The Paradoxes of Shrinking the State in Latin America

Jorge Castañeda is the foreign minister of Mexico.

The question for Latin America today is not whether we should dismantle the welfare state in order to adapt to globalization, but whether we can build one to cope with the domestic dislocations of integrating into the world economy.

Most Latin American states which have dismantled what little they had in the way of social programs have found it doesn't work. Chile, which until a few years ago tried to adjust to globalization without a welfare state, has arrived at the same conclusion. All governments now realize they must come up with something that looks like a welfare state. Otherwise, the gap between rich and poor will be so great that social peace will be at risk and any economic hopes dashed.

What Latin American governments, including Mexico, are trying to do today is increase their tax takes so as to improve the effectiveness of education and health delivery, combat poverty and establish a housing policy for the poor majority. Needless to say, the constraints are enormous.

This leads to a political paradox, especially for center-right governments. In the case of Mexico, the first main task of president Vicente Fox, who comes from a business background and conservative party, is to raise the tax take. Once you get into office and look at the budget numbers, it becomes clear you can do nothing else until the percentage of national wealth taken in taxes increases.

There are two other paradoxes that arise as governments confront the gap between rich and poor and the city and country exacerbated by globalization.
One is the federalist issue. The other is the "vacuum" issue.

Everyone in Latin America would like to decentralize, including Mexico. However, municipal and state governments simply cannot handle the devolution of power. Given our long experience with the centralization of power, the local and regional levels of government simply do not have the requisite administrative capability or even, in many cases, ethical competence.

The other problem that occurs when government withdraws from society is that it leaves a vacuum behind. It sounds nice to say that "civil society" will fill that vacuum. But what we are finding in much of Latin America, certainly in Mexico, is that "civil society" means the drug lords and organized crime more than it means Greenpeace.

By and large, Latin America's leaders today want to move away from the bloated populist state of yesteryear. They want to be lean and to decentralize. But they can't. They have to build welfare states where they don't exist; they have to cope with the ineffectiveness of lower levels of government; and the withdrawal of a government presence often means handing power over to private cartels and local bosses.
At the end of the day, it seems a better idea to have a strong, democratic, well-financed government than a weak state.

On the accountability of civil society: One of the biggest issues in the coming years is to find some way to make NGO's accountable. Is Greenpeace only accountable to its members? Are the media only accountable to their readers and viewers? Is it enough if their actions impact society as a whole? Just as governments have been made to be accountable, so too must NGOs.

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