Getting Social Capitalists On Board Against Populist Socialism

The recent reelection of Hugo Chavez by a margin greater than President Obama’s decisive victory in 2008 and the shenanigans perpetrated by Argentina’s populist president Cristina Kirchner suggest that populist socialism and doctored statistics are alive and well in parts of Latin America.

Let's be blunt: populist socialism doesn't benefit anyone but the rulers of these countries and their pliant cronies in the public sector. The gains in welfare are more than offset by a neutered private sector that won't create jobs and runaway inflation. Real wages have actually declined in Venezuela and barely improved in Argentina, while they have markedly improved in places such as Brazil. It gives the social capitalism popular in Latin America a bad name.

This is precisely why the moderate segments of Latin America (Brazil, Chile, Colombia, et. al) should more strongly condemn the populist socialism going on in Venezuela and Argentina. The U.S. can play a pivotal role in discouraging the proliferation of populist socialism in Latin America, but it must work in tandem with countries such as Brazil or Chile to maximize legitimacy (especially considering its stigma as a historic imperialist). America can feasibly convince these countries that because populist socialism reduces efficiency and stunts economic growth, it also reduces the level of Latin American trade that would increase standards of living. Right now, with the exception of Colombia and Venezuela, relations among Latin American countries are fairly good. This must be changed to create external pressure for reform.

Here are some guidelines on what the moderate social capitalists should do:

• They should push Venezuela and Argentina to increase the independence of their media and official statistics. Presently, both are completely pliant to the populists and spread propaganda to advance their agenda. Due to the lack of outside information, large swathes of the population are persuaded by the lies.

• In Venezuela, they should encourage fair elections. During this particular election, Capriles received a paltry 3 minutes on television while the airwave was saturated with propaganda supporting Chavez. Chavez used the full resources of the government to dole out political patronage and bus his supporters to the polls. Voter intimidation was apparent: supporters of Capriles were pelted by stones on occasion by red-shirted Chavez supporters, and one incident left 3 Capriles supporters dead. Public sector workers feared that the ballot was not secret and voting against Chavez would cause them to lose their jobs. In other words, Chavez rigged the game to his favor from the start.

• They should emphasize the dangers of populist socialism: cronyism, inefficiency, a neutered private sector that won’t create jobs, depressed economic growth, and rampant inflation associated with skyrocketing government spending. At the same time, they should highlight how their own model of balanced social capitalism would better reduce poverty, increase standards of living, create a robust middle class, increase resource production and overall efficiency, and result in stronger economic growth. They should strongly encourage basic reformations that would decrease the inherent cronyism under the current system.

How exactly to encourage the reformation of these populists is debatable. One way is to implement targeted sanctions on the elite leadership: this would entail freezing their assets abroad and depriving them of their visas. Another effective way is imposing light tariffs on certain products and conditioning their lift on fulfilling the two demands listed above. Finally, Latin America can kick countries of populist socialists out of multilateral groups such as MERCOSUR until they reduce the level of cronyism in their countries.

Whatever the case, all U.S. action must be committed with at least two other Latin American members. If the U.S. acts unilaterally, it risks creating the rally-around-the-flag effect and further entrenching the populists.

Populist socialism has great costs for the citizens of Venezuela and Argentina. It is high time to apply smart power to end their reign.