A NOTE ON SOCIAL POLICY IN POST-NEO-LIBERAL TIMES:  CONSENSUS, CONTENTION OR DISSENSION?

Mario Torres

Paper contributed to discussions at the Canadian Foundation for the Americas (FOCAL). October 2002

The implementation of neo-liberal economic and social reforms across Latin America has produced varied results in developed, developing, and transition economies.  It is argued that these reforms, encapsulated in the Washington Consensus, were necessary in order to overcome the economic crisis of the "disastrous" 80's and to avoid the worsening of social conditions.  However, available data for the case of Latin America indicate that the economic and social situation did not improve much in comparison with the regional performance in previous decades when the region implemented the import-substitution industrialization model. Actually, it may be argued that the situation in some key aspects is worse than before.  From a long-term historical perspective, social progress in the region that started to increase after WWII has been halted gradually and even reversed. 

Latin American region is leaving from a neo-liberal decade of reforms and entering into a period of post-neo-liberalism whose political, social and equity content is worrisome at best, and unknown at worst.

An interesting point of departure for discussing what the policy content of a post-neo-liberal period could be is the "Washington Contentious" document - WCD (2001).   The document proposes an approach about what can be done or should be done in terms of policy debate, advocacy, and further policy reform.  It reflects a broader consultation process and takes into account key reform experiences and results. 

The purpose of this paper is not to discuss each specific policy tool proposed in the WCD.  It rather attempts a broader examination of the document aimed at envisaging what can be expected and feasibly be done in the future in Latin America. Our questions are: How to get into the analysis of the current historical period and find viable options for facing current challenges? What may be the future scenarios of discussion and dispute? Do we need less consensus, more contentious, or simply dissension? 

The Establishment and The Underground

In a seminal work Peter Boothroyd (1998) approached the assessment of social policy by using a dichotomous typology that he labels "the Establishment" and "the Underground".  He uses this distinction in order to capture differences in methodological approaches for assessing social policy.  His distinction is disciplinary and institutional. However, this typology, despite the risk to be seem as too simplistic, may facilitate the understanding of processes that underlie 'consensus', 'contention' or 'dissension' around current economic and social policy reforms.  

In the following discussion, the "Establishment" will mean the official national and international institutions responsible for the governance of political, social, and economic affairs both at the national and global level.  This includes government agencies such as legislative bodies, ministries of education and health, and social investment funds; development banks, international financial institutions, the donor community, and international organizations; and banking, financial, industrial and trade associations.  It may also include think-tank institutions, research centers and university departments that produce policy assessments and recommendations for supporting the Establishment's discussions, debates and actions. Institutions behind the Washington Consensus make up a typical group of the Establishment.  

The Establishment is not a homogenous and, much less, harmonious group of people and institutions.  There are important political and economic differences among them.  However, its members share quite similar views about fundamental aspects of social and economic reforms.  This is expressed in the agreement among ministries of economics, the international financial institutions, and the executive and legislative branches at the time of discussing, approving, and implementing neo-liberal policy reforms. 

The "Underground" is made up by a quite varied number of groups and social sectors. "In the underground are different types of NGOs, unions, informal workers' groups, associations of retired persons, community associations, and groups of small producers in urban and rural areas" (Boothroyd, 1998).  As in the case of the Establishment, the Underground exhibits also internal differences and conflicts.  Generally speaking, the Underground lacks the kind of institutional articulation that is common in the Establishment. The Underground has not much access to information, the mass media, the mechanisms of government accountability, the judiciary, credit systems, or even effective political organization. This is not to say that the Underground lacks power or that the Underground is synonymous of the destitute or the marginal people.  It is a part and component of the society and the global village.
 
The Establishment and the Underground are not necessarily opposed or in permanent conflict. Alliances, agreements, and partnerships are usual.  However, they approach to the social, economic and political realities from quite different positions.  For this reason, the use of this distinction seems practical because it may permit to capture critical differences among actors and their resources, perceptions, expectations, strategies and practices for 'consenting, contenting, and dissenting' about neo-liberal policy reforms.  This dichotomy may be also useful to foresee some future scenarios in post-neo-liberal times.

A Response from The Establishment: The Washington Contentious

The Washington Contentious is a well-articulated criticism of the Washington Consensus.  Notwithstanding, it is a criticism that comes from the Establishment.  It is a provocative document that searches for overcoming problems that were supposed to be tackle well by neo-liberal reforms.  However, it may not reach its purpose for various reasons.   Here attention will be given to some of its assumptions.

It is difficult to disagree with what the document proposes at the level of each "policy tool" described in the document.  All 10 + 1 tools are desirable and commendable.  All key 'politically correct" recommendations are mentioned there.  However, one wonders whether the proposed tools may work consistently and in the same direction once they are applied in the Latin American context. There are major assumptions about the existence of the preconditions that would permit the tools to be applicable and feasible.  This may be argued at the macro and micro levels. At the macro level it may be mentioned the capacity of State institutions to implement some of the proposed tools and the acceptance to do so by economic national and transnational elites. At the micro level, it may be mentioned the opportunities, resources, and skills of target groups to participate in implementing some of the tools (1).

There is a less explicit but by no means a less important assumption about value orientations and practices implicit in the WCD.  This consists in that, on the overall, there is a view in the document that reflects in important extent an optimistic and enthusiastic perception of current neo-liberalism in developed societies.  Neo-liberalism has made key contributions to development in terms of value orientations, value practices, government institutions, transparency and accountability, human rights, and market institutions, just to mention some few facts.  But it has generated also inequity problems in developed societies and transition economies.  A mechanic application of neo-liberal value principles to the Latin American reality, whose historical background was never really liberal, may only deepen current inequity.    

Perhaps the main limitation of the document in terms of given assumptions is the belief that the Washington Consensus is basically "right". A major obstacle for assessing the viability of policy reforms is not to go far enough as to permit oneself to move beyond the frontiers of the paradigm one is using - in this case the neo-liberal paradigm.  Examination of what may be done in post-neo-liberal times requires, in addition to policy assessment using the neo-liberal model, a conscious effort for reaching a meta-evaluation approach (2). 

The Washington Contentious underlying model may led us to think, argue and conclude only from the perspective of the Establishment.  To avoid biases, there is a need to include in the debate the voices coming from the Underground. This is not really an easy task.  These voices are usually poorly informed in terms of data and analyses.  However, they may provide with indispensable, although perhaps painful and disappointment, first-hand information about what really is going on, and more important, what might be going on in the near future. 

It would not be a surprise to hear from the Underground questions like the following: How can I recycle myself in order to become a more 'flexible' worker if I have had badly few school years? How can I escape from poverty if I am paid below the minimum wage as it is assumed that otherwise I will not be encouraged to look for a really productive job? How can I make my small enterprise competitive if at the same time massive importation of similar products to those I produce is allowed into my country?  How can I overcome the digital divide if most digital information is in English and I speak only Spanish? How can I get access to the cyberspace if Internet access and use is expensive?   Why should I look for an honest job if I can move into the underground economy and make in one day what I cannot make even in a year of hard "legal" work? How to use my school vouchers when there is only one school close where my kids live? Etc. etc.

Each policy tool proposed in the Washington Contentious merits extensive discussion.  The authors are right when they say that there will be no easy agreement about them.  Although a discussion of each policy tool will not be attempted in this paper, it is worth examination of the "Plus 1" tool proposed in the document: Reducing Rich-Country Protectionism (3).  From a methodological perspective this may be the most interesting, controversial and unintended contribution of the document.  

"Plus 1" opens a window for looking beyond the neo-liberal paradigm and approach to another quite different, almost opposed, policy option: protectionism. The authors ask themselves: What is the main obstacle to reducing protection in rich countries?  They respond: politics.  Is this true?  Yes and no.  Yes, it is true because it is known the resistance of politicians in developed countries to open local markets.  But, why is there political resistance? There is resistance for many reasons including that people do not want to lose a way of life, their jobs, their safety nets, and their fulfilling of social and economic expectations.  To open markets would be equivalent to put in question their "model of society" and their way of life.  This "resistance" indicates also the existence of a clear alliance between the Establishment and the Underground in rich countries, and the use of resources by the Underground - such as education, information, access to political power, lobbying and organization - for reaching their goals.  This situation is quite different in developing societies.

"Plus 1" tool raises a very fundamental point.  We should look beyond the limits of the paradigm implicit in the Washington Consensus when examining what to do in a post-neo-liberal age. Contention is not enough.  We may need dissension too.

Moving Beyond The Paradigm

A discussion on theoretical, political, ideological or philosophical grounds only about what and why should be done in relation to social and economic policy reforms in a post-neo-liberal age may be endless and fruitless. Ideology, vested interests, and value orientations may lead to discussions with no practical outcomes.  It seems more fruitful to balance the discussion with a look at some concrete historical experiences of "partial" or "incomplete" neo-liberal reforms. From a fresh and comparative view about these experiences, much may be learned about where the opportunities are for more effective policy reforms in Latin America.

At a macro level, there is an important body of reform experiences implemented during the last decades in Canada, Western Europe, or China just to mention a few countries.  A response to questions such as: How did these societies dealt with reforms? What are the results?  What are the lessons learned? may permit to go beyond narrow, naïve, and rhetoric discussions about what can be attempted in a post-neo-liberal age.
 
At the micro level, the major risk when looking at concrete experiences is a piecemeal approach to 'program' experiences.  Program experiences should be examined in the broader societal context where they exist.  This should include consideration of the particular interaction between the Establishment and the Underground that supports policy innovations.  A particular difficulty in examining program experiences is the scarcity of systematic empirical knowledge.  At the micro level, the body of knowledge about what was the impact of neo-liberal reforms is not extensive.  For example, there has been only recently an attempt to examine the results of privatization (Birdsall, 2000).  In other cases, as with pension system reforms, results will not be known for some years until systems mature. In the case of education, impact may be assessed only in the medium to long term. 

A Future Scenario For Dissension

It is doubtful that further neo-liberal reforms will be implemented in Latin America.  More of the same is unlikely.  As it is well argued in WCD "poverty and equity" is the new and overriding objective in the agenda of politicians in Washington and Latin America.  In this regard, the document provides a good starting point for discussion.  However, it falls short to foresee how viable may be the policy tools it proposes in order to improve current policy reforms.  One reason for this shortcoming is that the document does not interrogated reality about what may be expected at the short to medium term.  The document is too optimistic about the opportunities that the "real politick" in the region may allow.     

What will be the content of the post-neo-liberal age to come?  In important extent, the content will depend on how the Establishment and the Underground will interact, and what "real" model of economy and society will be pursued.  This circumstance is not unique to Latin America.  It appears to be also true for the case of other areas.  The Middle East, Eastern Europe, East Asia will be scenarios of critical social, economic and political disputes between the Establishment and the Underground. (Perhaps this is more evident in the case of the Middle East, where current governments will need to deal with something more than just terrorism.)

In the case of Latin America, quite different scenarios may emerge during post-neo-liberal times depending on how some key gray and bright elements will combine at the short to medium term. On the gray side, there are elements like the following:

1. Further concentration of wealth and income
2. Concentration of poverty in urban areas
3. More "hard poverty"
4. Decentralization of "soft" policy instruments and mechanisms and, in practice, more centralization of "hard" aspects of the decision-making process
5. Authoritarian democracies
6. More urban violence
7. Expansion of the underground economy
8. International migration to the North of most skilled labor force
9. Consolidation of a divide in quality education
10. Consolidation of the digital divide
11. Less social security and return to "informal" safety nets
12. "Reactive" populism
13. Limited foreign investment
14. Social fragmentation

On the bright side elements appear to be less abundant:

1. Integration of the region into a larger trade area
2. Local governments closer to population demands
3. Demographic stability due to low population growth
4. Stabilization of demand for social services
5. More government accountability
6. Fiscal discipline
7. More female labor force participation
8. More free elections
9. More free press

How these elements will combine at the shortest term? How this short-term combination will condition subsequent opportunities for policy reform? A response to these questions may clarify what are the real borders of the "sand box" wherein political elites -national, transnational and global- will be able to play. One hypothesis is that, taking into account most recent historical experiences, it is doubtful that political elites in Latin America will look for implementing a long-term development strategy.  Another hypothesis is that it is doubtful that the Underground will look for more "democracy", political accountability or social participation.  The needs from both sides are too immediate and basic.  Apparently, there is not enough time (or room) to think about long-term objectives.  As the Washington Contentious document argues well, volatility is a key ingredient of the social and economic atmosphere in Latin America.  Globalization will not mitigate but, possibly, exacerbate it. 

Under these circumstances, it is not unrealistic to propose as another hypothesis that the Establishment and the Underground will look for short-term "a-synchronic" objectives.  In other words, the Establishment will look overall for political and economic stability; the Underground will look for indispensable income and survival. Any discussion of the WCD cannot ignore the reality of short-term scenarios that, unfortunately, may not look very happy.  Otherwise, the analyses will be naïve, produce little practical results, and contribute by proposing unfeasible "tools". 

It is not unrealistic to supposed that in many countries the quest for 'stability' and 'survival' at any price may produce further stagnation or very low growth rates, expansion of the underground economy, emigration of the most qualified to the North, and a worrisome general sense of frustration.  This is may be the most likely scenario, a scenario more appropriate for dissension rather than for contention.
 

References

Birdsall, Nancy and John Nellis
2002 Winners and Losers: Assessing the distributional impact of privatization. Center for Global Development.  Working Paper Number 6. Washington DC

Birdsall, Nancy and Augusto de la Torre,
2001 Washington Contentious, Economic Policies for Social Equity in Latin America. Carnegie Endowment for International Peace and Inter-American Dialogue. Washington DC

Boothroyd, Peter
1998 The Establishment, The Underground. A State-of-the-Art Report. Centre for Human Settlements. School of Community and Regional Planning.  University of British Columbia.