Published by Alma
By Mark Weisbrot/ The Hill
National sovereignty is an undervalued asset in today’s world, especially by the international media, where the views of Washington and its allies largely prevail. This is true with regard to economic as well as political issues, and its consequences can be quite heavy in a region like Latin America, long regarded by U.S. officials as their backyard.
The election in Ecuador is being watched, as well as contested by, forces that have opposing views on this question.
On the left, there is the presidential bid of former vice president Lenín Moreno, and his party — which has already won a majority of the Congress — Alianza PAIS (AP).
Like all of the left parties and governments that came to power in the “Pink Tide” that swept the region in the 21st century, the AP values national sovereignty and self-determination. Its leaders, as well as its activist and much of its electoral base, understand that the progress that has been made over the last decade would not have been possible if the government of President Rafael Correa had followed the economic prescriptions of Washington.
This progress included reducing poverty by 38 percent and extreme poverty by 47 percent. Inequality was also substantially reduced: The ratio of the income of the richest 10 percent to the bottom 10 percent was reduced from 36 in 2006 to 25 by 2012. Annual growth of income per person rose from 0.6 percent over the prior 26 years, to 1.5 percent. And access to healthcare and education was substantially increased, with spending for higher education rising from 0.7 to 2.1 percent of gross domestic product (GDP) — more than is spent by even many high-income countries. Social spending overall doubled, and public investment more than doubled, as a percentage of GDP.
In order to accomplish these goals, the government had to re-regulate the financial sector, tax capital flight, require banks to repatriate most of their liquid assets held overseas and make the central bank part of the executive’s economic team, among other economic reforms. Without this new role of the state — crucially, acting in the public interest instead of on behalf Ecuador’s bankers and richest citizens — Ecuador could not have made most of the gains over the past decade.
The other presidential candidate, former banker Guillermo Lasso, proposes a traditional right-wing program of tax cuts for the rich and spending cuts that will have to more than match these so as to bring down the national budget deficit.
He pledges to reduce the government’s role in the economy, which was actually quite important to the progress of the past decade, arguing that “free markets” are the key to unleashing the country’s economic potential. And he has pledged to restore the “independence” of the central bank, which would make it more an instrument of the big bankers, like it was when Lasso himself was in his prime in the late 1990s (when the economy was wrecked by a banking collapse).
Lasso has also admitted to owning a bank in Panama whose main line of business is to facilitate capital flight from Ecuador. This is also a big issue of national sovereignty in Ecuador, as the majority of people just voted (in the Feb. 19 election) to approve a ballot initiative saying that people who are holding money in offshore tax havens should have not be able to hold public office.
All this would bode ill under any circumstances, but the lack of respect for national sovereignty means that as the economy runs into trouble — which is likely, given the proposed budget cuts — Lasso would probably go to the International Monetary Fund (IMF) for a loan. This would mean the end of Ecuador’s hard-won sovereignty over economic policy, and a host of “structural reforms” made in the United States, which Lasso and his allies would be all too eager to implement.
It is worth noting that, according to a leaked document from the U.S. embassy in Ecuador, Lasso briefed U.S. embassy officials on his efforts to organize business opposition to the Correa government in 2007. If there were hard evidence like this on President Trump’s relations with the Russians, that would spell the end of his presidency.
We know what the decades of Washington-sponsored structural reforms looked like in the past: almost zero growth in income per person in Ecuador over an entire 20 years (1980 to 2000). We can also look at how the new, Washington-supported right-wing governments of Brazil and Argentina are doing.
It is nearly a year since the right-wing President Michel Temer took power through an “impeachment” — which many experts labeled a coup because of the lack of an impeachable offense. Brazil’s worst depression has continued to deepen through the fourth quarter of 2016, with record levels of unemployment, and no end in sight. Investment continues to fall despite — or rather, because of — austerity and budget cuts that were supposed to excite investors even as they sank the economy.
In Argentina, 40 percent inflation and a recession, as well as devastating hikes in utility prices, have given millions of Argentines second thoughts about the right-wing president that a majority actually voted for in December 2015. Like Lasso and Temer, Argentina’s Mauricio Macri is a protégé of Washington. Leaked diplomatic cables from 2009 show him appealing to U.S. officials to come down harder on the Cristina Kirchner government then in power in Argentina.
Now these people will have Trump and Republican extremists in Congress — people like Sen. Marco Rubio (R-Fla.), who would happily destroy Ecuador in order to save it — as their closest allies.
Not a great time for Ecuador to give its hard-won national sovereignty back to Washington.
Mark Weisbrot is co-director of the Center for Economic and Policy Research in Washington and the president of Just Foreign Policy. He is also the author of the book “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (Oxford University Press, 2015).