A Big Step Back for Latin America

Mobs are fighting in the streets of Venezuela, a country that sends the United States as much oil as Saudi Arabia. A general strike is paralyzing Venezuela’s economy. While ineffective mediators from the Organization of American States seek solutions, the country’s politics have broken down and its future could be up to the generals.

For Americans under 40, the depressing events in Caracas are an education: This is the way much of Latin America used to look.

Rapacious elites, often descended from the Spanish colonizers, pillaged countries, monopolized business opportunities and exploited populations often descended, in large part, from the pre-Colombian inhabitants of the region. Using their wealth and sophistication, the elites charmed naive U.S. economists and diplomats with their good manners and international culture as they reassured them about their affection for democracy and free markets.

Meanwhile, in shantytowns and impoverished farming communities, the increasingly embittered masses seethed until, from time to time, some charismatic figure emerged to channel their anger into a political movement. Turning the masses against the upper classes, sometimes with elections and sometimes without, the populist caudillo crushed the old oligarchic parties and set up a regime that concentrated power in his own hands.

Meet the new boss, same as the old boss: Corruption and incompetence under the populists often got so bad that the military took control and ultimately turned the system back over to the old, but still incompetent, ruling elite. Repeat as needed for 150 years.

In the 1990s, it looked for a while as if Latin America had broken this old cycle. A generation of free-market economists was replacing the old-business dinosaurs in controlling Latin American capitalism. Foreign competition and investment were forcing the oligarchs to give up their self-interested control over the levers of economic management.

Political competition among parties accepting the rule of law produced more competent democratic political leaders. Better policies got Latin America off the old treadmill of boom and bust, mob and coup.

Yet, the “new” Latin America, like the “new” stock market of the Internet boom, turned out to contain a lot of hot air. Argentina and Venezuela, in particular, seem to have sunk to the worst of the Latin past, as incompetent populists square off against crooked oligarchs, with the armed forces looming in the background. Other countries also look bleak: Peru, Ecuador and Colombia all teeter uneasily at various distances from the abyss.

Fortunately, things aren’t this bad everywhere. Chile continues to put the Pinochet years behind it; Mexico’s newly democratic political system is working reasonably well; Brazil’s new left-wing president, Luiz Inacio Lula da Silva, seems convinced that there are no populist shortcuts to the solid, long-term economic progress that, alone, can raise the living standards of Brazil’s workers in a sustainable way. Even where things are getting worse, rising education levels suggest that, long term, Latin America will move haltingly forward.

That long-term good news is of little help to a Bush administration confronting a serious political crisis in one of the largest oil exporters to the United States. From Washington, a city deeply preoccupied by the war on terror and the continuing crisis with Iraq, Venezuela is a deeply unwelcome diversion. Oil prices have passed $30 a barrel and the oil industry in Venezuela has cut production up to 70%. Worse, the United States has no attractive policy options at this time.

Let’s not be fooled again. Neither side in Venezuela really merits U.S. support. President Hugo Chavez is a Castro-hugging, anti-American thug. If he consolidates his power, he will undermine democracy in Venezuela in the name of his “Bolivarian revolution,” while seeking ways to alarm, annoy and harass the United States -- and back the price hawks in the Organization of Petroleum Exporting Countries. There’s also the possibility that Chavez could intervene to further destabilize war-torn Colombia by supporting Marxist guerrilla groups and drug cartels against the U.S.-aligned government there.

The Venezuelan opposition is more friendly to the United States, but it is composed of the corrupt and incompetent leaders who failed for more than a generation to harness Venezuela’s oil wealth to a development program that could meet the needs of the country’s poor. They attack Chavez in the name of democracy, but they want to rip up the Venezuelan constitution by street riots and strikes, and they are more than hinting at support for a military coup.

In the Cold War, Venezuela would have been a no-brainer. We would have backed the upper middle class and the elites against Chavez and the reds. We didn’t want another communist Cuba in the hemisphere, and while backing a military coup might have given us a propaganda black eye, Washington policymakers, except on Jimmy Carter’s watch, would almost certainly have seen it as the least of the possible evils.

Washington flirted with this approach earlier this year. With Chavez promising to ship oil to Fidel Castro at concessionary prices, and with Chavez supporters forming paramilitary groups modeled to some degree on Cuba’s Committees for the Defense of the Revolution, the U.S. could not conceal its glee when a military coup temporarily forced Chavez from office. The coup collapsed, and Washington, wiping the egg off its face, backed down.

The rise in world oil prices and instability in oil markets because of concern over a possible U.S. war with Iraq, however, has kept Venezuela on the front burner, and as domestic conflict mounted in the country recently, the U.S. turned to the Organization of American States to broker a compromise solution to the Venezuelan crisis.

So far, it’s not having much luck. Neither Chavez’s fans or foes look ready to compromise. Worse still, Venezuela is a country of weak institutions. Its constitution was introduced under Chavez and appears increasingly impractical. The supreme court has a history of subservience to political interests. The political parties are feeble and corrupt. None of this will change quickly.

Whatever the outcome of Venezuela’s crisis -- at the moment anything from peaceful compromise to full-fledged civil war is possible -- the lesson is, whether the United States likes it or not (and the Bush administration mostly hates it), we have a lot more nation- and institution-building to do in our hemisphere. Trade treaties and bailouts by the International Monetary Fund aren’t enough.

The OAS needs to have its institutional capacities improved and its leadership strengthened. Countries like Venezuela -- and Ecuador, Peru, Argentina and most of Central America -- need help to make their judiciaries more transparent and independent, their journalists more professional and their public administration more competent and less corrupt in handling basic responsibilities of government like education and social security.

As this happens, more Latin American countries will continue to move out of the chaos-and-coup lane of history into the fast lane, where they can make real progress. Until then, the United States can look forward to continuing crises in the hemisphere -- and can only count on limited help from the OAS in resolving them.