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Home Opinion Reflections on the centre left in two continents
Latin America • Europe • Progressives

Reflections on the centre left in two continents

Andrés Velasco - 03 December 2015

The Latin American centre left has been able to craft an alternative approach that avoids the gloom and doom observed in Europe

For many of the big issues and challenges in progressive politics today, there is a real contrast between how they are seen in northern Europe and what they look like from Latin American countries such as my own. I would like to reflect on some of the successes and failures of the centre left in Chile, and on how social democrats in Europe and Latin America can learn from each other.

Clearly, the context for centre left politics is different on each continent – most obviously in the level of per capita income, although here one should be wary of exaggeration: to take Greece as an example, its per capita income was only 25 per cent above Chile’s before the crisis, and today could well be the lower of the two. A more significant contrast is that Europe has been in a fiscal crisis in the past few years, whereas Latin American countries faced their fiscal crises back in the 80s, so fiscal issues are less dominant today. Finally, whereas there tends to be one established social democratic party in most European countries, this is not the case in Latin America, where party systems are more fluid.

Nonetheless, many of the issues faced by social democrats in Europe have parallels in Latin America.

For a start, the Latin American centre left is also under attack from populisms of right and left. In this sense, the political challenge is very much the same. And just as in Europe, in Latin America there is growing distrust of established political parties and established institutions. And again much as in Europe, in Latin America cultural issues are gaining political salience. While immigration is not (yet) a major issue, questions like abortion, marriage equality, and drug policy most definitely are.

In the end, the big challenge for parties of the centre left is the same regardless of country or continent. It is the challenge to reconcile the competing imperatives of equity, fairness, and redistribution on the one hand, and the need for reform, growth and modernisation on the other.

Listening to social democrats across Europe, the impression I get is overwhelmingly one of gloom – rather too much gloom in my opinion. For them, politics seems to be dominated by two presumptions: one economic and the other political.

The economic presumption is that the defining economic issue of the day is austerity. The right favours austerity, the left opposes it, and this division colours political discourse. A common corollary is the idea that since the financial crisis has led to popular distrust of the market economy, and so to be on the left means taking a somewhat anti-capitalist stance.

On the political side the presumption is that society is divided between a socially conservative working class and a liberal professional class, and this creates an unsolvable problem for the left, whose traditional working class base is opposed to the liberal values of its more cosmopolitan leadership.

From the perspective of the Latin American centre left, these presumptions could not be more wrong. Some of the successes of progressive politics both in Chile and across our continent make this clear.

For a start, in Chile (as in many other Latin American countries as well as in Scandinavia) we have been able to redefine the terms of debate: fiscal responsibility a progressive cause. One of my proudest days in politics was when I heard my boss, President Bachelet, a woman of the left, a socialist, an exile, and a symbol of resistance against Augusto Pinochet, get up and give a speech in which the crowning line was just that – ‘fiscal responsibility is a progressive idea’.

Why? Because when you get fiscal policy wrong, and things blow up, who suffers most? The poor. The people who have suffered most in Greece are not the Greeks who have their money deposited in the City of London, but the poor Greeks whose pensions have been cut or who have lost their jobs entirely.

In Latin America the trauma of painful fiscal crises in the 80s made it possible to argue that the first task of centre-left administrations was to show that we could manage our affairs in an orderly fashion. While adopting a fiscal rule and running surpluses was politically difficult in the short term, it meant that when Lehman Brothers went under, in Chile we were sitting on nearly $30bn of cash with a gross public debt of only three per cent of GDP. This meant that in response to a possible recession we could go on a spending spree that would have made Keynes blush.

We launched one of the most ambitiously counter-cyclical fiscal policies in the world, shifting from a surplus of eight per cent of GDP to a deficit of nearly five per cent in one year. President Bachelet left office in 2009 with an 82 per cent approval rating because we could say to people that we saved the money in order to spend it when they needed it most. We spent that money on transfers to households, on emergency house building programs, and on emergency public works programmes. As a result, while the economy did take a hit, the crisis lasted only six or seven months. In Chile we had only two quarters of negative growth; in contrast, Spain had six years of crisis.

Our example shows that it is possible to redefine the fiscal issue in a way that is progressive and economically sound. Of course, being able to run a counter-cyclical policy in crisis situations requires the pain of having saved and repaid debts earlier. To be Keynesian in the down part of the cycle one also has to be Keynesian in the up part of the cycle, saving during booms in order to be able to dis-save during recessions.

In Latin America we also have been able to argue that globalisation, if handled property, can be a positive force. Chile has 54 free trade agreements with countries collectively accounting for 82 per cent of world GDP. These agreements have paid off in terms of exports, jobs and economic dynamism. Obviously the politics of globalisation is easier in middle income nations than rich nations, since there is no point in protectionism if you do not have a large industrial base to protect. But still it is remarkable that today if you took a random taxi cab in any major city in Latin America and asked the driver ‘are free trade agreements good for you?’ the chances are that taxi driver would probably say yes – a very different answer to what might be expected in most places in Europe.

Finally, in Latin America at times we have managed to construct a core political constituency around progressive policies that do not cost money. For us the first such measure was achieving the return to human dignity associated with recovering democracy: people understood it to be an achievement and it gave the center left a good deal of political capital. More recently, strong anti-monopoly / pro-competition policies, strong consumer protection and anti-discrimination policies in the labour market have played a similar political role. They appeal to the concepts of openness and fairness that are key to any modern left-of-centre approach.

In these three broad ways, the Latin American centre left has been able to craft an alternative approach that avoids the gloom and doom that one observes in Europe.

It would be unfair, however, to overlook the areas in which we have failed.

First, in the same way the left in English speaking countries underestimated the need to regulate the financial sector, in Chile and Latin America we underestimated the need to hold the businesses that run many of our public services accountable for the quality of those services. In Chile and Latin America public services including electricity, water, phones and even roads were privatised. People are not upset by the conceptual public-private difference but they do resent failures in the quality of service they get. If your phone company at the end of the month charges $100 for calls you never made, in Chile you would have real trouble getting those charges off your bill, even after queueing in this office and that. This is a trivial example. There are dozens of more serious ones, which causes people to feel they have been abused by private companies because the regulatory framework is not stringent enough.

The second failure is that we have not pulled off the Danish success of redefining what a progressive labour market policy ought to be. I tried this when I was a minister, going to Denmark in what for Chile was a highly publicised trip. We talked about flexicurity, told people that we needed to protect workers and not jobs, and that we needed to beef up insurance and not necessarily subsidies, but we did not get anywhere. In fact the current government of Michelle Bachelet is doing a rather traditional union-oriented (as supposed to flexicurity-oriented) labour reform. This is a real problem in a country like Chile where the failings of the labour market are particularly harsh on women and the young. The overall unemployment rate is not too bad, but the unemployment rate for women and for young people is two and even three times the national average.

In fact, the very skewed income distribution in countries like Brazil, Chile, and Colombia is in large part accounted for by differences in access to jobs. To give a concrete example: in the rich parts of Santiago there are on average 2.5 jobs per household, while in the poor parts the average is 0.5 – that is to say that you have to put two families together to get one steady income. These statistics make it clear that low-income families will remain poor essentially regardless of wage levels because they only on average have half an income in contrast to two-and-a-half incomes on average for wealthy families. Without a new approach to the labour market, closest to what the Scandinavians have done, quality jobs for women and young people will remain scarce. But the politics of reform and moving toward that new approach are nearly impossible.

Failure number three is what I would call the legitimacy-of-democracy failure. With citizens distrustful of political institutions, politicians are seen as all alike. Any legitimacy that might have accrued to politicians by virtue of being on the center left has pretty much been wiped out. Add to that a slew of controversies and scandals over campaign finance in Chile, or the Petrobras scandal in Brazil, and in the eyes of the public their worst fears about politicians seem to have been confirmed. A poll done in Chile last year asked people which profession they respected most. While the top answer was of course football player, at the very bottom were business leaders, judges, Catholic priests, and last of all members of parliament with only four percent approval. This is not good for the future of democracy in the region.

So to conclude, from a Latin American perspective there are some reasons for optimism, some things to feel proud of, but also a few politically difficult areas in which there has been more failure than success. We still find inspiration in the kinds of ideas that were first put together in Europe. We still see Tony Blair and Gerhard Schröder as examples to follow. Yes Schröder wore very expensive suits and smoked cigars; yes Tony Blair started the wrong war at the wrong time. But their ideas are still worth pursuing. And, as Matteo Renzi has successfully shown, you can do so and be politically successful, getting 40 per cent of the vote or more.

Andrés Velasco is a professor of Professional Practice in International Development at the Columbia School of International and Public Affairs. From 2006-10 he served as finance minister of Chile under President Michelle Bachelet

This is a contribution to Policy Network's work on Party Politics, Government and Elections .

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The Policy Network Observatory promotes critical debate and reflection on progressive politics. It is centre-left orientated but determinedly challenges social democracy. It is pro-European but restlessly questions EU institutions and practices.

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