there is a 3.4 percent annual increase in the cities and a 0.5 percent increase in the countryside; in Colombia, the net annual increase in rural population is 1 percent, while the urban population is growing by 5 percent, and in some large cities by 7 percent; Brazil's over-all growth rate during the 1950s was 2.7, while that of her cities was 6 percent. The character of the Latin American nations is becoming an urban one, as already populous cities grow at a dizzying pace.
The reasons for this rapid urbanization may be briefly summarized: rural poverty and the lure of the city. Latin American land tenure systems and the stagnation of the rural sector of the economy have made it difficult to acquire land, to enlarge small holdings, and to mount the rural social and economic ladder. In the last few decades the Latin American nations developed a number of consumer industries, which, being located near the centers of consumption, created new jobs in the cities. Since urban workers average three times the income of agricultural workers, landless peasants stream into the cities seeking new jobs. The increasing role of the state in Latin America as a redistributor of income through the provision of public services has made it desirable to be close to the source of distribution-the city.
It will be said that the solution is to improve conditions in the countryside. If life on the farm is made more tolerable and rewarding, the argument goes, the need to migrate to the cities diminishes, and with it urban problems. If this were true, giving highest priorities to agricultural reform in Latin America might be justified. But the city, notwithstanding its often appalling conditions, holds an irresistible attraction for the young. It excites their imaginations to such an extent that neither rural inducements nor controls could stem the tide. As transportation and communication facilities in the rural hinterland improve with national development, the pull to the cities will inevitably increase.
The Mexican experience demonstrates the futility of hoping to solve urban problems through rural solutions. Despite 40 years of vigorous land reform during which millions of acres have been turned over to landless peasants, and despite the fact that temporary work in the United States has absorbed a great deal of surplus agricultural labor, Mexico's cities have continued to grow at a dazzling speed. Between 1951 and 1960, the population of Mexico City itself rose by 58 percent, and that of 54 other urban centers by 78 percent. Attempts to end migration, moreover, will not achieve the long-run goal of a general rise in the conditions of life for the country as a whole. Prosperity and industrialization today do go hand in hand, and urbanization is an inevitable concomitant of industrialization. As the development of Latin American countries accelerates, so will their cities increase in predominance over the rural areas. Economic development changes the structure of production, and the stress on industrialization will mean a reduction in the relative importance of agriculture, both in terms of the contribution to total national product and of the percentage of the labor force employed. The experience of the last few decades will be continued, and even intensified. Although improvement of the conditions of rural life may provide a partial solution, remedies for relieving Latin America's troubled cities must be sought in the cities themselves.
The problems created by the rapid urbanization of Latin America are of enormous proportions. Most critical is the lack of housing to shelter many millions of city dwellers. It is estimated that fully one-half of the population of Latin America is either homeless or living in inadequate or grossly overcrowded housing. Families live under conditions where sheer numbers and filth breed sickness and despair; often their homes are without the barest minimum of sewage facilities, water supplies or utilities. A recent study in Bolivia shows that 48 percent of the urban homes lack water, and 54 percent lack sanitation; in Chile the corresponding figures are 40 and 60 percent; and in Venezuela, 43 and 67 percent. In Ecuador, only 7 percent of the population has sewerage service. While families sleep six and ten to a room, children are left to play amid mud and offal. In Mexico City, families are forced to live in abandoned mines and caves; in Lima, the bare earth serves as a floor, and tin, cardboard or rags serve as construction materials.
Many of Latin America's urban families do not even have security in their shelters, for they are squatters on public land, on private land or on plots for newly planned developments. As illegal users of the land, theoretically they may at a moment's notice be forced to seek another plot of ground on which to live. And under such transitory circumstances it is often impracticable to furnish the necessary municipal services. An aggravating factor is that these conditions feed upon themselves; the very fact of squatting at once prevents the cure. Although without legal rights to the land they occupy, the squatters in some cities cannot be moved, for, as in the "City of God" in Lima, their numbers and concentration make them a powerful political force. In Caracas, a public housing project taken over by squatters even before completion looms on a hill high above the Presidential Palace, and serves as a warning of the fate of democratic institutions in a nation that cannot shelter its homeless. The squatters often make up such a great part of the urban population-35 percent in Caracas, 50 percent in Maracaibo-and are so discontented that their mere presence threatens political and social stability.
The numbers of squatters and slum-dwellers of Latin America are daily being swollen by agricultural workers who migrate to the cities in search of new jobs for themselves and their families. In Mexico City, whole families of peones newly arrived from the villages stream daily from the buses at Chapultepec Park. Most of the newcomers are unprepared for the city, unskilled, often illiterate. They have broken their ties with the village, the community and the family but can find nothing in the city to replace them. Welfare and health services are inadequate; there is a critical lack of educational and recreational services and of community centers. Even commercial and marketing services often do not begin to meet their needs. As arrivals to a new way of life, the migrants may be preyed upon by unscrupulous merchants, employers, landlords and even police. Many remain jobless or without permanent employment. Out of these appalling conditions are growing increased problems of juvenile delinquency, alcoholism and mental disease.
Less obvious but equally detrimental, this process of rapid urbanization frustrates the orderly, rational growth of cities, and thereby hampers Latin American development in general. Cities mushroom across the countryside wherever there is room and license to set up a shack. The best land is seized, and planned developments and communities are forced out into the surrounding areas where they cannot always be supplied with essential services; and severe strains are placed on already overtaxed transit systems. Meanwhile, land costs within the city rise sharply as owners hoard land and speculate on the city's growth. Public and private projects are forced still further from the city center, accelerating the pace of urban sprawl. Rising rents speed upwards in inflationary spirals, while the building booms sporadically enjoyed by many cities concentrate on luxury housing.
Most of the cities have planning departments whose job it is to guide urban growth along the most efficient and beneficial lines, but municipal officials often have insufficient resources, manpower and technical skills to deal with the problems of very rapid urbanization. In some cases it is simply a matter of money: the proliferation of slums and faulty or ill- administered tax systems keep municipal revenues low. In other cases it is a matter of power: too many and conflicting municipal jurisdictions-17 in the Lima metropolitan area, 16 in Santiago-make it difficult to plan adequately for the city as a whole. Orderly development is impossible; investment in land is discouraged, while speculation is made profitable; lack of planning and the acceleration of blight now pose problems of enormous magnitude for the future; the result is chaos and a frustration of the social and economic goals set for Latin America under the Alliance for Progress.
In a positive sense, too, Latin American cities demand our attention. Adequate marketing facilities and transit within the cities that constitute a nation's great markets are vital to the growth of a nation's commerce. Industry depends for its growth on the existence of a stable labor supply, skilled, healthy and relatively content. A vigorous construction industry, often considered in the United States the bellwether of the nation's economic fortunes, can help to stimulate investment, provide jobs for some of the excess urban labor force, and have a decisive effect on over-all economic health. Land hoarding and speculation in the cities can drastically slow the growth of this industry. Profiteering land activities, along with concomitant spiraling rents, can also frustrate attempts to check national inflation and institute sound fiscal policy. Thus Bolivia's great difficulty in controlling inflation has been in part due to the failure to control rent levels in La Paz, which between June 1958 and June 1959 increased by 96 percent. Controls on land use are essential to any effort to check the inflation that has been one of Latin America's most troublesome and persistent problems.
In some cities, industrial sites are already scarce due to lack of utilities and transit services; thus faulty physical planning retards economic development. Where rational land-use planning can operate, prime sites for commercial and residential construction can be laid out without danger of conflicting land uses or deficient municipal services; with such sites investment will become more attractive. This can be achieved only through a massive effort at providing low-cost housing which will eliminate the need for squatting. Also home-building programs will introduce and encourage the habit of saving; indeed, certain potential sources of savings could not be tapped in any other way.
Against the argument of some economists that housing investments pay low returns, it must be remembered that returns come not merely from a particular structure but from the whole community, as values of neighboring properties are raised by new construction. Home-ownership is likely to stimulate consumption demands that foster economic development. And, through public spending in housing and urban services, a redistribution of income can be effected that will spur demands for consumer goods and help create the domestic market frequently lacking in underdeveloped nations. Nor are the returns fully measurable in economic terms, for housing can provide at once the incentives and the tangible rewards that are necessary to the success of a development program. Finally, the foreign investment so heavily counted on to spur Latin American development will come only after many reforms in the urban life and environment. As long as social and economic unrest continue-and they will so long as present urban conditions persist-foreign capital will be wary of Latin American opportunities.
The Alliance should not abandon its attempts to improve rural life, nor land reform as one of its primary goals. But the problems of Latin America's sprawling and teeming cities should command more attention from those who determine where reform is to begin and where money is to be spent. National economic planning must include physical planning for cities. Creating a sound environment in the cities is a job of critical importance-in terms of the cost of rehabilitation once urban rot has cut too deeply, and in terms of the political and social instability currently being generated. Workers' homes, schools, urban transit, sewage and water- supply systems will provide tangible evidence to great numbers of people, and to people whose influence and good will are important, of United States support and of the benefits of the Alliance. These jobs must be started immediately, for daily the rapid growth of the cities makes their problems more acute.
There seems no end to the cataloguing of urban problems. What of possible solutions, even at this early date when little experience has been sifted?
It is not always the poverty of the people that is the cause of slums and squatters' shacks; slum houses filled to bursting with furniture and appliances often indicate the ability to pay for decent shelter. There simply is no decent housing available at moderate costs. Generally the difficulty lies with the lack of adequate credit facilities-for the contractor to obtain money to put up an apartment building, or for the individual to obtain a purchase money mortgage at reasonable rates. In many Latin American countries mortgages are either unknown or prohibitively expensive, with "equity" or down payments amounting to as much as 50 percent of the cost, and interest payments running between 12 and 30 percent per annum over an amortization period of only 15 years. What is needed is a credit system whereby capital for construction or purchase can be made available at rates and on terms that contractors and individuals can afford.
Outside capital must be solicited and, when invested, must be made secure. This might be done through the creation of an international mortgage insurance agency that can sell bonds in the United States and other capital- exporting countries and funnel the proceeds into mortgages in the Latin American nations. Puerto Rico's success in the housing field shows the value of financing in the United States and the ready market that exists for secure housing investments.
In addition to securing credit through an international agency, other techniques to finance urban reform in Latin America should be investigated. Stimulation of savings and loan associations-a policy presently followed by the Alliance administrators-can be helpful, but it is only one alternative. As economic growth makes it possible for an ever-increasing number of Latin Americans to afford decent housing, it becomes all the more important to draw on a whole range of solutions to their financing problems. There is great potential in the use of pension and credit-union funds for housing. Devices can be found for encouraging industrial housing for workers by granting tax relief and other incentives to participating firms. In some countries progress can be made through the creation of coöperative associations, not only for credit purposes, but for the construction of self-help housing as well. In others, laws that forbid banks, insurance companies and other financial institutions to invest their capital in housing must be amended.
Many of the Latin American nations have already begun to take steps to increase the volume of savings flowing into housing. In Argentina, under a law passed in October 1961, insurance companies must invest up to 50 percent of their reserves and deposits in housing bonds to finance programs carried out by the new Federal Housing Administration. In Chile a new savings and loan system was introduced in 1961 based on mutual and coöperative associations, with a Central Savings and Loan Fund insuring mortgages granted by the private associations. In Peru the People's Savings and Loan Association, established in March 1961, is eligible for credit up to three times its savings from the Home Loan Bank of Peru, which in turn has received a loan of $7,500,000 from the Alliance for Progress. Within a year, the Association's membership grew from 25 to 2,590 and it granted first-mortgage and home-improvement loans of some $60,000,000, while lowering the prevailing Peruvian interest rate from 12 to 10.8 percent simple interest and also paying a 6 percent dividend.
Whether or not these attempts to channel private savings into housing investments will succeed depends in large part on how secure and how liquid these investments can be made. One of the main deterrents to providing low- cost housing through private capital in Latin America is the unattractiveness of fixed-income investments in countries where money steadily loses its value due to inflation. This is one of the issues so truly central to the entire nature of the economy and its political stability that only the sharpening of experience can indicate the success of the technique. Protection against an unstable monetary system can be gained by tying repayment provisions to price indices or to other more stable currencies, as is done with savings deposits in Chile, or through government insurance against loss through inflation. Both security and liquidity of investment can be aided by revising antiquated forms of security documents and inefficient procedures for collection or foreclosure.
More generally, an appropriate system of land tenure must be created in order to make possible the conditions necessary to a modern economy-where land serves as a commodity that can be securely held, easily transferred and prudently invested in. This will demand suitable documents of title, mortgage and transfer, and a system whereby the interests in property are clearly defined and easily ascertainable. It will also demand administrative and judicial systems that will facilitate all arrangements in land and will provide quick solutions to all disputes. Archaic legalisms that inhibit the free alienation of land must be weeded out; time-consuming formalities and outmoded procedures must be reformed. These steps will have to be taken before the needed investment capital can be attracted to provide remedies to pressing urban problems.
The replacement of slums and shantytowns by decent structures will mean new sources of property-tax revenue for municipalities; this will enable them to provide some of the desperately needed services. Development can easily be choked unless planners take a critical look at the growth of the larger metropolitan areas, for some of them are growing too large. Soon it will be uneconomical to supply essential services, and precious resources poured into this effort will be wasted. It is time to explore the possibilities of decentralization, of new towns and satellite towns to open up new areas of settlement or to take advantage of natural resources, as has already been done in Brazil and Venezuela. The importance of early control of urban growth must be stressed, for once land-use patterns have been set, they can be altered only with enormous difficulty and expense.
Similarly, attention must be paid to the potential uses of tax policy in meeting the problems caused by urbanization. Adequate taxation of property would counteract the tendency to hoard land. Profits in Latin American countries are often put into land holdings which are not used to best advantage; the result is a rise in land prices. When land prices are high, the problem of providing adequate shelter becomes the more difficult to solve. The property tax should be high enough to force owners to obtain an economic return from their land, or else sell it to individuals who would make the investment necessary to such a return. In addition, undeveloped land can be taxed more heavily than that which is improved; this would encourage sale or development of land now held for speculative purposes and also stimulate construction. Tax penalties can be levied to discourage unsuitable building, and tax incentives granted to promote desirable improvements. Finally, reforms in the structure and administration of real- property taxes can bring the added revenues so urgently needed.
The use of all these devices to promote urban reform in Latin America ought to be investigated-realizing that they will depend on the necessary legal mechanisms to carry them out and suitably trained personnel to administer them. Administrative agencies and procedures need to be reviewed and made better equipped for carrying out new tasks. Legislation must be prepared to grant the necessary operational powers, for the best plans are doomed to failure unless there is legal latitude to implement them. Programs to train qualified Latin Americans in legal, planning and administrative techniques for these new positions must be stressed, for the lack of skilled manpower, already a serious concern, can frustrate all efforts to spur development.
The major task is to assure that the administrative agencies or national planning bodies perform within a democratic context. Institutional devices should allow for appeal from adverse decisions, impartial judicial review, and due process in legal proceedings concerning the use of land, or some substitutes which will promote certainty and confidence. A challenge lies in the problem of finding some means by which the consensus of the people is obtained during the period when plans for urban land reform are being formulated. It will be equally important to create a means by which plans can be adapted to changing circumstances and to the changing wishes of the people. If the social and economic progress is achieved through a perversion of democratic institutions, one of the major goals of the Alliance for Progress will have been frustrated.
Failure to plan adequately for urban reform cannot be excused by pointing out the cost involved nor the striking need for reform in the agricultural sector. It is true that a balance must be struck between investment in housing and municipal services and in industry; too great an allocation of resources to the former could slow the pace of economic development. It is also true that improvement of conditions of rural life must receive a high priority, not only to increase productivity and make social gains in the agricultural sector, but also because it may slow down the urban migrations and help take the pressure off the cities. Creating new sources of rural employment, promoting local industries and new towns, along with the basic agricultural reforms, should all be attempted.
Cities exert an influence proportionally greater even than the numbers of people they hold. A metropolis is the center of its nation's government, commerce, communications and thought; it is in the city that new ideas are evolved, and it is there that they are most quickly and easily caught up by vast numbers of people. The city is the source and destination of much of a nation's capital; it is there that the great bulk of goods are produced, marketed and consumed. Government policies are created in the city; they draw the quickest and strongest reaction there. And the city is the home of the nation's intellectuals, its universities and its students. In Buenos Aires, in Santiago, in Rio de Janeiro, in Mexico City live most of the nations' middle class-those people who are at once most influential and who are most amenable to change. If the Alliance for Progress is to succeed, it must succeed in the great cities where its accomplishments will be manifest to the greatest number of people and to those people who will lead and direct Latin American development. In these cities the struggle to provide a better life and greater opportunity for millions of Latin Americans, within the framework of a democratic society, will be won or lost.