The fall of the left in LatAm: A political or economic failure?

Venezuela’s political cusp is crumbling but still stands, in Bolivia, Evo maintains power and support. Everywhere else, the left is gone. Was their mistake made in politics or economics?

The fall of the left in Latin America has been talked about so much that it is rarely ever disputed. The case of the Kirchner dynasty in Argentina, of Dilma Rousseff’s impeachment and of Venezuela’s economic collapse seemed to sentence any semblance of the movement in the eyes of public opinion, even as some of its representatives stay strong. Among those who have fallen; was their failure to stay in power a virtue of poor political management or poor economic policies?

Venezuela was for a long time the poster-boy for South American leftist governments, Hugo Chavez’ irruption into the political scene made a huge splash in the region. Now, his successor, Nicolas Maduro is struggling to keep the country under control both politically and economically.

Politically, the way the ‘chavismo’ repressed opposition, by expanding its government throughout all branches of the Venezuelan government created a feeling of helplessness and lack of representation among the population. This lack of an authentic alternative in power is itself the reason why the people struggle to recognize legitimacy in the Maduro government. Additionally, the imprisonment of opposition leader Leopoldo Lopez in 2014, during the first year of Maduro’s presidency delivered a painful strike to the hopes of the Venezuelan people who hoped Maduro would leave office.

Economically, the current crisis is harder to explain. During Chavez’ presidency, aided by a generally high price of oil, Venezuela’s GDP increased constantly, and thanks to income redistribution programs, inequality fell dramatically. But economic conditions in Venezuela steadily became absolutely dependent on oil, and resulted in a textbook case of Dutch disease.

Besides a strong dependency on oil, during Chavez’ presidency oil experts were replaced with party loyalists and foreign oil trade contracts were altered beyond recognition or completely eliminated. All of this made it extremely hard for foreigners to trust Venezuela with investments of substance.

Heavy state investment in social programs, a dependency on oil and an absence of traded goods drove Venezuela’s economy to the ground during Maduro’s time in office. Astronomical inflation and shortages of basic goods are arguably the real reason why despite all efforts, the Maduro administration are losing control of the country and are crumbling to an increasing social pressure. In the olden days, Chavez could buy allegiance with housing subsidies, healthcare programs and economic assistance, but now, it is the economic climate which prohibits Maduro from doing the same.

Argentina’s case is a clearer cut case of economic mismanagement. As with Venezuela, Nestor Kirchner’s first years in power were marked by economic prosperity, but it was mostly due to favorable international markets than due to domestic economic policy. The rising price of soybean positioned Argentina as an agricultural powerhouse, however, nationalization of industry caused the Argentinian energy sector to slow down considerably.

Again, resembling Venezuela, Nestor Kirchner’s economic policy prioritized economic inequality, and he too implemented a vast system of subsidies to public services as well as wage increases, the immediate result of these was an increase in economic activity, but high inflation and lack of investment in the private sector soon followed. To this day, inflation is yet to return to desirable levels, even with the efforts made by the Macri administration.

All this goes without mentioning a series of economic debacles that struck Argentina during the 2000’s Kirchner rule. The infamous ‘corralito’ and the problems brought around by the ‘pesification’ of the economy, the failure of debt restructuring, the attack of the vulture funds, the continued devaluation of the Argentine peso and the dozens of international lawsuits presented to Argentina as they failed to pay back their debt. All of this means it is hard to argue that the rupture of the left in Argentina was due to anything other than ill-advised economic policy.

Brazil’s two left-wing presidencies, Luiz Inacio Lula da Silva and Dilma Rousseff fell into many of the same traps as did Argentina and Venezuela. Both stood out for their significant emphasis on welfare, subsidies rolled in and tax cuts for consumers came aplenty. But the government did little to control the backlash on these very radical fiscal reforms, as happened in Venezuela and Argentina. As a result of heavy government expenditure and reduced fiscal collections, consumer spending decreased radically as of 2015.

Lower spending led to reduced investment as the population lost its purchasing power due to a weaker Brazilian real, reduced investment, in turn, emptied government reserves and harmed investor confidence, leading to lower credit ratings.

In the last decade alone there are three cases where we can see the left struggling to maintain power due to their fiscal and economic mismanagement. The common trend seems to be the rapid implementation of social subsidies and tax breaks without accounting for its negative effects in the long term. Although the role of populism in this process cannot be played down, all signs seem to point to the lack of a follow up plan to social expenditure as the key player in the collapse of the Latin American left-wing. 

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