I apply the name homegrown orthodoxy to this type because its associated ideotypical trajectory during the commodity boom years essentially embodied the continuation of an orthodox neoliberal approach to policy. Much the same may be said, in broad terms, of the donor-dependent orthodoxy type discussed in chapter 8, though the HO formation lacks the distinctive variety of donor-driven continuity seen in the DDO cases. Instead, the persistent neoliberalization observed in Peru, Colombia, South Africa, and Indonesia (though not in the special case of Jamaica), while heavily influenced by engagement with international financial institutions, is essentially domestically derived and homegrown, eschewing the need to demonstrate “ownership” of the program in the manner of the DDO type.
As with the other types we have considered, I ascribe the course steered by HO cases since 2003 to the relative strength of particular social forces on the domestic scene. Rather than the inertia encountered among DDO governments whose interests tended to lie in acquiescence to donor priorities, relatively strong, externally oriented local capitalist fractions themselves ensured the survival and extension of neoliberalism in HO states. Peru, South Africa, Colombia, and Indonesia experienced the same takeoff in prices for their major exports as were seen across resource-rich states in the global South, and they were thereby presented with the same opportunities to draw upon favorable global circumstances as a material base for a change of political-economic direction. These states, therefore, possessed similar levels of potential policy autonomy as others but chose to maintain their neoliberalizing course.
Jamaica stands as an exception to this schema but is nevertheless included as part of the HO type due to the shared features of its continuing neoliberalization. Jamaica serves as an extremely useful counterfactual illustration of a central argument of the book—that a high export concentration in those natural resources subject to rapidly rising Chinese demand during the boom was a necessary condition for departure from neoliberalization—because the Caribbean island is unique among all typology cases in being dependent upon a natural resource export sector (bauxite/alumina) in which Chinese import demand growth was comparatively slow over the boom years. As we will discuss, without the demand pull from the People’s Republic of China, prices for aluminum (for which bauxite/alumina constitutes the raw material), unlike those for other metals, were relatively flat over the course of the commodity boom.
As a result, the case of Jamaica presents an opportunity to examine a resource-rich, highly indebted Southern state whose major export markets were not subject to the China effect. In many senses, global market conditions for Jamaica continued as though the rise of China had never occurred.1 It is therefore particularly significant that, in the absence of any China effect on bauxite/aluminum exports, Jamaica continued to struggle under one of the heaviest debt burdens in the world and subsequently committed to an International Monetary Fund program that demanded annual budget surpluses equivalent to 7.5 percent of gross domestic product (Johnston 2015).
While Jamaica is a crucial case in this respect, its neoliberal orientation is still shaped primarily by external forces and constraints, with little likely hope of any alternative political-economic program emerging while this remains the case. For this reason, I also provide a longer treatment of Peru in this chapter as a more appropriate exemplar case of the HO type. One important characteristic of the HO type is continuing neoliberalization under the direction of transnationally oriented domestic groups, despite conditions in resource export markets offering the potential to set a different, non-neoliberal developmental agenda.
After this introduction, I will explore in more detail the rationale for the use of Jamaica as a counterfactual case, examining the differences between bauxite/alumina/aluminum markets and those for comparable metals, particularly copper, during the commodity boom. I will then demonstrate how these divergent market conditions have translated into a lack of opportunity for Jamaica to break with externally imposed neoliberal discipline, whereas HO cases have been presented with this opportunity as a result of their hugely positive export performance. After looking at the circumstances of these countries’ insertion into the world economy, I then turn to the course of domestic politics. I discuss postindependence developmentalism in Jamaica, Michael Manley’s attempt to install a form of democratic socialism, and then the impact of the debt crisis and pressures to neoliberalize. Next, I provide an account of Jamaica’s struggles with debt in recent years and the rather desperate level of dependence upon multilateral creditors that resulted. I pay particular attention to the bauxite industry here.
Thereafter, I move to a somewhat lengthy account of the Peruvian case. This level of depth is provided for two reasons. First, Peru is presented here as the exemplar case of the HO type. Second, the trajectory of Peru, unusually among the typology cases, includes an attempt by a (purportedly) radical leader to capture the state and to apparently lead Peru along a distinctly non-neoliberal direction of travel, perhaps akin to that of Chavez’s Venezuela or Morales’s Bolivia, though this did not materialize in practice. The narrow loss by Ollanta Humala in the 2006 Peruvian presidential election was then followed by a successful presidential bid in 2011, by which point Humala had shed much of his chavista rhetoric and policies. In office, his administration did little to slow Peru’s neoliberalization. Peru, therefore, provides an opportunity to analyze a “near miss” in terms of post-neoliberal turns among commodity exporters.
Finally, I summarize the political-economic trajectories of South Africa, Colombia, and Indonesia. In the case of South Africa, democratization, in 1994, was secured on terms favorable to large white capital, which had steadily shifted toward (often illicit) externalization during the period prior to the end of apartheid. Under African National Congress (ANC) rule, and with the gradual lifting of capital controls, the integration of the old bourgeoisie with its transnational counterparts accelerated, together with an acceptance of black capital into the fold. In spite of the socialist roots of the ANC and continued rumblings from its leftist elements (and allies), postapartheid South Africa followed an overall process of neoliberalization that favored a dominant and increasingly financialized fraction of capital. Price increases in South Africa’s export commodities prompted calls in some quarters for the nationalization of mines, but despite the increasing use of the developmental state trope on the part of the Zuma administration, the commodity boom did little to disturb the South African trajectory of liberalization.
The history of Colombia in recent decades, sadly, has been dominated by conflict between guerrillas, paramilitaries, and state forces, which adds a heavily securitized spin to Colombia’s neoliberalism. Colombia is a relatively late liberalizer, and support for the neoliberal program has been bound up in the ongoing conflict and the consequences of the cocaine trade. Most domestic capitalists are enthusiastic supporters of liberalization, and even initially resistant traditional landowners have come on board, convinced, in the context of the internal conflict, of the need to maximize foreign investment—particularly in extraction—as a means of funding huge security expenditures.
Indonesia entered the commodity boom only a few years after the Asian financial crisis of 1997–1998, which had brought a $40 billion IMF agreement and the fall of the thirty-one-year New Order dictatorship under Suharto. A state-incubated capitalist class, comprising mainly ethnic Chinese–owned conglomerates and their allies in the bureaucracy, had begun to externalize and to become increasingly integrated with multinational capital during a period of selective liberalization in the 1980s and 1990s. Most of these business groups were able to rely on their connections to the state to ride out the late 1990s crisis with their economic and political power intact, with networks of influence now reconfigured around the new democratic landscape. A continuing, if ambivalent agenda of neoliberalization over the period broadly suited leading sectors of capital (particularly, though not exclusively, ethnic Chinese), especially when contrasted with occasional calls for an economic nationalism framed in terms of redistribution toward pribumi (indigenous) business.
In an important sense, the case of Jamaica does not properly merit inclusion in the typology of extractive regimes presented here. Indeed, the country stands as an important exception to the observed trend of markedly improved circumstances of insertion into the global economy for resource exporters during the commodity boom, which is extremely useful in demonstrating the centrality of Chinese demand to this effect. Bauxite, the ore from which aluminum is produced, has been a major Jamaican export since before independence, in 1962, and Jamaica today certainly meets the criteria for resource dependence in terms of export concentration, with bauxite and alumina together accounting for more than half of exports, from 2002 to 2008, before dipping but remaining above 40 percent throughout the boom years (Observatory of Economic Complexity n.d.).
However, though Chinese aluminum consumption has risen, broadly in step with other metals, the PRC’s continued ability to mostly meet this demand through domestic sources meant that its total imports of bauxite/alumina, compared to most other hard commodities, were relatively small for most of the period.2 This can be seen in figures 9.1 and 9.2. Figure 9.1 shows the value of the PRC’s total annual imports of copper and aluminum (including bauxite and alumina) ores and concentrates.3 The overall shape of import demand in aluminum ores and concentrates broadly matches what would be expected during the commodity boom—an upward trend begins in 2002, with a dip in 2008, followed by a recovery beginning a year later, as China’s stimulus program began to kick in. It is clear, however, that, when compared with copper ores, aluminum import demand growth was proportionately small over the course of the commodity boom. Figure 9.2 compares finished copper and aluminum; although Jamaica does not produce finished aluminum, a link between demand for processed aluminum and its raw materials would be expected.4 Here, the difference in growth of Chinese import demand between the two commodities is even more stark.
Figure 9.1 China copper and aluminum ores and concentrates imports (in billions of dollars), 2000–2014. Calculated from Chatham House Resourcetrade.earth database.
Figure 9.2 China copper and aluminum imports (in billions of dollars), 2000–2014. Calculated from Chatham House Resourcetrade.earth database.
That these contrasting trends in Chinese imports should have a large differential impact upon global markets for the respective metals is unsurprising. From 1997 to 2017, China accounted for 80 percent of global demand growth for metals (World Bank Group 2018b), and by 2014 the country’s share of world consumption was around half for both copper and aluminum (International Monetary Fund 2015). Importantly, however, a much greater share of China’s increasing consumption of aluminum could be met with domestic sources—indeed, the country was actually a net exporter of aluminum until 2007 (Farchy 2011). Figure 9.3, showing movements in both copper and aluminum prices on the London Metal Exchange, provides a picture that is entirely expected, given the combination of differential import demand from the PRC and the weight of China within the global market.
The relatively moderate price movements seen in aluminum markets over the commodity boom are helpful in demonstrating the counterfactual scenario of how prices in other metal markets might have changed over the commodity boom years in the absence of high levels of Chinese import demand. Without the demand pull from the PRC, bauxite/alumina, and by extension Jamaica, has undergone a commodity “boom” that is a pale shadow of that experienced in other markets and countries.
Figure 9.3 Aluminum and copper price indexes, 2000–2015. Calculated from World Bank, Commodity Price Data—Pink Sheet Data.
Jamaica, then, presents an opportunity to examine a contemporary resource-exporting state in which the China effect has occurred only weakly, if at all. As would be predicted, the result was a continuation of pre–commodity boom conditions and therefore little change in the neoliberalizing trend. In the absence of increased state bargaining power over the natural resource sector, the buildup of fiscal resources that in other states provided the key to (relative) policy independence from IFIs, capital markets, and donors was not possible. With a debt-to-GDP ratio of some 140 percent in 2013 (International Monetary Fund n.d.), contemporary Jamaica is certainly more dependent on the IFIs than any of the other states considered in this typology—perhaps more so than any other state in the world.
The other cases considered in this chapter also mostly continued in the neoliberal mold, in spite of their benefiting from largely China-driven demand and price hikes for their resource exports. Why, then, is there any reason to believe that differences between the bauxite market and those for other commodities prevented Jamaica from taking an alternative course, when others without this apparent constraint also failed to do so?
Juxtaposing Jamaica’s trajectory with those of the HO states should help to answer this question by illustrating that, in the Jamaican case, the relevant constraint continued to be located in the transnational—in the circumstances of insertion into the global economy. In Peru, Colombia, and South Africa, however, external circumstances presented no such barrier. While the road away from neoliberalization was thus ostensibly open in these cases, internal drivers, particularly the relative strength of transnationally oriented domestic capital, were the main factors in explaining the persistence of their neoliberal trajectories.
This differentiation between Jamaica and the other HO cases, in terms of external constraints resulting from wildly divergent conditions in their export markets, is relatively easy to demonstrate through, for instance, changes in the purchasing power of exports from South Africa, Peru, and Jamaica, as shown in figure 9.4. From 2000 to 2002, Jamaica’s export purchasing power declined, though not precipitously, and indeed was higher, in proportional terms, than that of South Africa in 2002. With the beginning of the commodity boom, however, strong trends of increasing export purchasing power in South Africa and Peru were not matched in the Jamaican case. Some pickup occurred for Jamaica by 2007, but the 2008 crash coincided with a rapid falloff between 2008 and 2009, subsequent to which, with several mining operations shuttered (as we will discuss), there was little in the way of recovery.
Figure 9.4 Colombia, Jamaica, Peru, and South Africa export purchasing power indexes.
Note: Jamaica data is not available for the years 1995 to 1999.
Source: United Nations Conference on Trade and Development, UNCTADStat data center.
South Africa and Peru, by contrast, followed the more expected commodity-boom path of rapid improvement after 2003, with a dip after 2008 and then strong recovery to 2011. In line with prices in most hard and energy commodity markets, the two states’ export purchasing power then declined somewhat but, until 2013, nevertheless remained above levels seen prior to the global financial crisis. Peru, in particular, saw huge gains in its export sectors, caused not only by price increases in its main natural resource sectors of copper, oil, and various other base metals (as well as gold) but also by a 2,700 percent increase in mining investment from 2002 to 2012 (PriceWaterhouseCoopers 2013). The opening of Peru as a major resource frontier appears to have continued apace through the whole period, with an estimated $57.4 billion of projects either under construction or awaiting approval in 2013 (Gacs 2014). One-quarter of this total was made up of ventures by Chinese firms, particularly in copper, and the PRC accounted for 17 percent of Peruvian trade in 2012.
In contrast to the other HO states, an exploration of Jamaica’s path of persistent neoliberalization through the boom years depends principally upon a mapping of those external constraints that have done the most to determine this trajectory. As is typical for states considered in this book, these constraints primarily consist in the relationship between commodity prices, indebtedness, and the ability of creditors and investors to impose policy discipline. In common with most other cases included in the typology, the origins of neoliberal constraints lie in negative trends in the first two of these factors, from the 1970s on. The fundamental difference between Jamaica and any other case is the lack of sufficient positive change in commodity prices (in Jamaica’s case, in bauxite prices) during the commodity boom years. Without the bargaining power that this afforded other governments, the Jamaican state was unable to extract better terms from investors in the mineral sector, leaving it with no capacity to build the fiscal base that, in other states, greatly diminished their reliance upon creditors.
As with many commodity exporters, the roots of Jamaican indebtedness lie in the 1970s. Following—and even prior to—independence in 1962, Jamaican developmentalism had, in Lewisian fashion, concentrated on promoting labor-absorbing basic manufacturing while encouraging foreign investments (Findlay 1980).5 Ensuing growth brought with it both increasing inequality and a much larger constituency of urban poor, setting the scene for the 1972 election victory of Michael Manley’s People’s National Party (PNP). Though the PNP, much like the opposition Jamaica Labour Party (JLP), had stood on a classically vague populist platform, once in office, Manley declared a democratic socialist approach that became more radical in rhetoric (and, to some extent, in policy) over the following years (Huber and Stephens 1992).6
Initially, Manley’s appeal to economic nationalism, arguing for greater state intervention in pursuit of self-reliance, was able to win the approval of domestic capital, in spite of the imposition of property taxes to pay for social spending and redistribution. A new levy on bauxite exports was also key, upping the government’s take from $27 million in 1973 to $180 million the following year (Davies 1986). In this context, the 1973 oil shock had ambiguous consequences, raising the price for Jamaica’s ore exports, though by proportionately less than for the country’s energy imports.
An increasingly friendly relationship between Manley and Fidel Castro served to alienate both the United States (for which Jamaica was a major source of bauxite) and Jamaican business. This, coupled with rising taxes, drove a first round of emigration and capital flight as well as resulting in a suspension of U.S. aid and a drop in tourist revenues from North America. As in many Southern states, easily available loans were used to compensate for these problems and to finance the continued rollout of social programs and support for local industry, with the capital requirements of such spending itself being a net drain on foreign exchange.
In an increasingly polarized political scene, Manley was able to convincingly win the 1976 election by mobilizing the PNP’s urban base on a more radicalized platform. By this point, however, and with falling bauxite prices, the IMF was called in to cover the deficit problems, resulting in loan agreements signed in 1977 and 1978. Though the first of these was relatively benign, the second agreement demanded severe austerity measures, combined with the stipulation that further disbursements would be predicated upon Jamaica meeting stringent performance targets. It seems very likely, as has been argued, that, given both poor relations between the fund and Manley and U.S. concern over the government’s leftward drift, these targets were made purposely unrealistic, both as a punishment and with the goal of weakening the Jamaican position during negotiations over further agreements (Bernal 1984; Bissessar 2014).7
In early 1980, the Jamaican government gave up on negotiating with the IMF. By this point, though, precipitously declining standards of living—due in great measure to the combination of imported inflation and repeated currency devaluations—had undermined support for the PNP, giving Edward Seaga’s JLP an easy path to a landslide victory in the 1980 election. Seaga had cultivated relations with the United States and the IMF even while in opposition, and the fund certainly dealt more leniently with the new JLP government in an effort to make Jamaica a “showcase of capitalist development in the Caribbean” (Stone 1985) at a time of reescalating Cold War tensions in the region.
Seaga’s own preference seems to have been for a brand of economic nationalism not entirely removed from that of Manley’s early years. As Huber and Stephens (1992) detail, the state’s participation in the economy actually increased over the 1980s, though this was combined with a thorough opening of domestic markets to imports, with the ensuing deficits being covered by further rounds of debt. The IMF, in turn, gradually upped the levels of conditionality, with more devaluations placing Jamaica firmly onto a debt-dependent path by the 1990s. Increasing neoliberalization prompted a general strike in 1985, but its defeat, combined with increasing unemployment, weakened the trade union movement significantly, along with the left wing of the PNP.
When the PNP eventually returned to government, in 1989,8 the scale of the debt burden was such that there appeared to be little alternative to continuing austerity and neoliberalization, even if a path independent of the IFIs was forged. Jamaica, in fact, gives a rare and important illustration of the sheer extent of policy constraints faced by a highly indebted middle-income state in the 1990s, even for a government ill-disposed to working with IFIs. The long-standing rancor between the PNP and the IMF led P. J. Patterson’s government to make a decisive break with the fund in 1996, though from 1992 onward there had been efforts made to shift the debt burden toward domestic bondholders (Johnston and Montecino 2011).9 These moves allowed the government to set policy free of direct conditionalities, and the 1990s did see an increase in infrastructure spending, and some attempts to alleviate poverty, coinciding with a period of increased foreign direct investment. Nevertheless, even shorn of any direct policy impositions, Patterson’s program essentially mirrored contemporary instances of so-called adjustment with a human face (Cornia, Jolly, and Stewart 1989) carried out elsewhere under IFI supervision.10
A second leg of the PNP strategy was the creation of a new domestic black business class (Robotham 2000).11 This is somewhat comparable to the approach taken by the ANC governments in South Africa. In the absence of any feasible options for significant redistribution to the poor,12 who formed the base of PNP support, the PNP attempted to create a new bourgeoisie from the majority ethnic group, thus appealing to a cultural politics of aspiration. Though the vast majority of Jamaica’s population identifies as black, political and economic power have, since independence, tended to lie with a “brown” (multiracial) elite.13 Many members of this multiracial group, however, had emigrated during the 1970s and 1980s. As the state payroll contracted over the same period, large numbers of black public sector professionals began to take on management—and then, increasingly, ownership—positions in the private economy.
At the same time, the further round of liberalization that occurred after 1989, which Robotham (2000) connects explicitly with the rise of the upwardly mobile black middle classes within the PNP, had the contradictory effect of concentrating capital in the hands of the remaining brown elite, who still controlled greater sums of capital and were therefore best placed to benefit from initial privatizations. When Patterson replaced Manley in 1992, loose monetary—and, to a point, fiscal—policy was implemented, with one goal being to promote the nascent black capitalist class. New black-owned financial institutions grew rapidly, combined with a redirection of government contracts and privatization deals away from the “brown” bourgeoisie.
High levels of inflation prompted the government to hike interest rates by 1994. Though the period of monetary stimulus had ended, a highly deregulated financial sector continued to grow—largely, it appears, feeding on the government’s preference for domestic borrowing, which would then be recycled through linked instruments offered to private investors. With banks competing to offer better—and increasingly unrealistic—returns to depositors, the sector had unsurprisingly tipped into crisis by 1998, leading to a government bailout, which was responsible for the majority of the 71 percent increase in debt-to-GDP ratio seen between 1996 and 2003 (King and Richards 2008). The nationalized financial firms were then sold off, overwhelmingly to investors from the United States, Canada, and other Caribbean states.
With a return to the IMF being politically difficult, given the strength with which Patterson had repeatedly denounced the fund, the government attempted to meet its now much larger interest payments by upping consumption taxes, which was met with widespread rioting in 1999 and sealed the PNP’s fate at the next election, in 2002. With the black embourgeoisement project thus derailed, JLP governments of the 2000s continued to pursue a homegrown neoliberalization under the weight of debt and a lack of other viable options.14
The attempt to forge a path independent of the IMF and to establish a black capitalist class had, if anything, ended in massive levels of indebtedness to a foreign-owned financial sector and a bondholder elite whose priorities were squarely in line with those of the IFIs.15 From 2000 to 2010, in spite of running primary surpluses in excess of 5 percent of GDP every year, Jamaica posted a net fiscal deficit and saw its annual interest payments rise to as high as 17 percent of GDP (Johnston and Montecino 2011). The result, in effect, was a continuing and substantial redistribution upward, strengthening the bondholders at the expense of any real hope for economic recovery.
The fallout from the 1990s financial crisis heaped a further round of fiscal obligations onto Jamaica, above and beyond the levels of indebtedness seen in any other cases examined in this book. Since this occurred prior to the onset of the commodity boom, it is difficult, counterfactually speaking, to establish whether, had the boom in bauxite prices matched those seen in other minerals, conditions in Jamaica may have been propitious for a commodity-bankrolled break from neoliberalization, in the 2000s. Quite apart from the exceptionally high debt burden, the relative weight of domestic compared to foreign debt surely is significant in this regard.16 It is certainly plausible to suggest that a plan to increase natural resource revenues under boom conditions might appeal to creditors’ desire for a fiscally solvent state.
Mirroring the economy as a whole, however, the trajectory of the bauxite industry over the boom years was disappointing when compared to equivalent mineral sectors elsewhere.17 As with Zambia’s copper (discussed in chapter 8), state holdings in bauxite—a major source of foreign exchange, even under unprofitable conditions—had been privatized only reluctantly. Indeed, perhaps one legacy of Jamaica’s non-IMF-path neoliberalism was the persistence of public stakes in several of the island’s bauxite and alumina ventures. The state continues to own 51 percent of the Noranda bauxite mine, plus a 45 percent share of Jamalco (through the parastatal Clarendon Alumina Production), as well as holding a 7 percent interest in Windalco up to 2014. Until 2007, 93 percent of Windalco was owned by the British-Swiss firm Glencore, before Glencore’s aluminum interests were split off and merged with those of Russian firms Siberian-Urals Aluminum Company and RUSAL to create the Russian-headquartered UC RUSAL, which became the world’s largest aluminum company. UC RUSAL was also the sole owner of Alpart, formerly the biggest alumina producer in Jamaica, until it was sold to the Chinese firm Jiuquan Iron and Steel (JISCO) in 2016 (Drakapoulos 2018).
UC RUSAL shuttered the Alpart and Windalco alumina refineries in 2009, citing low demand and high production costs. There is some merit in these claims, insofar as the long history of bauxite mining in Jamaica means that the remaining deposits are relatively deep and difficult to extract, and this is coupled with the high cost of energy in Jamaica, as a function of its almost total reliance upon imported oil.18
Even so, one sectoral expert was certain in their belief that UC RUSAL was using its increasing power within the Jamaican bauxite sector to influence the government in several ways.19 In the first place, and in the short term, negotiations were begun with the government over reopening the Windalco facilities, with one of the refineries being restarted in 2010, after the government agreed to a halving of the bauxite levy. The Alpart refinery, meanwhile, seems to have been used as a bargaining chip in a dispute between UC RUSAL and the government over the public stake in Jamalco.20
With three out of four of Jamaica’s refineries remaining closed for several years, it is very evident that the Jamaican government was negotiating from a position of weakness, making concessions in order to try to guarantee the survival of as much of the sector as possible. In addition to supplying foreign exchange, and although the bauxite/alumina sector is not a large employer, the mines often are the main economic locus in their rural locations, with small businesses depending upon sales to miners.21
There is a marked contrast here with extractive industries in almost all the states surveyed in the typology over the boom years. Even under neoliberal governments in Peru, for example, royalties on mineral exports were raised, with few concerns apparently expressed on behalf of the mining firms, given continuing profitable operating conditions (Reuters 2011). In Zambia, which is perhaps an appropriate comparator for Jamaica here, given that it, too, is a high-cost mineral producer, several mines were shuttered following the global financial crisis. When copper prices rebounded to above precrisis levels, however, these mines were quickly reopened, with Chinese firms purchasing some of the ventures during the lull. In Zambia, the government did not need to offer extra concessions to firms—in fact, though a proposed windfall tax was never pursued, royalty rates on copper were later raised.22 It seems reasonable to suggest, therefore, that if Jamaica had been a copper producer, or if China were a major importer of bauxite, the sector would have been a point of strength rather than weakness for the Jamaican government, especially given the state’s direct control of parts of the industry. It is, of course, much harder to ascertain whether this would have been a tool of sufficient leverage to escape the exceptional and unusual circumstances of indebtedness seen in Jamaica since the late 1990s.
Recent Jamaican governments have attempted to mitigate the short-term domestic debt problem with two rounds of restructuring, in 2010 and 2013, which lengthened maturities and so lowered interest payments, but left the principal untouched for fear of undermining local financial institutions (Johnston 2013). In both cases, these processes were meant to allow for a reengagement with the IMF, after an absence of fourteen years. The initial agreement, signed in 2010 and requiring a new round of expenditure cuts, was suspended after a Jamaican court ruled in favor of a group of public sector employees who were demanding back pay, leading to a suspension of multilateral funding and new concerns over even short-term fiscal sustainability (Gleaner 2010).
The extent of Jamaican political change over the past two decades, as well as of the public’s sheer desperation, is rather revealed by the fact that the 2011 election was largely fought over which party would be able to secure a renewed deal with the IMF.23 Portia Simpson-Miller’s opposition PNP proved victorious and, indeed, has negotiated access to some $2 billion of IMF, World Bank, and Inter-American Development Bank funds. This came with the requirement to run a 7.5 percent primary surplus in 2013, which, as Johnston (2013) points out, in citing the IMF’s World Economic Outlook of that year, would be the highest in the world, outside of oil exporting states.24 Even after three years of hitting these targets, Jamaica’s debt-to-GDP ratio was still 122 percent for the fiscal year 2016/17 (International Monetary Fund n.d.).
Peru’s major exports include copper, hydrocarbons, lead, and zinc, all commodities which have been subject to the China effect on price movements since 2003.25 With regard to Peru, as with Colombia, South Africa, and Indonesia (but unlike Jamaica), I make the claim that (similar to the conditions under the neodevelopmentalist type, discussed in chapter 5) the political-economic agenda is shaped most significantly by a domestic capitalist class, which is relatively strong and unified and thus is able to exert a greater influence than competing (though sometimes co-opted) popular class movements. Unlike in Argentina or, to a lesser extent, in Brazil, though, the dominant segment of capital in Peru comprises externally oriented interests in finance, mining, and other export industries. The commodity boom, when it came, tended to further strengthen this fraction of capital, which already exerted a considerable influence at the heart of the state.26 Combined with a relative fragmentation of popular protest into various localisms, the result has been one of continuing neoliberalism in Peru, despite greatly expanding resource exports, which might well have financed a change of direction.
At one point, however, a post-neoliberal turn appeared plausible. A strong electoral challenge by an ostensibly radical leftist, Ollanta Humala, was ultimately unsuccessful in 2006, before he returned to win, in 2011, on a significantly moderated platform. The fact that Peru apparently almost selected a president committed to breaking with neoliberalism in 2006, but then backed the same candidate in 2011, who subsequently governed as a neoliberal, is something of a puzzle that requires rather detailed examination in order to solve.
Reminiscent of Hugo Chavez in Venezuela, Humala was an army officer who first came to national prominence after leading an abortive rebellion—in his case, during the last days of the Alberto Fujimori regime, in 2000.27 He first organized a political party in 2005, building a base through a network of army reservists and veterans, particularly in the Southern and Central Andes (the former epicenter of conflict with Sendero Luminoso, the Shining Path) and the Amazon (where the military had long played a developmental role). Though he was privately educated in Lima, Humala’s mestizo ethnicity (and indigenous surname), along with a nationalist, anti-elite, and anti-neoliberal discourse, gained him a good deal of support among low-income and indigenous voters, especially in his areas of organizational strength, which correspond to a significant degree with the poorest and historically most marginalized regions of the country (Burron 2011; Cameron 2008).
Humala, evoking Peru’s 1970s leftist military regime of General Juan Velasco as well as Chavez, advocated the repudiation of a free trade agreement with the United States, the nationalization of strategic national resources, and the election of a constituent assembly tasked with writing a new constitution. In spite of the fact that incumbent Alejandro Toledo had himself been elected on a populist outsider platform, Humala managed to portray himself as an antidote to an ossified Lima elite, referring to the government as a “dictatorship” of “traditional politicians” and even proposing the introduction of the death penalty for political corruption (McClintock 2006; Levitsky 2011).
Although it is impossible to know how Humala would have governed if elected in 2006, the political style and policy positions of his later government suggest an intention to follow a path lying squarely within the extractivist-redistributive type explored in chapter 6. The political dynamics that produced Humala’s core base of support in the marginalized southern highlands and Amazonia also bear a striking resemblance to those that propelled Evo Morales to electoral success in neighboring Bolivia. Local protests over dispossession, environmental damage from mining, and neoliberalization of public services were widespread in both cases, with the emblematic 2002 struggle against electricity privatization in Peru’s southern city of Arequipa appearing to mirror the Bolivian “water war” in Cochabamba, two years previously. The water war is widely seen as a key moment in the mobilization of social movements, which would eventually culminate in Morales’s victory in 2006 (Webber 2010).
During the same year, it appeared that Peru was moving in a similar political direction, as Humala won the first round of presidential elections, mainly on the basis of strong support in the south, the center, and Amazonia. Humala, however, then lost the runoff election to Alan García—who had promised to continue the neoliberal policies of the incumbent Alejandro Toledo—largely because of Humala’s failure to attract sufficient support from the populous slum districts of Lima.28
The failure of the protests in Arequipa, among others, to coalesce toward the kind of national momentum seen in Bolivia is most often attributed to a series of decentralization measures instituted during the early 2000s (Balbi 2008; Eaton 2011). These measures effectively shifted the locus of protest to the local level, while leaving most crucial decision-making (such as in matters relating to mining) in the hands of the central government. A handful of somewhat radical regional leaders appeared, though with few connections and little presence at the national level. Adding to this, decentralization encouraged subnational governments at various strata to compete for investment and public funds. While this system no doubt encouraged atomization, a similar structure had been in place in Bolivia since 1994, and a comparable shift toward local-level political contestation occurred there too (Kaup 2013b, 85).29 Appeals to ethnicity may well have helped overcome these obstacles in Bolivia, in contrast to Peru, which lacks both an indigenous majority and a national indigenous political party. Nevertheless, Humala’s base, drawing particularly upon the south, the center, and Amazonia, represented a constituency of marginalized indigenous and mestizo voters—analogous, if not identical, to that which underpinned Morales’s electoral success (Madrid 2011).30
Divergent electoral fortunes for the candidates spearheading these forces’ electoral bids seem to be grounded in differences in the relative strength of domestic class groups in the two Andean neighbors, and in demographic and geographic factors. In first place, the structure of Peru’s capitalist class differs from its neighbors Ecuador and Bolivia in that it is relatively unified and concentrated on the coastal lowlands, around Lima and the nearby port of Callao. Partially, this is a legacy of the long-standing political and economic primacy of Lima, in contrast to Ecuador’s rival centers of Guayaquil and Quito or Bolivia’s analogous highland–lowland fracture. The dominance of Lima, however, was further reinforced under General Velasco (1968–1974), who instituted a land reform program that, though rather botched, effectively destroyed the traditional agrarian oligarchy concentrated in the highlands.31 A powerful capitalist class concentrated on the coast emerged during the import substitution industrialization of the late Velasco years, as a result of deliberate efforts to construct a new national (and nationalist) bourgeoisie (Figueroa 2012). The fortunes of this group were then substantially bolstered during the “soft,” IMF-friendly second phase of dictatorship, in the late 1970s.
With the return of democracy, the civilian government of Fernando Belaunde-Terry (1980–1985) was primarily externally oriented, toward accommodation with the IMF and the World Bank, but the subsequent influx of foreign capital allowed a strengthening of exporters, especially the midsize mining sector, or mediana minería, who became junior partners to foreign investors and provided ancillary services at the time of the brief surge in mineral prices during the early 1980s. By now, the center of gravity for the domestic capitalist class resided in a small number of coastal-based and primarily externally oriented grupos economicos with interests in finance, mining, commerce, and agro-exports. This geographic concentration, combined with cross-sectoral spread, meant that, while the dismantling of ISI-era protections did split the bourgeoisie, with impacts felt until the 1990s, this never produced the kind of fracture that occurred in Bolivia and resulted in split party loyalties among sectors (Conaghan and Espinal 1990; Conaghan, Malloy, and Abugattas 1990).32
A radical-populist interregnum under a first presidency for Alan García, during the late 1980s, saw a serious political and economic crisis that represented the death rattle of Velasco-era national industry but also exposed an overall capitalist weakness. A concurrent collapse of the left opened space for the election of outsider candidate, Alberto Fujimori, in 1990. With an economic team heavily reliant upon technocrats with few domestic ties, the autocratic Fujimori was able to push through a radical neoliberalization that, though broadly supported by domestic business leaders, tended to favor international investors in a manner that may not have been possible under a less autonomous government.33 By the middle of the 1990s, a restructured Peruvian capitalist class, ever more tightly integrated with external capital and markets, itself began to take up the mantle of neoliberal reform through the growing weight of the umbrella trade group Confederación Nacional de Instituciones Empresariales Privadas (National Confederation of Private Enterprise Institutions, CONFIEP), several members of which served in later Fujimori cabinets (Arce 2006).
On the other side of the ledger, the neoliberal era in Bolivia effectively laid the groundwork for the worker–peasant (or, more accurately, informal sector–peasant) alliance that would eventually prove decisive for Morales’s electoral fortunes, while events in Peru during the 1980s and 1990s moved in a very different direction. The decline of the tin mining sector and the liberalization of agricultural imports in Bolivia from the early 1980s onward sparked the large-scale migration of miners and campesinos into the three main urban centers of La Paz, Cochabamba, and Santa Cruz. An ensuing growth of neighborhood organizations in urban zones such as El Alto (now considered a separate city, perched on a plateau overlooking La Paz) provided the beginnings of the structures upon which the Movimiento al Socialismo would later build.
Meanwhile, because the rapidly growing cities hardly offered much in the way of economic opportunities, a secondary migration of dispossessed peasants and miners toward coca-growing regions began (with Morales himself emerging as a leader of the cocaleros’ union) (Kaup 2013a). Concurrent local struggles against dispossession and marginalization began to snowball—against coca eradication in the Yungas and the Chapare and for provision of services in the swelling peri-urban areas. The circulation of people and continuing ties among old mining areas, informal urban settlements, and coca-growing regions, together with the organizational potential provided by both former unionized miners and appeals to shared ethnicity, allowed for initially local movements to knit together into a loose but politically powerful national movement. The issue of natural gas revenues then happened to provide a national issue, which acted to galvanize this nascent coalition toward an eventual capture of state power.34
In Bolivia, the strongest contestation of the MAS has come from the lowland Media Luna provinces, where the agro-industrialist capitalist fraction continues to wield considerable influence. This has been most notably manifested in regional autonomy movements (Eaton 2011), which, though primarily drawn from elites and the middle classes, were able to rally a degree of support from the urban poor, particularly in Tarija and Santa Cruz. To a limited degree, these developments exposed and exploited something of a split in the MAS coalition; lowland indigenous groups have been less enthusiastic followers of Morales than have their Andean counterparts.35 Nevertheless, lowland capitalists’ ability to sway poor voters during elections appears not to extend beyond these heartlands.
In Peru, mass rural–urban migration during the 1980s and 1990s had somewhat different drivers than was seen in Bolivia, but initially, at least, also showed notable parallels. The land reforms of the 1970s had created a large surplus of rural labor, now free to move in search of economic opportunity. The process of stitching together the political aspirations of the resultant new wave of urban residents and those remaining in the countryside advanced considerably faster than in the Bolivian case, given existing popular rural and urban popular organizations, which had been at least tolerated by the military governments (Roberts 1996). Indeed, as a consequence, by the early 1980s, Peru had the strongest leftist opposition in the region, with Alfonso Barrantes’s Izquierda Unida (United Left) peaking at just under 25 percent of the vote in the 1985 presidential election. Support for the United Left rested principally upon the solid dual bases of the Lima slums and the southern and central highlands. However, a combination of worsening economic crisis and the rise of the Shining Path insurgency acted to fatally undermine the United Left’s electoral prospects by the end of the decade.
The economic implosion of the late 1980s served to concentrate domestic capital and bind it more tightly to its external counterparts, although this process did not instill an internal cohesion among Peruvian capital until the coming of Fujimori’s brand of Bonapartism, in the 1990s. Conversely, the relatively large industrial workforce, which had grown during military rule, was significantly reduced in size during the 1980s, with urban popular classes being segmented into permanent, temporary, and informal sectors all possessing conflicting interests, at least in terms of the defensive, short-term strategies encouraged by the crisis (Chavez O’Brien 1992).36
Also highly significant was the advance of the Shining Path, from the early 1980s on. In addition to setting up organizational structures that competed with those of the United Left and independent popular groups, the Shining Path infiltrated rival organizations and assassinated their activists and leaders. The movement’s violence prompted widespread fear and revulsion across Peruvian society and, particularly in urban areas, has acted as a drag on the credibility of leftist politics to the present day, a factor clearly evident in the panicked reaction, among Lima’s elite and middle classes, to Humala’s candidacy in 2006.37
Given the mass killings and displacement of the 1980s, combined with the disintegration of both the structures and base of the legal left, it is hardly surprising, in hindsight, that Fujimori’s authoritarian and “antipolitics” outsider presidential bid was able to prevail in the 1990 election, setting the scene for a decade of antidemocratic retrenchment and neoliberal transformation.38 Though Fujimori’s government was able to neutralize the Shining Path threat, one important consequence of the internal conflict was a further disintegration of peasant and labor movements, caught between the pincers of insurgent violence and government repression (Kay 2007).
With a return to democracy, in 2001, Alejandro Toledo’s government essentially picked up where Fujimori had left off, drawing upon antisystem appeals to attract a similar tranche of support from Lima’s poorer districts, as well as from the Southern and Central Andes and the Amazon. As a mestizo former World Bank official with no previous ties to Peruvian politics, Toledo was the ideal candidate to navigate the contradictions of neoliberal populism, at least to the point of securing election. Toledo’s period in power, though, coincided with the beginnings of the commodity boom and a related surge in economic growth, the benefits of which accrued mainly to the coastal regions while prompting a surge of protests around both mining and broader marginalization in the south and center of the country. Though Toledo himself was almost universally unpopular by the end of his constitutionally mandated one term in 2006, the diverging fortunes of coast and hinterland set the scene for a splitting of the political preferences of these zones, which had tended to vote together since the 1980s.39
It is therefore unsurprising that, in the 2006 election, Humala was able to plug into the simmering discontent of ever more marginalized regions and win the first round, particularly with the pro-system vote split between several candidates. However, emerging from the assaults of the 1990s, popular movements hardly had time to coalesce into a national coalition in the manner seen in Bolivia, where the coalition-building process began in the 1980s. A national Peruvian popular movement was made even more unlikely by the growing rift between the economic circumstances of the poor of the coastal slums and their counterparts inland.40 The military reservist network, which represented the backbone of Humala’s organization, was a poor substitute, since it did not reach into the urban littoral—nor, indeed, into the northern highlands. The highlands supplied the historic base of strength for Alan García’s American Popular Revolutionary Alliance (APRA), providing a springboard for García to qualify for the runoff.
Though much of the Peruvian elite had uncomfortable memories of García’s first presidency, during the late 1980s, which had seen hyperinflation, attempts to nationalize banks, and the growth of the Shining Path, once into the second round of this election, he presented an orthodox platform that attracted most of the votes given to the pro-system candidates in the previous round. Some observers (for example, McClintock 2006; Madrid 2011) make perhaps too much of the coastal poor’s enthusiasm for such policies, given that the majority of the benefits of the boom, even here, tended to bypass these voters. Nevertheless, García’s professed belief in “moderate change” was easier to sell in the coastal slums than in Humala’s heartlands, particularly once the Lima elite and media began to swing behind APRA as, at least, the lesser of two evils (Cameron 2008).41 In this sense, García’s victory allowed for the release of popular resentment toward the political order through the election of a populist able to present himself as an outsider, while in fact he preserved this status quo, at least in terms of political-economic continuity with the Toledo era.
In a somewhat bizarre turn of events, when Humala returned to win the presidency, in 2011, his candidacy—to an extent—fulfilled a role similar to that of García in 2006, by embodying a less unpalatable choice for the coastal middle classes than the second-round alternative. In 2011, this was Keiko Fujimori, daughter of the former autocrat. Fujimori’s father, by this point, had become the only former head of state to be jailed for human rights abuses and corruption committed while in office. The level of distaste felt by much of the Peruvian elite toward both candidates is summed up by the widely repeated comments of Mario Vargas Llosa—a Nobel laureate and himself a former presidential candidate—that the decision was akin to choosing between “AIDS and terminal cancer” (quoted in Levitsky 2011, 85). Humala did not assume the mantle of second-round pro-system candidate to the extent seen with García in 2006, since the Lima media, surely reflective of at least a degree of elite sentiment, certainly preferred Fujimori.42 Nevertheless, with pro-system elements split, Humala’s antisystem coalition drawn from marginalized areas proved sufficient for a second-round majority.
Before the first round, a Fujimori–Humala runoff seemed a remote possibility. Given the one term limit, though, García was barred from running for reelection, and internal wrangles meant that the incumbent APRA failed to present a presidential candidate. This left three potential claimants for the continuity vote—Toledo, Pablo Kuczynski, and Luis Castañeda—who between them garnered 44 percent of the first-round tally. Had one of these figures successfully navigated the first round of voting, it seems likely that he would have attracted the endorsement of the two losers, as well as the vast majority of support from Peruvian business and the Lima media. Instead, the fragmentation of the center and center right allowed for a second round contested by Humala and Fujimori.
Many authors (Burron 2011; Lupu 2012; Levitsky 2011) ascribe the success of Humala’s comeback, in large measure, to a notable overhaul of political style. Gone was the 2006 candidate, wearing a red shirt and professing his admiration for Chavez and Velasco. Instead, the 2011 Humala hired several of Lula’s campaign team, wore a suit, and swore on the Bible to respect the Peruvian constitution and private property. Nevertheless, as Madrid (2012, 143) points out, though Humala’s message and presentation may have been moderated, the broad themes of his 2011 campaign were similar to those seen in 2006. His manifesto, entitled “The Great Transformation,” explicitly criticized the neoliberalism of past governments, argued for redistribution, and made specific appeals to the Amazon and the Andean regions.
In the first round of voting, Humala again finished first, thanks to support from his base in these areas. Given an apparent inability to make inroads in other areas of the country, however, it was at this point that Humala’s policy stance was significantly moderated. After an agreement was reached with Toledo, who had been eliminated in the first round, several of Toledo’s economic advisers joined Humala’s team and produced a “road map” for policy, which, while committing to expanded social programs, emphasized the importance of foreign investment and fiscal prudence.
Toledo’s endorsement of Humala was, in some senses, remarkable, given the level of distrust with which Humala tended to be regarded by the majority of the Lima elite. Undoubtedly, in common with many Latin American political contexts, the coastal elite viewed the prospect of a Humala victory, both in 2006 and in 2011, through both class- and race-tinged lenses, something very much reflected in media coverage of the campaign. Fujimori, seen as running on a platform that echoed her father’s aggressive neoliberalism and hard-line security policies, attracted strong support from some sections of the urban poor, who had been the recipients of significant patronage spending during Alberto Fujimori’s tenure. Meanwhile, heightened social conflict, particularly around mining, allowed Keiko Fujimori to mobilize a degree of reactionary sentiment in a country where memories of the Shining Path insurgency still held resonance and motivated a good deal of the suspicion around Humala.43 In the second round, however, the combination of a particularly divisive opponent and concessions to the center meant that Humala was placed in the unexpected position of being the more moderate candidate, leading to a narrow victory.
In this light, the fact of Humala’s 2011 victory appears relatively unremarkable. The real surprise, or at least the phenomenon that appears to merit greater attention, is the question of why Humala, in office, governed with such a high degree of neoliberal policy continuity with his predecessors. In fact, Levitsky (2011, 91), in discussing his (accurate) prediction that Humala would not govern as a radical, largely concurs with my arguments, citing opposition from a “robust private sector … considerably stronger than in previous decades,” along with foreign investors, the media, and the Church.
A first attempt at neoliberalization had collapsed under the Belaunde-Terry administration, in the early 1980s (Conaghan, Malloy, and Abugattas 1990). By the 1990s, however, a confluence of economic crisis, widespread contempt for democratic institutions, and fear of the Shining Path insurgency created an environment conducive to Alberto Fujimori’s authoritarian neoliberal “Fujishock” program (Conaghan 1996). Since Fujimori had been both an outsider candidate and a post-electoral-victory convert to neoliberalism, he owed few political favors to any fraction of domestic capital, which was reflected in his appointment to key positions of neoclassical economists educated in the United States and with little in the way of political or business records within Peru. When initial reform efforts became bogged down in Congress, public antipathy for legislators was such that Fujimori’s move to dismiss them, in his 1992 autogolpe (self-coup), gained broad approval.
From this point, the government’s economic team, operating from a position of autonomy, was able organize a rapid reconfiguration of state and capital, divesting the state of the tattered remains of Velasco’s state-owned industry and favoring its sale to foreign over domestic investors (Arce 2006). Many domestic grupos, however, then thrived as junior partners to Chilean, Spanish, and U.S. investors. Initially lukewarm domestic business support for Fujimori’s program morphed into greater enthusiasm by the mid-1990s, and government from this point became increasingly embedded with these interests, with many later cabinet appointees being drawn from their ranks and regularized ministerial access established.
The subsequent administrations of Toledo and García, for their part, reflected a changing emphasis, championed by the IFIs but supported by most domestic capital, toward second-generation neoliberal institutional reforms, which were probably incompatible with Fujimori’s authoritarian personalism.44 Toledo’s policies, in particular, reflected his sympathy with the principles embodied in the IFI turn toward the “participatory” agenda examined in chapter 8. The internal Peruvian version involved the establishment of policy roundtables drawing upon business, nongovernmental organizations, donors, and the Catholic Church (Burron 2011). Though Toledo was forced by the 2002 Arequipa protests to back down on public utility privatization, both he and García advanced an administrative decentralization that inhibited the formation of nationwide protest movements, as discussed previously.
Nevertheless, especially in relation to the rapidly expanding mining frontier, decision-making continued to reside with the central government, seen most strikingly in García’s use of presidential decrees to implement legislation compliant with the 2006 Free Trade Agreement with the United States. Localized protests and violent conflicts over extraction mounted, culminating, in 2009, with the death of thirty-one protesters and police at a demonstration against oil development at Bagua in the Amazon (Aiello 2010).
Though many protests were primarily opposed to the expansion of extraction itself, rather than the distribution of the ensuing revenues, the obviously inequitable impact of the commodity boom, combined with resurgence of state involvement in mining and hydrocarbons in neighboring countries, certainly focused attention on the neoliberal extractive regime (Arce 2008). As in other states, bilateral and multilateral investment agreements and tax stability contracts signed in the 1990s meant that the vast majority of the extractive surplus flowed abroad, something which became less politically tenable as prices continued to rise throughout the 2000s. While campaigning, García had promised to review mining contracts, but once he was in office, this exercise was radically diluted into a scheme that asked for a voluntary contribution of 3.75 percent of mining firms’ total profits while prices remained high (Eaton 2015). It is difficult to argue with Arellano-Yanguas (2011, 621) that the “mining alms” that resulted from these negotiations “clearly [signaled] the subordination of the government to mining interests.” Perhaps more importantly, the establishment of this system itself represented a growing penetration of neoliberal norms into rural service provision. Payments were to be made into trusts managed by the firms themselves, with wide discretion over the projects that they would then choose to finance.
Upon assuming office, Humala did quickly institute a promised windfall tax on mining profits, as well as a negotiating an additional “duty” for those companies covered by previous tax stability contracts (reminiscent of similar moves in neighboring Chile). However, extra revenue collection was substantially reduced by a provision that allowed firms to deduct operating costs from any taxes due. García’s voluntary contribution scheme, meanwhile, was overhauled and replaced by the Obras por Impuestos (Works for Taxes) program. The new arrangement allowed all companies (not limited to the mining sector) to directly fund local social projects of their own choosing, paying construction, operation, and maintenance costs in lieu of up to half their overall tax burden (Eaton 2015). There is an efficiency argument here, given Peruvian regional governments’ notorious lack of administrative capacity in allocating decentralized mining revenues (Eaton 2011), though it is difficult to see how this mix of private and publicly funded projects could produce anything approaching a coherent program for service or infrastructure provision. For a government better disposed to and more closely integrated with mining and other industries than often obstructive local governments, though, there was an obvious political expediency to taking some degree of these responsibilities away from localities and placing them under the control of business.
In this sense, Humala actually presided over a rather radical extension of neoliberal governance in this sector. In most other ways, however, the Humala government looks strikingly similar to its two predecessors in both policy and (to some extent) personnel. As with Toledo and García, Humala began with the appointment of orthodox, North American–educated economists to senior cabinet positions. Miguel Castilla, deputy minister of finance under García, was promoted to head the Ministry of Economy and Finance, with central bank governor Julio Verlarde retained in his post. The new government did, of course, to some limited degree, reflect its coalition of electoral support, with left-leaning intellectuals given jobs in ministries relating to social policy (Achtenberg 2011). With a bureaucratic structure largely unchanged from the Fujimori era, though, these positions had little influence in a system where the Ministry of Economy and Finance continued to play a dominant role in decision-making, as per the neoliberal norm (Phillips et al. 2006).
Another legacy of Fujimori has been the continuing ability of CONFIEP and other private sector associations, especially the Sociedad Nacional de Minería, Petróleo y Energía (National Society of Mining, Petroleum, and Energy, or SNMPE) to access and influence both line ministries and the presidency, with “government [making] policy at the behest of a small group of corporate interests, arguing that such policies are—in the long run at least—identical with the interests of the nation as a whole” (Peru Support Group 2014).
Such state capture was especially evident in the Ministry of Energy and Mines. Not only had most ministers previously worked in the mining sector, under Toledo, García, and Humala, but also the ministry itself embodied a fundamental conflict of interest in that it was responsible for both promoting investment and conducting the environmental impact studies that might serve to constrain this. Humala, under pressure from escalating protests, did move the assessment function to the Ministry of Environment, in 2012. However, not only was this ministry generally considered to be weak in terms of bureaucratic capacity (Eaton 2015) but also the directors of the certification authority, while nominally under the auspices of the ministry, were drawn from elsewhere (de Echave 2013). Under pressure from the SNMPE, which argued against procedural delay, the process for certification assessment was limited to a maximum of one hundred days, which José de Echave, himself a former environment minister, argues is insufficient for any rigorous examination, given the lack of capacity within the institutions involved.
These kinds of internal conflicts were an ongoing feature of the Humala government, resulting in multiple cabinet reshuffles as the government repeatedly changed political tack, at least in terms of line ministry appointments.45 Turnover of personnel tended to come in the wake of various scandals—including corruption and spying accusations—though also in response to a seemingly ever-growing tide of protests. Fallout from sometimes deadly anti-extractive conflicts, together with a rising crime rate, claimed a slew of justice and interior ministers’ jobs. Even the position of prime minister was held by seven different individuals over Hulama’s term (Kozak 2015). Only one of these, Ana Jara, came from the ranks of the Gana Perú (Peru Wins) alliance, which had won the 2011 election. That Gana Perú itself dissolved in 2012 and Humala’s own Partido Nacionalista Peruano (Peruvian Nationalist Party) fielded no candidates in the 2016 presidential and legislative elections is undoubtedly reflective of a weakly institutionalized party system.
However, far from the absence of a strong governing party allowing Humala the chance to advance a radical personalist vision, his chaotic term serves as evidence that party weakness also can act as a brake on the emergence of any coherent trajectory or vision on the part of a government. The one area in which such coherence and consistency was visible was in a more-or-less strict adherence to an “inclusive” neoliberal political economy model, centered on and directed from the Ministry of Economy and Finance, a bastion of relative technocratic stability. Castilla, at its head from 2011 to 2014, was one of Humala’s longest-serving cabinet appointments. Though he was eventually forced to resign, Castilla was immediately replaced from within the ministry by Alonso Segura Vasi, yet another former IMF official (Schiipani and Rodrigues 2014).46
To some extent, the inability or unwillingness of the Humala government to venture into more heterodox economic territory, whether in personnel or policy, may be explained by its reliance upon votes from Toledo’s Perú Posible (Possible Peru) party in the legislature. Nevertheless, looking at the few initiatives that did depart from neoliberal orthodoxy, it is possible to see that the fundamental policy constraints that Humala faced emanated, at their base, not from political fragmentation but from CONFIEP as the powerful voice of capitalist interests. For example, when the Spanish oil company Repsol announced plans to sell off its Peruvian holdings, including a refinery and a chain of filling stations, the government proposed that the state should acquire them under the auspices of the state-owned enterprise Petroperu. The Lima media presented the move as confirmation of their worst fears around Humala, painting the proposal as the first step toward a Peruvian chavismo (Peru Support Group 2013). The furor generated by these attacks, combined with a CONFIEP “ultimatum” to the government, was enough to not only scupper the purchase but also actually move the government toward the sell-off of 49 percent of Petroperu by the end of the year (Economist Intelligence Unit 2013).
In many senses, the Latin American leader whom Humala most closely resembled is not Chavez, Morales, or even Lula but ill-fated Ecuadorian president Lucio Gutiérrez. Both were former army officers elected on a moderately anti-neoliberal and antisystem platform, with a base of support in indigenous and marginalized areas. The political record of both is perhaps evidence that neither was especially committed, on a personal level, to an anti-neoliberal agenda. Despite this, their diverging fates reveal the significance of very different respective balances of domestic social forces in determining the continuing viability of the neoliberalization that they both, as candidates, professed to oppose.
Gutiérrez was forced to tack right even before assuming office, partly as a result of alliances with center-right parties and partly because of a pressing need to maintain credit lines with the IFIs (see chapter 6). In the context of Peru’s mineral boom (even given relatively meager tax revenues), and with Peruvian public debt at 22 percent of GDP in 2011 (World Bank n.d.), Humala did not face the external constraint of heavy dependence on the IFIs. As with Gutiérrez, though, Humala did require political alliances with parties wedded to a continuing neoliberalization. In an Ecuadorian context in which mass mobilization had previously removed the Jamil Mahuad government and set the scene for Gutiérrez’s ascendancy, a failure to depart from neoliberalization led to a renewed mobilization, in turn clearing a path for the rise of Rafael Correa. Correa, as with Chavez and Morales, but in contrast to Humala, was able to harness this mobilizational power to override neoliberal opposition in the legislature.
The level of disappointment felt by Humala at his failure to advance his relatively radical platform of 2006, or even its moderated form of 2011, remains an open, though rather moot, question. A strong domestic business elite able to articulate its interests widely, through the media, and deeply, in terms of ministerial access and influence, presents a hurdle that would appear impossible to surmount without the kind of popular mobilizational capacity that neighboring leaders were able to call upon. Though there was clearly anger, disappointment, and a rising tide of protest in the areas that composed Humala’s political base, the continuing segmentation of Peruvian popular movements effectively prevented such sentiments from spilling into coastal areas and threatening the government directly. Perhaps more accurately, violence arising from protests may well have posed a threat to individual ministers (and even prime ministers), but it could not shake the technocratic core of the Peruvian state established by Fujimori, extended by Toledo and García, and buttressed by its pervasive integration with key elements of domestic capital. Humala, in this sense, may have occupied the presidency, but he was little more than a passenger when it came to Peru’s trajectory of persistent neoliberalization.
The South African political-economic terrain has been usefully illuminated with the development of the minerals-energy complex (MEC) concept by Ben Fine and colleagues (Fine and Rustomjee 1996; Fine 2010). The MEC is meant to denote a system of accumulation stemming from the particular history of capital and labor relations in South Africa. Briefly, the economic primacy of mining following the discovery of diamonds and then gold in the second half of the nineteenth century encouraged the consolidation and then dominance of English conglomerates whose interests spread beyond extraction to linked sectors such as chemical manufacturing.47
With the rise of Afrikaner nationalism over the first half of the twentieth century, a clear tension developed between the economic power of large English capital and the political power of the more numerous Afrikaans speakers. Particularly after the election of the National Party, in 1948, state involvement in mining-related sectors such as steel and electricity, together with the nurturing of private Afrikaner capital, allowed for a growing interpenetration of English and Afrikaner capital (Ashman, Fine, and Newman 2011), concentrated on heavy industry either feeding or fed by the mines.48
The combination of high gold prices in the 1970s and a gathering crisis of the apartheid system in the 1980s led to a disinclination, and then an inability, to break out of the core MEC industries into the development of a broader manufacturing sector. As international sanctions began to bite during this era, most South African capital accumulation was trapped within the domestic sphere, engendering a concentration of capital and the growth of an increasingly sophisticated financial sector. Though South Africa may have been globally isolated in many respects, changes to its economic structure in some ways thus reflected trends elsewhere, as did South African investors’ preferences for diverting an increasing share of capital into short-term financial rather than long-term productive uses.
It now seems clear that influential figures within the ANC had also moved some way toward neoliberal orthodoxy by the late 1980s (Freund 2013; Pons-Vignon and Segatti 2013). Unsurprisingly, this subject has attracted a great deal of attention (see, among others, Peet 2002; Bond 2000; Williams and Taylor 2000; Hart 2003), given the disjuncture between the relatively radical aspirations of the ANC in opposition—encapsulated in the 1955 Freedom Charter—and the persistent neoliberalization that ANC governments have overseen since 1994. The usual suspects—international financial institutions—certainly played a role in the initial postapartheid trajectory, though their role was less crucial than in many other cases.49 More broadly, during the early 1990s, international actors in the shape of the U.S. and British embassies, as well as domestic business representatives, pursued a campaign to persuade ANC leaders—including Nelson Mandela—of the importance of a neoliberal approach. According to Hirsch (2005, 28–30, cited in Freund 2013), Mandela’s attendance at the World Economic Forum in 1991 was a key moment in convincing the future president of the importance of foreign investment and the abandonment of a former commitment to nationalizations.
Nevertheless, there is a definite homegrown quality to South African neoliberalization, which helps to explain its persistence over the commodity boom era. A central component of this was the stance of domestic capital—as well as liberal economists—prior to political transition, which presented the ANC leadership with “the sugar cube of understanding chat about the evils of racism and the need for change, but also … the stick of what might happen if they tried to defy business consensus, both nationally and internationally” (Freund 2013, 528). A major fear, and indeed one which has come to be partially realized, was of massive capital flight in the wake of the removal of sanctions (Ashman, Fine, and Newman 2011).
Initial neoliberalization since 1994, therefore, might easily be viewed as pragmatism in pursuit of more fundamental goals of deracialization and consolidation of majority rule. There can be little doubt, however, that key ANC figures, such as long-serving finance minister Trevor Manuel and Mandela’s successor as president, Thabo Mbeki, were personally convinced of the desirability of a neoliberal macroeconomic approach. Mbeki, especially, seems to have played a crucial role in the reorientation of the ANC government toward liberalization, signaled most clearly by the adoption of the misnamed Growth, Employment, and Redistribution plan in 1996.
For all that particular ANC leaders may be seen to have influenced the course of South African political economy after apartheid, the role of domestic capital in prompting the ruling party as a whole to move toward a neoliberal macro framework points toward more basic structural causes at work. The sanctions and divestment of the late apartheid period had produced an unusually large financial sector tightly integrated with the core MEC in a small number of dominant conglomerates. The main prize for South African capital in ending apartheid, therefore, lay in the prospect of escaping its domestic confinement and allowing its internationalization.
Given this, postapartheid macroeconomic policy, in both its overall neoliberal orthodoxy and its exceptional features, can be seen as defensive, from the point of view of the state, but also as fundamentally acting in the generalized interests of MEC conglomerate capital. Despite a persistent current account deficit in recent years, capital controls, gradually eased, have prevented a stampede, which might have brought balance of payments and currency crises, either of which would have been disastrous for firms trying to off-load their rand-denominated assets (Fine 2012). The necessary complement here has been the maintenance of a high interest rate in order to attract compensatory inward investment, which, unsurprisingly, has come mainly in the form of short-term flows. As Fine points out, this creates a vicious circle, through which the economy becomes more vulnerable to speculative attack as the process advances, making the strict maintenance of sound orthodox macro policy ever more central. Meanwhile, the growing integration of South African capital with its transnational counterparts—with many of the largest firms relisting on the London Stock Exchange—has strengthened its neoliberal orientation while affording it greater disciplinary power over its “home” state.
The very fact of the end of apartheid does, of course, show that popular class movements have been a significant countervailing force in South Africa in recent decades. This explains some of the deviations of the South African homegrown neoliberal trajectory from the IFI-endorsed template. Clearly, even if the ANC was shifted rightward in the 1990s on issues relating to economic restructuring, any broadly acceptable postapartheid settlement would need to involve some efforts to redress the country’s racialized inequalities. Social spending, expanded from the apartheid era whites-only system, includes pensions for those over sixty years old, child support payments, and grants for the disabled, foster parents, and caregivers. Taken together, these schemes covered 14 million people by 2010, out of a population of almost 50 million (Woolard and Leibbrandt 2013, 365). In the context of overall increasing inequality since 1994, however, welfare payments have done little more than compensate for declining household incomes among the poorest 50 percent of the population (Leibbrandt et al. 2010).
One signature policy of the ANC has been to engineer the creation of a new black bourgeoisie through the Black Economic Empowerment (BEE) program. Interestingly, this scheme is in many respects reminiscent of the black embourgeoisement plans of the PNP in 1990s Jamaica. There, similarly, a nominally leftist government with a core support base in a historically disadvantaged majority black population, but without the structural capacity (or perhaps political will) for any thoroughgoing redistribution, attempted instead to create a new black capitalist class. In South Africa, this involved a more overt set of state interventions, including minimum black ownership thresholds for most firms, the favoring of black-owned businesses in government procurement, and the commercialization of parastatals, often as public–private partnerships (Freund 2007; Ponte, Roberts, and van Sittert 2007). The ANC government has generally been cautious in deploying BEE in any manner that might provoke fear in domestic and foreign capital (Tangri and Southall 2008), though clearly a new, if narrow, group of black capitalists with significant asset holdings, including in core MEC sectors, has been produced. This “BEE elite” (Freund 2007) is both loyal to the ANC (indeed, most of the new owners are former and current government figures or their relatives) and highly integrated with the white capital of the MEC, stitching together more tightly the interests of state and dominant capital in maintaining a neoliberal course.
Clearly, the persistence of neoliberalism in South Africa, initially justified as necessary in terms of stabilization of the new democratic government (Segatti and Pons-Vignon 2013), has been a major disappointment to many, particularly the leftist sectors of the tripartite alliance (the ANC, the Congress of South African Trade Unions, and the South African Communist Party) that officially supports the government. In response to the rumblings of discontent, the government has, since the mid-2000s, been officially focused on South Africa becoming a democratic developmental state (Marais 2011, chap. 11; Ashman, Fine, and Newman 2010). Partially, of course, this has drawn on the growing attention devoted to the experiences of the East Asian developmental states and, latterly, has been associated with South Africa’s status as the newest of the BRICS countries. The concept as deployed by the South African government, though, has been strangely devoid of specific content, accompanying, at various times, a range of different policy proposals from opposing factions within the state. The Congress of South African Trade Unions and the South African Communist Party—who have taken the developmental state to mean a model sharing some features with the newly industrialized countries and some with contemporary Brazil—hoped to advance their cause by successfully backing Jacob Zuma as the new ANC president, in 2007, and as national president, in 2009 (Botiveau 2013). Zuma made some concessions to these interests, such as creating a new Department of Economic Development, though this office remained underresourced and a minor voice in policy formation, particularly when compared with a dominant national Treasury. Rather than a policy realignment, Zuma’s presidency (2009–2018) was defined by the Marikana massacre (where police killed thirty-four striking miners) and a number of corruption scandals involving the powerful Gupta business family (Fogel and Jacobs 2018).
External pressure for neoliberalization in Colombia was, at least at first, relatively moderate. The country was the only Latin American state to register positive growth in every year of the 1980s (Aviles 2006, 44), and it faced debt and balance of payments problems which, while hardly trivial, were manageable in comparison to the regional norm. Nevertheless, access to international credit in the wake of the 1982 Mexican debt crisis was difficult for any Latin American state, leading Colombian governments to seek IFI approval in a series of agreements, beginning in the mid-1980s, initially focusing on austerity measures before moving to trade liberalization, labor deregulation, and then a raft of privatizations during the 1990s (McKeown 2011).
Neoliberalization has increasingly come to be viewed as a necessary means through which foreign capital, particularly in extractive sectors, might be attracted to Colombia in spite of the risks posed to investors by more than a half century of internal conflict. Most of the dominant sectors of Colombian capital—which has little of the history of fractiousness seen in most other Latin American cases (Schneider 2004, 151)—have interests compatible with neoliberal policy. Those that might seem to be less likely supporters of liberalization, such as traditional large landowners, have tended to favor a more aggressive and militarized approach to the conflict. Since such an approach has meant an ever-rising defense budget, encouraging investment with which to fund the war against guerrilla groups has become something of preoccupation for agrarian elites, leading to a near consensus among Colombia’s capitalist class as to the desirability of continuing neoliberalization.
The emergence and persistence of this neoliberalization in Colombia clearly was bound up with the effects of the internal conflict. As in Peru, the twin pressures of a guerrilla insurgency and state (plus paramilitary) repression effectively removed the possibility of an electoral victory for any party connected to popular class movements.50
In fact, Colombia has been described as the worst place in the world to be a trade unionist, with four thousand murdered between 1986 and 2003 (Solidarity Center 2006, 11).51 These crimes are mostly attributed to paramilitary groups such as the Autodefensas Unidas de Colombia (United Self-Defense Forces of Colombia) and their successors, many of whom have ties to large landowners, the military, and government (Gill 2015, 89–92; on the Álvaro Uribe government, in particular, see Aviles 2006, 135–36). The Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or FARC), along with the Maoist Ejército de Liberación Nacional (National Liberation Army, or ELN), have also been responsible for the deaths of figures from the legal left, at various points.
The cocaine trade is, of course, a well-known aspect of the Colombian conflict, as is the involvement of both paramilitaries and guerrillas in production of the drug.52 Cocaine’s impact on social structure, and thence on neoliberalization, has been less widely discussed. Colombian drug traffickers initially became internationally important during the bonanza marimbera, a boom in cannabis production and export during the 1970s. This experience left Colombian cartels in a position to dominate the international cocaine trade when it began to boom in the 1980s, making traffickers far more significant in the Colombian context than their counterparts were in Peru and Bolivia (Thoumi 2002). Thoumi estimates the value added generated by illegal drug industries in Colombia at 7 to 10 percent of gross national product in the early 1980s.
A rising “narco-bourgeoisie” found land acquisition to be the easiest way to invest and launder money, leading to an eventual legitimization of the narcos as large agrarian landowners. A more immediate impact was a rising tide of speculation on land values as other sections of the capitalist class joined in (Richani 2010). In turn, peasant dispossession, usually at the hands of paramilitary groups who had begun as private security for landowners, became an increasingly important aspect of the internal conflict, more deeply implicating a bourgeoisie for whom land was becoming more central. The rise of the narco-bourgeoisie—who are generally in favor of neoliberalization as providing avenues for greater legitimization (McKeown 2011)—has thus helped to tie conservative agrarian elites to more outwardly oriented fractions.
At various points in recent decades, ascendancy within the dominant bloc has alternated between these two groups. This has been mirrored in the approach to the FARC, with more transnationalized sectors favoring negotiation and the eventual peace accords ratified in 2017. Traditional landowners, most obviously represented by Álvaro Uribe, who was president from 2002 to 2010 (and now by President Ivan Duque), have tended to be more vociferous in their condemnation of the guerrillas, have stronger links to paramilitary forces, and rejected the peace deal (Aviles 2006, 90–93; Richani 2010).53 While this group may, under other circumstances, have been less inclined to support continuing neoliberalization, the needs occasioned by their approach to the internal conflict have driven them to champion such an agenda. In part, this has been a consequence of Colombia’s heavy reliance on U.S. military aid (Stokes 2006), a precondition of which, since the Bill Clinton administration, has been the adoption of “sound” neoliberal economic policies.
More important, though, has been a desire to attract foreign investment, particularly in extractive industries, as a means to pay for increasing military spending, which moved from 2.2 percent of GDP in 1990 to 5.6 percent by 2008 (Richani 2010). Unusually for Latin America, because of long-running conflict and instability, Colombia’s potential for natural resource extraction was relatively undeveloped (and underexplored) prior to the global push for new extractive frontiers that was prompted by the commodity boom. The guerrilla struggle, which saw the FARC and the ELN launch at least a thousand attacks on oil pipelines during the 1980s and 1990s (Aviles 2006, 79), hardly afford Colombian governments the strong bargaining position that the commodity boom has brought elsewhere.54 This has meant that high levels of investment in extractives have only been secured through linked processes of liberalization and militarization. As a result, Colombia saw FDI flows balloon from $2.34 billion in 2000 to $16.2 billion in 2012, much of this in oil and coal (World Bank n.d.).
The link between a need to please foreign investors and the internal conflict is made obvious by the role that campaign contributions and lobbying efforts on the part of U.S. firms active in Colombia have played in securing U.S. military and development aid (Aviles 2008, chap. 7). Often, this aid has been directly used to protect investors, as with the $100 million of U.S. government funding for a special Colombian brigade to guard Occidental Petroleum’s pipeline in Arauca (Aviles 2006, 132). It was the Uribe administration’s Democratic Security and Defence Policy, though, which most explicitly expressed the symbiosis of further militarization and a neoliberal conception of development. McKeown (2011, 82) cites the U.S. Colombian Embassy’s formula, which succinctly sums this up: “Democratic security = [Foreign investor] confidence = Investment = Growth.”
Indonesia’s economic orientation during the Suharto years (1965–1998) can be divided into three broad periods (Winters 1996), of interest because they illustrate a swing in the country’s policy autonomy that presents a parallel to that described in this book in relation to resource exporters during the 2003–2013 period. The first period, from the mid-1960s to 1973, saw great efforts to attract foreign capital to the country in the aftermath of the mass killings and upheaval that marked the transition from Sukarno’s Guided Democracy to the New Order regime. The IMF was welcomed into the country, Western-educated technocrats were appointed to key positions in the bureaucracy, and the inward investment regime was liberalized. The second period coincided with the 1970s oil boom, revenues from which made Indonesia less reliant upon what Winters (1996, 41–42) terms “mobile capital,” including both foreign investors and elements of domestic business, especially ethnic Chinese capital (see also Rosser 2002, 26–32). This phase, especially in the aftermath of the second oil price spike, in 1979, saw a shift toward more dirigiste policies and the channeling of resources from the state to emerging pribumi (indigenous) firms. Declining oil prices across the 1980s then brought a third phase, with partial moves toward liberalization, including in capital markets, allowing for both an influx of foreign investment and a growing internationalization and financialization of large Indonesian capital over the next two decades (Robison and Hadiz 2004).
Over all three periods, however, the New Order state held the reins of an extensive system of patronage, exercised via control over credit, mining, and timber concessions; import licensing and procurement; and important SOEs in sectors such as oil, mining, power generation, banking, and trade (Hadiz and Robison 2013).55 As Robison (1986, 26–27) shows, over the first two decades of Suharto’s rule, this apparatus served as midwife to a domestic class of capitalists drawn especially (though not exclusively) from the ranks of Indonesia’s ethnic Chinese minority. Ethnic Chinese business figures were limited in their ability to participate directly in domestic politics, and so, even as their conglomerates grew in economic importance, they continued to depend upon alliances with military and bureaucratic patrons, who could function as rentiers through their discretionary power to award contracts and licenses to favored clients. By the 1980s, bureaucratic elites began to outgrow their role as fixers and increasingly moved into business for themselves, either directly or via family members. Economic reform during this period included moves such as the ending of state monopolies in key sectors that ostensibly might have served to weaken the nexus of patronage—but in reality saw the persistence of such activities, now shifted into the private sector (Hadiz and Robison 2013).
In 1997, the Asian financial crisis hit with speculative attacks on the rupiah. By this point, Indonesian businesses were heavily exposed to the crisis through the accumulation of short-term foreign debt. A collapsing currency then led to bankruptcy for many of the most prominent conglomerates, implosion of the country’s deregulated banking sector, racing inflation, a severe fiscal crisis, and growing political unrest (Rosser 2002, 171–72). Though the government dragged its heels, it had little choice but to eventually accept a $41.5 billion IMF loan, which the fund saw as a lever for the transformation of Indonesian capitalism (Robison and Hadiz 2004, 259) through thoroughgoing neoliberalization. Meanwhile, the crisis had fatally undermined Suharto’s political and economic base among the wealthy and the middle classes. Widespread rioting, the occupation of Parliament by students, and abandonment by key regime figures would trigger Suharto’s resignation in May 1998 (Robison and Hadiz 2004, 6).
Under Suharto’s successors B. J. Habibie and Abdurrahman Wahid, much of the IMF’s package of reforms was implemented, including a reduction of subsidies, liberalization of trade and capital markets, and privatization or ending of monopolies for SOEs. Nevertheless, the severely weakened alliances of crony capitalist and state officials that continued to undergird economic and political power in Indonesia were largely able to survive the crisis and to emerge in a reconfigured form adapted to the introduction of democracy. As Robison and Hadiz (2004, 187–222) detail, IFI-sponsored initiatives aimed to rein in the old predatory networks and introduce transparent governance mechanisms. But the process remained largely in the hands of political interests, which worked to maintain and restore the essence of the old system under the carapace of new institutional forms. Bank and debt restructuring programs, for example, often resulted in the state propping up unviable banks and shouldering the debt burdens of distressed conglomerates, while effectively allowing the such conglomerates to retain their assets. A relatively swift return to economic growth, in the early 2000s, then provided a renewed base of accumulation for domestic capital while reducing the structural leverage of the IFIs, leaving many of the liberalization programs only partially completed.
The absence of an anticipated influx of foreign investment in the initial post-Suharto years amplified the need to entice the substantial sums of Chinese Indonesian capital (estimates vary widely, from $5 billion to $165 billion), which had fled the country in the wake of the crisis (Chua 2008, 88). This is one indication that, while the alliance of capital and bureaucracy persisted, new conditions began to tip the balance of power within these networks toward capital. Though authors disagree on the degree to which this process has advanced since that time (Choi 2014; Aspinall 2013), democracy has opened new channels of political influence for capitalists, through the opportunity for media ownership and through aspiring politicians’ need for campaign finance. In some cases, wealth has become the basis for securing political office, rather than the reverse, with prominent business figures—including a smattering of Chinese Indonesians—entering politics for themselves.
Chinese Indonesian capital, which continued to account for ownership of most large conglomerates, tended to ambivalently but broadly favor a continuance of liberalizing policies (Chua 2008). This was in part a defensive strategy, since currents of economic nationalism that have periodically surfaced in Indonesia (and that ebbed and flowed over the commodity boom years) are associated with state support for pribumi capital and perhaps redistribution along ethnic lines. In this sense, it is hardly surprising that the administrations of Megawati Sukarnoputri (2001–2004) and Susilo Bambang Yudhoyono (2004–2014), both enmeshed within familiar elite networks of patronage and money politics, oversaw an overall continuity of policy that won (sometimes equivocal) praise from IFIs and investors at home and abroad (World Bank 2009; Sidel 2015). The overall trend of neoliberalization, however, seems more reflective of the search for particularistic advantage among the most influential segments of capital and their political allies than of any strong ideological commitment. In the post-Suharto era, corporate control of Indonesia’s largest firms continued to lie, to a large extent, in the hands of powerful families (many ethnic Chinese and some pribumi) with extensive formal and informal political ties, while these groups had simultaneously become increasingly powerful in relation to the state and increasingly interpenetrated with foreign investment (Aspinall 2013; Leuz and Oberholzer-Gee 2006).
Shifts in some mining sectors, beginning during Yudhoyono’s second term, seem indicative of both Indonesian capital’s political influence and its ambivalent attitude toward neoliberalism. A 2009 mining law increased royalty rates, mandated that foreign firms divest 20 percent ownership of mines within five years of operation, and banned the export of some unprocessed ores while heavily taxing others.56 Warburton (2017, 299) argues that this legislation reveals “the ambitions of politically connected domestic capitalists … driving policy.” More interventionist and nationalist policies have been adopted in mining because this is one area of the economy where foreign and domestic capital are highly differentiated; that is, most firms are clearly either domestic or foreign owned, with foreign ownership mostly concentrated in copper and gold. This has left these firms subject to aspiring domestic capitalists looking for legislative help to acquire assets in these subsectors. In Warburton’s counterexample of palm oil, ownership structures are much more complex and blended between domestic and international capital, providing a strong incentive for political-economic elites to reject moves toward capping foreign investment in the sector.
Popular opposition to elite predation and corruption has been prevalent throughout Indonesia’s years of democracy, as inequality rose—the Gini coefficient climbed from 30 in 2000 to 41 in 2013 (World Bank 2015)—and social spending stagnated. Nevertheless, public sentiment did not coalesce into a coherent movement for substantive change. Successive presidential candidates won on antigraft platforms despite being enmeshed in familiar networks of patronage and money politics themselves. By the 2009 election, politicians were pejoratively using the term “neoliberal” to accuse opponents of alignment with big business and foreign interests, though this hardly amounted to a comprehensive critique or alternative economic program (Kuncoro, Widodo, and McLeod 2009).
Interestingly, and somewhat out of sync with other cases, populism emerged as an electoral force in Indonesia at the end of the commodity boom, with the 2014 election of Joko Widodo (known as Jokowi), a figure who had emerged from local politics and was initially relatively unencumbered by ties to existing elites. However, without a strong party or mass movement base of the type encountered in many other cases of electoral populism, Jokowi in office has had to rely on alliances with forces from within the existing system—the Indonesian Democratic Party of Struggle as well as prominent business figures and generals. Jokowi’s economic agenda has been an ideological “mash-up” (Baker 2016), combining elements of redistribution, such as efforts to widen access to health care; liberalization, such as removal of subsidies on fuel, deregulation of business, and investment and trade in some areas; and more statist and nationalist policies, such as implementation of export bans in mining, new consumer subsidies, and a revitalization of the SOE sector (Busch 2015). The totality has been described in some quarters as developmentalism (Warburton 2016; Baker 2016). It is probably more accurate to characterize this somewhat ad hoc series of measures as a part of a strategy aimed at meeting the varied demands of Indonesian capital—never as strongly or broadly committed to liberalization as in other HO cases—and, under the pressure of declining commodity prices and foreign investment, seeking new avenues for rent and accumulation via the state (Hadiz and Robison 2017).
The HO type, much like all the others, displays a trajectory under commodity boom conditions that can be accounted for by a particular pattern of domestic social configuration, with the decisive element for the HO type being a strong, externally facing fraction of capital with extensive ties to its transnational counterparts. As with the DDO cases, the observed trend over the boom was one of continuing neoliberalism. However, compared to those states, the HO type is distinctive in that the persistence of a liberalizing policy agenda was driven by its dominant domestic fraction of capital, which perceived its interests to be served through the maintenance and extension of the neoliberal settlement.
In the extractivist-redistributive and neodevelopmentalist (ND) types, the lifting of external neoliberal discipline brought about by the China effect on commodity markets allowed previously circumscribed groups of productive capital and popular classes to mount successful challenges to neoliberally inclined domestic elements for control of the state. In the HO cases of Peru, South Africa, Colombia, and Indonesia, the similar easing of external constraints also left the way open for possible post-neoliberal turns. In this sense, HO states during the commodity boom (unlike Jamaica) have potentially possessed just as much freedom of action to set policy and define national development projects as those of the ND or ER types.
That state managers in HO cases chose not to pursue breaks with neoliberalism was not due to any lack of material base from which do so—resource exports have boomed, bringing the potential for significant increases in state revenues. Instead, the continuity of neoliberalism was the result of independent, domestically driven policy setting in the HO type. The force of IFI demands may have been greatly diminished under the new conjuncture, but it was then that the voice of externally oriented domestic capital came to speak loudest, sounding remarkably similar to its previously dominant IFI allies.
In Jamaica, of course, the story is somewhat different. The Caribbean country serves as an illustration of the dire circumstances (and tight neoliberal conditionality) that other resource-rich states might have faced over the same period, absent of the rise of China. It also provides a demonstration of why it is significant that China drove this commodity boom and thus shaped it in ways that mirror the structure of its own economy. Because Jamaica missed out on the major part of the China effect, external voices continued to paramaterize the country’s domestic agenda. Despite a fractious history of engagement and breaks with the IMF itself, the island has never been able to chart a course away from the neoliberal demands of the IFIs. A particularly heavy debt burden, much of which stems from a disastrous effort to liberalize the financial industry, has become so debilitating that the IMF called for a primary budget surplus that, proportionally, is more than double what the troika asked of Greece. For now, Jamaican governments seem to have little choice but to accept the IMF’s conditions and acquiesce to this debilitating demand.