Throughout the 1990s and well into the 2000s, indigenous movements led by CONAIE provided heroic resistance to one neoliberal government after another in Ecuador. Public sector workers, teachers and transportation workers in particular, also led fierce resistance against the neoliberal assault. Neoliberalism is a menu of right wing economic policies. While there is no universal agreement about every item on the menu, the following are the key neoliberal policies that plagued Ecuador:
- reducing public and social spending, typically by slashing public sector wages and employment levels, often through privatization
- making central banks increasingly “independent” of elected officials and dedicated to keeping inflation as low as possible at all times
- deregulating financial markets
- prioritizing interest payments to investors above all else (i.e. default on your commitments to the public but never to elite foreign investors)
- providing tax cuts and other giveaways to financial speculators and multinational industries
By 1998, Ecuador boasted perhaps the most “independent” (democratically unaccountable) central bank in the world. That elitist neoliberal “principle” had been written into the constitution. Public sector workers frequently waited months to be paid while elite investors received interest payments on time. Greatly assisted by an essentially banker-owned media, Ecuadorian governments not only rammed through neoliberal policies for years but also made illegal deals with foreign creditors. In 1999, Ecuador’s financial system collapsed under the weight of its own corruption and incompetence. Hundreds of thousands of Ecuadorians fled the country – at least 300,000 though some estimate many more than that.
By the year 2000, Ecuador’s per capita GDP was 14% lower than it had been in 1980 – quite a disaster considering that it had grown by 110% in the 1960-1980 period. Refugees from Ecuador’s neoliberal nightmare acted as a pressure relief valve (as Correa has put it) by reducing the ranks of the unemployed and sending remittances back home or the collapse would have been even worse. According to World Bank figures, in the first half of the 1990s, remittances averaged about 1% of Ecuador’s GDP. In the second half of the 1990s, they averaged 3.5%. In the first half of the 2000s, they averaged 6% of GDP.
Rafael Correa took office in 2007 promising to undo neoliberal polices, and he has, but has faced accusations of being “neoliberal” from some on the Left. The allegations are outlandish even if they’ve often been made by people, like CONAIE’s leadership, who did a great deal to bring Correa to power.
Within two years after taking office, Rafael Correa’s government was caught up in a global economic crisis that could easily have produced an increase in poverty which Ecuador would still be struggling to recover from today. In addition to decreased prices for its oil exports – which also hit Venezuela – two other factors made Ecuador a sitting duck to suffer a prolonged economic collapse.
One factor was that slow recovery in rich countries from the global crisis dramatically reduced remittances from Ecuadorians living abroad. Remittances fell from 7.6% of GDP in 2007 to 3.5% in 2012. In Venezuela, in contrast, remittances have always been a negligible share of GDP according to World Bank figures. The other factor that made Ecuador especially vulnerable was that – unlike Venezuela – Ecuador did not have its own currency. It’s economy was abruptly “dollarized” in 2000 amid the crisis. Ecuador could obviously not devalue the US dollar to offset the impact of the crisis through increased net exports.
Under Correa’s government the constitution was rewritten in a very consultative and democratic process. The 2008 constitution, approved by 64% of voters in a referendum, made the central bank a part of the executive branch’s economic team. Correa’s government defaulted on $3.5 billion of public debt that was illegally negotiated. The no longer “independent” Central Bank was also forced to bring home $2 billion worth of reserves that had been sitting in foreign banks. When inflation spiked in 2008, the Central Bank – as ordered by the government – did not drive up interest rates. Its priority was mitigating the downturn, not reducing inflation. Private banks faced a serious of new regulations based on lessons learned after the Great Depression then “forgotten” by governments around the world in the neoliberal era. The 2008 constitution also sought to end the ability of financiers to swindle the public through dominance of the media. The restrictions on financial sector ownership of media were strengthened in amendments made to the constitution in 2011 and – yet again – in a new media law that allocates one third of the broadcast spectrum to private media, one third to community based media, and one third to public media. Incidentally, a media dominated by bankers, which is what Ecuador had for many years, is a massive assault on freedom of expression. Try finding that truism expressed anywhere in the international corporate press.
All these initiatives and others – like new taxes on capital flight and on assets held abroad – contributed to the government increasing its revenue from 27% of GDP in 2006 to 40% in 2012. Public and social spending increased from 4.8% of GDP in 2006 to 9.3% in 2011. Education spending doubled. Anyone who has traveled to Ecuador over the past few years can attest to the dramatic improvement in its roads. In short, catastrophe was not only averted, real economic progress was made because Correa’s government boldly defied neoliberal dogmas as he had promised. Poverty rates are now one third lower than they were when Correa was first elected in 2006. Child mortality has fallen faster in Ecuador under Correa than it has in countries that were at the same level as Ecuador in 2006.
All of this progress under Correa could have been derailed by an attempted coup on September 30, 2010. Perhaps overly credulous of the right wing media’s claims of falling support for Correa, perhaps also emboldened by hostility towards Correa expressed by CONAIE, the coup attempt led by police who took Correa hostage quickly failed. Days after the coup attempt, CONAIE and Pachakutik, and indigenous based political party, issued a joint statement angrily denying reports of US government funding that that had been uncovered by Eva Golinger. Her findings were actually vastly more damning of Pachakutik than of CONAIE. Years earlier, Pachakuitik’s sharp turn to the right caused its popularity to plummet. It also led to a rift with CONAIE. However, the statement by the two groups was outrageous – much more damning of CONAIE’s leadership than Golinger’s findings.
The joint statement denied that a coup attempt – or even a kidnapping! – had taken place, denounced the Correa government as “dictatorial” and stated that it “did not recognize” it. It also regurgitated the right wing talking points on “freedom of speech”. The tendency among some international leftists to automatically assume “social movement” leaders are more credible than the Correa government should have ended with the publication of that statement.
Left critiques of Correa’s government have surged recently because of its decision to drill for oil in the Yusuni National Park. Correa’s campaign to not drill in exchange for payment from rich countries failed. Only $13 million of the $3.6 billion requested was paid so the Correa government decided to drill.
In an excellent piece for Znet, Christian Tym assessed the criticism over Yusuni and remarked
“Writers and activists too often meet an indigenous leader and assume he or she speaks for all of Ecuador’s 10 indigenous nationalities, when the leader’s authority is most likely contested even within his or her own nationality. Or worse, following a 4-day chaperoned trip to “the indigenous communities,” an environmentalist repeats the rant of one indigenous person as though it stood for the thoughts of millions of people.”
Another excellent point Tym made: “When indigenous leaders decide to join Correa’s movement Alianza País – as did Alberto Anrango, mayor of Cotacachi and Ecuador’s first director of bilingual, intercultural education – they cease to be as visible a part of ‘indigenous politics’, particularly in the eyes of foreign reporters and NGOs.”
Correa has responded aggressively to some ridiculous criticism his government has received from segments of the Ecuadorian and international Left. However, the Correa government should remember the extreme importance of critiques that are to its left. In rich countries, the Keynesian economic policies Correa has championed were discarded despite their success. Elites mounted a very long term and devastating counterattack against them and can do the same in Ecuador. Preventing that requires a far more radical project – a deeper democratization of the economy – than any left government in South America has yet undertaken.
Joe Emersberger can be reached at joeemersberger AT gmail DOT com