Latin American Liberals

Clarification by The Economist

2009-09-13T13:32:00.000-07:00

As you know, The Economist is the flagship liberal newspaper, and usually on the spot on many issues concerning Latin America. Please watch the video below.

Pain but no panic

2009-05-02T08:50:00.000-07:00

Latin America's economies

A traditionally crisis-prone region is belying its reputation. But that has not spared it from the world recession

UNTIL recently many Latin Americans saw the financial crisis and the global recession as events happening somewhere else. But in the past six months the region’s economies have swiftly slumped along with the rest of the world, showing double-digit falls in industrial output. Workers have been laid off in Mexican car factories, Brazilian aircraft plants and Peruvian building sites. For Latin Americans such woes are sadly familiar: income per person in the region has fallen on five separate occasions since 1980. What is different this time is that Latin Americans are faring no worse than the rest of the world. And there are reasons to believe that their recession may be relatively short and mild. That may not be cause for celebration but it is a crumb of comfort.

The bad news is, however, quite bad. Latin American countries have been hit by four different recessionary forces. As the financial crisis in the developed world transmuted into a collapse of manufacturing, trade plunged: total exports for five of the region’s larger economies fell by a third between August and December, partly because fewer goods were sold and partly because the price of commodities fell.

The flow of capital to the region also dried up, leading to a steep rise in borrowing costs for governments and companies. The Institute of International Finance, a bankers’ group, thinks that net private capital flows to Latin America will fall by more than half this year compared with last, to $43 billion (down from a record $184 billion in 2007). Foreign banks have trimmed credit lines, especially for trade. In addition, remittances from Latin Americans working abroad have begun to contract, and fewer tourists have come visiting.

Most forecasters think that GDP in Latin America and the Caribbean as a whole will contract slightly this year, but a moderate recovery will follow next year. The IMF, for example, predicts a contraction of 1.5% in 2009 and growth of 1.6% in 2010. With the population growing at 1.3% a year, income per person will shrink.

All this brings an abrupt end to five years in which economic growth averaged 5.5% amid generally low inflation. This golden demi-decade also saw social progress: according to household surveys, poverty fell from 44% in 2002 to 33% last year, when 182m people were classed as poor; the region’s wide inequality of income narrowed; and tens of millions of Latin Americans joined an emerging lower-middle class.

Just how bad the recession will be varies markedly from country to country (see chart 1). Countries with close ties to the United States’ economy—Mexico and much of Central America and the Caribbean—will fare worse than the regional average. In Mexico the fall in output was still accelerating in February, and the disruption caused by the outbreak of swine flu will make things worse.

By contrast, countries such as Brazil whose exports are more diversified, spanning different markets as well as products, or those whose economies are relatively closed, will be hit less badly. In Brazil there are already signs that recession will be short. Guido Mantega, the finance minister, points out that more Brazilians were hired than fired in March. Many forecasters expect Peru’s economy to buck the regional trend by growing this year and next, partly because it exports much gold, whose price has held up, and partly because it has a fat pipeline of foreign and public investment projects.

Lessons learnt
The good news is that things might be much worse, and in the past usually were. The three classic Latin American sources of weakness—financial systems, currencies and the public finances—have not been an independent source of woe this time, as Augusto de la Torre, the World Bank’s chief economist for Latin America, points out. In the case of financial systems, that is partly because they are relatively small and undeveloped (paradoxically, this was often cited as a drag on growth). But it is also because most were tightly regulated, the result of lessons learnt the hard way over the past quarter-century. So the banking system is not acting as a magnifier of recession.

A decade ago governments in many of the larger countries in the region reacted to a previous bout of financial-market turmoil by switching from fixed to floating exchange rates. They backed these up with more responsible fiscal policies, and by requiring their central banks to target inflation. In contrast to the practice during previous booms, Latin America maintained a current-account surplus (and so accumulated reserves), and paid off public debt.

In this group of countries (Brazil, Mexico, Chile, Peru and Colombia among the larger ones), these policies are now proving their worth. The currencies of several of them depreciated by around 30% when money fled emerging markets in the weeks surrounding the collapse of Lehman Brothers last September. But devaluation, which will help exports, has not led to panic. In contrast to past recessions, when governments were forced to raise interest rates to defend the currency as well as to cut spending, this time they have been able to take steps to mitigate recession. Several of the larger economies have announced fiscal measures to stimulate demand, averaging around 1% of GDP. Some have done more: both Chile and Peru promise to raise public spending by around 10% this year, much of it on infrastructure such as roads and housing. It is not yet clear how much extra spending will happen in practice.

As important, central banks are cutting interest rates steadily (see chart 2). They have scope for further cuts. They have also taken other measures to provide credit. Brazil’s Central Bank, for example, stepped in to provide dollars to help companies to repay foreign debt. It also allowed commercial banks to draw down some of the funds they are required to deposit at the Central Bank in normal times. As a result of these actions, credit is gradually returning, says Henrique Meirelles, the Central Bank’s president. Peru’s Central Bank has taken similar steps. State-owned development banks in Mexico, Chile and Brazil have all stepped up their lending.
The dissenters
Other countries have taken a radically different approach. Venezuela, Argentina and Ecuador have pursued expansionary fiscal policies in recent years, and their populist governments have harassed the private sector and foreign investors. All have fairly rigid exchange rates: Venezuela’s bolívar is fixed, Argentina has long intervened to manage the peso and Ecuador uses the dollar as its currency. The growth of public spending in these countries was highly dependent on the commodity boom. To sustain spending, Argentina and Ecuador have raided pension funds while Venezuela’s government has plucked reserves from the Central Bank. Venezuela’s public debt is low and it can tap local banks for loans, but it is the only one among the region’s bigger economies to have announced a cut in public spending this year.

The IMF reckons that these three will be among the worst-performing Latin American economies, along with Mexico’s, though it thinks Mexico will recover more quickly. Many economists believe that the longer the world recession lasts, the greater the risk that Ecuador, Argentina and Venezuela (in that order) will run out of money. Supporters of these governments point out that the IMF’s past growth forecasts for Venezuela and Argentina have been unduly pessimistic. All three countries are looking to China for support: Venezuela and Ecuador have signed investment agreements, and Argentina has a currency-swap line aimed at reducing its need for dollars. But such help may be inadequate.

Other governments are starting to queue up for support from the IMF. This month Mexico arranged a loan of $47 billion under the fund’s new flexible credit line. Colombia has requested a similar loan of $10.4 billion. This credit is designed for countries with sound policies and carries no strings. Buttressing the balance of payments in this way gives more scope for interest-rate cuts without triggering currency weakness, says Nicolás Eyzaguirre, the IMF’s top official for Latin America.

Even in the better-run countries, the scope for fiscal stimulus is limited. Only Chile, which saved the equivalent of 12% of GDP in a special fund during the boom, can repeat the dose for several years from its own resources. As recession bites, tax revenues are falling everywhere and public deficits rising. Mr de la Torre predicts that in the region as a whole fiscal revenues will fall as a proportion of GDP from 24.4% in 2008 to 21.2% this year. The multilateral banks are stepping into the breach. The World Bank will lend about $14 billion to the region in the year to June, and a similar amount in the following 12 months, up from a recent annual average of $5 billion, according to Pamela Cox, the bank’s vice-president for the region. The Inter-American Development Bank (IDB) has also increased lending, to $15 billion a year. It is seeking to raise more capital.

The big fear in the region is that the longer the recession lasts, the more difficult it will be to sustain government spending without additional aid. That is because the vast stock of public debt to be issued by rich countries may crowd out Latin American borrowers. Researchers at the IDB argue that aid should be geared more to helping government refinance public debt than to providing further stimulus. Unlike rich countries, this argument goes, Latin America may gain more in the medium term by defending its hard-won fiscal stability and relying on the outside world for stimulus.

But there will be political pressure to do more. Already recession has halted some of the social progress of the past few years. Even if the recession is short and mild, the result will be 6m more Latin Americans in poverty than would otherwise be the case, estimates Marcelo Giugale, a poverty specialist at the World Bank. Of these, 4m are people whose incomes will sink below the poverty line, while 2m are people who would have risen above it had it not been for the recession. Mr Giugale notes that traditionally recessions in the region see an increase in child malnutrition and in teenagers dropping out of school to seek money in the informal economy. Public-health provision deteriorates both because budgets are cut and because demand rises as some middle-class Latin Americans can no longer afford private health insurance.

In social policy, too, the region is better placed than in the past. A dozen countries have cash-transfer schemes aimed at tackling extreme poverty in rural areas. In some countries, such as Mexico and El Salvador, governments have increased payments under these schemes. Many are looking at expanding their coverage. Peru is trying to extend the provision of free school meals to cover family members.

In the 1980s poverty rose steeply in Latin America, and public services and investment were slashed. There are reasons to hope that it can be different this time. Seven months after the financial crisis hit the region, pain is spreading but not turmoil, nor is economic stability being lost. “If the world economy rebounds, Latin America can rebound,” says Mr Eyzaguirre. The question is when that will happen.

Stimulating

2009-03-01T08:07:00.000-08:00

Chile's economy
Feb 19th 2009 | SANTIAGO
From The Economist print edition

Cashing in the fruits of rigour
LONG held up as a model of policymaking that others in Latin America and beyond should follow, Chile’s economy has recently seemed oddly lacklustre, with growth below the regional average and inflation stubbornly high. As a small, open economy it is uncomfortably exposed to the world recession—the price of copper, its main export, has fallen by almost two-thirds since mid-2008. But virtue sometimes has its reward. More than any other government in the region, Chile’s is able to take action to stimulate the economy. Now it has done so.

Last month Andrés Velasco, the finance minister, unveiled fiscal measures worth $4 billion. Government spending will rise this year by 10.7%. On February 12th the independent Central Bank joined in, slashing its benchmark interest rate by a massive two-and-a-half percentage points, to 4.75%. These measures mean the economy may suffer only a mild downturn.

Mr Velasco’s package includes an extra $1 billion for Codelco, the state-owned copper company, to finance investment; $700m for infrastructure projects; extra benefits for poorer Chileans; and temporary tax cuts for small businesses. The measures are better designed than similar efforts in rich countries, says Eduardo Engel, a Chilean economist at Yale University. “There’s almost no pork.”

Mr Velasco himself says that the challenge is to get the bulldozers moving: “We looked for projects we can do quickly.” Much of the money will go on houses for the poor and road maintenance. He reckons these public works will create 70,000 new jobs directly. They follow an earlier, smaller fiscal stimulus last year.

The government forecasts this year’s fiscal deficit at 2.9% of GDP, but it can easily afford this. That is because it has stuck to a rigorous fiscal rule drawn up by its predecessor requiring it to save much of the revenue gained when the copper price rises. Not only is public debt minimal (4% of GDP in December), but the government has also piled up $20.3 billion (about 12% of GDP) in a sovereign wealth fund which it can now spend. That marks a contrast with neighbouring Argentina, whose government has financed an increase in spending by nationalising private pension funds, shredding investor confidence.

The fall in commodity prices has at least helped to cut Chile’s inflation rate, from 9.9% for the year to October to 7.1% in December. By the end of this year it should have fallen back within the Central Bank’s target range of 2-4%, reckons Rodrigo Valdés, the bank’s former chief economist who now works for Barclays Capital. He expects further substantial interest rate cuts in the course of the year.

Lower rates will not necessarily encourage Chile’s banks, some of which are foreign-owned, to lend. So officials are also trying to inject cash and confidence into the banking system. They have done this in two ways. The Central Bank, which has ample reserves, has auctioned dollars. And the government has given a $500m capital boost to BancoEstado, a state-owned entity which is the third-biggest commercial bank, to allow it to expand lending, especially for mortgages and small businesses.

The government’s decision to save so much of the copper windfall was not popular at the time. But “being a Keynesian means being one in both parts of the cycle,” Mr Velasco says. His approval ratings in opinion polls have leapt over the past few months, as have those of his boss, Michelle Bachelet, Chile’s president. The ruling centre-left Concertación coalition, which has been in power since 1990 and had been looking tired, now has a chance in a presidential election next December it had seemed certain to lose. Good policy can sometimes be good politics.

Tables turned: a lesson from Latin America for the west

2009-02-18T15:24:00.000-08:00

Tables turned: a lesson from Latin America for the west
(Financial Times, UK)

By Philip Stephens

Here is a parlour game of political identification.

Start with country A. It boasts a free-trade policy to make it one of the world's most open economies. A run of budget surpluses has wiped out its national debt. It has a privatised pensions system and education vouchers that allow the affluent to top up state provision. Fiscal responsibility is enshrined in law.

Now consider country B, a similar-sized emerging economy. It takes pride in an aggressive anti-poverty campaign. The proportion of young people attending university has quadrupled. Public health provision has brought strong gains in life expectancy. The state guarantees a minimum income for the elderly. A publicly owned bank is mitigating the effects of the credit crunch.

For those steeped in the familiar reference points of western politics, the ideological divides are obvious. Country A is governed from the right or centre-right: fiscal conservatism, free trade and private pensions give the game away. As for country B, the emphasis on education, poverty reduction and welfare provision speak to the progressive politics of the left.

Those who have noticed Chile's remarkable political and economic progress since the restoration of democracy nearly 20 years ago will know otherwise. Country A and country B are one and the same - a Latin American success story.

I was reminded of this when Andres Velasco, the Chilean finance minister, visited Europe the other day. Mr Velasco is a member of what might be called the progressive jet set, the network of centre-left politicians that emerged from the "third way" mapped out by Bill Clinton and Tony Blair. Last year Mr Velasco gave an arresting speech at a conference of progressive leaders organised by Policy Network and hosted by Britain's Gordon Brown. Next month the event travels to Chile.

On leave from an economics professorship at Harvard, Mr Velasco is every bit the progressive politician. What marks him out is that he is also as fervent an apostle for supposedly "rightwing" economic policies as he is for the social values of the left. His polished prospectus reminds me of the New Labour mantra that brought Mr Blair to power in Britain in 1997. Lest anyone has forgotten, Messrs Blair and Brown campaigned then on a pledge to marry economic efficiency with social justice.

Unnoticed by much of the world, Chile has done just that. Mr Velasco has a statistic to prove every point. Thus Chile's economic growth rate has averaged more than 5 per cent since the country rid itself of Augusto Pinochet's dictatorship in 1990. The country has established two sovereign wealth funds to invest some of its revenues from copper. It has dismantled tariff barriers. Its banks - the nationalised bank is only the fourth largest - are sound.

When Pinochet finally left office, some 40 per cent of Chileans lived below the poverty line; the proportion now is 12 or 13 per cent. The number of young people at university has risen from 10 per cent to 40 per cent.

If it can be called such, one of the benign legacies of the Pinochet years has been a succession of stable centre-left governments. The politicians have had the space to think beyond the next electoral test. They have been smart enough to modify and improve rather than scrap some of the free-market policies of the previous regime. Thus most people still have private pensions, but the government has added a safety net.

Twenty years ago some two-fifths of Chile's public spending went on debt servicing. The figure now is zero. Instead 70 per cent of all public spending is on social programmes.

Chile, of course, has natural advantages, notably abundant reserves of copper. It sells a surprising amount of good wine. It also has its problems. Inequality has fallen only slowly as the poor struggle to catch up with the professional classes. Chile is not immune from the global crisis - the economy has already slowed.

The less attractive side of the longevity of the ruling Concertacion coalition is that it has been dogged by infighting and corruption allegations. The centre-right Alliance thinks it has a good chance of winning the next presidential election. Some say that such an electoral transfer of power would be a useful testament to Chile's democratic maturity.

There are broader lessons here for the richer nations of the west. Most obviously, politicians should practise what they preach. Not that long ago, the US and Europe were lecturing Latin American countries about their fiscal profligacy, unregulated banks and opaque financial markets. In Chile's case, the tables have been turned. It will not escape unscathed from the global shock, but its fiscal position and financial system are robust - and transparently so.

Mr Brown might feel particularly shamefaced. Had he stuck, as chancellor and prime minister, to the prudence promised in 1997, Britain would not be facing such a dreadful economic bust - nor an annual budget deficit that looks set to tip over 10 per cent of national income.

The broader message, though, lies in the way Chile has separated political ends from means. There is nothing wrong with ideology, whether it is the conservative belief in individual freedom or the progressive view that the state must spread opportunity. Where the tired left-right debates become pointless is in confusing the preferred route with the desired destination.

Chile has avoided the trap by mixing and matching government and market, economic orthodoxy and social intervention. This was the insight that Mr Blair was supposed to have brought to British politics during the 1990s. Now, New Labour looks a tarnished brand. The economy is sinking but Mr Brown is casting the next election in Britain as a tired ideological fight between his pledges to "invest" in public services and Conservative plans to cut taxes.

In truth, once the recession is over, the organising fact of British, and most European politics, will be the huge deficits that governments are now accumulating in the effort to stave off slump. There will be room neither for tax cuts nor spending increases. There will instead be a demand that governments, left or right, spend money more effectively.

Economic recovery will bring in its wake a profound debate about how governments should seek to shape post-financial capitalism. The danger will be of a rush to the old ideological barricades of right and left - the one promoting resurgent nationalism, the other big government.

In Chile, the politicians have preferred progressive politics shorn of the shibboleths. There is indeed a lesson there for the rest of us.

philip.stephens@ft.com

Copyright The Financial Times Limited 2009

Democracy and the downturn

2008-11-26T13:02:00.000-08:00

The Latinobarómetro poll

Nov 13th 2008
From The Economist print edition

Latin Americans are standing up for their rights

FIVE years of strong economic growth have prompted a slow but fairly steady rise in support for democracy and its institutions among Latin Americans, although many remain frustrated by the way their political systems work in practice. Most see themselves as politically moderate, but they retain a yearning for strong leaders and expect the state to solve their problems. These are some of the findings from the latest Latinobarómetro poll taken in 18 countries across the region and published exclusively by The Economist. Because the poll has been taken regularly since 1995, it tracks changes in attitudes in the region.

This year’s poll was taken in September and early October. It therefore reflects the sharp increase in inflation in the region in the first half of this year, but not the full effect of the financial turbulence and deteriorating economic outlook that hit some Latin American countries in recent weeks. Nevertheless, it carries some sobering lessons for the region’s politicians.

The poll underlines the fact that a small majority of respondents are convinced democrats (see table 1 and chart 2). In 12 countries, support for democracy has risen since 2001, when the region last suffered an economic recession. But only in five countries is it higher than it was in 1996. This year democracy has received a particular boost in Paraguay, a country where authoritarian attitudes previously predominated. The shift follows the victory in a presidential election in April of Fernando Lugo, a leftish former bishop who ended more than half a century of rule by the Colorado Party. That echoes similar hopes of change aroused by newly elected leaders in the region in recent years.

Conversely, in Venezuela, support for democracy may have been boosted this year among opponents of President Hugo Chávez, after their victory in a referendum on constitutional change last December. In Colombia, President Álvaro Uribe’s success against the FARC guerrillas may be the reason for a similar democratic lift.

Uruguayans are by far the most satisfied with how their democracy works (see chart 3). Peruvians are particularly disgruntled. That is paradoxical: Peru’s economy has grown faster than that of any other of the region’s bigger countries both this year and last. Their discontent seems to reflect deep flaws in the political system. But even if slightly less than two-fifths of respondents across the region are satisfied with their democracies, that is a significant improvement on the 2001 figure.

The relative dissatisfaction owes much to the deep-rooted socioeconomic inequalities in Latin America. Across the region 70% of respondents agreed that governments favour the interests of the privileged few; around half say they would not mind a non-democratic government if it solved economic problems; a similar proportion say democracy has not reduced inequalities; and only 30% think there is equality before the law. These attitudes help to explain the popularity of Mr Chávez, an oil-rich strongman—more than a third of Venezuelan respondents say inequalities have diminished.

But most respondents are convinced that democracy is the only road to development—and 71% say they are personally happy. So why the grumbles? As democracy has come to stay in the region, “people are more conscious of their rights and their expectations are higher”, says Marta Lagos, Latinobarómetro’s director. She adds that the yearning for a strongman is more a cultural trait than a political preference—and that the same goes for a fondness for a paternalist state.

The poll shows that a large majority believe that pensions should be in state hands (see chart 5). In Argentina that number is 90%, which perhaps helps explain why President Cristina Fernández last month nationalised the private pension system. But at the same time 56% of respondents see a market economy as the road to development (up from 47% last year). And 32% declare themselves satisfied with privatised public services, up from 15% in 2004. Some 44% say they trust their banks, up from 29% in 2003. The church remains the most trusted institution in the region—but less so than it was. Trust in government and legislatures continues to edge up (see chart 4).

In six countries, including Mexico and Venezuela, crime and public safety are seen as the most important problem. In ten countries, economic concerns (unemployment, poverty and inflation) are still seen as paramount. In Brazil 19% cited health care as the biggest problem.

Despite the swing to the left in the region in recent years, most respondents to the poll consider themselves in the political centre (42% this year, up from 29% in 2003). Only 17% say they are on the left and 22% are on the right (even in Mr Chávez’s Venezuela those on the left and right are tied at 26%).

Despite the swing to the left in the region in recent years, most respondents to the poll consider themselves in the political centre (42% this year, up from 29% in 2003). Only 17% say they are on the left and 22% are on the right (even in Mr Chávez’s Venezuela those on the left and right are tied at 26%).

That provides hope for centre-right politicians in a round of presidential elections in the larger countries in the region in 2010-12. Those elections are likely to be held against a much less rosy economic backdrop than has prevailed for the past few years. The task facing Latin America’s politicians is to ensure that economic difficulties do not spill over into a weakening of support for democracy.

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Latinobarómetro is a non-profit organisation based in Santiago, Chile, which has carried out regular surveys of opinions, attitudes and values in Latin America since 1995. The poll was taken by local opinion-research companies in 18 countries and involved 20,217 face-to-face interviews conducted between September 1st and October 11th 2008. The average margin of error is 3%. Further details from http://www.latinobarometro.org/

Hola, Luther

2008-11-12T14:44:00.000-08:00

Nov 6th 2008
From The Economist print edition

A holiday that is a cultural milestone
ATIN AMERICAN countries have long celebrated a plethora of Roman Catholic public holidays, from Corpus Christi to St Peter and St Paul. But this year Chile set a regional precedent, declaring October 31st a public holiday in honour of “the evangelical and Protestant churches”. It marks the date in 1517 when Martin Luther pinned his 95 theses to the door of a church in Wittenberg, Germany, starting the Protestant Reformation. Only Slovenia and some German states take it as a holiday.

What makes the decision to celebrate the Reformation odder is that Chile is the only country in Latin America that still has a significant (Catholic) Christian Democrat party. Nevertheless, the new holiday was approved by a unanimous vote in Congress. The politicians seem to have spotted an opportunity.

In the latest census in 2002 in a once staunchly Catholic country, 15% of Chileans said they were “evangelicals” (a synonym in Latin America for Protestants). State schools now offer a choice of Catholic and evangelical religious teaching, and the armed forces have chaplains from both denominations.

Chile is not alone. More than 15% of Brazilians and over 20% of Guatemalans are now evangelicals. Most Latin American Protestants are Pentecostals, stressing direct experience of God. Pentecostal churches continue to multiply in poorer areas of Santiago, as they do across the region. A former Catholic bishop and liberation theologian was elected as Paraguay’s president this year. But the embrace of Protestantism by Latin America’s socially aspirational poor looks like an inexorable trend. Five centuries after the region’s forced conversion to Catholicism, Chile’s new holiday is a cultural milestone.

It comes at a price. Chile may have a reputation as boringly hard-working, but now has 16 public holidays a year (plus the “bridge” days that Chileans tack on when a holiday falls near a weekend). A workday’s production is worth some $735m in lost output. So the government wants quietly to drop two of three holidays dedicated to the Virgin Mary.

The writing on the wall

2008-11-01T07:16:00.000-07:00

Oct 30th 2008 | SANTIAGO
From The Economist print edition

And it points to the right

MUCH as some of them tried to claim the result was a victory of sorts, the dejected faces of the leaders of Chile’s governing centre-left Concertación coalition on the night of October 26th told a different story. In that day’s municipal elections, Alliance, the centre-right opposition, won 41% of the vote for mayors, two percentage points more than the Concertación but enough to win eight of the 14 regional capitals. It was the first-ever defeat in a nationwide election for the Concertación, which has ruled Chile ever since the end of General Augusto Pinochet’s dictatorship in 1990. Jubilant Alliance leaders reckon that the result paves the way for them to win the presidency in an election in December next year—and to counter South America’s recent drift to the left.

The victory was not clear-cut. Confusingly, municipal councillors are elected separately. In that ballot the Concertación, which includes the Socialist and Christian Democrat parties, won 45% of the total vote to 36% for the Alliance. But more people (some 10% more) voted for mayors than for councillors. The overall result confirmed opinion polls that make Sebastián Piñera, a wealthy businessman and the Alliance’s putative candidate, the front-runner for the presidency.

A dress rehearsal for the presidency

Voters punished the Concertación because it is tired, increasingly ineffective and fractious. It has presided over the consolidation of Chile’s democracy, almost two decades of economic growth and stability, and much social progress. But under Michelle Bachelet, the president since 2006, it has run out of steam. It has failed to promote new, younger leaders. A spate of corruption scandals, though mostly minor, has left even some Concertación supporters wondering whether 20 years in office might not be enough. Chile’s economy may be stronger than that of many of its neighbours, but it no longer grows at Asian rates, and inflation has spiked this year. A botched attempt to modernise public transport in Santiago, the capital, smacked of incompetence.

But if voters are tiring of the Concertación, opinion polls suggest they are not thrilled by the Alliance. The voting system, bequeathed by General Pinochet, divides the country into two-member constituencies, thus cementing a two-coalition system and punishing third parties. This has produced political stability but is widely blamed for apathy. Nevertheless, in the municipal election a new force formed mainly by defectors from the Christian Democrats won 7.6% of the vote, while a far-left coalition got 9.1%.

Ms Bachelet this week called on the Concertación to show “unity, unity and more unity”. She also called for an electoral pact with the far left—which would push Christian Democrat voters towards Mr Piñera. She has presided over unprecedented infighting among the Concertación’s four parties. Since presidents cannot serve consecutive terms, the coalition must now try to unite behind a successor to Ms Bachelet, decide how to choose one and agree a programme. There are three strong contenders: Ricardo Lagos, a former president, is Chile’s most popular politician; the stolid Eduardo Frei, another ex-president, might appeal to the centre; José Miguel Insulza, the secretary-general of the Organisation of American States, has said that he would stand only if the Concertación fields a single candidate.

Chileans have not elected a government of the right for half a century. Mr Piñera’s victory is not assured. But Alliance has taken the first step. As the economy slows along with the world’s, the government will start to spend some of the windfall copper revenues it has saved. But many of the mayors implementing job-creation schemes will now be from the opposition, and they will doubtless claim the credit for them. No wonder the Concertación looked so glum on election night.

A force for good, now

2008-10-19T07:27:00.000-07:00

Chile
A force for good, now

Sep 25th 2008 | SANTIAGO
From The Economist print edition

A newly streamlined army polishes its democratic credentials

TEN years after General Augusto Pinochet stepped down as commander-in-chief, Chile’s army is at last emerging from the shadow of its murky past. For a quarter of a century it laboured under the baleful influence of the man who came to power in a military coup in 1973, its once proud reputation sullied by the blood of thousands of innocents tortured and murdered under his 17-year dictatorship. The army was unable to start reforming itself until he finally stepped down as its leader another eight years later.

Despite hundreds of court cases (though few convictions so far), many questions about the army’s role in the human-rights abuses remain unanswered. The remains of some 3,000 people killed or “disappeared” by the regime have never been found. Many Chileans still wonder how such a highly disciplined force could have resorted to such appalling violence. “There is a weight of history,” admits José Goñi, Chile’s defence minister. “But the new generation doesn’t have to be held responsible.” Only six of those in the army at the time of the 1973 coup remain in service.

The bad memories are fading

Despite hundreds of court cases (though few convictions so far), many questions about the army’s role in the human-rights abuses remain unanswered. The remains of some 3,000 people killed or “disappeared” by the regime have never been found. Many Chileans still wonder how such a highly disciplined force could have resorted to such appalling violence. “There is a weight of history,” admits José Goñi, Chile’s defence minister. “But the new generation doesn’t have to be held responsible.” Only six of those in the army at the time of the 1973 coup remain in service.

General Óscar Izurieta, the army’s commander, says that the army will not be accepted fully as part of democratic society until questions over its past can finally be laid to rest. The courts have to do their job, he agrees, and it is legitimate for people who suffered at the army’s hands to want to keep the issue open. “But I don’t know if it’s good for them or the country,” he says. “Every day, they put me face to face with a problem of the past.”

The army has tried hard to regain legitimacy over the past decade. It has seized on natural disasters, such as earthquakes, to play an active civil-defence role. It has used its field hospitals to take medical services to remote areas and help the national health service cut waiting lists. And it has sought to reduce its social isolation by such measures as sending cadets from the Santiago military academy to one of the city’s universities for some of their courses.

Some of the excess fat has been shed, too. Currently 40,000-strong, down from around 70,000 in the mid-1990s under Pinochet’s command, it is leaner and more professional. Unpaid military service has been scaled down and, unlike General Pinochet’s conscript-packed army, all national-service places are now filled by volunteers. And under a law passed by Congress this summer their number will drop even further as they are gradually replaced by professional soldiers.

Thanks to record prices for copper, Chile’s main export, and an odd arrangement (predating Mr Pinochet) under which Codelco, the state copper producer, transfers 10% of its export revenues (amounting to $1.4 billion last year) to the armed forces for capital expenditure, there has been money to spend. The finance ministry has the last word, but the army has been able to shop extensively, with acquisitions including German tanks and better electronics. Today, Chile’s is the most modern and best-equipped army in Latin America, says Armen Kouyoumdjian, an adviser to the Stockholm International Peace Research Institute.

But what exactly does the country need such an army for? In the 1970s Chile faced a real threat of war with Argentina and Peru, but relations with both have improved a lot since then. Indeed, Chile’s military ties with Argentina are so close that the two countries have created a joint standby unit for international operations. Although political instability in Bolivia is a worry, the main risk to Chile from that direction—an exodus of Bolivian refugees—is hardly a military problem. On the other hand, having a strong army may help to ensure that relations with Peru stay peaceful. Chile and Peru have had a long-standing dispute over maritime borders, and Ollanta Humala, the Peruvian populist who almost won his country’s most recent presidential election, found it convenient to stir up sentiment against Chile.

For its part, the army emphasises that it is available for international peacekeeping. It is already part of the United Nations force in Haiti—its first significant peacekeeping role. Some Chileans reckon that the army is still bigger than necessary for a peaceful country of only 16m people. But a rational plan for slimming should be based on the needs of the future, not the misdeeds of the past.

Keeping their fingers crossed

2008-10-10T13:31:00.000-07:00

Latin America's economies

Keeping their fingers crossed

From The Economist print edition

In Latin America, the most trenchant opponents of globalised finance look most likely to suffer at its hands

IF ANALOGIES with the Great Depression are scary for Americans, they are hardly less so for Latin Americans. Within a few years of the 1929 stockmarket crash, 16 governments in the region fell to military coups or takeovers by strongmen. In recent years the talk has mostly been of Latin America’s economic independence from its big neighbour in the north (with the exception of Mexico). But on September 29th, the day the House of Representatives in Washington balked at the bail-out, came a reminder of just how close those ties still are. While the Dow Jones dropped by nearly 7% in a day, Brazil’s Bovespa, the region’s biggest stockmarket, tumbled by more than 9%.

Even so, the fact that this financial crisis does not have “made in Latin America” stamped on it is cause for modest celebration. In the crises of 1994, 1998 and 2001 Latin America went on a binge, using foreign finance to pay for a huge rise in imports. The mood then changed, foreign money fled and panic ensued. This time many countries have had trade surpluses in recent years, and soaring commodity prices have made government finances look more than respectable (see chart).

Latin American banks also look strong. This is partly because they did not hoover up American mortgage-backed securities, but also because they are not that dependent on foreign credit. Brazil’s banks are an exception: the publicly traded small and medium-sized banks that do depend on foreign funding have had their share prices pummelled over the past week. But even in Brazil, foreign capital accounts for only about 10-20% of bank-funding needs.

Equity markets in Latin America are shallow (apart from in Brazil), which reduces the chances of one path of infection. Credit is more of a concern, particularly for exporters, who are finding foreign lines of credit much harder to acquire. This may be only a temporary blip. But if it endures, companies will turn to domestic lenders instead, leaving less credit to go around. Edmar Bacha of the Banco Itaú, who has seen many crises come and go, says a credit squeeze is now his chief concern.

A bigger future fear, though, is that a global slowdown accompanied by a decline in commodity prices will put government finances under pressure. Chile, which pours money into a big fund (currently around $20 billion) when copper prices are high, and bases its budget on a copper price far below the current spot price, is the only big country in the region where the commodity boom has not been accompanied by a government spending spree. Commodity prices have already fallen back a bit. If they fall much further some countries will be in trouble.

Heading the list of those most vulnerable are countries whose markets have been viewed for some time as badly behaved: Venezuela, Argentina and Ecuador. Venezuela, which has given up producing things that its consumers want, importing them instead on the back of its oil revenues, looks particularly exposed. The same oil revenue has allowed the number of public-sector jobs to more than double since President Hugo Chávez came to power in 1999, and is also underwriting a big new arms deal with Russia. Cutting public spending is an option, but not one which he would wish to contemplate before critical regional elections at the end of November. Even then it may not be easy to switch into austerity mode. Despite a recent increase in the arrests of “foreign imperialist plotters”, Mr Chávez would find it hard to explain away large numbers of people descending onto the streets.

If lower commodity prices lead to lower costs of staple foods, this would provide Argentinians with some relief against their country’s rampaging inflation. But for President Cristina Fernández’s government it would be a different story. It gets 10% of its revenue from export taxes. A fall in commodity prices would squeeze farmers (who already pay a 35% tax on exports) even more and might reignite their recent protests. Ms Fernández might be tempted to make up the shortfall by raiding pension funds. There is also a currency concern. The peso, which has won back trust after its crash in 2001, is backed by high soyabean prices. If these fall, it could lead to a fresh flight to dollars for those able to get them, and misery for everyone else.

For well-behaved countries, such as Mexico, Brazil, Colombia and Peru, things look better. Their governments have balanced their budgets and built up trade surpluses along with dollar reserves. In some places growth is still strong: the latest year-on-year figures show an 8.3% rise in Peru for July, and 6.1% rise in Brazil for the second quarter. Not everyone is convinced by this rosy picture. “Economists who talk about structural shifts on the eve of a cyclical downturn should all be taken outside and shot,” says Gray Newman of Morgan Stanley, a bank.

Meanwhile, Mexico’s age-old linkage to the United States’ economy is already having an effect. In August remittances from Mexicans working north of the border suffered their biggest drop on record. Hopes that Americans will keep buying heroic quantities of Mexican manufactured goods are dimming. And Mexico’s trade balance, boosted by high oil prices, is at risk. Brazil, Latin America’s biggest economy, looks better placed. But commodities account for about half its exports, leaving it, too, vulnerable to a fall in prices.

The biggest difference this time around, it seems, is that those countries that have been most hostile to global capitalism look the most exposed to its changed mood. In the 1930s, the region’s democracies suffered from a crash and a depression made thousands of miles away. Today, it is the elected monarchies ruled by economic populists who have the most to fear.

The Economist: The end of Allende

2008-09-07T07:07:00.000-07:00

See original here

Leader
The end of Allende
From The Economist print edition

Our leader on the death of Chile's President Allende, published in The Economist on September 15th 1973

The temporary death of democracy in Chile will be regrettable, but the blame lies clearly with Dr Allende and those of his followers who persistently overrode the constitution

President Allende did not become a martyr, even if it is true that he took his own life on Tuesday. The bombing and storming of his presidential palace and the seizure of power by the commanders of Chile’s armed forces put a bitter end to the first freely-elected marxist government in the west. And the fighting may have barely begun. With most of Chile’s links with the outside world still severed, it was difficult to take the full measure of the apparently continuing violence. But if a bloody civil war does ensue, or if the generals who have now seized power decide not to hold new elections, there must be no confusion about where the responsibility for Chile’s tragedy lies. It lies with Dr Allende and those in the marxist parties who pursued a strategy for the seizure of total power to the point at which the opposition despaired of being able to restrain them by constitutional means.

What happened in Santiago is not an everyday Latin American coup. The armed forces had tolerated Dr Allende for nearly three years. In that time, he managed to plunge the country into the worst social and economic crisis in its modern history. The confiscation of private farms and factories caused an alarming slump in production, and the losses in state-run industries were officially admitted to have exceeded $1 billion last year. Inflation rose to 350 per cent over the past twelve months. Small businessmen were bankrupted; civil servants and skilled workers saw their salaries whittled away by inflation; housewives had to queue endlessly for basic foods, when they were available at all. The mounting desperation caused the major strike movement that the truck-drivers started six weeks ago.

But the Allende government did more than wreck the economy. It violated both the letter and the spirit of the constitution. The way it rode roughshod over congress and the courts eroded faith in the country’s democratic institutions. A resolution passed by the opposition majority in congress last month declared that “the government is not merely responsible for isolated violations of the law and the constitution; it has made them into a permanent system of conduct”. The feeling that parliament had been made irrelevant was increased by violence in the streets (almost on a Belfast scale) and by the way the government tolerated the growth of armed groups on the far left that were openly preparing for civil war.

The armed forces moved only when it had long been clear that there was a popular mandate for military intervention. They had to move in the end because all constitutional means had failed to restrain a government that was behaving unconstitutionally. The trigger for the coup was provided by the efforts of left-wing extremists to promote subversion within the armed forces. Two leaders of Dr Allende’s Popular Unity coalition, Sr Carlos Altamirano, the former Socialist party secretary-general, and Sr Oscar Garretón of the Movement of United Popular Action, were named by the navy as the “intellectual authors” of plans for mutiny among the sailors at Valparaiso. The Valparaiso naval commanders were the first to move this week.

But the rapid success of the coup and the participation in it of all the armed services (including the paramilitary carabineros) suggest that the plans for it had been carefully laid. It remains to be seen whether the armed forces are now solid in their opposition to the ousted government. The disappearance of two commanders, Admiral Raul Montero and General Sepulveda, the carabineros’ chief, who were replaced by their anti-marxist subordinates on the day of the coup, shows that not all senior officers were in favour of it. The real danger of bloodshed will come if the armed forces split, or if there are serious mutinies among the lower ranks. That could produce a messy civil war. Strong resistance can be expected from the workers’ committees and paramilitary brigades that the Socialist party and the Movement of the Revolutionary Left are running in Santiago and from guerrilla groups in the south. But if they fail to get significant military backing, they can probably be contained.

No return to the old ways
Whatever government emerges from the coup cannot expect an easy time. There will also be a temptation now for those who have suffered from the Allende government to settle their accounts with the defeated side. Few people believe that Chile can now return to its old ways of doing things. The work of reconstruction will involve considerable sacrifice, just as it did in Brazil when Senhor Roberto Campos was responsible for economic planning in the years after the 1964 coup. This does not mean that Chile will become another Brazil; for one thing, it is probably a less violent place even now, and for another, its soldiers have a rather different conception of their role from the soldiers behind Senhor Campos. They accept that it is too late to reverse many of the changes brought about by Dr Allende; in trying to rebuild the private sector, for instance, they will lay more stress on coaxing back foreign investors and on creating new industries than on handing back what was taken away.

General Pinochet and his fellow officers are no one’s pawns. Their coup was home-grown, and attempts to make out that the Americans were involved are absurd to those who know how wary they have been in their recent dealings with Chile. The military-technocratic government that is apparently emerging will try to knit together the social fabric that the Allende government tore apart. It will mean the temporary death of democracy in Chile, and that is to be deplored. But it must not be forgotten who made it inevitable.

Pinochet, Milosevic...Henry Kissinger?

2008-05-17T07:08:00.000-07:00

Christopher Hitchens vs David Rieff

Dear Christopher

28th June 2001

I hold no brief for Henry Kissinger, and had your recent attack on him been concerned-as you put it-with exposing his "depraved realpolitik," I would not have been disposed to quarrel with you. There is much to loathe about what Kissinger believes, and much to despise about what he did when he applied his brand of amoral realism to the conduct of US foreign policy. But you insist that your goal is different. You claim that the book you have written is "concerned only with the Kissingerian offences that might or should form the basis of a legal prosecution for war crimes, for crimes against humanity, and for offences against common or customary or international law, including conspiracy to commit murder, kidnap and torture."

You claim that in your bill of indictment you have included only those acts of Kissinger's which can be properly described as identifiable crimes rather than exercises of irresponsible power, or acts which, however repulsive they are to you, "might in outline have been followed under any US administration." These include the secret bombing of Indochina; collusion with the Pakistani government's campaign of slaughter in East Pakistan in 1971 and in the subsequent assassination of Bangladesh's first president, Sheikh Mujib; collusion in the assassination of Rene Schneider, the chief of the Chilean general staff under Allende; involvement in the plan to assassinate President Makarios of Cyprus; guilt for the Indonesian genocide in East Timor; and personal involvement in a plot to kidnap and murder Elias Demetracopoulos, an exiled Greek journalist then living in Washington.

There are a number of flaws in your argument which would be apparent even to someone who shared both your politics and your presuppositions. Among them is the fact that, as you yourself admit, you don't have a lot of direct evidence in a number of these cases. You blame Kissinger for withholding access to his papers and speculate, without evidence as far as I can see, that he has destroyed certain key documents. But the result, as you concede, is that you can often only bring what you call a prima facie case. In other words you want Kissinger in the dock, but you often don't have enough evidence to warrant an indictment under the legal standards you yourself invoke and depend on.

Let me give one example of many. You demonstrate that Kissinger lied when he said that he had no advance warning of the Turkish invasion of Cyprus. You go on to claim that Kissinger must have approved of it. If you were writing a political polemic, that would be acceptable. But you have imposed higher standards on yourself by claiming to have written a prosecutor's brief. By those standards, you fail. Reading that section of your book, the old Scottish verdict "Not Proven" came to mind.

But let's assume you're right. It still seems to me that the Cyprus case is better understood as emblematic of the irresponsible exercise of US power during this period than of the particular whims of Kissinger. The same, I believe, can be said of the US government's complicity in the Indonesian invasion of East Timor. No fact adduced by you suggests that Kissinger's views in these matters were at variance with that of the US policy establishment generally.

If I am right, then despite your claims you have not taken sufficiently into account the institutional nature of the policy Kissinger implemented and instead have fetishised the role of one celebrated official at the expense of seeing his role in its appropriate political, historical and moral context. The oddity in this debate is that it is you, not I, who is the self-proclaimed leftist. It seems to me, though, that by fixating on Kissinger you let the US policy elite, of which Kissinger is only one rather florid and over-rated product, off the hook. In your account, he is a kind of lone gunman, spreading destruction across the globe out of a demented, pathological need to do harm. There is little attempt in your book to grapple with the issue of how much difference any individual made to the conduct of US foreign policy during the cold war, or, to return to the concrete world of personalities, no real recognition of the implications of the fact that Kissinger spent most of his time in government serving Richard Nixon-a president who was hardly a passive bystander in all these events. In these important ways, your book is astonishingly, defiantly, and perplexingly anti-political.

You are not alone. The belief that evil deeds committed by people in power are best understood as criminal acts, violations of international law best addressed by courts of law, is one of the reigning bien pensant pieties of the age. In a recent widely-praised book, the journalist Bill Berkeley, claimed that many African tyrants, from Mobutu to Foday Sankoh, are best understood as mafia chieftains-Don Corleone wannabes.

Would that it were so. The truth is that all political violence, whether committed by Alexander the Great or Foday Sankoh, Napoleon or Saddam Hussein, could be described in this anti-political, ahistorical way. By the same token, to describe the cruelties of statesman in the language of the criminal statute books is to offer a chimerical vision of a world into which, if we only can get enough courts and enough prosecutors and policemen, we will usher that human rights utopia that you seem to believe is heralded by the formation of the International Criminal Court and the Pinochet indictment.

Don't bet the ranch on it. In reality, this is a specious, self-congratulatory logic which mistakes setting new legal norms for the transformation of reality, and mistakes trivial steps forward for seismic shifts in the political landscape. You should know better. When you write that "we now enter upon the age when the defence of sovereign immunity has been held to be void," you sound, I'm sorry to say, almost as callow as Mary Robinson, the UN's human rights commissioner, whose windy optimism has made her a laughing stock from Beijing to Havana.

Even your usually inspiring prose suffers as a result of such flights of fancy. Who is this "we"? And which defence against sovereign immunity, by whom, and against what charges? A real judge would laugh your prosecutor's brief out of court. To me, you are in the process of falling into the same trap of human rights triumphalism, into which the mainstream human rights organisations slipped some time ago.

International justice, as it is grandiloquently called, is not the cure-all its advocates believe. To the contrary, in a world of gross oversimplifications, both benign and malign, it is among the grossest. Montesquieu writes somewhere that to every problem there is one, simple solution, and it is wrong. The idea that political wickedness can be usefully considered as a matter for the courts rather than political debate, resistance, or counter-violence is just the sort of wrongheaded prescription Montesquieu would have recognised and deplored.

Leave the practical difficulties of such human rights to one side. Leave aside the fact that, by your criteria, not only Kissinger but every French statesman since Colbert (including one of my heroes, General De Gaulle) and a plurality of British foreign secretaries could have been hauled before a tribunal. Assume, for the sake of argument that justice really should be humanity's collective categorical imperative at the expense of other, often conflicting imperatives like, well, peace. Even after you have done so, you are left with the problem that the judicialisation of the world that your book calls for, which constitutes its moral and intellectual underpinnings, effectively means a great shift toward the depoliticisation of our understanding of politics and history. In your account, the bad guys are just criminals, and you can simply hunt them down.

In an age when the general public is obsessed with personalities, your strategy, though doubtless undertaken for the best of reasons, only panders to the world as distilled by Tina Brown and Rupert Murdoch. The point was not, is not, Kissinger; it was, it is, the American empire. You know this. That is why your emphasis on one personality, and your attempt to transform Henry Kissinger into human rights public enemy number one is, whether you will forgive or not for saying so, beneath you.

David

Dear David

29th June 2001

On 28th May of this year Henry Kissinger was visited by the Paris police at the Ritz Hotel. The gendarmes bore a summons, still extant, from Judge Roger Le Loire. It asked that Kissinger attend the Palais de Justice on the following day, to answer questions about his knowledge of Operation Condor. Operation Condor, as you well know, was the international death squad which co-ordinated the secret police terror of Chile, Argentina, Paraguay, Bolivia, Uruguay, Brazil and Ecuador in the decades of dictatorship. This atrocious system enjoyed the collusion of the US government, most warmly in the Nixon-Kissinger years. Five Frenchmen are "missing" from that period, which gives Judge Le Loire his jurisdiction. Kissinger left town in a rush. On his return to New York, he found similar summonses from Judge Garzon in Spain and Judge Rodolfo Corral in Argentina.

Earlier, I published a short book predicting that this and other forms of legal redress would be pursued against a man whose continued immunity and impunity astonishes us both. I wrote the book in that form because, in the post-Pinochet (and indeed the imminent post-Milosevic) context, I thought we might realistically promote the term "criminal" from metaphor to job description. And, as it happens, I was right and everybody else was either wrong or not paying attention.

You don't flatter me all that much by saying that I could have written ten different books. Of course I could (though I wouldn't have been so wedded to anachronism as to call for the trial of Richard Nixon). But this is the most stringent test yet of the principle that no one is above the law, whether local or international. I can't think why so many people are in such a hurry to change such a fascinating subject. I'm naturally sorry to find you among them.

Christopher

Dear Christopher

1st July 2001

At the end of your book, you tell the story of an American network television producer who tried to avoid responding to your arguments by asking if there was anything "new" in the claim that Henry Kissinger was a war criminal. "The shallow demand for novelty," you write, "is... a favourite spin tactic of the powerful." But you are fair-minded enough to add that there is a way of "asking such a question in good faith." You go on: "The information is not 'new' to the people of East Timor and Cyprus and Bangladesh and Laos and Cambodia, whose societies were laid waste by a depraved statecraft."

I agree. But I would suggest that your apt phrase, "depraved statecraft," radically undermines the force of a polemic which singles out Kissinger for opprobrium in each of these episodes.

It seems to me that none of the episodes in which you describe US power being used to malign ends would have played out very differently if someone other than Kissinger had been US secretary of state. Kissinger himself wrote recently that US victory in the cold war was the result of bipartisan efforts over nine US administrations. The same can be said about cold war crimes.

If I am right, then for all its merits as reportage or polemic you have written a perversely anti-political book. I don't think that by saying this I am trying to change the subject; what I'm saying is that you've got the context wrong. The judicialisation of the world that you support implies the rejection of a political understanding grounded in history, and institutions in favour of the criminal code. Such a choice has been the catastrophic error of the contemporary human rights movement, and I am sorry to find you joining them.

Dear David

2nd July 2001

Of the four men who concocted the wicked plan set out in the first chapter of my book-the plan to subvert the Paris peace talks on Vietnam and undermine the 1968 presidential election-Richard Nixon, Spiro Agnew and John Mitchell were eventually brought within the ambit of the law. Mitchell went to jail; the first attorney-general to do so. The fourth man, Henry Kissinger, has escaped judgment even though his crimes extended well into Washington DC during the Watergate nightmare.

Of the international despots who were his favoured clients-Augusto Pinochet, Suharto, Brigadier Ioannides, the coup-mongers in Bangladesh-all are in jail or awaiting (or evading) trial. I fail to see the objection to making this due process more thorough and consistent.

Of course you are right to say that there were systemic deformities in the US apparat, some of them produced by cold war exigency. However, would you not agree that by the middle of 1968 a strategic majority of the establishment had decided that the Indochina war had lost any semblance of imperial rationality? This was even Kissinger's view until Nixon made him a secret job offer. The decision to prolong and extend that war, by covert means and with an eye to domestic political manipulation, created a presidency under which the US was in the real sense of the term a "rogue state." I take it that you do not believe that the ruling class, or whatever you wish to call it, wanted or needed the bugs, the bagmen and the "madman theory of war."

Kissinger was a crucial enabler of all this-he even urged Nixon to burn the tapes rather than submit to subpoena. Because of the Nixon regime's implosion, he became for some time the president, at least for foreign policy. He is the only surviving unpunished co-conspirator of that period. The truth and justice commissions of neighbouring nations, pursuing their inquiries into the same epoch, have reached a point where they have to apply by legal means to open some hidden archives in Washington, and for a deposition of Kissinger himself. I think they deserve support in this. Don't you? Or are such commissions just a part of the skein of inky parchment bonds which you see festooning the globe?

As you know, I have produced a history of the Cyprus question which examines the continuity of American foreign policy through several administrations. I take your point about power. Who could not. However, even the most hardened student of realpolitik has to whistle a bit when examining Kissinger's volatile, high-risk dependence on criminal elements, and on fascist-minded forces. And how did the precipitation of a war within Nato-between Greece and Turkey-aid the west in its contest with the Warsaw pact? Did the mass murder of the Timorese help demolish the Berlin wall? Did the asphyxiation of democracy by death-squads in South America cost Brezhnev any sleep?

This is partly a battle to open the archives; the weapons of subpoena are already being aptly employed against Kissinger in DC as a consequence of the Letelier trial, and I predict there will be further legal initiatives.

You have to begin somewhere: the British Special Branch was not ordered to go round to a clinic and democratise Chile; it was told to pick up a wanted war-criminal. At the time of that arrest, you were among those who thought it would retard the opening of Chile's politics; it has, of course, greatly assisted that process. The open trial of Milosevic has every chance of beginning the rehabilitation of Serbia. But you and I would be the first, I hope, to say that laws and precedents and principles of this kind should not be used only to discipline small fry.

The summons served on Kissinger in Paris on 28th May is the highest the finger of justice has ever reached; it touches a senior offender who is a citizen of an undefeated nation. I said this would and should happen, and I designed my book as part of the new argument needed for the new context of international law. Progress here is (like my book) uneven and inconsistent, but it is measurable. Universal jurisdiction is in; "sovereign immunity" is out. As Pinochet's prison-visitor once said: "Rejoice! Rejoice!"

Dear Christopher

3rd July 2001

As you know perfectly well, Nixon, Agnew, and Mitchell were not punished for their complicity in the secret bombing of Cambodia or any other part of the Vietnamese catastrophe, but for violations of domestic US law connected to Watergate, or personal corruption. What has this got to do with the question of whether Henry Kissinger is or is not guilty of war crimes? Surely, such conflating of historical and legal issues is no advance on the past and no further step toward what you describe-far too credulously in my view-as the "new context" of international law.

More important, I think your claim that Kissinger was acting in defiance of an American elite consensus by continuing to prosecute the war in Vietnam, even if it is true (and I am not convinced that it is), does not answer the question of why you hold him particularly responsible for US actions at key times in Cyprus, Bangladesh, East Timor, and Chile-policies that, at least in the case of Cyprus, you yourself concede had considerable continuity across US administrations.

You ask, as if this demonstrated anything about Kissinger's guilt or innocence, whether such policies were necessary for the US to win the cold war-something I don't believe any more than you do. But the salient question is whether most of the American elite believed such acts to be necessary, however regrettable some may have found them. I believe that, demonstrably, they did. The whole sorry record of cold war excess, from the overthrow of Arbenz and Mossadeq in the 1950s, through Vietnam and the slaughter in Indonesia in the 1960s, to the support for the Turkish repression of the Kurds that persists to this day-more than ten years after the defeat and disappearance of the Soviet Union-supports such a view.

But my deepest anxiety is about the position you now espouse, and, more generally, about the current direction of the human rights movement. It is that by fetishising the guilt of a few individuals, you give considerable support to the consoling fiction that the cruelty with which powerful states and those who administer them apply to the destinies and dreams of weaker states and vulnerable peoples, are the exceptional acts of a few criminals.

There is little in the argument you advance in your book, and still less in the declarations of groups such as Human Rights Watch, which could rebut a person who said, "oh, Bangladesh (or Laos, or East Timor, or some fresh horror still in store for us), that's not the fault of the system-it's that wicked war criminal Kissinger (or Pinochet, or Suharto, or, yes, Milosevic)." As the writer, Nuruddin Farah, likes to say: "a thief cannot live among honest people."

So "Rejoice! Rejoice!" eh? Painful as it may be to disagree with the Iron Lady, I should have thought a more appropriate response would have been: be careful what you wish for.

David

Dear David

5th July 2001

You are verging upon error in your memory of the Nixon gang. Not only was Mitchell convicted for illegally using the CIA as a domestic politicised police force, but the first article drawn up by the House in the impeachment of the president explicitly cited the unlawful blitzing of Cambodia. It's a great shame that these grave issues were never put to proof. I suppose if Nixon had been brought to book-and he would hardly have stood in the dock alone on the Cambodia arraignment-you would be grumbling that this left Abraham Lincoln unpunished for his suspension of habeas corpus.

I realise that I simply don't know, and can't tell, from your arguments, whether or not you approve the detention and trial of men like Pinochet and Milosevic. You seem to prefer saying that such things don't go far enough, or that mere trials are surrogates for deep societal reforms. I dare say you might be right about that. But you are not entitled to the corollary, which is your assertion that supporters of universal jurisdiction propose it as a universal panacea. And it's simple casuistry on your part to suggest that we blame everything on malign or deviant individuals.

It does sometimes happen, however, that such persons come to power. Blame "the system" all you like; the fact remains that Kissinger twice provoked-over Bangladesh and Cambodia-mass protests and mass resignations from his own state department. And the disclosures about him in the Pike Committee report had to be extracted by congressional subpoena. My point is disarmingly simple-do you think that men like this should be above the verdict of law? In saying that they should not, I don't thereby discard or disdain other verdicts, such as those of history or political theory.

My closing point is more intuitive than forensic. If you consult the current issue of Foreign Affairs, you will find an article by Henry Kissinger on the grave dangers of universal jurisdiction. (It is an extract from his latest dreadful book.) There is no doubt that he is extremely rattled by the advances made in this direction. So are the ex-caudillos of many unhappy countries. We cannot prove that the future caudillos have been depressed as well, but that is Kissinger's explicitly-stated fear. I don't mean to cite Kissinger as an authority on anything, but his express misgivings surely make nonsense of your insinuation that justice for war criminals is a feelgood trip for the bien pensant.

Cristina in the land of make-believe

2008-05-03T10:36:00.000-07:00

Argentina
Cristina in the land of make-believe

May 1st 2008 | BUENOS AIRES
From The Economist print edition

Dashing hopes of change, Argentina's new president is leading her country into economic peril and social conflict

SHE romped to an easy victory in last year's presidential election by promising to maintain Argentina's impressive economic performance while easing its social tensions and rebuilding its foreign relations. Yet just five months after Cristina Fernández succeeded her husband, Néstor Kirchner, in the Casa Rosada, Argentina is worse off on all three counts. Already, her government looks in disarray. It has provoked a tax revolt by farmers. On April 24th, it lost its most important new face when Martín Lousteau resigned as economy minister over a policy disagreement. The price of Argentina's bonds has plunged as investors show little confidence in the government.

With the economy having grown at over 8% a year since 2003, when it began a vigorous recovery from an earlier financial collapse, Mr Kirchner basked in popularity. He was helped by record prices for Argentina's farm exports but pumped up the economy further, with dollops of public spending and an undervalued currency. He brushed off worries about inflation, strong-arming businesses into freezing prices and ordering an underling to doctor the consumer-price index.

During her campaign, Ms Fernández led some analysts to believe that she would be more moderate than her combative husband. But any such hopes have been quickly dashed. She has kept most of his ministers, his policies and his rhetoric. According to unofficial calculations, inflation has reached 25% (officially, it is 9%).

Ms Fernández shows little sign of curtailing the dash for growth at any price. Mr Lousteau's mistake seems to have been his intention to act on her campaign promise to restore credibility to official statistics. His replacement, Carlos Fernández, is a non-entity. In practice, Mr Kirchner himself seems still to be in charge of economic policy. “We don't want a cooling of the economy because that always brought us unemployment, poverty, exclusion and economic concentration,” he told a recent rally of the ruling Peronist movement.

But overheating and inflation are already bringing Argentines some of these woes—and if unchecked will in time bring all of them. The statistics agency has stopped releasing poverty figures. Using an independent estimate of inflation, the poverty rate has risen from 27% in 2006 to 30%, with 1.3m Argentines descending into poverty last year, according to calculations by Ernesto Kritz, a labour economist in Buenos Aires.

To tame inflation and stabilise the economy, the government needs to allow the peso to appreciate, curb spending growth and energy subsidies, and raise interest rates. The longer such measures are postponed, the more painful and unpopular they will be.

Ms Fernández is already in a weaker position than her husband was. Several recent opinion polls give her an approval rating of only 35%. Mr Kirchner used lavish fiscal transfers to buy the support of provincial governors and mayors. But it is getting harder for his wife to match that.

To compensate for Mr Kirchner's pre-election spending binge, in March she raised taxes on agricultural exports. Buoyed by record world commodity prices and a favourable exchange rate, farmers had hitherto grudgingly accepted the levies. But the tax increase, together with rising inflation, cut the profit margin on soyabeans to just 6%, for example. The farmers launched an unprecedented campaign of strikes, roadblocks and pot-banging protests in city centres.

Taken aback, Ms Fernández's response was tellingly authoritarian and unstatesmanlike. She accused the farmers of greed and, improbably, of seeking a military coup. Government rent-a-mobs of piqueteros (unemployed protesters receiving state welfare payments) were unleashed against the farmers and their supporters. That backfired. “Cristina managed to do in three weeks what Argentina's farmers couldn't over 50 years: unite them,” says Gustavo Martínez of Salvador University in Buenos Aires. The farmers suspended their protests to allow talks to take place. The government seems to be seeking a way to back down.

Even in foreign policy, in which Mr Kirchner showed no interest, Ms Fernández has had little success. Her expressed desire to improve relations with the United States foundered on a complicated campaign-finance imbroglio. Last year customs officers at a Buenos Aires airport impounded $800,000 in cash being brought in by Guido Antonini Wilson, a Venezuelan-American who had arrived on a private plane rented by the Argentine government. Two days after Ms Fernández's inauguration, American prosecutors charged five men who they said threatened Mr Antonini, who lives in Miami, and claimed to have evidence that the money was for her presidential campaign.

The president seemed to blame the United States government, rather than its courts, for what she called “a garbage operation” against her. A planned visit to Europe last month was curtailed because of the farmers' protests. While foreign investment pours into neighbouring Brazil, Ms Fernández has done nothing to assure investors that they will enjoy predictable policies while she is in power. The government signed a contract this week for a $3.7 billion high-speed train from Buenos Aires to Córdoba, the first of its kind in Latin America, but it will be paid for with debt.

Ms Fernández still has plenty of time to correct her mistakes. She is blessed with a weak and divided opposition. Her husband has installed himself as president of the Peronist party, still Argentina's most formidable political machine. But the first couple's support is narrowing to not much more than the urban underclass organised by that machine.

After her bumpy start, Ms Fernández is being compared to Michelle Bachelet, the similarly hapless president of neighbouring Chile, with whom she is friendly. But at least Ms Bachelet is making her own mistakes. The suspicion in Buenos Aires is that Cristina is paying the price for her husband's pigheadedness, even if that is something she shares. “The Kirchners' golden age is over,” says Sergio Berensztein, a political consultant. “Now they'll have to get used to it.”

MIGRATION: You don't have to be rich

2008-04-12T14:58:00.000-07:00

Developing countries attract migrants too

THE complaints sound familiar. Foreigners steal our jobs. Aliens cause a rise in crime. The corrupt interior ministry cannot cope. The border is ineffective and deporting illegal migrants does not work: removed by train, they return on foot. Outsiders put a strain on housing, especially for the poor, and on hospitals and schools. But employers do not care: farmers want cheap labour, and rich families need skilful foreign gardeners and housekeepers.

ReutersTurfed out of Little London

Residents of Soweto, or other urban areas in South Africa, are likely to grumble about foreigners in the same way as in rich countries. The makwerekwere, as African foreigners are insultingly known, are attracted by South Africa's relative wealth. Some Tanzanians talk longingly of Johannesburg as “Little London”. One in four Little Londoners may now be a foreigner. Zimbabwean teachers, forced out by hunger and repression, work as security guards and shop assistants. Congolese lawyers toil as waiters and chefs.

In 2005 two World Bank researchers, Mr Ratha and William Shaw, estimated that two in five migrants—about 78m people—were outside rich countries. But who in the poor world is counting? South Africa's government does not know how many foreigners it has (2m? 5m? more?). Mexico, India or Turkey cannot be sure either. Total numbers are skewed by those displaced by the collapse of the Soviet Union or who became de facto migrants when borders moved.

Ms Newland of the Migration Policy Institute in Washington, DC, says the flows between poor and mid-income countries are huge but “desperately understudied”. One reason why outsiders pay little attention is that most poor migrants do not move far. Roughly half of all South-East Asian migrants are thought to have remained in the neighbourhood, and nearly two-thirds of migrants from eastern Europe and Central Asia have stayed in their own region. Nearly 70% of migrants from sub-Saharan Africa remain on their continent. West African countries do not limit immigration from their neighbours, so lots of people cross borders, for example from Ghana to oil-rich Nigeria.

Some middle-income countries, such as Morocco, Mexico, Turkey and Libya, are well-trodden transit routes with migrant populations of their own. A senior civil servant in Morocco laments that his country is “between the hammer and the anvil” of Africa and Europe. Others, like India, Russia, South Africa and Argentina, are destinations in their own right. With all this come the same opportunities and threats as in the rich world. Chile imports doctors and maids from Peru, raising worries about a brain drain. Zambians fret about an invasion by Chinese, whose numbers in Africa are said to be between 80,000 to 400,000, many in oil-rich countries such as Sudan, Nigeria and Angola.

Remittances from one low-income country to another probably help to cut poverty. A 2006 study of 4,700 households by the Southern African Migration Project found that 40% of Zimbabwean households received some money from this source. How much is hard to measure, but a World Bank estimate for 2006 gives a range for remittances among poor countries of $17 billion-55 billion.

Some middle-income countries are extraordinarily welcoming. Venezuela, awash with oil revenues, even allows Colombians to use its social-welfare system. Argentina has lifted most restrictions on immigration from South America, again guaranteeing access to public health and education, even for illegal migrants. But many other countries show signs of xenophobia. On one occasion a newspaper in Morocco gave warning that “black locusts”—African migrants—were invading. Russian authorities, especially in Moscow, regularly throw out traders from Georgia and elsewhere in the Caucasus. Libya occasionally expels African migrants.

Many poor people are drawn to somewhat less poor countries in the hope of finding work, just as they are to rich countries. But with war, repression and economic collapse, push factors are much stronger in the poor world. The invasion of Iraq in 2003, and the violence since, has uprooted more than 4m Iraqis. Some 95% of them have remained in the Middle East, including 2m in hard-pressed Jordan and Syria. Sweden, with an admirable history of taking in refugees, has welcomed 23,600 Iraqis, but few other rich countries have followed suit. Some of the displaced are beginning to return home. Since the Taliban were booted from power in 2001, Afghanistan has seen the voluntary return of at least 3.2m people from Pakistan, Iran and elsewhere.

Climate of fear

Could a changing climate cause similarly big ebbs and flows? Scientists agree that average temperatures are likely to rise significantly by the end of this century. Rainfall patterns are already shifting. Those in marginal areas, for example on the edges of deserts, will suffer most, along with those in countries with the least resources to adapt. The sea is also rising, which might mean floods on vulnerable coasts. Some 12% of Africa's urban population, and 18% of Asia's, live in low-lying coastal zones and may be exposed to extreme weather or floods. The Intergovernmental Panel on Climate Change suggested in 2007 that millions may face water shortages, hunger and flooding as a result of climate shifts. Some would migrate, although probably over a period of time.

Environmental change has already set off some migration. Because the Sahel region gets much less rain than it did a century ago, farmers in Mali are moving to the cities. According to the UN Environment Programme, over the past four decades the desert in Sudan has crept south by about 100km and forests have disappeared. Rainfall in north Darfur, in Sudan, has dropped by a third over the past 80 years.

All this has displaced people and, some believe, encouraged war. Morocco's government is anxious about it. “There is a direct impact on migration. You see people leaving sub-Saharan Africa in search of more habitable land,” says Mr Ameur, the minister for Moroccans abroad. Abdelhay Moudden, a migration expert in Rabat, suggests that the first to leave may be struggling farmers: “If the urban economy cannot absorb them, then it may also push international migration.”

A 2005 report by the Institute for Environment and Human Security in Bonn suggested that rising seas and extreme weather, among other things, could uproot 150m people by 2050. Ms Newland of the Migration Policy Institute cautions against talking up the figures, but thinks that if drought and rising temperatures cause crop yields to fall in, say, the Sahel, they will probably encourage migration. If climate change were to cause wars or spread disease, that could compound the effects. Another reason, then, to switch to low-energy light bulbs.

MIGRATION: Of bedsheets and bison grass vodka

2008-04-12T14:54:00.000-07:00

Rich economies gain from high levels of migration, but the benefits are unevenly spread

FOR the past two decades or so, high rates of immigration into OECD countries have coincided with prolonged economic growth in much of the Western world. Consider Cobh, a bustling tourist town in southern Ireland which used to be famous for exporting people. Some 2.5m Irishmen and women embarked for America from its quayside, and its great and gloomy neo-gothic cathedral was paid for by remittances.

ReutersThey need her

Now, like the rest of Ireland, Cobh heaves with foreign workers. There are Poles on building sites, Latvians who own a shop selling dumplings, sauerkraut and other continental delicacies, a South African in the tourist office and another driving a taxi, Chinese in restaurants, a Bangladeshi managing a fishing business, and so on. A hotel owner says that he could not do without the migrants: when he recently advertised for a receptionist, none of the 200 applicants was Irish.

Migration can be both a consequence and a cause of economic well-being, but many people in host countries with lots of migrants have yet to be convinced of the economic benefits. A poll in November 2007, for France 24, found that 55% of Spaniards consider migrants a boon for their economy, and so do 50% of Italians, but only 42% of Britons and Germans and a mere 30% of French respondents.

Some of the hostility towards immigration seems linked to worries about the economy. If recession looms, locals are more afraid that outsiders will take their jobs or scrounge on their welfare systems. The last time that immigration in America was as high as it is now, just under a century ago, xenophobia rose as recession took hold. Today, amid concerns that a housing slide could lead to a general economic slump, American anxiety about migration is rising again. But the poor worry about immigration even when the economy is thriving.

Legal migrants usually have better job prospects than illegal ones, and the more educated outdo the rest. Not all of them stay. Nearly a third of those who crossed the Atlantic to America between 1890 and 1914—and as many as half the Spaniards and Italians—re-emigrated. Similarly, surveys today show that a majority of Poles in Britain plan to go home within a few years.

Some migrants do better not only than those left behind but also than those in their destination countries. The Institute for Public Policy Research, a British think-tank, found in 2007 that the foreign-born of many ethnic groups are both more likely to have a job and to be better paid than the average Briton. In America, over the past century, studies have shown migrants' wages catching up with, and then often surpassing, those of average Americans. Migrants' children do well too. This is not surprising. Migrants need health, skills, determination, a willingness to take risks and some entrepreneurial nous to take the plunge, which marks them out as special people.

Assuming that migrants are in work, they are bound to benefit the economy of the host country as a whole. Most simply, an expanding workforce permits faster growth. More people can do more work, and many migrants are young adults who are particularly productive. Moreover, migrants increasingly alleviate specific labour shortages in rich economies. Some economies could not function without foreign workers. In the United Arab Emirates, for instance, they make up an astonishing 85% of the population.

For the moment few other countries rely so heavily on outsiders (see chart 2), but in a number of rich countries, including Britain and America, foreigners typically make up 10-15% of the labour force and their share is rising. Around half of the new jobs created in Britain today are filled by migrants, often because they have skills that locals lack (from plumbing to banking) or because natives scorn the work (from picking fruit to caring for the elderly).

Low jobless rates in Ireland, Sweden, Britain, America and other countries with high migration suggest that, so far, foreigners are not squeezing out natives. Migrants also help to create jobs, because a good supply of labour encourages those with capital to invest more. For example, the hotel owner in Cobh, knowing he can find affordable staff, has added an extension with extra rooms. In contrast, countries where migrants have been kept at arm's length, such as Germany, complain about a chronic shortage of skilled workers such as engineers, scientists or programmers.

Just say the word

Foreign workers are often more flexible than native ones, too. Having already moved from Mexico to California, say, they are probably willing to take a job in Chicago. Migrant labour helps to keep economies on an even keel. At times of strong growth, an influx of workers reduces the risk of wage pressures and rising inflation. If growth weakens, migrants can go home or move to another country, or choose not to come in the first place. For example, the flow of Mexicans to America is probably slowing as the housing slump worsens and construction jobs disappear.

Migrants can also release skilled natives to do a job (for example by providing child care that allows a parent to go back to work). And they are consumers, too, renting accommodation and buying goods and services. The owner of the off-licence in Cobh is delighted by his Polish customers, who are fond of bison grass vodka and east European lager. Cobh's supermarket, fast-food restaurants and other shops are flourishing too.

Quantifying the impact of all this is tricky. A 2007 report by PricewaterhouseCoopers concluded that a surge in migration has helped to lift Britain's growth rate above its long-term trend. Alexandros Zavos, of the Hellenic Migration Policy Institute in Athens, reckons that immigration into Greece has recently added as much as 1.5-2.0% to its GDP every year. For countries that have long had high rates of immigration, such as America, sustained economic growth partly reflects an ever-growing workforce.

Sceptics say that migration may boost the economy as a whole, but on a per-head basis the benefits for the natives are less impressive. Migrationwatch, an anti-migration group in Britain, reckons that for the average Briton the inflow of foreigners provides just a few extra pence a week. Roy Beck, an anti-immigrant activist in America, suggests that countries with ageing workforces should try to make their economies less labour-dependent. His country is “addicted to foreign labour”, he says, and more capital investment and more training for locals would reduce the need for foreign workers. But some jobs (such as cleaning or nursing) cannot be sent abroad or mechanised. And even if more natives can be trained to do highly skilled work, shrinking native workforces in many countries could mean economic contraction.

Some of the sceptics' arguments touch raw political nerves, particularly when it comes to the least well-off natives in the host country. In America the share of national income that is going to the poorest has been shrinking in recent decades. Inequality has increased and the real wages of the least skilled have fallen. Circumstantial evidence suggests that foreigners, who typically work in less skilled jobs, might be partly to blame. According to one estimate, they make up around 28% of legal construction workers in America and over a third of maids and housekeepers. If the illegal workers could be counted, the figures would probably be much higher still.

Cheap and cheerful

Do migrants make life worse for poor natives? Studies comparing wages in American cities with and without lots of foreigners suggest that they make little difference to the income of the poorest. George Borjas of Harvard University, who compared wages for different kinds of jobs where migrants most obviously compete with natives, estimated that immigration in America in the two decades to 2000 may have kept wages 3% lower than they would otherwise have been. For the least skilled the difference may have been as much as 8%. But Mr Borjas also calculated how a rise in the number of migrants might have encouraged the creation of jobs, which reduced the impact on wages.

This tallies with the outcome of natural experiments in recent history, such as the influx of 610,000 Russian Jews into Israel in the early 1990s, the return of 900,000 Frenchmen from Algeria in 1962 or the homecoming of 600,000 Portuguese after the collapse of their empire in Africa in 1974-76. Each time the influx of workers expanded the workforce and wages dropped slightly, but subsequently recovered. Given prolonged immigration, argues Steven Camorata of the Centre for Immigration Studies, the impact is sustained. He thinks that “it's the poorest 10% [of Americans] who seem to lose out, cutting their wages by perhaps 5%.”

Worse, say the sceptics, migration may limit poor natives' chances of moving up to better-paid jobs. With changing economies that reward skills, it is anyway getting harder to move up the ladder from low-wage jobs to better-paid ones. Now migrants, especially those with skills and drive, are making life even harder for the weakest natives.

A second worry is that migrants will put a strain on public services and the tax system. It is in schools, public housing and doctors' surgeries that natives come face to face with migrants and it is often at the local and state level, where responsibility for such services usually lies, that hostility to migrants seems strongest. Local councils in Britain complain that clinics and schools are overloaded and central government is slow to dish out help, and local police in areas with many immigrants blame foreigners for a rise in crime.

In Greece, as new illegal immigrants arrive at remote spots on the border, officials complain that they lack funds for policing and social services. The prefect of Samos laments that “we are given a short bedsheet to cover our body.” In America hostility to migrants is greatest where they have recently been arriving in large numbers, not where their absolute numbers are highest (near the borders or in big cities, such as New York). Several states have passed tough new laws banning illegal migrants from using their public services.

But crowding, although likely to cause resentment, results from the unexpected arrival of those migrants, with bureaucracies taking time to allocate resources to the right places. In itself, it does not prove that migrants are a drag on public services as a whole. Indeed, migrants often make a large contribution to the public purse. When a foreign worker first arrives, usually as a young adult, fully educated and in good health, he makes few demands on schools or clinics. A legal immigrant will pay taxes just like any native; even an illegal one will contribute something (if only through the tax on those bottles of bison grass vodka). If the immigrant stays on (and quite a few do not), the benefits will diminish as he ages, but at least he has given his host country a breathing space.

To complicate matters, highly skilled migrants contribute much more to tax and social-security systems than do less skilled ones. A study in America by the National Research Council suggests that migrants with an education beyond high school contribute an average of $105,000 to the tax coffers over their lifetime. By contrast, the least educated migrants are reckoned to leave the taxman with a $89,000 hole. But migrants as a whole, in the long term and counting the contribution of their children when they grow up and get jobs,are not a drain on public services. For rich countries with ageing workforces in particular, gains from importing the young, the energetic and those willing to take risks comfortably outweigh the costs.

MIGRATION: Open Up

2008-04-12T14:48:00.000-07:00

Despite a growing backlash, the boom in migration has been mostly good for both sending and recipient countries, says Adam Roberts (interviewed here)

ENOCH POWELL had a point. The Conservative British politician gave warning, nearly four decades ago, that immigrants were causing such strife that “like the Roman, I seem to see the River Tiber foaming with much blood.” That proved to be nonsense, as did his advice that migrants should be encouraged to leave. Had they done so, Britain and other rich countries that depend heavily on foreign labour would be in a dreadful state. But one prediction he made was spot on: that by about now, one in ten people in Britain would be migrants. And indeed, at the last count in 2005, the foreign-born made up 9.7% of the British population.

By historical standards, that is high. It is a lot more than a decade ago, and the trend is resolutely upwards. Yet it is not dissimilar to that in many other rich countries, which have mostly seen equally rapid increases. And it is still lower than in America, where the proportion is now about 13%, not far off the 15% peak reached just before the first world war, in the previous great era of migration. What is particularly striking in Europe is that many countries which until recently had known only emigration, such as Ireland or Greece, are now seeing the sort of influx more typical of countries such as Australia and America.

This special report will argue that both emigration and immigration countries, as well as the migrants themselves, have been coping remarkably well with this new force that is reshaping our world. Yet there are now signs of a serious backlash against immigration on both sides of the Atlantic. In 2007 activists in America smashed a bill to make immigration easier that had the backing of the president and the leaders of both big parties in Congress. In France, Nicolas Sarkozy won the presidential elections partly thanks to his anti-migrant rhetoric. But this is still a far cry from Mr Powell's doom-mongering.

Politicians in rich countries may tinker with migration policies. They will certainly, under public pressure, put extra resources and energy into building more fences and walls to keep people out. And by making a connection between immigration and terrorism, they may cause their societies to become more heavily policed. But the basic forces driving migration are unlikely to ebb.

Counting the ways

People who cross international borders are often categorised by their motives, and some of these categories are seen as less desirable than others. Most migrants move for economic reasons, many in search of jobs, some to be united with relatives. Most appear to be doing so legally. America in 2002-06 allowed in an average of just over 1m legal immigrants a year who planned to settle permanently, more than half of them sponsored by relatives. Another 320,000 a year entered temporarily.

The number of illegal migrants is by definition hard to ascertain, but likely to be smaller than the legal sort. The illegals also go for economic reasons, and they probably make up the bulk of people seen floating on rafts in the Mediterranean or scrabbling over the fence from Mexico to America. Many illegal migrants do not risk the high seas or physical borders but instead enter under some other guise, perhaps as tourists, and then stay on. In that same period of 2002-06, America's population is thought to have seen a net gain of 500,000 illegal migrants every year. Within the European Union it has become impossible to keep a tally because people can move legally among most of the member countries without asking anyone. Britain, as an island, should find it easier than most to know how many foreigners it has allowed in, but its statistics on migrants have recently turned out to be way off the mark.

Lastly, there are refugees and asylum-seekers, strictly defined as those escaping persecution but often including anybody forced to flee, for example from a war. According to the UN's refugee agency, at the close of 2006 some 10m people fell into this category. Many go through legal channels, applying for refugee status and then asylum. But others join illegal migrants in trying to reach host countries by raft or by jumping over a fence. Genuine refugees may have no alternative.

The 200m question

The number of migrants in the world today, both legal and illegal, is thought to total perhaps 200m (though many of the figures, even those used by governments, are at best educated guesses). That sounds a lot, but it adds up to only 3% of the world's population, so there is great potential for growth. Migration has turned out to be a successful strategy for the world's poor to make their lives a little better. Nor is it the very poorest who travel. You need money to move to another part of the world. Thus as Africa, China and other emerging countries become less poor, many more people can aspire to travel in search of a better life.

In the 100 years to 1920, such prospects encouraged some 60m Europeans to uproot themselves and move to the New World. A European who crossed the Atlantic could expect to double his income. Today the incentives are even more enticing. Those who move from a poor country to a rich one can expect to see their income rise fivefold or more. As long as such differentials persist, the draw will continue.

These days, too, demography is playing a big part in migration. Not every migrant is aiming for America or Europe: perhaps two in every five move to another poor or middle-income country. But those who go to the richest parts of the world do their inhabitants a favour. Without migrants, the greying and increasingly choosy populations in much of the rich world would already be on the decline today. That matters for their fast-changing economies, which increasingly demand either highly skilled workers or people willing to do unpleasant and tiring jobs.

One reason why much of the world has enjoyed a sustained economic boom with low inflation in the past decade is that the effective global workforce is expanding so fast. The IMF says it has quadrupled since 1980 as China and India have plugged their huge young populations into the world economy. It is likely to keep on growing, though at a slower pace, with a 40% increase in the world's working-age population forecast by 2050. According to the UN,the global stock of migrants has more than doubled in the past four decades. Not enough young natives have the right skills or motivation, so the rich must hope that outsiders will keep coming.

And they will. Luckily for Europe and America, there are huge pools of eager workers ready to jump on the next plane, train or leaking raft to work abroad. This can be beneficial for their home countries as well, at least as long as the population is growing fast. The IMF says that emigration from Belize, El Salvador, Guyana and Jamaica, for example, may have led to higher wages and less poverty. Some Chinese from the heavily populated east coast are moving out, despite a fast-growing economy. Researchers in Africa report a recent rapid inflow of Chinese workers.

If exporting brawn generally makes sense for a poor country, sending its better brains away may not. Most, perhaps all, poor and middle-income countries face chronic shortages of skilled workers. In South Africa, although universities churn out graduates at a fast clip, many well-qualified people promptly depart for Britain or Australia, leaving tens of thousands of jobs unfilled at home. In Morocco those with science and engineering degrees, computer skills and languages go to France, the Netherlands and Canada, whereas the students of literature and public administration stay at home. Professor Mohamed Khachami, of AMERM, a migration think-tank in Rabat, laments that his country lacks people to build better internet connections, yet Paris now has an association for Moroccan IT engineers. Hospitals and clinics in southern Africa struggle to cope with huge public-health problems as doctors and nurses pack their bags for jobs in the Gulf, Europe and elsewhere. It is a similar story for schools.

Those in demand abroad are the hardest people to keep at home. Some European countries tried, and failed, to stop artisans emigrating to America in the early 19th century. In fact it is almost impossible to block the exit for the highly skilled if the lure is strong enough. Small countries such as Jamaica, Trinidad and Senegal have seen half to three-quarters of all their graduates move abroad.

Rich countries have taken in more highly skilled migrants than ever before. The World Bank looked at a sample drawn from 52m migrants in 20 rich countries in 2000 and found that 36% of them had a college education, a sharp rise on a decade earlier. Yet emigration of skilled workers may be a consequence rather than a cause of problems in the sending country. For example, nurses may be quitting Malawi because their salaries are not being paid or because hospitals are crumbling; entrepreneurs may be moving abroad because the business climate back home is wretched. Stopping emigration, even if you could, would not solve the problems. The nurses might still leave their jobs, the would-be entrepreneur might sit on his hands.

Indeed, some argue that emigration can help to add to the stock of brainpower. Migrants who go abroad may spend more time studying, pick up more skills and experience and then bring them all home again. Remittances are often used to fund schooling. And the prospect of emigration and prosperity abroad may be an inducement for many more to get an education. All this suggests that the consequences of skilled emigration are difficult to calculate, even if they are not negligible.

Governments of sending countries would do well to tackle whatever factors are pushing their skilled people out in the first place. Malawi, which exports a lot of nurses, should of course worry that it lacks medical staff. It is said that there are more Malawian nurses in Manchester than back home. But, perhaps with donors' help, more investment in public health could be combined with a strategy of training many more nurses than are needed, allowing for future emigration and the other benefits that brings. If migrants can be tempted back home, even for short spells, all the better. Ghana, for example, has raised wages for some medical staff and offered incentives to the highest-skilled to come back. Money is not the only concern: staff are also allowed parts of the year to work abroad, giving a boost to their careers.

There is no guarantee that migration will carry on at record rates. It is possible to seal borders tightly enough to keep more people out if those inside are ready to pay the price. An earlier period of great migration came to an end, for example, when America some 90 years ago shut its doors to immigrants for a while.

But easier movement of capital and goods has helped to make the world a much richer place in the past decade or two, and more human mobility has both created wealth and helped to share it out more equally. The billions sent around the world in remittances each year is testimony to that. The price of keeping people out would be high.

And unexpected things keep happening. Wars can suddenly displace millions of people who may start off as refugees but end up as migrants. Some people think that climate change might force tens of millions of people to get moving within just a few decades. Misguided policies, a backlash over terrorism or a failure to integrate migrants could all cause serious problems. All the same, it seems clear, 40 years on, that Mr Powell got everything but his sums completely wrong.

Religion: The power of private prayer

2008-01-21T12:58:00.000-08:00

RELIGION AND PUBLIC LIFE

The power of private prayer

Nov 1st 2007
From The Economist print edition

A heretical thought about religion in Europe

EVEN in these dark days for the Bush presidency, there is one topic that can make American conservatives smile—religion in Europe. The White House might be going to hell (or at least to Hillary Clinton), but Europe faces a worse nightmare: a continued descent into Godlessness, and then a takeover by Islam.

The second part—the imminent arrival of Eurabia—can be dismissed as poor mathematics. Muslim minorities in Europe are indeed growing fast and causing political friction, but they account for less than 5% of the total population, a tiny proportion by American standards of immigration. Even if that proportion trebles in the next 20 years, Eurabia will still be a long way off.

The more interesting question is whether Christianity will recover. A new book by Philip Jenkins on European religion comes up with some gloomy statistics. Only 20% of Europeans say that God plays an important role in their lives, compared with 60% of Americans. A survey in 2004 found that only 44% of Britons believed in God, whereas 35% (45% among 18-34-year-olds) denied His existence. Only 15% of them go to church each week, against 40% of Americans. Even in the Catholic heartlands of Spain, Italy and Ireland attendance rates have dropped below 20%. And priests are dying out: in Dublin, home to 1m Catholics, precisely one was ordained in 2004.

But there are a few signs of revival. Some of this is of a demographic kind: even in Europe, the religious breed more. Writing in Prospect magazine, Eric Kaufmann calculated that in the most secular bits—France and Protestant Europe—the “non-religious” majority (currently 53%) would peak at around 55% in 2040. If present trends continue, by the end of the century there will be more religious Europeans than there are today.

This has to do with recovering Christian belief as well as fertility and immigration. Islam plays a role: where there are lots of Muslims in Britain, the locals are more likely to profess Christianity. But the real change is coming on the supply side: religion is being privatised.

Grace Davie of the University of Exeter argues that there are really two religious economies in Europe. In the old one, religion is “a public utility”: there is one state-backed supplier, and most Christians follow their religion vicariously (in the sense that somebody else does your churchgoing for you). For instance, around 75% of Swedes are baptised as Lutherans, but only 5% regularly go to church. The church pockets a staggering $1.6 billion in membership fees, collected by the state through the tax system. It has been rare for Swedes to opt out, though that seems to be changing.

Alongside this old religious economy, a smaller one, based on personal choice, is growing. Together evangelicals, charismatics and Pentecostals accounted for 8.2% of Europe's population in 2000, nearly double the rate in 1970, according to the World Christian Encyclopedia. Pentecostalism is France's fastest-growing religion. London's immigrant-packed East End is thought to have twice as many Pentecostal congregations as Church of England ones.

However, most evangelicals and charismatics are contained within the older religions. Over 2m Britons have now taken the Alpha course, “an opportunity to explore the meaning of life”, which began at Holy Trinity Brompton, a posh church in Kensington. Richard Chartres, the Bishop of London, uses Alpha veterans to “rechurch” areas of his diocese.

Ms Davie cites two examples of opt-in behaviour within the older churches. First, the number of adult confirmations in the Church of England has risen sharply even as the overall number has fallen. Second, pilgrimages are booming. Some 100,000 hikers a year make the trek across Europe to Santiago de Compostela in Spain; 6m people visit Lourdes and 4m go to Jasna Góra in Poland.

The optimists point out that Europe's churches are roughly as full as America's were before the First Amendment separated church from state. Hence the importance of the current pope. One rumour is that Benedict XVI would prefer a smaller but more vibrant Catholic church in Europe. In Germany he is said to have argued privately against the churches' lavish state funding. If he took the same line publicly in Rome, that would certainly test the free-market hypothesis.

Religion: O come all ye faithful

2008-01-21T12:36:00.000-08:00

RELIGION AND PUBLIC LIFE
O come all ye faithful

Nov 1st 2007
From The Economist print edition

God is definitely not dead, but He now comes in many more varieties

MENTION a “megachurch” and most people think of a gleaming building in the American suburbs. In fact, many of the biggest churches are outside the United States. In Guatemala, Pentecostals have built what may be the largest building in Central America: Mega Frater (Big Brother) packs a 12,000-seater church, a vast baptism pool and a heliport. One church in Lagos can supposedly bring 2m people out onto the streets. But five of the world's ten biggest megachurches are in just one country: South Korea.

The largest of them all, Yoido Full Gospel Church, sits opposite the national assembly in Seoul, an astute piece of political positioning. It looks somewhat unprepossessing—a brownish blob surrounded by office buildings—but Yoido boasts 830,000 members, a number it says is rising by 3,000 a month. One in 20 people in greater Seoul is a member.

Each of the seven Sunday services at Yoido is a logistical challenge: apart from the 12,000 people in the main sanctuary, another 20,000 follow the service on television in overflow chapels scattered around neighbouring buildings. Some 38,000 children go to Sunday school during the day. As one service begins and the next ends, around 60,000 comers and goers are ushered by white-jacketed traffic directors. If you want to attend one of the two services starring the church's founder, David Cho, you need to be an hour early or you won't get in.

Not that you will lack entertainment whilst you wait. The massed choir (one of 12) is already belting out hymns, backed by a large orchestra (one of three). The audience sings along, with huge television screens supplying the words, karaoke style. Pictures of the service are beamed to hundreds of satellite churches around the world and to Prayer Mountain, a gruelling religious camp close to the border with the North. Translation is offered in English, Japanese, Chinese, Spanish, French, Indonesian, Malay and Arabic.

By the standards of American preachers, Mr Cho is a relatively unflashy figure. With his glasses, tie and tidy red cassock, he looks like one of the more bureaucratic kinds of Asian politician. His tone is logical and unrelenting. His theme today is “Deliver us from the Evil One”.

Sin and Satan are omnipresent, he argues, but if you ignore their enticements, “your grave is already empty.” As he cites scripture, the passages appear on the big television screens. Mr Cho urges the liberation of North Korea and quotes Edward Gibbon. He then invites people to touch the part of their body that most needs healing. There are shouts of success. After he sits down, a young opera singer performs while the money is collected—by the sackful in gold and scarlet bags—and piled up in front of the pulpit.
Divide and multiply

To Mr Cho's critics, Yoido, like many megachurches, is too much of a business nowadays; and there was a fuss to do with his son running the church's newspaper, Korea's fourth-largest. Yet its beginnings were humble. Mr Cho, who was converted to Pentecostalism from Buddhism by his nurse after he nearly died of tuberculosis, founded Yoido in 1956 in a battered $50 tent bought from the Marine Corps. Like Pentecostals the world over, Yoido's system is rooted in “home-cells”. Most of the praying and converting is done at home, in small groups of around a dozen people. The idea is that these cells, like their biological equivalents, will multiply. Women are crucial. Mr Cho's right-hand woman was his mother-in-law, Jashil Choi, a figure known as “Hallelujah Mama”. Today Yoido boasts 68,000 female deacons—twice the number of male ones. A typical evangelist will make 35 visits a week and drink an unhealthy amount of coffee in the process.

This sort of “viral marketing” might seem untraditional to those used to bishops, cardinals and popes. In fact, Christianity advanced from an obscure sect to the official religion of the Roman empire by focusing on women. Christians stressed fidelity and marriage, which attracted women to the faith, who then bore Christian babies.

The Protestant surge in South Korea has slowed down a bit recently, a development which is variously blamed on changes in school laws and the abuses of some clerical families. Even so, the growth has been phenomenal. In 1950 only 2.4% of South Koreans were Protestant. Now the figure is close to 20%. Counting Catholics (which many Korean Protestants don't), Christians make up close to 30% of the population. “Koreans don't play church,” says an American elder at Yoido.

The people who have flocked to South Korea's megachurches are the upwardly mobile. Asked (in 2004) which faith had been most instrumental in their country's modernisation, 42.7% of South Koreans named Protestantism and 11.3% Catholicism. Hahn Meerha, a professor at Hoseo University, points out that 42% of the chief executives of listed companies and a third of its senators are Protestants. There are monthly prayer breakfasts at the national parliament, and the current favourite to win the presidency in the election due in December, Lee Myung-bak, is the elder of a megachurch.

That is not an undisguised blessing for Mr Lee. If one part of the middle classes has flocked to the megachurches, another is increasingly unhappy about religion's role in society: the same 2004 poll also found that 59% of Koreans thought the churches were going in the wrong direction. When a group of clueless young Korean missionaries were captured by the Taliban in Afghanistan earlier this year, there were widespread complaints in Seoul that the youngsters had been brainwashed into going there as a marketing ploy for South Korea's churches.

Korean Protestantism is certainly export-minded: Yoido sends out 600 missionaries a year. One target is North Korea, which used to be the more Christian end of the country. Yoido already has plans to build a second sanctuary in Pyongyang. Yanbian, a district in China that has a large ethnic Korean population, is choc-a-bloc with missionaries.

But the biggest prize for Christians across Asia is China itself. Some call it “the Africa of the 21st century”, recalling that the number of Christians in that continent rose from below 10m in 1900 to 400m in 2000. Officially, the Chinese government admits to 23m Christians within its borders, but it counts only churches that register with the authorities, and the real figure is probably around three times as high. Most Christians prefer private “house churches”. China even has two Catholic churches, one official and one underground. One Korean ruse is to set up small businesses and get work permits for traders who are really missionaries.
On this rock

South Korea illustrates three features of modern religion: competition, heat and choice. To understand the competitive mechanism, you need only two sacred texts. The first is “The Wealth of Nations”, in which Adam Smith argues that the free market works in religion as in everything else. Non-established clergy, who rely on the collection plate, show greater “zeal” in proselytising “the inferior ranks of people” than the established, salaried sort, who are more interested in sucking up to clerical bigwigs. Europe has been a textbook illustration of this (see article).

The second text is the American constitution. As a refuge for dissenters, America was always closer to Smith's vision, though it was not quite the religious city on a hill its boosters claim. The early Puritans were soon swamped by more venal colonists: in Salem, the zealous town in Arthur Miller's “The Crucible”, 83% of taxpayers in 1683 had no religious allegiance. Most of the Founding Fathers thought religion was useful in a squirearchial sort of way, but they were not particularly godly: George Washington never mentions Jesus Christ in his personal papers.

Thus, the First Amendment—“that Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof”—was a compromise between dissenters (who wanted to keep the state away from religion) and more anti-clerical sorts like Thomas Jefferson (who wanted the church out of politics). Yet it became the great engine of American religiosity, creating a new sort of country where membership of a church was a purely voluntary activity.

Look back at the first great success in this free market, Methodism, and it is not difficult to spot where Yoido's growth formula came from. When Francis Asbury arrived in America in 1771, there were barely 1,000 Methodists in the country. By the time he died in 1816, 1m people, one-eighth of the entire population, were attending Methodist camp meetings (the 19th-century equivalent of megachurches). The Methodists paid their preachers only a nominal stipend, gave them no job security and told them to avoid arid theology (“Always suit your subjects to your audience,” went the instruction, and “choose the plainest texts you can.”)

The constitution explains not just why America still excels at the religion business (the late Peter Drucker, a famous management guru, used to point out that American business could learn a lot from its “pastorpreneurs”) but also how it has become a huge export industry. Rick Warren, America's favourite preacher, likens his “purpose-driven formula” to an Intel operating chip that can be inserted into the motherboard of any church; there are now more than 100,000 “purpose-driven” churches in 160 countries. Korea was converted by Americans.

As the Methodists became more hierarchical in the mid-19th century, they began to lose ground to the Baptists. In all likelihood creative destruction will eventually hit Yoido and Mr Warren too. Religion in America tends to come in waves—and the current “awakening” may just be dying down. But an advantage of competition is that it spurs responses. For instance, the recent setback for Korean Protestantism has given a push to Catholicism (whose priests don't have sons to inherit churches). The Catholics are also fighting back against Pentecostals in Latin America, “becoming less Roman and more local”, says Harvey Cox, a Harvard divinity professor. In Nigeria Catholic priests have so embraced the habits of their evangelical competitors that the Cardinal of Lagos recently warned them about the “incalculable damage” being done to services by “unorthodox spontaneous prayers by all the faithful at the same time”.

Has the same competitive spirit gripped other religions? Buddhism, the religion whose market share has dipped most over the past century, remains pretty passive: its adherents believe that people should discover faith for themselves rather than be energetically introduced to it. But there are some signs of awakening. In South Korea Buddhist monks, often hidden away in inaccessible rural shrines, have set up meditation areas in cities to fight off the Protestants.

Hinduism tends to be more turf-conscious. Some states in India have passed “anti-conversion” laws banning evangelists from using force or “allurement”—code for Christians and Muslims converting Hindu untouchables, who tend to get a raw deal under the caste system. And when it comes to marketing pizzazz, the trendier Hindu ashrams are more than a match for America's pastorpreneurs. The Art of Living, a Bangalore ashram that “is committed to making life a celebration on this planet”, has offshoots in 141 countries.

This spirit of competition also helps to explain some of Islam's success. That may sound odd. Saudi Arabia enforces religious orthodoxy with police and prisons. Under many sharia systems, apostasy is still punishable by death. And in many Islamic countries mosques get far more financial help and direction from the state than Adam Smith would have approved of. But in fact there is more competition within Islam than at first appears.

Like Pentecostalism, Islam is a religion without much hierarchy: most mosques claim to be following the teachings of one preacher or another, but their real authority comes from the Koran. This helps new imams to set up shop and allows them to do pretty much what they like. But marketing has not been neglected. There are megamosques (one in east London, planned by missionaries, will hold 12,000 people, five times as many as St Paul's Cathedral) and televangelists, such as Amr Khaled, an engaging former accountant from Egypt, whose sermons are watched by millions in Europe and the Middle East. If you want a fatwa (religious ruling), you do not have to go to a mosque: you can get it online (and in English) from efatwa.com, muftisays.com or askimam.com.

Islam is not as evangelical as Christianity. Its followers are less intent on spreading the good news; much of their attention is focused on stiffening the resolve of communities that are already Muslim. But Islam is expansionist in some areas, including sub-Saharan Africa and the fringes of China. In Xinjiang province, the state government has got so worried about Muslim separatism that it has cracked down on Islam. China may yet end up being both the world's largest Christian country and its largest Muslim one.

The second lesson from Korea is that hotter religion does better. In the 1960s it was thought that if any sort of religion would survive, it would be the reasonable and ecumenical sort—intellectual Anglicanism, say, or Graham Greene's doubting Catholicism. In fact, certainty has proved much easier to market.

In America the famously tolerant Episcopal Church (which recently elected a gay bishop) has been in decline; the Southern Baptists (who in 1988 denounced homosexuality as “a manifestation of a depraved nature”) have jumped forward. Altogether conservative Christians now make up around 25% of America's population, compared with 20% in 1960.
Hot as hell

In global terms the most remarkable religious success story of the past century has been the least intellectual (and most emotive) religion of all. Pentecostalism was founded only 100 years ago in a scruffy part of Los Angeles by a one-eyed black preacher, convinced that God would send a new Pentecost if only people would pray hard enough. There are now at least 400m revivalists around the world. Their beliefs are not for the faint-hearted. According to a study of ten countries by the Pew Forum on Religion & Public Life, most adherents have witnessed divine healing, received a “direct revelation from God” or seen exorcisms (see chart 3).

The only other Christian faith to grow at such rates is the Church of Jesus Christ of the Latter Day Saints, again hardly an easy-going religion. Mormonism remains a favourite butt of comedians, because of its historic belief (now abandoned) in polygamy and its ban on such worldly pleasures as beer, coffee, tea and “passionate kissing” outside wedlock; there will be more fun poked if Mitt Romney wins the Republican nomination. But clean-living certainty sells: over the past half-century the church has grown sevenfold, with half the world's 13m Mormons living outside the United States.

The hotter bits of Islam have also gained ground. As American neoconservatives never tire of pointing out, this is partly a matter of Saudi money: petrodollars have flowed into fundamentalist madrassas around the world and paid for millions of copies of the Koran with Wahhabi interpretations (for instance, stressing jihad as an extra pillar of Islam). But the main driver has been globalisation.

In the Arab heartlands fundamentalism has become a refuge for anyone worried by the spread of Western culture and power. In overseas communities where Muslims are in a minority, notably Europe, it has had far more to do with a search for identity. Scholars such as Olivier Roy have shown that extremism has become a form of generational warfare, with Western-born Muslim girls choosing to wear the headscarf that their mothers jettisoned on their arrival from Pakistan and Morocco.

One final advantage for hotter religion of all sorts is demography. From Salt Lake City to Gaza, religious people tend to marry younger and breed faster than non-religious ones. An ultra-Orthodox Jewish woman in Israel will produce nearly three times as many children than her secular peer. By some counts, three-quarters of the growth in the hotter varieties of American Protestantism is down to demography.

But heat in religion does not necessarily generate light. Relatively few Muslims have actually read all of the Koran, and although 83% of Americans regard the Bible as the word of God, half of them do not know who preached the Sermon on the Mount. American evangelicals are so worried by fundamentalists being ignorant of the fundamentals that they have set up refresher courses in Bible knowledge.

Nor does the heat always last. “You don't see many graveyards in megachurches,” say the sceptics. Emotional, unhierarchical religion may be gloriously customer-centred, but it lacks a control mechanism. Pentecostal pulpits have been a home to some almighty rogues, and many Muslims would like to bring radical imams under control.

Besides, should religion really be so focused on rounding up customers? Rowan Williams, the thoughtful Archbishop of Canterbury, points to the many things his church does in the fields of social welfare and urban regeneration that pew-focused rivals do not. Pick-and-choose religion, he argues, has less depth. From the front-line in Nigeria, the Catholic Archbishop of Jos makes the same argument. He might be able to push up numbers if he spent his money on television rather than hospitals, and if he did not spend six years training priests. But that is not his job.
The value of choice

The final lesson from South Korea, however, is one that both archbishops admit is crucial. Modern religion is pluralistic and increasingly based on choice.

Often the spur is immigration. Richard Chartres, the Anglican Bishop of London, calls his city “a test case”, pointing to the sprawling number of mosques, Sikh temples, synagogues, African and West Indian churches, even the Church of Scientology. In Latin America, evangelical churches now offer a ready alternative to Catholicism. And in the United States mainstream Protestants will soon account for less than half the population. Although the country remains predominantly Christian, America is home to around 10m other believers (Jews, Muslims, Buddhists, Hindus) as well as 30m agnostics and atheists.

And atheism is definitely part of this pluralism. The proportion of Americans citing no religious preference has increased from 7% to 14% (20% for young people). As Ross Douthat argued recently in the Atlantic Monthly, anti-religiosity has moved from America's east-coast elite to the masses. By some counts there are at least 500m declared non-believers in the world—enough to make atheism the fourth-biggest religion.

Choice is the most “modern” thing about contemporary religion. “We made a category mistake,” admits Peter Berger, the Boston sociologist, who was once one of the foremost champions of secularisation but changed his mind in the 1980s. “We thought that the relationship was between modernisation and secularisation. In fact it was between modernisation and pluralism.” Religion is no longer taken for granted or inherited; it is based around adults making a choice, going to a synagogue, temple, church or mosque.

This has a profound affect on public life. The more that people choose their religion, rather than just inherit it, the more likely they are to make a noise about it. Miroslav Volf, director of Yale's Centre for Faith and Culture, says this is showing up in the workplace too: “It used to be that workers hung their religion on a coat rack alongside their coats. At home, their religion mattered. At work, it was idle. That is no longer the case. For many people religion has something to say about all aspects of life, work included.”

The same applies to politics. For instance, South Korea's megachurches have recently created their own version of America's religious right. The New Right movement already has around 200,000 members, around two-thirds of whom are Christian. Its views are somewhat vague. The founder, Jin-Hong Kim, complains about the country's leftward drift, America-bashing, North Korea and corruption. His enemies say the New Right is really just a way to help his friend, Mr Lee, win the presidency. In the primary, Protestants voted overwhelmingly for Mr Lee. The churches are banned from endorsing candidates, but one prayer at Yoido asks God “to help us choose the right president”.

The rest of this special report will look at the various ways in which religion intrudes into public life—from religion-based parties to attempts to challenge capitalism and science. It begins with the subject that people fear most: the wars of religion.

Religion: In God's name

2008-01-21T11:44:00.000-08:00

RELIGION AND PUBLIC LIFE

In God's name

Nov 1st 2007
From The Economist print edition

Religion will play a big role in this century's politics. John Micklethwait (interviewed here) asks how we should deal with it

THE four-hour journey through the bush from Kano to Jos in northern Nigeria features many of the staples of African life: checkpoints with greedy soldiers, huge potholes, scrawny children in football shirts drying rice on the road. But it is also a journey along a front-line.

Nigeria, evenly split between Christians and Muslims, is a country where people identify themselves by their religion first and as Nigerians second (see chart 1). Around 20,000 have been killed in God's name since 1990, estimates Shehu Sani, a local chronicler of religious violence. Kano, the centre of the Islamic north, introduced sharia law seven years ago. Many of the Christians who fled ended up in Jos, the capital of Plateau state, where the Christian south begins. The road between the two towns is dotted with competing churches and mosques.

This is one of many religious battlefields in this part of Africa. Evangelical Christians, backed by American collection-plate money, are surging northwards, clashing with Islamic fundamentalists, backed by Saudi petrodollars, surging southwards. And the Christian-Muslim split is only one form of religious competition in northern Nigeria. Events in Iraq have set Sunnis, who make up most of Nigeria's Muslims, against the better-organised Shias; about 50 people have died in intra-Muslim violence, reckons Mr Sani. On the Christian side, Catholics are in a more peaceful battle with Protestant evangelists, whose signs promising immediate redemption dominate the roadside. By the time you reach Jos and see a poster proclaiming “the ABC of nourishment”, you are surprised to discover it is for chocolate.

Recently Christians have been returning to Kano, partly because sharia law (which in any case applies only to Muslims) has been introduced sympathetically. None of the bloodier sentences has been carried out. Indeed, the election in April was settled in a reassuringly secular way—with the local political barons swapping cash and ballot papers in the bungalow of the Prince Hotel.

Yet it would not take much for things to boil over again. The Muslim north resents the Christian south's hogging of Nigeria's oil money. When earlier this year the shadowy “Black Taliban” struck a police station in Kano, around 20 militants were killed. In September Muslim youths set shops on fire after rumours that a Christian teacher in the area had drawn a cartoon of the Prophet Muhammad. And the missionaries are still pushing provocatively north. Salihu Garba, a prominent Muslim convert to Christianity (who has survived various assassination attempts), claims that the Evangelical Church of West Africa now has 157 churches in Kano state—double the number five years ago.

The journey from Kano to Jos may seem a trip back in time. In fact, religious front-lines criss-cross the globe.

Most obviously, Americans and Britons would not be dying in Iraq and Afghanistan had 19 young Muslims not attacked the United States in the name of Allah. The West's previous great military interventions were to protect Muslims in Bosnia and Kosovo from Orthodox Serbs and Catholic Croatians. America's next war could be against the Islamic Republic of Iran. Other conflicts have acquired a new religious edge. In the poisonous war over Palestine, ever more people are claiming God on their side (with some of the most zealous sorts living miles away from the conflict). In Myanmar (Burma) Buddhist monks nearly brought down an evil regime, but in Sri Lanka they have prolonged a bloody conflict with Muslims. If India has an election, a bridge to Sri Lanka supposedly built by the god Ram (and a team of monkeys) may matter as much as a nuclear deal with America.

Formerly communist countries are also getting hooked again on the opium of the people. Russia's secret police, the KGB, hounded religion: its successor, the FSB, has its own Orthodox church opposite its headquarters. In the Polish parliament the speaker crosses himself before taking his seat. Some of China's technocrats think that Confucianism, which Mao condemned as “feudal”, is useful social glue in their fast-changing country. But they brutally repressed a Buddhist sect, the Falun Gong, and they are worried that Christian churchgoers may already outnumber Communist Party members.

In Western politics, too, religion has forced itself back into the public square. The American president begins each day on his knees and each cabinet meeting with a prayer. The easiest way to tell a Republican from a Democrat is to ask how often he or she goes to church. And although European liberals sneer about American theocracy, American conservatives claim that secular, childless Europe is turning into Eurabia.

Many secular intellectuals think that the real “clash of civilisations” is not between different religions but between superstition and modernity. A succession of bestselling books have torn into religion—Sam Harris's “The End of Faith”, Richard Dawkins's “The God Delusion” and Christopher Hitchens's “God is not Great—How Religion Poisons Everything”. This counterattack already shows a religious intensity. Mr Dawkins has set up an organisation to help atheists around the world.

Part of that secular fury, especially in Europe, comes from exasperation. After all, it has been a canon of progressive thought since the Enlightenment that modernity—that heady combination of science, learning and democracy—would kill religion. Plainly, this has not happened. Numbers about religious observance are notoriously untrustworthy, but most of them seem to indicate that any drift towards secularism has been halted, and some show religion to be on the increase. The proportion of people attached to the world's four biggest religions—Christianity, Islam, Buddhism and Hinduism—rose from 67% in 1900 to 73% in 2005 and may reach 80% by 2050 (see chart 2).

Moreover, from a secularist point of view, the wrong sorts of religion are flourishing, and in the wrong places. In general, it is the tougher versions of religion that are doing best—the sort that claim Adam and Eve met 6,003 years ago. Some of the new converts are from the ranks of the underprivileged (Pentecostalism has spread rapidly in the favelas of Brazil), but many are not. American evangelicals tend to be well-educated and well-off. In India and Turkey religious parties have been driven by the up-and-coming bourgeoisie.

With modernity now religion's friend, an eternal subject has become fashionable. Father Richard John Neuhaus points out that when he founded his Centre for Religion and Society in 1984, there were only four centres of religion and public life in America; now, he thinks, there are more than 200. Religious people are getting more vocal in all sorts of fields, including business. Religion is also cropping up in economics. Niall Ferguson, a Scottish historian, re-examined Max Weber's theory of the Protestant work ethic to explain why Europeans work less than Americans.
The garden of Eden

Philip Jenkins, one of America's best scholars of religion, claims that when historians look back at this century, they will probably see religion as “the prime animating and destructive force in human affairs, guiding attitudes to political liberty and obligation, concepts of nationhood and, of course, conflicts and wars.” If the first seven years are anything to go by, Mr Jenkins may well turn out to be right.

What has changed? The main protagonists are oddly unhelpful in providing explanations. Believers usually produce some version of “you can't repress the truth for ever.” Sociologists point out that outside western Europe most people have always been religious. Peter Berger, the dean of the subject, chides journalists for investigating the religious rule, not the secular exception: “Rather than studying American evangelicals and Islamic mullahs, you should look at Swedes and New England college professors.”

Yet even if underlying piety has not changed that much, religion's role in public life plainly has. Only ten years ago, most academics and politicians would have dismissed Mr Jenkins's claim about religion being central to politics as weird.

After all, for much of the 20th century religion was banished from politics. For most elites, God had been undone by Darwin, dismissed by Marx, deconstructed by Freud. Stalin forcibly ejected Him, but in much of western Europe there was no need for force: religion had been on the slide for centuries. In Britain the “long withdrawing roar” of Anglicanism that Matthew Arnold lamented faded to a distant echo in the 20th century.

In America the number of churchgoers stayed high, but evangelical Christians retreated from politics, embarrassed by the failure of prohibition and the Scopes Monkey trial (in which creationists were mocked). In 1960 Jack Kennedy assured the country that his Catholicism would not pollute his politics. In 1966 Time magazine famously ran a cover asking “Is God dead?”; three years later man reached the moon, metaphorically conquering the heavens.

For modernising post-colonial leaders in the developing world, secularism and progress were indivisible. “The fez”, said Kemal Ataturk, “sat upon our heads as a sign of ignorance and fanaticism.” In India Jawaharlal Nehru wished to make “a clean sweep” of organised religion: “almost always it seems to stand for blind belief and reaction, dogma and bigotry, superstition and exploitation and the preservation of vested interests.” In Egypt Gamal Abdel Nasser, the champion of Arab nationalism, clamped down on the Muslim Brotherhood. Africa's new rulers nationalised the Christian mission schools that had taught them. Even “the Jewish state” deemed religion a distraction: after Israel's founding in 1948 the secular David Ben-Gurion agreed that rabbinical law would prevail in matters such as marriage and divorce partly because he assumed the Orthodox would melt away.

In retrospect, the turning point came long before Osama bin Laden declared his jihad on Jews and Crusaders. For Timothy Shah, a scholar at the Council on Foreign Relations in New York who is writing a book on secularism, the symbolic turning point was the six-day war of 1967. It marked a crushing defeat for secular pan-Arabism; meanwhile Israel's “miraculous” triumph gave God a stronger voice in its politics, emboldening the settler movement. In the same year a Hindu nationalist party won 9.4% of the vote in India.

By the end of the 1970s this counter-revolution was in full swing. America had elected its first proudly born-again Christian, Jimmy Carter; Jerry Falwell had founded the Moral Majority; Iran had replaced the worldly shah with Ayatollah Khomeini; Zia ul Haq was busy Islamising Pakistan; Buddhism had been formally granted the foremost place in Sri Lanka's constitution; and an anti-communist Pole had become head of the Catholic church.

What caused this shift? Believers inevitably see a populist revolt against the overreach of elitist secularism—be it America's Supreme Court legalising pornography or Indira Gandhi harrying Hindus. From a more secular viewpoint, John Lewis Gaddis, a Yale historian, points out that much religious politics dates back to the 1970s, a time when more worldly “isms” seemed to fail. By then, the Soviet Union's evils had made a mockery of Marxism, and capitalism had also hit some buffers (the oil shocks, hyperinflation). More generally, politicians' ability to solve problems such as crime or unemployment was questioned: faith in government tumbled just about everywhere in the 1970s—and has stayed low since.

But why has religion's power seemed to keep on increasing? The first reason is a series of reactions and counter-reactions. Fundamentalist Islam, for instance, has helped spur radical Judaism and Hinduism, which in turn have reinforced the mullahs' fervour. Hamas owes much to Israel's settlers. Without Falwell, Messrs Hitchens and Dawkins would have smaller royalties.

Second, the latest form of modernity—globalisation—has propelled religion forward. For traditionalists, faith has acted as a barrier against change. For prosperous suburbanites, faith has become something of a lifestyle coach. It is no accident that America's bestselling religious book is called “The Purpose Driven Life”.
A hitch for the Hitch

Whatever the exact cause, two groups of people in particular have struggled to come to terms with this new world. The first is politicians, especially practitioners of foreign policy. Realpolitik does not easily cope with the irrational. For instance, religion does not appear in the index of “Diplomacy”, Henry Kissinger's 900-page masterpiece on statesmanship (a mistake, admits the former secretary of state, who now sees some “depressing similarities” with 17th-century Europe).

Mr Kissinger is not alone. Before September 11th 2001, most “big books” (with the exception of Samuel Huntington's “Clash of Civilisations”) predicted a secular end to history. The Economist was so confident of the Almighty's demise that we published His obituary in our millennium issue. Madeleine Albright recalls a meeting at the State Department about Northern Ireland in the late 1990s when a diplomat asked despairingly: “Who would believe that we would be dealing with a religious conflict near the end of the 20th century?”

September 11th has changed that. A decade ago, a proposal by the CIA to study religion was vetoed as “mere sociology”; that would not happen now. But mistakes are still made. When America went into Iraq, people worried about George Bush's God-directed foreign policy; in fact it would have helped if Donald Rumsfeld et al had understood more about religion—especially the difference between Shias and Sunnis. “Everywhere we look, we have religious problems,” admits one (born-again) member of the Bush team. “And it is not just Islam. There are the Orthodox in Russia, Hindu nationalism in India, Christians in China...the list is long.”

The other group struggling to deal with religion's role in public life are liberals. When religious belief is plainly unreasonable—for instance, when schools teach creationism—it is easy to fight. But in many disputes there are liberal answers on both sides. Those who are embracing religion nowadays are doing so out of choice. Is it liberal to stop a British Airways worker from wearing a crucifix? Whose rights are being infringed when a majority of people on a Turkish bus ask the driver to stop so they can pray?

A schism in Western liberalism that dates back to its two founding revolutions seems to have reopened. In France, where the Catholic church was the sole faith, the revolutionnaires detested God as a crucial part of the ancien régime: politics, they declared, henceforth would be protected from this evil. By contrast, America's Founding Fathers, used to many competing faiths, took a more benign view. They divided church from state not least to protect the former from the latter.

This special report is an attempt to tease out these conflicts. It comes with three health warnings. First, many numbers in religion are dodgy: most churches inflate their support and many governments do not record religion in their censuses (in Nigeria the best source is health records). Second, in a field where many believers claim to know all the answers, it poses mainly questions. And lastly, given the emotion the subject arouses, the chances are that some of what follows will offend you.

The advanced liberal

2008-01-18T12:56:00.000-08:00

From Prospect Magazine

John Stuart Mill believed in liberty but he valued it less for its own sake than for its contribution to human advancement. It was "man as a progressive being" that most interested him. If we want to resurrect his liberalism, we may have to revive his draconian idea of progress too

Jonathan Rée

John Stuart Mill: Victorian Firebrand, by Richard Reeves
Atlantic books, £30

The Liberal electoral committee for the parliamentary borough of Westminster took a big risk when it invited John Stuart Mill to be its candidate in the general election of 1865. The 58-year-old philosopher had written respected books on logic, political economy and representative government, and spent 35 years working as a senior public servant at the India office. But he was impatient with all kinds of formal flummery and he had a most unfortunate reputation as the cleverest person in the world. He was also a grief-stricken widower who had just retired to a cottage in the south of France to study wild flowers and commune with the Greek philosophers. He made it clear to the committee that he would prefer not to become an MP, and that if elected he would devote himself only to the "emancipation of the dependent classes"—particularly workers and women. He was committed to "advanced liberalism," he said, and would never lift a finger to promote the "local interests" of his constituents.

In spite of his perversity, Mill was elected by a comfortable margin. A vast crowd gathered in Covent Garden to greet the announcement, cheering so loudly that he could not make himself heard. He blinked out at them for several minutes before his reserve gave way and he rewarded them with a brilliant smile.

Mill proved an effective politician and—as Richard Reeves shows in his timely and readable biography—a virtuoso in parliamentary banter. Asked early on to withdraw a remark about the Tories being "the stupidest party," he retrieved himself with a perfect Westminster apology, as recorded in Hansard. "'I did not mean that Conservatives are generally stupid; I meant, that stupid persons are generally Conservative.' (Laughter and cheers.) 'And I do not see why the honourable Gentlemen should feel that position at all offensive to them; for it ensures their always being an extremely powerful party.' (Hear hear.)"

When the Liberals got into trouble over their electoral reform bill in 1866, Mill staved off defeat with some well-judged appeals to high principle, putting Gladstone deeply in his debt. But he had always intended to concentrate on unpopular causes (popular ones could take care of themselves), and when the Liberal administration fell in June 1866 he was able to get into his stride. He began with a campaign to indict Edward Eyre, governor of Jamaica, for his murderous response to an uprising of freed black slaves. Later he agitated for Irish tenants to be granted "permanent possession" of their land. And when Disraeli and the Conservatives came up with a reform bill more radical than the one proposed by the Liberals, Mill achieved what he regarded as the most honourable defeat of his political career—proposing that the word "man" be replaced by "person," thus initiating the first parliamentary discussion of the enfranchisement of women.

The 1865 parliament was dissolved after three years, and by that time Mill was accustomed to being lampooned as a transvestite, a Fenian rebel, a Jacobin or an anarchist who was "nuts upon niggers." He was neither surprised nor displeased when the electors of Westminster turned Conservative, putting an end to his brief but eventful political career.

Reeves tells his stories well, and if he is right we should be looking to Mill for inspiration and enlightenment in our perplexing political times. He realises, of course, that "advanced liberalism" would be pretty distasteful to most of those who call themselves liberals today. Mill may have been a pioneering feminist and anti-racist, but he would not have had much sympathy for the liberal tenderhearts who put their faith in "human rights" and recoil from the death penalty, military intervention or the exercise of political despotism over those who are not civilised enough to govern themselves. He was also an admirer of capitalism, but he regarded it as an engine of economic growth rather than an arbiter of social justice, so he would have repudiated the liberal shock troops of untrammelled market freedom. He himself looked forward to a form of production based not on competition between capitalists in the exploitation of labour, but co-operation between workers in the exploitation of capital: "associations of labourers," as he put it, "collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves." More tentatively, he anticipated a further transition from co-operation to a system of communism or socialism where all the instruments of production would be under public ownership, and goods distributed not according to ability to pay, but in conformity with some "pre-arranged principle of justice."

But even in his most collectivist moments, Mill detested the political quacks who peddled socialism as a moral panacea, "the sole refuge against the evils which bear down on humanity." The resolution of fundamental political issues depended, he thought, not on assertions of ethical absolutes but on inventories of available options and evaluations of "comparative advantages." He may have said it through gritted teeth, but Gladstone was probably right when he described Mill as "the most open-minded man in England."

Mill spelt out his standards of political judgement in On Liberty in 1859. Admirers of this pungent little book usually focus on Mill's maxim that "the only purpose for which power can rightfully be exercised over any member of a civilised community, is to prevent harm to others." And they tend to interpret the remark as a simple warning against the extension of state power above the minimum required for the security of its citizens. But as Reeves points out, On Liberty goes beyond the so-called "harm principle" to make a positive case for what might be called cultural biodiversity—the cultivation of "a large variety in types of character," as Mill put it, "giving full freedom to human nature to expand itself in innumerable and conflicting dimensions." The liberty that Mill prized was not political or economic so much as intellectual, moral and artistic; the real struggle, he thought, was not between individual and state but between originality and conformism, or between creative spontaneity and the "despotism of custom." What Mill wrote was a manifesto for free spirits, not free markets.

Reeves may be right to promote On Liberty as "the greatest celebration of the value of human freedom ever written." But Mill's argument depended on some assumptions that Reeves passes over in silence. He was a disciple of progress before he was a disciple of liberty, and he valued liberty not for its own sake or for the sake of short-term human happiness, but as a contribution to what he called "the permanent interests of man as a progressive being." He preferred creativity to contentment because it was more progressive—it kept people on the move, he thought, and on their way to something better.

Contemporary liberals will probably regard Mill's appeals to the principle of progress as an extravagance and an embarrassment. Yet anyone who uses the term "progressive" as a byword for political virtue—and there are not many people who don't—is standing in the tradition of Mill's "advanced liberalism," whether they know it or not. Indeed, they may well be parroting lines from one of Mill's early books, even if they have never read it. The work in question was a 19th-century bestseller and a standard university text all around the world, and Mill thought he had never written anything better. But it had the misfortune of being called A System of Logic and the title seems to have sunk it. Even Reeves, whose enthusiasm for Mill may seem immoderate, sums it up as "a formidable tome" and then moves on.

Actually, the Logic is a great book, if a little long-winded. The earlier parts are devoted to proving that there is more to science than the observation of patterns in nature: knowledge becomes scientific, according to Mill, only when these patterns are made intelligible on the basis of first principles or "laws of nature"—as when Newton explained planetary motions in terms of the forces of attraction and inertia. And what was true of natural science applied to "social science" too. Political economy, in particular, was not based on empirical observation of people producing wealth, but on a priori calculations showing how people would behave if they were perfectly intelligent and cared for nothing except getting rich. Mill thought that social progress was ripe for similar treatment, and in the Logic he sketched out a "science of history" based on the assumption that every generation is in a position to improve on the civilisation of its predecessors. But progress could never become a reality without the constant clash of competing ideals, hence the importance of cultural freedom. Progress depended on freedom, according to Mill, and if we want to resurrect his liberalism, we may have to revive his theory of progress too.

The centre cannot hold

2008-01-18T12:52:00.000-08:00

Jan 10th 2008 | SANTIAGO
From The Economist print edition

Bachelet picks a new strongman

WHEN she took office as Chile's president almost two years ago, Michelle Bachelet promised to be a different kind of politician, one who would lead a “citizens' democracy”. Her first cabinet contained only two members with previous ministerial experience; half of its members were women and several were independents. Three reshuffles later, on January 8th, Ms Bachelet unveiled her latest team, one stuffed with seasoned party figures.

That smacks of near-desperation. Broadly speaking, Chile remains a success story. Ms Bachelet has some achievements, such as an agreement on education reform, new child-care centres and wider health care. But she is much less popular than she was, and her government has found it hard to shake off a sense of drift.

The economy no longer outperforms its neighbours, despite record copper revenues. High energy prices—Chile imports almost all its oil and gas—have contributed to a blip in inflation. A new transport scheme in Santiago, designed under her predecessor, has brought misery for commuters. Not all of this is the president's fault. But she has been both hesitant and meddling, and has often allowed a small cabal of personal advisers to overrule and undermine ministers.

The reshuffle is a fresh start, she said. But it was a clumsy one. After weeks of delay, her hand was forced by the sudden resignation of her interior minister. His replacement, Edmundo Pérez Yoma, is a plain-speaking and experienced Christian Democrat who as defence minister in the 1990s oversaw the departure as army commander of General Augusto Pinochet, the former dictator. He is expected to act as a de facto prime minister—if the president lets him. The changes weaken the position of Andrés Velasco, the ultra-orthodox finance minister, several of whose protégés have lost their jobs. Mr Pérez Yoma criticised him last year for lacking “imagination and boldness”.

The reshuffle is in part an attempt to shore up Soledad Alvear, the leader of the Christian Democrats (DC), one of three main parties in the centre-left Concertación coalition, which has ruled Chile since the return of democracy in 1990. The DC suffered a serious split last month, when supporters of Ms Alvear, who is a potential presidential candidate, expelled Adolfo Zaldívar, a senator who led the party's right wing. Several of his senior followers departed too. As a result, the Concertación has lost its majority in Congress.

It has also lost much of its discipline and energy. Municipal elections are due in October, which in turn will mark the start of campaigning for the next presidential election in December 2009. Although the right has not won a presidential vote in Chile for half a century, many in the Concertación fear that after almost two decades in power their time is nearly up. The risk for Ms Bachelet and Mr Pérez Yoma is that this defeatism could become self-fulfilling. They have their work cut out.

A warning for reformers

2007-11-15T15:35:00.000-08:00

The Latinobarómetro Poll

A warning for reformers

Nov 15th 2007
From The Economist print edition

Latin Americans expect more from the state and less from the market

DESPITE four years of solid economic growth and, in many countries, low inflation, Latin Americans continue to grumble about their democracies. In some countries in the region—though not in Brazil and Mexico, the two giants—they are becoming disillusioned with the market economy. But rather than socialism, they want a fairer distribution of income and a state that gives greater social protection. These are some of the conclusions suggested by the latest Latinobarómetro poll taken in 18 countries across the region and published exclusively by The Economist. Because the poll has been taken regularly since 1995, it tracks changes in public attitudes in the region.

The picture that emerges from this year's poll is somewhat contradictory. After a boost last year—probably the result of a dozen presidential elections in the region—support for democracy has fallen back slightly: only around half of respondents are convinced democrats (see table 1 and chart 2). In only five countries has support for democracy risen since last year: in Costa Rica and Panama, where popular social-democratic leaders are in office, and in Bolivia, Ecuador and Nicaragua, whose left-wing presidents, respectively Evo Morales, Rafael Correa and Daniel Ortega, represent constituencies who have previously felt excluded from power.

Apart from in two small Central American countries (El Salvador and Honduras), the biggest falls in support for democracy occurred in Argentina and Chile. That is odd, since both countries' economies are growing fast. In Argentina, some democrats may have become disillusioned by dynastic rule: a presidential election last month saw an easy victory for Cristina Fernández, the wife of the outgoing president, Néstor Kirchner. In Chile, Michelle Bachelet may have failed to meet the expectations of social change that she aroused when elected in 2006.

Fewer than a fifth of respondents favour authoritarian government. Support for authoritarianism has fallen in both Mexico and Brazil to 17%, down respectively from peaks of 35% (in 2001) and 25% (in 2000). In two poor countries, Guatemala and Paraguay, a small majority now favours authoritarianism—nowhere was that the case last year.

Paraguayans and Peruvians are the least satisfied with how their democracy works in practice (see chart 3). Overall, only 37% of respondents across all 18 countries pronounced themselves satisfied with their democracies, a similar figure to last year. But that is up from 25% in 2001.

Latin Americans are becoming similarly equivocal towards the market economy: this year's poll shows sharp falls of those responding affirmatively when asked whether this is the best economic model for their country (see chart 4).

Marta Lagos, the director of Latinobarómetro, says this reflects not just the persistence of poverty but also the impact of the “leftist discourse” of the likes of Hugo Chávez, Venezuela's president, against the United States and against the free-market formulae of the Washington Consensus. She adds that the poll does not show a demand for a fundamental change in the economic system but rather a desire for a more protective state.

Slightly over half of respondents across the region still favour the market economy. Private business is trusted slightly more than government. And support for privatisation continues to recover—though not in Argentina, where Mr Kirchner has preached in favour of nationalisation with a fervour similar to that of Mr Chávez (see chart 5). But many Latin Americans no longer seem to think that the market alone will bring them a fair share of the fruits of economic growth. Only 41% of respondents across the region think that governments guarantee equality of opportunity.
That is the main message for democratic reformers from the poll. Economic growth and democracy have improved the lives of many Latin Americans. But that in turn seems to have raised their expectations rather than making them more satisfied with the state of their nations. “After four years of growth people want to see that their slice of the cake is bigger,” says Ms Lagos.

Thanks to its bounteous oil revenues and Hugo Chávez's rapport with many of his country's poor, Venezuela stands out in the poll. Some 56% of respondents there said that the distribution of wealth in the country was fair, way above the regional average of 24%. Despite this, 63% of Venezuelan respondents said they had difficulties paying their bills each month, well above the regional average of 49%.

The poll finds that Mr Chávez is no more popular in Latin Americas as a whole than George Bush. He is considerably less popular than Brazil's Luiz Inácio Lula da Silva or Spain's king, Juan Carlos, and its prime minister, José Luis Rodríguez Zapatero (with both of whom Mr Chávez crossed words at a recent Ibero-American summit).

The poll shows that governments are steadily becoming more popular and many political institutions a bit less distrusted (see chart 6). One sign of better economic times is that fear of unemployment is falling steadily. For the first time, crime seems about to displace unemployment at the top of the list of problems in the region (see chart 7). If that trend continues, it could eventually see the region's political pendulum start to swing back towards the right after several years in which the left has been in the ascendant.

.........................................................................................................................................................................
Latinobarómetro is a non-profit organisation based in Santiago, Chile, which has carried out regular surveys of opinions, attitudes and values in Latin America since 1995. The poll was taken by local opinion-research companies in 18 countries and involved 20,212 face-to-face interviews between September 7th and October 8th 2007. The average margin of error was 3%. Central America in chart 4 refers to an unweighted average of results from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Further details from www.latinobarometro.org.

Let them eat Kafka

2007-10-26T15:25:00.000-07:00

Oct 25th 2007 | SANTIAGO
From The Economist print edition

The president enlists the literary critics

ASK Chileans what they are reading and the answer will probably be Isabel Allende's “La Suma de los Días”, a memoir by their country's best-known living writer. If, that is, they read anything at all: in a recent survey, 45% said they never read books and 34% did so only occasionally.

Michelle Bachelet, Chile's president, wants to change that. To do so, she has come up with a scheme to give 400,000 of the poorest families a maletín literario or box of up to nine books each. After much pencil-chewing, a jury of literati this month selected a list of 49 works, from which officials will then choose those books they think appropriate for each family (each will get an encyclopaedia and/or a dictionary).

The list comprises fiction and poetry for both adults and children. It ranges from Chile's Ms Allende and Pablo Neruda to J.D. Salinger's “The Catcher in the Rye” and Franz Kafka's “Metamorphosis”. This is unexceptionable fare. But is the book box the best way to achieve Ms Bachelet's laudable aim?

It could help. While some older Chileans lack functional literacy or were alienated by a rigid school syllabus, younger ones may be deterred from buying books by their price. This averages $14, higher than the Latin American average and the equivalent of two weeks of bus fares to and from work in Santiago. If books were cheaper, more Chileans would read them: pirated copies sell on pavements, while a lending library that operates on the Santiago metro has been a big success. With massive orders, the government could force big discounts from publishers.

But critics see the book box as a populist gesture. “It's like dropping bank notes out of the sky,” complains Verónica Abud of La Fuente, a charity that promotes reading. “Who says that a plumber in a poor district of Santiago will actually want to read Kafka?” For less than the estimated $11m cost of the book box, La Fuente has set up 60 libraries in schools and neighbourhoods. Since only 7% of Chileans belong to a library, there is scope for plenty more.

Commerce between friends and foes

2007-10-26T15:15:00.000-07:00

Oct 4th 2007 | LIMA AND MEXICO CITY
From The Economist print edition

The United States may finally ratify a trade deal with Peru. But pan-American trade diplomacy remains a mess

IN HIS first term as Peru's president, in the 1980s, Alan García was a firm believer in protectionism, banning the import of foreign cars and even of Chilean wine. But since coming to office again last year he has embraced free trade with a passion bordering on mania. “More trade and more investment [means] less migration, less poverty and less environmental destruction,” he told a meeting in Lima last month convened by the World Trade Organisation (WTO). “You might resign yourself to just having a free-trade agreement with the United States, but for me it's not enough,” he told his audience, ordering his harried trade minister to secure similar deals with a score of other countries.

That Mr García was so pumped up was perhaps because at long last Peru's trade deal with the United States, negotiated 18 months ago, looks close to ratification by a hitherto reluctant American Congress. On September 27th the administration sent a bill to Congress after a majority of the House Ways and Means Committee and the Senate Finance Committee indicated they would back it. Though upsets are still possible, supporters reckon the bill will be approved within weeks. But for free-traders, that is cause for only the faintest cheer.

The benefits to Peru seem clear. Mr García, who when a candidate was sceptical of the deal, now says that it could add an additional percentage point to economic growth (which reached 8% last year). That is mainly because it provides investors with greater security. Peru's industrialists' association reckons that it could prompt an extra $9 billion in industrial investment in 2008 and 2009 alone.

Opponents worry that farmers, especially of maize, cotton and wheat, will struggle to compete with their subsidised counterparts in the United States. They also fret that American companies will try to take out patents on Amazonian plants.

Free-traders have other worries. A decade ago, the United States and 33 countries in Latin America and the Caribbean hoped to negotiate an all-embracing Free Trade Area of the Americas (FTAA). But the mood has changed. The Democrats, who won control of the American Congress last November, are mistrustful of trade agreements, reflecting widespread fears that globalisation has made jobs more insecure in the United States. Mercosur, the trade block led by Brazil, backed away from an FTAA in favour of the Doha round of WTO talks, but these have stalled too. All this comes as some governments in Latin America, led by Venezuela's Hugo Chávez, are turning their backs on open trade.

Others have negotiated bilateral free-trade agreements (FTAs) with the United States. But George Bush's administration has struggled to persuade Congress to ratify them: even before the Democrats took control, the Central American Free Trade Agreement (known as CAFTA-DR) passed by just two votes; as well as Peru, deals with Panama and Colombia (and South Korea) still await approval.

So Latin American politicians, such as Mr García, who see trade as an engine of growth, find themselves caught between American indifference and a resurgent, anti-trade left at home. When they negotiate bilateral FTAs, they are in a much weaker position than they would have been when gathered together in an FTAA.

Even so, the Democrats have insisted on changing the agreements. In May they struck a deal with the administration under which the FTAs would have to include clauses to strengthen labour rights and the environment (see article), while slightly loosening intellectual-property protection (giving more flexibility for generic medicines). The Democrats say this was the only way to restore bipartisan consensus on trade. Some economists note that since countries such as Peru already subscribe to many of these standards, in theory at least, their formal incorporation is no big deal.

Even so, only a minority of Democrats are likely to vote for any of the FTAs. Peter Hakim of the Inter-American Dialogue, a think-tank in Washington DC, reckons that at most about 70 of the 232 Democrats in the House of Representatives might vote for the Peru FTA. The agreement with Panama was supposed to be next in line. But the Bush administration has balked over the recent choice to head Panama's parliament of a politician whom it accuses of killing an American in 1992.

The FTA with Colombia faces even bigger obstacles. The Democratic leadership in the House has refused to back it, arguing that Colombia's government needs to do more to prevent the killing of trade unionists and to punish officials linked to right-wing paramilitaries. That was a slap in the face for Álvaro Uribe, Colombia's president, who has been Mr Bush's most loyal ally in Latin America. Colombian officials argue that their efforts to strengthen the rule of law in the face of violence from drug traffickers, guerrillas and former paramilitaries will be undermined by failure to approve an FTA.

This is a powerful point and an objection to the whole structure of trade agreements that is now evolving in Latin America. If the agreements with Peru and Panama are approved, the effect would be to divert trade and investment from Colombia. A recent study by EAFIT, a university in Medellín, and the University of Antioquia found that if the Colombia FTA is not approved and the others are, Colombia's GDP would be 2.2% smaller and 400,000 jobs would be lost.

Some Democrats, at least, recognise that this would be a perverse outcome. Mr Hakim reckons there is a chance the Colombia agreement could be ratified next year—but only if Mr Uribe's government takes further steps to protect trade unionists, and these are seen to be working.

The United States' hard-nosed approach to trade is winning few friends in Latin America. That may become apparent in Costa Rica, which is holding a referendum on October 7th on whether to ratify CAFTA-DR. Polls suggest the result will be close, but opponents appear to have momentum. They recently assembled more than 100,000 protestors in San José, the capital. Although Oscar Arias, the president, insists the accord is vital to his country's future, his government may have overplayed its hand. Last month one of his vice-presidents resigned after the leaking of a memo in which he advocated scare tactics such as painting opponents as allies of Mr Chávez. Some are—but others merely think CAFTA-DR a bad deal, especially in its intellectual-property clauses.

If the American Congress does ratify the pending FTAs, turning its back on CAFTA-DR could cause Costa Rica to lose jobs—a fate that may also await Bolivia and Ecuador. This whole mess underlines that bilateral deals are a third-best option after the Doha Round or the FTAA. But for those Latin American countries that are ambitious to expand their share of the biggest market for manufactured exports, they are the only game in town.

AIDS: Time to grow up

2007-10-12T13:03:00.000-07:00

From The Economist print edition (see article)

“Abstinence only” education does not slow the spread of AIDS

THERE can be no surer way of averting a sexually transmitted infection such as AIDS than avoiding sex. That much is obvious. And it is also convenient for religious lobbyists who believe that premarital sex is a sin. But is it realistic? Those lobbyists argue that a popular alternative—known in the jargon as “abstinence-plus”—which recommends chastity but also explains how to use condoms, is likely to make things worse by encouraging earlier intercourse. “Abstinence-only” teaching, they reckon, should be more effective.

That, of course, is a possibility. But it is a testable possibility. And Kristen Underhill and her colleagues at the University of Oxford have, over the past few months, been testing it. Their conclusion is that it is wrong. Abstinence-only does not work. Abstinence-plus probably does.

Last month Dr Underhill published a review of 13 trials involving 16,000 young people in America. The trials compared the sexual behaviour of those given an abstinence-only education with that of those who were provided with no information at all or with whatever their schools normally taught. Pregnancies were as numerous in both groups. Sexually transmitted diseases were as widespread. The number of sexual partners was equally high and unprotected sex just as common.

Having thus discredited abstinence-only teaching, Dr Underhill and her colleagues decided to evaluate the slightly more complicated message of “abstinence-plus” using 39 trials that involved 38,000-odd young people from the United States, Canada and the Bahamas. Their results are published in the current issue of Public Library of Science Medicine.

This tuition—compared, as before, with whatever biology classes and playgrounds provide—reduced the number of pregnancies in three out of seven trials (the remaining four recorded no difference). Four out of 13 trials found that abstinence-plus-educated teenagers had fewer sexual partners, while the remainder showed no change. Fourteen studies reported that it increased condom use; 12 others reported no difference. Furthermore, in the vast majority of cases, abstinence-plus participants knew more about AIDS and HIV (the virus that causes the disease) than their peers did. And the tuition often reduced the frequency of anal sex (which brings a greater chance of passing on HIV than the vaginal option). In contrast to the fears of the protagonists of abstinence-only education, not one of the trials found that teenagers behaved in a riskier fashion in either the long or the short term after receiving abstinence-plus instruction.

Unfortunately (and surprisingly) only two of the studies addressed the question of disease transmission directly, and the numbers involved were too small to find a statistically significant difference between groups. Nevertheless, Dr Underhill's pair of reviews should make informative reading for policymakers. America's government earmarks money for abstinence-only teaching, which is matched by individual states. It should review that policy—which is clearly no better than the alternatives, and is probably worse. Its generosity to needy foreigners is similarly prescriptive. Of the $15 billion promised over five years by PEPFAR, President George Bush's personal anti-AIDS initiative, $1 billion is reserved for groups that intend to fight AIDS without mentioning condoms. Though Dr Underhill's results apply only to North America, they do suggest a need to investigate what happens elsewhere, in case PEPFAR's policy, too, needs to be reviewed.
A dose of prevention

Teaching people about what they might wear during intercourse is an important way of reducing the chance of them catching HIV. But teaching them, in addition, about what drugs they could take to reduce that risk may be added to the syllabus in the future. A vaccine is still a long way off, but four clinical trials—in Peru and Ecuador, Thailand, Botswana and also America—are assessing how well daily anti-retroviral pills, which are normally prescribed to control established HIV infections, prevent the virus infecting healthy people who do dangerous things. The results of these trials will be plugged into epidemiological computer models to assess the likely effect of various drug-distribution policies.

One model intended to do exactly that has already been built, by Ume Abbas and John Mellors of the University of Pittsburgh. It is designed to mimic a mature HIV epidemic in sub-Saharan Africa—which it did rather well when the researchers tested its output against data from Zambia, a country in which the epidemic has remained stable for a decade.

Writing in PLoS Medicine's sister journal, PLoS ONE, Dr Abbas and Dr Mellors describe what happened when they added prophylactic anti-retroviral drugs to the model. They experimented with different measures of drug efficacy and with different groups of people taking the pills.

Assuming that anti-retrovirals work 90% of the time and are taken by three-quarters of sexually active people, their model suggests that new HIV infections in sub-Saharan Africa would be cut by 74% over 10 years. Unfortunately, the idea of providing and delivering so many drugs to so many people is logistically implausible. And even if it could be done, it would cost about $6,000 per HIV infection averted—a lot of money in Africa.

However, giving the drug to the 16% of Africans who behave most riskily would be easier and could lead to a 29% reduction over a decade at only a tenth of that cost. A harsh calculation, but a realistic one—unlike expecting teenagers to give up sex because you tell them to.

Fugitive returned

2007-09-30T06:02:00.001-07:00

Sep 27th 2007 | LIMA
From The Economist print edition

A landmark extradition sees Alberto Fujimori facing justice

FOR much of his decade as president between 1990 and 2000, Peruvians saw Alberto Fujimori as a saviour. He conquered the hyperinflation bequeathed by his predecessor, Alan García, and restored growth. With Vladimiro Montesinos, his shadowy intelligence chief, he crushed the Maoist terrorists of the Shining Path and locked up their leader, Abimael Guzmán. Now the saviour has joined Messrs Montesinos and Guzmán behind bars.

There was always a dark side to Mr Fujimori. Though twice freely elected, he shut down his country's Congress in 1992 and used other strong-arm methods. He fled to Japan in 2000 after trying fraudulently to win a third, unconstitutional term. In November 2005 he flew to Chile, in an apparent bid to slip back into Peru and rally his supporters for last year's presidential election. There he was arrested at the Peruvian government's request.

In a decision hailed by human-rights campaigners, Chile's Supreme Court ruled on September 21st that Mr Fujimori should be extradited to Peru to face seven sets of charges. These include complicity in the actions of the Colina Group, an army death squad that killed 25 civilians in two separate incidents (one of them involved the slaughter of those attending a barbecue which the intelligence service believed was to raise funds for Shining Path). Most of the charges relate to corruption: the most sinister feature of Mr Fujimori's rule was the unlimited power granted to Mr Montesinos to bribe and extort on a scale that prosecutors say topped $1 billion.
>Mr Fujimori claims not to have known the doings of his spy chief. But Mr Montesinos, who has already been found guilty on several charges and is serving a 20-year jail sentence, will be a key figure in his trials. Mr Montesinos and several members of the army are still being tried for the actions of the Colina group.

The Fujimori case had the potential to strain Peru's relations with Chile, which while much improved are easily inflamed by hurt from defeat in 19th-century wars. But Chile's Supreme Court stuck to the letter of the country's law. In approving extradition while rejecting six of the charges, it mainly based itself on Chile's own penal code rather than on international norms.

Nevertheless, some lawyers see the verdict as a wider turning point. The court followed the ruling of Britain's House of Lords in the case of Chile's former dictator, Augusto Pinochet, in dismissing defence arguments that Mr Fujimori, as a former head of state, enjoyed immunity from criminal prosecution.

José Miguel Vivanco of Human Rights Watch, a New York-based group, points out that the Fujimori case marks the first time that a court has extradited a former head of state for trial in his own country, rather than by an international tribunal. In doing so, Chile's Supreme Court, one of the more formalistic and conservative in Latin America, has up-ended the region's long tradition of granting political asylum to former rulers. Under that tradition, Panama shelters several disgraced presidents, including Haiti's Raoul Cédras.

Another former Haitian dictator, Jean-Claude Duvalier, this week asked forgiveness of his country. Mr Duvalier, in exile in France since 1986, is believed to want to return home after running out of money. But the country's president, René Préval, said his government would press ahead with efforts to recover money he believed was stolen during Mr Duvalier's rule.

Mr Fujimori's case will be a test for Peru's judges and for Mr García who, in an irony of history, is again its president. The judiciary was undermined when Mr Fujimori appointed pliant judges in the 1990s. It has since taken steps towards greater professionalism. The defendant enjoys certain privileges: as a former head of state, he will be tried by the Supreme Court, and under international law he can be tried only for those matters on which the Chilean judges approved his extradition.

In 1992 Mr García himself sought asylum in Colombia, fearing corruption charges from Mr Fujimori (they were eventually dropped). Since winning last year's election, having campaigned as a free-marketeer, he has relied for a legislative majority on the backing of Mr Fujimori's supporters. They are now led by Mr Fujimori's daughter, Keiko, who won 603,000 votes in Lima, three times more than any other congressional candidate.

That alliance is now under strain. Mr Fujimori is being held at a police base, rather than under house arrest as he hoped. Mr García says his former adversary's fate should be decided strictly according to the law. Ms Fujimori, who is likely to run for the presidency in 2011, calls her father the victim of a vendetta.

In trying to return to Peru, Mr Fujimori seemed to hope that he would again be greeted as a saviour. But Peru has moved on: in polls, a majority say they would never vote for him. Ms Fujimori has some of her father's political talents, and Peru's politics is notoriously unpredictable. But rather than the return to the presidential palace he dreamed of, it may be Mr Fujimori's fate to join Mr Montesinos and Mr Guzmán in the high-security jail he himself ordered built in a naval fortress.

Jam today, not mañana

2007-09-22T12:35:00.000-07:00

Sep 20th 2007 | SANTIAGO
From The Economist print edition

Stronger democracies have brought demands for a share-out of economic growth. Two reports, the first from Chile, the next from Peru (see article)

DESPITE a transition to democracy and rapid economic growth, Chileans have grumbled a lot over the past 20 years—but only quietly. Many felt let down by the terms on which General Augusto Pinochet yielded power in 1990, which let him stay on as head of the army for eight years; but their complaints were muted by relief at the return of democracy. Many were also disappointed that the centre-left coalition, called the Concertación, which has governed since 1990, maintained the dictatorship's free-market policies; but that disappointment was tempered by the prosperity and improved services that these policies delivered.

The muted complaints have suddenly become louder. Last year, encouraged by the promise of Michelle Bachelet, Chile's president since March 2006, to lead a more “participatory” sort of democracy, secondary-school children took to the streets to demand better education in the biggest protests since the 1980s. With the price of copper, the main export, at record levels and the economy growing at 6% this year, workers are protesting too.

Until recently, strikes were relatively rare in Chile. Last year, however, miners at Escondida, the world's biggest copper mine, won a hefty increase after a month-long strike. This year has seen stoppages in the forestry industry and a 36-day strike by sub-contracted workers at Codelco, the state-owned copper producer.

“Workers see a country that is growing and companies that are doing well and they're tired of waiting,” explains Arturo Martínez, president of the Central Unitaria de Trabajadores (CUT), the main trade-union confederation. The unions point to Chile's unequal income distribution. A government survey last year found that almost 1m workers, or 15% of the total, were earning less than the legal minimum take-home pay of just over $200 a month.

With unemployment dropping sharply, wage demands are unsurprising. They are also being fanned by the Communist Party. It is aggrieved by the government's failure to act on a campaign promise to reform an electoral system, left in place by the dictatorship, which makes it almost impossible for small parties (such as itself) to win seats in Congress.

Trade-union leaders say the country is on the brink of social conflagration. Certainly, recent strikes have been unusually violent, as was a national day of protest called by the CUT, the Communist Party and others on August 29th. This gained the support of some Concertación politicians, who have taken to railing against their own government's “neoliberalism”. They object to a strict fiscal policy under which much of the windfall gain from the copper price is being saved for the future. (This will enable the government to spend its way out of any future recession.)

Rather than a big ideological shift, the discontent reflects a change in labour relations. Workers are more aware of their rights and want them respected, says a senior manager at Codelco. One matter of contention is sub-contracting. This has helped to keep exports competitive, but in some industries it has been used as a means of obtaining a low-wage workforce on short-term contracts.

A new law seeks to prevent the misuse of sub-contracting. Last month the government set up a committee to consider broader changes in labour laws. “We're not condemned to look at poverty and inequality and merely wait for growth and the trickle-down of wealth to take care of them,” said Ms Bachelet recently. The government also wants to set up special courts to settle worker grievances and to strengthen unemployment insurance.

Economic, political and social stability since 1990 has been crucial in attracting the investment, both local and foreign, that has secured rapid economic growth. As a result, Chile is a much richer country: income per head is almost $9,000, up from $2,400 in 1990. At this stage in its development, further capital investment and better education should raise productivity and thus wages, in a virtuous circle.

There is plenty of scope for improving productivity. The management of forests and plantations is five times more labour-intensive than it is in Scandinavia, for example. But improving education takes time. And as an alternative to capital investment, Chilean firms can import cheap labour from poorer neighbours, such as Peru and Bolivia, points out Rosanna Costa of Libertad y Desarrollo, a conservative think-tank. That is happening in low-paid jobs in construction and agriculture.

Chileans are throwing off the mental shackles imposed by the dictatorship. The process was accelerated by Pinochet's death last December. But political freedom has bred impatience for a fairer share-out of the fruits of growth. Ms Bachelet has proved less adept than her predecessors at serving up the Concertación's successful recipe of economic liberalism combined with redistributive social policies.

Even so, Chile seems unlikely to veer towards populism. Greater prosperity has brought mortgages and credit-card debts. These are “the new chains of the workers,” complains Mr Martínez. They are also a sign that most Chileans now have a stake in stability.

Revolt in the Andes

2007-09-22T12:25:00.000-07:00

Sep 20th 2007 | LIMA
From The Economist print edition

A vote of sorts against big mines

MANY of the world's top mining companies have made big investments in Peru and are now ramping up output just when world prices for minerals are at record highs. The government has handed out concessions for exploration covering 12m hectares (45,000 square miles), which it hopes will trigger further investment of $11 billion over the next four years. The industry is booming, as is the economy. But in the Andean highlands that contain the mineral deposits, some Peruvians are turning against the mining companies.

The latest battle is at Rio Blanco, a remote spot close to the border with Ecuador where the Andes meet the Amazon, forming a misty cloud forest. Monterrico Metals, a London-based start-up recently sold to China's Zijin Consortium, plans to develop a huge copper mine there, costing $1.4 billion. Urged on by a loose coalition of environmentalists, Catholic priests and foreign NGOs, local mayors have campaigned against the project. On September 16th they held an unofficial referendum in the three affected districts. Of the 17,971 votes cast (a turnout of almost 60%, said the organisers), all but 984 voted against the mine.

Opponents say the mine would pollute rivers that are vital for farmers in fertile valleys lower down and accuse the company of ignoring local opinion. More broadly, they argue that mining has failed to develop the highlands. President Alan García's government denounced the referendum as unrepresentative and claimed its organisers were “communists”.

At Rio Blanco genuine fears and grievances have been mixed with much misinformation and political manipulation, a familiar pattern in Peru. The local mayors say they now want talks on the project. Richard Ralph, Monterrico's chairman, welcomes this as a chance “to dispel some of the myths about a mine that hasn't even been built”. He says that the project will use clean, modern mining technology and very little water, which it will not pollute. The company has promised the few thousand villagers who live close to the mine a community-development fund of $80m over the next three decades.

Monterrico hopes that work on the mine can still start next year, after an environmental-impact study is completed. Other mining companies in Peru will be watching closely. In recent years the industry has tried to clean up its image. But it labours under a legacy of poor environmental practice (some of it when the big mines were state-owned in the 1970s and 1980s). Conflicts between farmers and miners over water use are particularly common.

Modern mines may be much cleaner but they are capital-intensive and generate relatively few jobs. Some economists argue that mines could do more to boost surrounding areas by using local suppliers: one study found that in northern Chile each mining job generates seven others, while the figure in Peru may be lower.

In response to the protests, mining companies are spending more on community development. Half of their income taxes are also returned as local royalties. But local governments often make a bad job of spending this money. And in Apurímac, one of Peru's poorest regions, the national government has rejected all the projects proposed by local communities that would draw on a $40m fund set up by Xstrata, a Swiss firm developing a copper deposit at Las Bambas.

“Mining companies are making huge sums of money right now, but...the average person living near a mine does not see any benefits,” complains Victor Madariaga, who heads the chambers of commerce in southern Peru. In Cajamarca, the site of Yanacocha, a big gold mine, six out of ten residents are still poor (though that figure is lower than a decade ago and includes areas far away from the mine).

Others argue that by focusing on mining's impact on the local economy, the critics miss the point. Mining provides much of Peru's foreign exchange and tax revenues. Some Peruvians argue that more of the windfall from high prices should be taxed: mining's total tax bill was around $2.9 billion last year on net profits of some $7.3 billion, according to the mining society. Taxes have been edging up: the previous government imposed a royalty of up to 3% on new projects; Mr García negotiated a further “voluntary contribution” of 3% of the industry's after-tax profits (raising some $175m this year).

With or without mining, parts of the Andes will remain poor. But with it, Peru's economy can continue to grow fast. For that, the government will have to do more to engineer a modus vivendi. It is looking at reining in labour sub-contracting in the industry. But it has yet to take what is perhaps the most important step: remove environmental regulation of the industry from the mining ministry and vest it in a specialist environmental agency. The future of mining in Peru depends on the government acting as an effective referee. The days when mines could ride roughshod over the locals are well and truly over.

Neoliberalism: Santiago Calling

2007-09-02T14:27:00.000-07:00

It is time to turn neoliberalism up a notch, not down. And the government should stay out

Last week in my beloved hometown, Santiago de Chile, a street protest was staged against the neoliberal model. Check out the report under the bombastic title Chileans take to streets in anger at regime.

The regime is a term used chiefly to describe oppressive and unelected governments. Chile, on the contrary, is ruled by a woman who won by a devastating majority in fair and free elections. However, the state of things has turned nasty thanks to Ms Bachelet's own strategy: she opened the floodgates criticising the neoliberal model. Now some Chileas demand her promises to be delivered. Obviously, president Bachelet knows very well that the economic system works fine. Poverty has decreased. The gap between rich and poor persists due to poor education and uncontrollable fertility rates at the lowest end of the social ladder. Some sections of the opinionated class insist we need a change of the economic course. I cannot help but thinking it’s the society, stupid.

The paradox here is that Chilean president is a lefty-cum-neoliberal, but the result is neither social liberties nor sound free-market policies. The public has been told too often and for too long that the problem is the economy, legacy of the dictatorship and the excuse was that democratic governments were unable to change it out of fear of the reaction by the conservative forces. However, the left now is majority in both chambers of Congress. The president is a left-winger. The electorate is on her side. There are no elections coming up so no need for populism. She is doing nothing simply because on her campaign she lied to everyone, and people are now showing their dissatisfaction. In other words, the electorate woke up to reality.

There is no alternative

In fact, the government should perfect the free-market model and not give in to populism. In Latin America, we have had enough of populism and neo-populism. Neoliberalism is not the root of all evil. Hardly two decades of sound market principles have been applied in Chile, and now poverty is about to be abolished. What do the union workers want then? They simply long for old-school socialism, a system exhausted and proved not only immoral but brutally wrong. People want the state to intervene, but that is actually dangerous. The economy should keep growing to make more people, especially the poor, join the job market. That is why the populist minimum wage should be scrapped altogether: let the market mechanisms work its magic. Trade Unions' main concern is the low wages (£200 per month). I do not understand why then this coalition approved an increase toVAT two years ago, and insist on protectionists barriers to imports of such importance as grains and milk. Prices for diary products and bread have sky-rocketed. The poor have been hit the hardest, and no wonder they complain when their wee salaries are used to subsidise the landownser. An increase in salaries may affect them as a result of higher internal consumption and inflation.

Another problem is Chileans low productivity. Workers tend to be lazy and the job market is not flexible enough. And the icing on the cake is the shambolic transport system in Santiago, and only the government can be blamed for it. Workers find themselves commuting endless hours. There was a faulty transport system before, but it did the job of getting people to their work places, and it was based on freedom to set up new bus routes giving the chance to small entrepreneurs to offer their services. The left coallition decided to change over to a centrally planned system, and in a pompous tone ex President Lagos announced only Stockholm would rival Santiago. It turned out a bloody mess and the Bachelet administration only intensified the problem. Indictments are already underway. Transport has been a major components in Bachelet's underperforming government. People seem to target the economy rather than the ruler of the country. People are wrong.

The gap between rich and poor is less a concern than the gap between society and the economy, the latter is way ahead of the former. Chileans remain deeply Catholic, hence their weak work ethics. Independece Day in Chile means two Bank Holidays in mid-september, and now one more has been added: a week of productivity will be lost this month. They wonder why the economy is not doing any better? Because they do not work enough, perhaps?

On the demographics of Chile, Roman Catholic idiosyncratic vices explain a lot. Sexual oppression leading to teenage pregnancy in the less educated has an impact in the high crime rates, and scores of workers on minimum wage have too many children. If you think that £200 is too low, fair enough. I agree, even. But why would you have three or four children then? The powerful Roman Catholic church opposes all sorts of contraceptive methods and cheers when people breed like rabbits. Let alone legalisation of abortion, which is a taboo in Chile, and anyone suggesting switching back-street abortions to safe hospitals can expect to be labeled, at best, a criminal. (In that case I am a hell of a criminal: legalise abortion now!)

Suffice to say that the protests were fuelled by a Chilean bishop who demanded a 60% hike in the minimum wage and made an appeal to pay an ethic salary, whatever that is. Now with god standing by them, do not expect workers to give up easily.

History repeats itself

We went through this once. See And if it means civil war, so be it, from Time magazine, 10 of setpember 1973 (also here in my Spanish site). At that time, workers took over companies and the whole country was brought down to its knees. The outcome was more that three thousands deaths in 17 years of dictatorship. It is in the government's interest to curb the unions... now!

It is true, this is not as bad as in the 70s. Chile now is stable, inflation under control, food supplies are there, only a bit expensive, but there is no need to queue for hours to buy them. I have to insist and remark that poverty is decreasing. The protests also gathered a few thousands, less than expected, and they only made headlines because of the riots.

The reality is that this government lied, like all their predecessors. Things are not great, but Chileans have never had it so good. How to build up a more meritocratic society is the real challenge. Let’s hope that next time, the left-wing candidate will not run on a free-market bashing ticket. Workers should get over it, and put this down as a lesson: next time, just do not vote for them again.

I recommend the opinion article published in The Guardian How the neoliberals stitched up the wealth of nations for themselves and and the letters about it on Santiago sends a message to the City.

Latin American Axis of Evil

2007-08-27T12:46:00.000-07:00

George W Bush's infamous axis of evil is quite a paradox. Certainly, Irak, Iran and North Korea are not beacons of democracy and individual freedom. In that sense, Bush was right. The fundamental contradiction is that American heavy-handed foreign policy has exacerbated the problem, being Bush himself an active part of an axis of evil. We could regard the Bush Administration, the Religious Right, the Republican Party and Fox News (we report, you decide) as a pivotal devilish and corrosive force.

During the cold-war years, Latin Americans experienced the constant political intervention by the URSS and the US, flaring up conflicts and armed struggles in every single country. It is not fair to put all the blame on the US alone. Soviet communism was equally pervasive. But the cold war is over. Former fledgling democratic projects have stregthened. State-owned companies are being privatised and, more importantly, the electorate seem to understand why it is better to pay for a service rather than expect fiscal support (and Central Banks stopped issuing crisps bank notes displaying astronomical figures). In other words, Latin Americans learned that there is no such thing as a free lunch.

Even more interesting, most left-wingers are coming to terms with the benefits of free market. The results are evident, as reported in Adiós to poverty, hola to consumption by The Economist Newspaper. The graphic below is eloquent.

For once, governments are keeping the lid on inflation and are less worried about job creation. Fiscally-conservative and free-market policies are finally paying off. I cannot help but saying 'I told you so'. Back in the mid-80s, Chileans complained over privatisaton of telephone services. A couple of years later, every one could have one: it was not a prerogative of the rich anymore. Same with electricity, and most public services. At the time, a few of us thought it was the right thing to do. But we were thought to be fascsists at worse, and not having social conscience at best. Perhaps the latter is true. Social conscience, and everything social, has a bad ring to it, and for a very simple reason: on behalf of the people all sorts of atrocities are committed, and even justified. It is a lot harder to excuse bad policies in the name of individual freedom than for the people (see article on Chile).

Less than two decades later, we find that the left is in charge, but ruling under a new economic framework. I cannot help but remark that more often than not, these new breed of free-market leftists are only paying lip service to the market economy. Michelle Bachelet, Chile's president, epitomises this anomaly. One of yesterday's free-marketeers main achievement, the Chielan private pensions system (AFP), now —according to the government— needs to be transferred back to the state. The source of Chile's main income, cooper-mining, is seen by most as a very efficient state-owned company... what an oxymoronic statment. Not even General Pinochet himself wanted to privatise it. After all, a genuine free economy is dreaded by the right and also the left.

Today, most voters seem to get the virtuosity of free-market mechanisms. But only few are willing to apply them. But others have come up with idiotic ideas such as 21st-century socialism. This is not only the new awkward squad, insetad they are Latin America's Axis of Evil.

The Devil Inside: Chávez, Castro, Morales... and counting

We have all heard of the antics of Venezuelan president Hugo Chavez (remember that great spiritual clown Pat Robertson who called to assassinate Chavez?). Sadly, there is yet a lot to hear from him. He is not only a friend at personal and government level with the rulers of Iran, Russia, Libya and even North Korea. Oil companies are again back in the hands of bureaucrats. Extravagant speeches are every day broadcast through the governemnt-controlled media. He has tweaked the country's constution to appointing himself a president for life. And all this is done not only in the name of the Bolivarian Revolution (whatever that is), but on behalf of the people. I wonder if you can ever shut down a TV station on behalf of individual freedom.

Chávez is not alone. In Bolivia, Evo Morales is the president of Latin America's poorest country, which means that it is a really really poor country. Instead of opening up its underperforming economy for the much needed foreign direct investment, he insists on state-controlled developments for the country's huge hydrocarbons reservoirs. The results is bolivians sitting on the world's largest natural gas reserves unable to translate all that into wealth, whilst their Chileans neighbours do not have energy supplies to meet the needs of its fast-growing economy. Bolivia's aversion to foreign capital is fuelled by the socialist speech of president Morales, another self-styled defender of the people.

The third member of the Latin Axis of Evil is Cuba. The vicious man who has been in charge of the Cuba over the last four decades took office, also, on behalf of the people in order to stop the island being the brothel of America. Ironically, today's Cuban women do not charge money in exchange for sexual services. Now they need soap, shampoo and shoes. Let's not forget that Morales and Chávez are admirers of the Cuban model. Apparently, they have found the way to upgrade the old-school socialism to answer the challenges of the new centuries.

Someone has got to stop this madness. The continent is waking up to a new reality and we have a lot of catching up to do. Schools need to be fixed, and the best way is by adopting the school vouchers. Rotten and useless ministries of education are part of the problem, not the solution. We must shut them down. Universities need academic excellence: they also have to be fully privatised. Let people educate themselves, and they will learn to choose better rulers.

We'll Get By With a Little Help from our American Friends

The free-market principles were introduced to the continent via Chile, where a number of American-educated economists applied the teachings of liberal-economics policies taught mainly at the University of Chicago. There were massive blunders, but the errors were outwighed by the positive results. Latin America now needs more free exchange of ideas, capitals and free movement of people. More free-market agreements and more technological transfer. More hispanic professionals should be offered the chance of development in the US, and universities have to deepen their exhange programmes. It benefits all parties involved. And the result will be the defeat of populism.

Destitute no more

2007-08-27T12:38:00.000-07:00

Chile

Aug 16th 2007 SANTIAGO
From The Economist print edition

A country that pioneered reform comes close to abolishing poverty

ON ONE of the coldest days in an unusually cold southern-hemisphere winter, Sara Reyes's house is warm. Ms Reyes is sewing the clothes that for the past 18 months have allowed her to support her two children and a nephew, and sometimes to employ a sister and two neighbours. Previously jobless, she obtained her first sewing machine—she now has three—from Chile Solidario, a government programme launched in 2002 to tackle extreme poverty.

Her neighbourhood was once one of the biggest and poorest shanty towns in Santiago, Chile's capital. Over the past ten years, the roads have been paved and piped water installed. Most people now have fridges and telephones and some have cars. “Defeating material poverty is a mission well on the way to being fulfilled in Chile,” says Benito Baranda of Hogar de Cristo, a charity. Its shelters now cater less for the destitute than for people with drug or psychiatric problems. Around 500,000 people still suffer extreme poverty, but that number is down by a third since 2003.

Poverty has fallen further, faster, in Chile than anywhere else in Latin America (see chart). Sustained economic growth and job creation since the mid-1980s are the main explanation, though it helps that poorer Chileans are having fewer children than in the past. In recent years public policies, such as Chile Solidario, have played a bigger role. In the 1990s poverty dropped by half a percentage point for each point of economic growth, but now it falls by one-and-a-half points, according to Clarisa Hardy, the planning minister.

Chile Solidario aims to help the poorest support themselves, by ensuring they take up various social benefits and keep their children healthy and at school, and by offering training and a grant to set up a small business. It is too soon to tell whether it will be a long-term success: the first of 250,000 very poor families enrolled in the scheme are only just graduating from it. Even so, Chile has a chance of all but abolishing poverty in the next few years.

Some Chileans argue that the national poverty line, of $90 a month, is set too low. In Santiago this buys just four bus fares a day. Income distribution in Chile is becoming slightly less unequal. The richest tenth of the population still take 38.6% of national income, though this is slightly less than they take in the United States. Using the relative yardstick favoured in many European countries, 27% of Chileans would be poor, according to Juan Carlos Feres of the UN Economic Commission for Latin America and the Caribbean.

The fact that alternative ways of measuring poverty are now being discussed is a sign of how far Chile has come in the past two decades. It is also an indication of the tasks that still lie ahead in creating a middle-class society.

Adiós to poverty, hola to consumption

2007-08-27T12:27:00.000-07:00

Latin America's middle class

Aug 16th 2007 SÃO BERNARDO DO CAMPO
From The Economist print edition

Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class

MONTANHÃO takes its name from what it used to be not long ago: a rubbish dump. On the southern extremity of São Bernardo do Campo, a suburb of São Paulo, Montanhão's houses of brick and breeze-block straggle over abrupt hills next to a reservoir. With more than 110,000 people, it is one of the few districts in Brazil's biggest city where the population is still growing fast. It is also one of the poorest. But it is not nearly as poor as it was only a decade ago.

Its winding main street bustles with building-materials depots, gift and clothes shops, restaurants and several small supermarkets. One, called Dia, is part of a discount chain owned by France's Carrefour. Its closest competitor is Mercado Gonçalves, whose owner, Afonso Gonçalves, is a former street-vendor and factory electrician. Since 1997 his little shop has expanded more than fourfold to 480 square metres (5,200 square feet). It sells more than 10,000 separate items, from Nescafé and Colgate toothpaste to fresh meat, freshly baked bread and, locked in a glass case, imported whisky. According to Mr Gonçalves, “A lot of people here are very poor, but a lot are becoming middle class.”

Life in places like Montanhão is still tough. Raw sewage runs in a stream not far from the supermarket. Up on the hillsides, amid a host of evangelical Protestant churches, a few houses are still made of wood. Crime is a big problem. Dora Jozina de Arruda, a young woman who runs a small kiosk on the main street selling sweets and grinding keys, says that she has been robbed twice and wants to move to a quieter neighbourhood. Some residents have clubbed together to pay private security guards to keep drug-traffickers away.

But signs of progress are all around. New tower-blocks, of the kind ubiquitous in the smarter parts of São Paulo, now jut up from among the houses of what still resembles a favela, or shantytown. Public services are improving fast: nearly everyone has electricity, piped water and sewerage. Smart new school buses run by the municipal government ply up and down the hillsides. And the mood of optimism is palpable. “Each year has been better than the last,” says Mrs Jozina de Arruda. Between the profit from the kiosk and her husband's wages as a security guard at a bank, they earn $900-1,200 a month.

They are members of a new middle class that is emerging almost overnight across Brazil and much of Latin America. Tens of millions of such people are the main beneficiaries of the region's hard-won economic stability and recent economic growth. Having left poverty behind, their incipient prosperity is driving the rapid growth of a mass consumer market in a region long notorious for the searing contrast between a small privileged elite and a poor majority. Their advent also promises to transform the region's politics.

From the market, not the state
While poverty is measurable, the word “middle-class” is subjective. The kind of people who call themselves middle-class in Latin America tend to be at the top of the scale: prosperous professionals with several servants, children at private schools and holidays in Europe or Miami. From the 1940s to the 1970s, state-led industrialisation and the growth of public employment saw the rise in some Latin American countries of a middle class of managers, bureaucrats and a labour aristocracy of skilled workers. But the policies that pushed them up proved unsustainable; they were abandoned after the 1982 debt crisis, which triggered a decade of mediocre growth and high inflation (see chart 1). Since then, partly because protected industries were subjected to privatisation and import competition, this group has struggled. Marcio Pochmann, an economist at the University of Campinas, reckons that in Brazil 7m people dropped out of the middle class after 1980 (although 3m moved into the upper class).

The middle class that is emerging now is very different. It is more accurately described as a lower-middle class. Fernando Henrique Cardoso, a former president of Brazil who is also a sociologist, points out that this class is related more to the market than the state. Many of its members have small businesses, like Mr Gonçalves. Others act as consultants to larger concerns. José Roberto Mendonça de Barros, an economist in São Paulo, points to a plethora of small service companies which advise large Brazilian farms on computing and biotechnology. The difference is summed up by the changes in São Bernardo do Campo. A generation ago it was the heart of Brazil's car industry, where Luiz Inácio Lula da Silva, the country's president, once led the metalworkers union in strikes. Today the car factories have shrunk or moved away, and São Bernardo lives mainly from services.

In Mexico, argues Jorge Castañeda, a political scientist, some of the new middle class come from the informal economy, others from new industries or service businesses. The class is less concentrated in Mexico City and is rougher-edged, culturally and socially, as well as darker-skinned, shorter and more Mexican-looking than its predecessor, he says.

These trends are furthest advanced in Chile (see article). But they are most dramatic in Brazil and Mexico, which between them account for more than half of Latin America's 560m people. In Brazil between 2000 and 2005 the number of households with an annual income of $5,900 to $22,000 grew by half, from 14.5m to 22.3m, while those receiving less than $3,000 a year fell sharply to just 1.3m (see chart 2). In Mexico, according to Alejandro Hope of GEA, a consultancy in Mexico City, the number of families with a monthly income of between $600 and $1,600 has increased from 5.7m in 1996 to 10.7m in 2006.

Something similar is starting to happen in Colombia and Peru. In Argentina the decline of what had been a predominantly middle-class country until the 1970s reached its nadir in the economic collapse of 2001-02, when a majority of Argentines fell below the poverty line. But a rapid economic recovery has been mirrored in a revival of the middle class. Ernesto Kritz, a labour economist in Buenos Aires, reckons that around 40% of Argentine families, up from 20% in 2003, have the monthly income of $1,000 that he sees as necessary for a middle-class lifestyle.

In Latin America as a whole, according to calculations by Banco Santander, a Spanish bank, some 15m households ceased to be poor between 2002 and 2006. If the trend continues, by 2010 a small majority in the region will have joined the middle class, with annual incomes above $12,090 in purchasing-power-parity terms (see chart 3). In Mexico some 15m out of 27m households could have middle-class incomes by 2012, reckons Mr Hope.

The sociology of growth
Several factors lie behind these trends. The first is that, since 2004, the region's economies have grown at an annual average rate of 5%. That is not spectacular, but it is not bad (the population is growing at only around 1.4% a year). And the growth is having a bigger social impact than in the past.

In the early 1990s Latin America saw a burst of growth driven by an inflow of capital and accompanied by overvalued exchange rates. This combination tended to boost the relative price of non-tradable services, and the incomes of those in the informal economy. This period is different, says Guillermo Perry, the World Bank's chief economist for Latin America. Exports are booming, partly because of high prices for Latin America's raw materials. But the export growth also follows a round of devaluations and two decades of market-opening economic reform.

This time the growth is generating more jobs in the formal sector. In Mexico the economy grew by 4.8% last year and created 900,000 new jobs—in line with the growth of the labour force. In Brazil, too, the proportion of the labour force employed informally is starting to shrink.

Another new element is innovative social policies. In both Mexico and Brazil, one family in five now receives a small monthly stipend from the government, provided they keep their children in school and take them for health checks. Lastly, in some countries remittances from Latin Americans who have migrated help their poorer families back home.

The result is that in both Brazil and Mexico the incomes of the poorest half of the population are growing faster than the average. In both countries poverty is falling steadily, and income distribution is becoming less unequal. In Mexico, although growth has been only moderate, poverty, defined as income insufficient to feed a family, fell from 37% to 14% over the decade to 2006.

The figures collated by the UN Economic Commission for Latin America and the Caribbean may understate the regional fall in poverty, since they rely on respondents answering truthfully when asked about their income. Consumption may be a better guide. The other crucial factor that is changing Latin America is low inflation, achieved because most governments have abjured deficit spending and because trade liberalisation has made many goods cheaper. Low inflation benefits the poor more than the rich, who can find ways to protect the value of their incomes. And as interest rates have fallen credit has returned. Credit is still much scarcer than in developed countries, but it is growing fast: in Brazil, for example, the stock of credit has risen to 32% of GDP from 21% in 2002.

It typically starts with consumer loans for cars and durable goods, and moves on to mortgages. In Mexico the value of new mortgages has been growing by around 35% a year. That in turn has stimulated a boom in the building of new housing projects for lower-middle-class families.

Cars, jeans and pampered pets
Sales of new cars, computers and consumer electronics in both Brazil and Mexico are at record levels. Much of the extra demand has come from the new middle class. A study in 2005 of low-income families in four former favelas in São Paulo by the Fernand Braudel Institute, a think-tank in the city, found that all the households surveyed had refrigerators and colour televisions (often more than one), nearly half had mobile phones, 30% had DVD players and 29% owned a car.

Tracy Francis of the São Paulo office of McKinsey, a management consultancy, points out that social classes D to B2 (those with annual incomes from $3,000-22,000) were responsible for 69% of total consumption in Brazil in 2005, up from 51% ten years earlier. The average woman in these social classes has 13 pairs of jeans in her wardrobe, she claims.

They spend on pets, too. “Nowadays people treat their dogs and cats as if they were upper-middle-class: they feed them pet food and take them to the vet,” says Mr Gonçalves. They are also taking to the air for the first time. One cause of the recent problems in Brazil's airline industry has been its rapid growth. In Mexico, Mr Castañeda cites a survey by a new low-cost airline last year which found that 47% of its passengers had never flown before.

All these positive trends are recent and remain fragile. Mr Mendonça de Barros notes that in Brazil, until very recently, a university graduate could expect to earn less than 2,000 reais a month in his first job—roughly the same wage as a bus driver. Many of those who have clawed their way out of poverty could be knocked back down again if there were a repeat of the financial collapses the region suffered in the 1980s and 1990s.

The new middle classes have more schooling than their parents; some have gone to mushrooming private universities. But they are less educated than the old middle class that benefited from elitist public universities—and that makes moving into the upper-middle class hard.

Nevertheless, the direction of change is clear. “We are going faster towards a middle-class society than we could have imagined 20 years ago,” says Mr Cardoso. “My bet is that you're crossing the threshold.”

If so, this carries big implications for politics in the region. Mr Hope finds a close correlation in Mexico between home ownership and support for the ruling centre-right National Action Party. The old middle class believed in state protection. The new middle class is more self-reliant. Above all, it has benefited from economic stability. Since it has much to lose from political adventurism, it could become a force for political stability as well.

Welcome

2007-08-25T08:39:00.000-07:00

Dear reader,

Welcome to my blog. A civilised society should pursue the welfare of each one of its members, and the most efficient way to do so is by providing the maximum individual freedom for everyone, so that we can all do and choose what is best for us. Building up a free society means individual freedom should never be vulnerated. Ever.

In Latin America this is a far cry from reality. In this continent the name of the game is populism, socialism, clericalism. Someone has to stand up and say No More.

That is why I have set up this blog. Let the fight begin. From Latin America to the world: ¡viva el liberalismo!