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Preferential Option: A New Strategy for Latin America's Poor

The stench as you stand on the edge of the city dump in Guatemala City is overpowering. Even more overwhelming is the realization that crashes into your heart and mind: 3,000 families actually live here. Children and parents fight the vultures and pigs and search through the garbage for small “treasures”–bits of nylon, scraps of plastic and discarded jewelry–to resell to open air marketeers. I’ll never erase the gut-wrenching picture from my mind.

But other images are also deeply etched, like the sensory overload of the hustle and bustle of Sexto Avenida in zone one, the city’s principal commercial center. Or the look of the customs officer who coolly asked what my friends and I could give him in order to receive permission to bring into the country our 26 boxes of school children’s clothes and supplies for a large orphanage. Though he seemed satisfied with two boxes of Crayola children’s modeling clay and some shoes, a higher ranked official overruled the decision. He argued that we needed a special stamped letter from someone in the finance ministry. We later discovered that $200.00 could have substituted for this “requirement.”

Three images, three realities of Latin American underdevelopment: the chronic, excruciating poverty of the super poor; the economic dynamism of thousands of entrepreneurs in the “informal” sector; and the corruption and bureaucratic inefficiency of the state. As an infamous rogue once asked, “What is to be done?”

My plane trip home succinctly summarized two possible responses. To my left (literally!) sat a “Sandalista” professor from the University of Arizona. Despite the events of 1989, she remained a supporter of the Marxist, state-centered approach to political economy executed at astonishing human cost by Daniel Ortega et. al. in Nicaragua. To my right sat the well-dressed son of a wealthy cattle rancher from the coastal region of Guatemala. I have no way of knowing, of course, whether this man is personally culpable for any of the abuses heaped upon the poor by many in his class. But to me he symbolized the land-owning elite’s oft-employed “development” strategy: find friends in the government, corner the market, exploit the farm-workers, call these arrangements “capitalism” and assert that over time this system will produce growth “trickling down” to the poor.

Of course, as Peruvian economist Hernando de Soto argues in his powerful book, The Other Path (Harper & Row, New York, 1989), that approach isn’t capitalist at all. It is mercantilist–a variety of statism wherein the government bureaucracy controls most of the decisions about investments, production, prices and distribution that in a truly free enterprise system would be determined through market forces. Rhetorically, many of these self-proclaimed “populist” governments assert that only state regulation can ensure that the welfare of the poor is safeguarded. In reality, powerful politicians get rich through their controls over the economy, collude with a few influential businessmen in the “private” sector, and drive their country into economic stagnation, foreign debt and breathtaking inflation.

The good news is that the debacle of statist policies and the collapse of Eastern European socialism has stimulated much soul-searching throughout Latin America and the rest of the underdeveloped world.

An essay in the July 13, 1991, issue of The Economist noted, a “Third World revolution” that has “less to do with achievements than with attitudes” is underway. “It is simply this,” the article continued, “old ideas about economic policy and the role of the state in development are being challenged and cast aside.” In place of them are new, “market-friendly” attitudes produced by the “lessons learned” in forty-some years of development experience. Simply put, the lessons suggest that free trade, free markets, free prices, private property rights and a legal environment conducive to entrepreneurial activity produce economic growth from which the poor can benefit. The government does have a role to play, but not the intrusive one it has sought. It must provide predictable and accountable governance and secure law and order.

Development is a formidable task, to be sure. But some countries have graduated out of Third World status like the East Asian “tigers”–Taiwan, South Korea, Singapore and Hong Kong) and others are on the way to doing so (Chile, Malaysia, Indonesia). These diverse countries share similar, market-friendly economic policies. Unfortunately some have been marked by political authoritarianism. But economic success has produced more prosperous and self-confident citizens who apply strong pressures for reform. Democracy movements are underway throughout East Asia, and Chile returned to civilian governance just a few years ago.

The bad news is that, in their public policy advocacy, many Christian organizations have continued to argue for models of development that have oppressed, rather than liberated, the poor. Mainline (and some evangelical) commentary on development issues criticizes “exploitative” capitalism, pins the blame for Third World poverty on “unjust” global economic structures, and argues for massive, state-led wealth redistribution within less developed countries and between the industrialized “North” and the impoverished “South.” The hostility towards the market is rooted in large part in a faulty reading of Third World realities. Though the churches correctly argue that poor people in many Third World countries are victims of exploitative, unfair and oppressive economic structures, the structures are statist, not capitalist.

Clearly, a new “option for the poor” is called for. It would welcome, in the first place, the emerging consensus around the need for a radical restructuring (“adjustment”) of Third World economies away from statist control towards market norms. Second, it would affirm what the experience of Peru attests to: that the costs to the poor of not adjusting are far worse than those of adjusting. Third, it would emphasize some new roles for grassroots development efforts. Specifically, Christian groups could help alleviate the painful dislocations created by the transition from a state-centered to a market-centered economy, through employment-creation schemes, credit to informal “micro-entrepreneurs,” and greater social service provision to fill the gap left by reduced government efforts in health, education and nutrition. Para-church organizations that lobby the Agency for International Development and multilateral institutions such as the World Bank should influence them for greater funding of non-governmental organizations (NGOs) whose projects are participatory, cost-effective and truly reach the poor.

Religious groups need not halt their advocacy and “development education” activities in the developed world either, just re-orient them. Instead of mouthing Marxist “dependency theory” slogans about the international economy, they could embrace the “outward-oriented” trade policies of the East Asian tigers while lobbying the U. S. government to lower its protectionist trade barriers against, for example, textiles from the less developed countries. Instead of demanding massive government-to-government foreign aid from North to South (which frequently props up corrupt and inefficient governments and allows them to pursue economically destructive policies) they could embrace “conditionality.” This means refusing assistance to regimes who stubbornly cling to out-dated statist ways and making renewed funding contingent on a government’s record in implementing both macroeconomic policy reforms (such as liberalizing trade, terminating domestic price controls, cutting red tape and allowing exchanges rates to “float” to international standards) and strategically targeted, direct poverty alleviation measures to assist the most vulnerable citizens.

The “new” option for the poor requires more sophisticated economic analysis and greater attention to the relationship between government policy at the “macro” level, and non-governmental organizational efforts at the “micro” level than traditionally has been the norm for most Christian organizations. But joining rigorous empirical examination with Christian compassion–wedding head and heart–is necessary if our opting for the poor is to truly serve them.