|United Nations University - Work in Progress Newsletter - Volume 15, Number 1, 1998 (UNU, 1998, 12 pages)|
By Alan Gilbert
For the millions of poor peasants newly crammed into already overcrowded cities, of Latin America, life is unpredictable - and made all the more so, argues Alan Gilbert, by the impact of the information revolution. Key decisions affecting daily lives are made elsewhere. The processes of globalization, bolstered by new communications technology, can bring new wealth or suddenly take it away. The computer, the video and the laptop have created high expectations - but carry with them the equal risk of high uncertainty. Professor Gilbert, from the Department of Geography, University College, London, was a coordinator of the UNU project on population, urbanization and development. He is editor of the UNU volume, The Mega-city in Latin America. - Editor
The new world of computers and telecommunications cyber-growth - has greatly facilitated the process of "globalization." For the populations of Latin America's cities, as elsewhere around the globe, this means that many of the key decisions affecting their lives are made elsewhere. Decisions made in the headquarters of a major transnational company lead to jobs being shed in Argentina. Decisions made in the International Monetary Fund offices in Washington D.C. affect the levels of food subsidies in Mexico. A rise in the price of oil, generates taxes for the Government of Venezuela.
As those examples suggest, the effects of globalization on Latin Americans can be either beneficial or harmful. Perhaps this is the main problem. The brief answer to how cybergrowth will influence Latin American cities lies in one word, unpredictably.
In the past, a lower level of dependence on international trade and foreign investment and greater protection against international competition for local industry and agriculture gave a certain autonomy to national governments. The state was able to take decisions that are no longer possible. It is true that a more integrated world economy provides more opportunities for competitive Latin American companies to sell abroad but reduced levels of protection mean that inefficient Latin American companies go out of business. Some cities do very well while others fare rather badly. And, within those cities, some people make fortunes while others lose their jobs and even their pensions.
During the last 30 years the volume of international trade has increased dramatically but the volume of foreign direct investment had grown much faster. Foreign investment has established new manufacturing facilities in formerly far-flung parts of the globe, the expansion of maquila plants on the Mexico-US border being the classic example. Foreign companies have also invested heavily in producer services. The spread of major international hotels, communications, transport, accounting and banking systems has been impressive. Most notable of all has been the expansion of electronic financial transfer systems and the emergence of 24-hour trading practice
Unfortunately, there has been a downside to the new openness, illustrated dramatically by the events that were triggered in Mexico in December 1994. From paragon of neo-liberal virtue, Mexico's economy changed overnight into a basket case. A combination of guerrilla activity in Chiapas, an increasing balance of payments deficit, a new president with less than deft political touch, and a bungled devaluation caused portfolio funds to flood out of the country. Mexico lost some US$4 billion dollars trying to maintain the value of the peso. The Mexico City stock market dropped in dollar terms by 50 per cent and perhaps a million jobs were lost during 1995.
Globalization meant that the damaging impact of this loss of confidence was not confined to Mexico. The so-called "Tequila effect" hit stock markets and foreign exchange markets throughout the region. In the three weeks after the Mexico peso crisis of December 1994, the São Paulo stock market fell by 34 per cent and that of Buenos Aires by 29 per cent. The new global financial community, with its reliance on the latest communications technology, reacts instantly to any local change in political or economic expectations. Mere hints of a change in interest or exchange rates send billions of dollars cascading around the financial circuits.
Not only the changing rules of the financial system but the whole process of international competitiveness seems to encourage volatility. Comparative advantages tend to be a fleeting phenomenon; one day, Brazil may be producing most of Latin America's cars, the next day it may have lost its competitive edge because of a shift in the external value of the real. Internally, a crisis such as Mexico's can plunge domestic production into turmoil.
Poverty and Inequality
The new international trade regime both creates and destroys domestic jobs. In Mexico, it has created employment along the border with the United States while creating unemployment in Mexico City and Guadalajara. In Colombia, cheap imports from China have undermined the clothing industry of Medellín while creating opportunities for exporters in Bogotá.
In the process of restructuring the labour market, globalization has accentuated already marked levels of inequality, what Mittelman aptly calls a "life is marked by a deepening divide between rich and poor."* The qualified are more likely to get jobs, the unqualified less likely. Newly created "professional" jobs in the largest cities are available only to those with relevant skills. Those lacking university education or technical skills cannot expect to gain access to highly paid forms of employment. The poor, benefit only insofar as these jobs create more work in lower paid activities.
* J. H. Mittelman, "The globalization challenge: surviving at the margins," Third World Quarterly 15, 427-43, 1994.
Consumption and the International Demonstration Effect
In Latin America, the desire of most households to become global consumers has been whet by the ubiquitous television set and by the advertising campaigns of international companies. Latin Americans now crave Walkmans, Levi's, Big Macs and visits to Disney World. Unfortunately, the wish to buy "sophisticated" products and services is not the same as the ability to do so. With the value of local currencies often falling spectacularly against the dollar and with real incomes falling in many countries, the masses are frustrated in their desire to buy the new products. Rising levels of crime are possibly one manifestation of that frustration.
Of course, the degree to which Latin American consumption has followed international trends varies considerably from place to place. Tijuana is much more international La Paz, both because it is on California's doorstep and because it is much more affluent.
The Nature of the State
Globalization has demanded that the Latin American state remove many of the controls that it painstakingly instituted during the phase of import substitution. Liberalization required that governments reform themselves, a shift further encouraged by the drift toward democratic government that occurred in Latin America during the 1980s. Many of these new administrations embraced the ethos of decentralization and participation. They tried to reduce centralized control and give a stronger voice to the majority of the people.
Unfortunately, the combination of economic decline and administrative decentralization did not always improve living standards. Whereas more authority was given to municipal and provincial governments to run services such as water and electricity, few resources came with the new responsibilities. One of the clear advantages of decentralization for central governments is that democratically elected local leaders now take the blame for the non-provision of services.
Globalization has also brought greater competition between cities and regions. Latin American governments have been forced both to make their economies more competitive and to woo foreign investors. In the process, each Latin American city has been restructuring itself in an attempt to make itself more appealing to foreigners, particularly those with high-level business or diplomatic credentials.
If that process is not necessarily harmful to local populations, one form of international salesmanship is. Too often, local authorities are either fuming a blind eye when companies pollute the environment or promising to clear up the mess if they do. Again the example, par excellence, comes from the US-Mexico border where the development of maquila plants has produced serious environmental problems.
Despite the fears expressed by some, in practice, I am not sure that there has been any generalized rise in social protest in Latin American cities as a result of globalization. Indeed, for me one of the strangest features of political life in Latin American cities during the 1980s was how placidly most Latin Americans accepted structural adjustment. There were riots in some Brazilian, Mexican, Peruvian and Venezuelan cities but, in general, the poor did not protest a great deal. Indeed, the recent election successes of presidents Cardoso (Brazil), Fujimori (Peru) and Menem (Argentina) suggest that the poor are prepared to reward the instigators of tough macroeconomic policies for removing the "poverty tax" of inflation.
No doubt the global reach of the media produces some kind of international demonstration effect. If they can riot in Caracas why not here in Mexico? But, on the whole, the whole process has met with surprisingly little protest. In the poorest neighbourhoods, the poor have been too busy working longer hours to make up the family budget to protest. Globalization may have created objective conditions under which protest should have appeared, but, so far at least, there are relatively few signs of its having done so.
Most Latin American offices have embraced computers warmly. Many homes have mobile phones, videos, personal stereos, laptops and modems. Whether this has improved the quality of life in Latin American cities is uncertain. What is beyond doubt is that cyberspace has changed them. The globalization that cybergrowth has generated has both offered the potential for improvement and has created grave dangers.
A critical danger is that globalization brings with it both higher expectations and higher uncertainty. Advertising encourages poor families to expect their own car but their jobs may disappear as a result of decisions made in offices thousands of miles away. What is particularly worrying about cyberspace is how quickly decisions are made and their consequences diffused across space. The spectre of what happened in Mexico in 1994 now hangs over Latin America. If a paragon of neoliberal orthodoxy can be fumed so quickly into a basket-case, where will disaster strike next? Perhaps this is the greatest danger in the new global era. A botched devaluation, a peasant uprising or the election of a leftwing leader may suddenly hit international confidence. The confidence achieved through years of hardship and economic reform may be swept away in a few days. And, when international confidence is damaged, one can be sure that it will be the poor and the middle class who will pay most of the price. In this age when making money is again regarded as a noble ambition, equity ranks low among the aims of most Latin American governments. Whatever the future holds for Latin America, therefore, it is likely to be less stable and less equitable than in the past. Given Latin America's past record, that hardly constitutes grounds for real optimism.