11
Labor Control and the Postwar Growth Model in Latin America

Ian Roxborough

In the 1940s, more precisely in the years 1944–1948, the institutional foundations of the postwar growth model in Latin America based on import-substituting industrialization (ISI) were established. At the same time, this period laid the contours of more than three decades of political and economic development, an outcome that was in large part a conservative response to the political and economic mobilization stimulated by World War II. Although there were significant trends toward ISI in the 1930s in response to the world depression and in some countries during even earlier decades, its adoption as a deliberate policy dates from around the mid-1940s.^[1]

The 1940s marked the institutionalization of the systems of labor relations and capital accumulation that dominated the postwar era. Henceforth the development of Latin America was closely related to economic expansion worldwide based on the institutions created at the end of World War II. This system of political economy survived basically unaltered until the debt crisis, beginning in 1982, finally produced efforts to reorganize the Latin American economies. Thus as ISI unraveled during the late 1970s and early 1980s, the model of capital accumulation pursued by the larger, more highly industrialized Latin American countries lost viability and finally collapsed. By the early 1990s the ISI model had largely been rejected, and was being replaced by totally different economic strategies.

The Shocks of the Depression and World War II

At the onset of the world depression in 1929, the nations of Latin America were still overwhelmingly rural and their political systems dominated by agrarian or less commonly by mining elites. Urban middle-class groups had already begun to challenge the prevailing systems of oligarchic parliamentarism and personalistic dictatorship but without so far having any noticeable impact on policy.^[2] The crisis of the 1930s brought into power regimes seeking alternatives to those systems, and so-called revolutionary challenges to oligarchic control became frequent. But apart from the sweeping transformation brought about in the aftermath of the Mexican Revolution, the movements supporting change were mostly unsuccessful: the Cuban insurrection of 1933, the Socialist Republic in Chile in 1932, the tenente movement in Brazil in 1922 and 1924, the rise of the Alianza Popular Revolucionaria Americana (American Popular Revolutionary Alliance) in Peru. Generally speaking, the ideological mainspring of these short-lived movements and regimes was an inchoate form of statism that drew inspiration from Mussolini's Italy and Catholic social thought, as well as from more conventional liberal sources. Some of the successful regimes, however, notably those of Brazil under Getúlio Vargas and Mexico under Lázaro Cárdenas, created novel and complex systems of corporatist intermediation whose principal aim was to control rapidly growing labor movements.

Except in these two countries the 1930s produced little change in economic policy or institutional innovation, and throughout the decade traditional types of regime remained in most of Latin America. Although the depression shook the Latin American societies and stimulated antioligarchic opposition movements, it failed to produce a new growth model. The absence of change reflected in part the lack of any self-conscious strategy for industrialization among Latin American policymakers and in part the unpropitious international economic climate. The industrial development that occurred during this period did so either as an unplanned response to external shocks or in conjunction with the export of primary products.

Toward the end of World War II the situation changed. Three sets of factors were important: (1) the structural shift in Latin America toward urbanization and away from the undisputed domination of agrarian or mining elites; (2) the diverse impact of the war in stimulating industrial and political mobilization; (3) the changing international economic and

political context. These factors converged in complex ways to produce the institutional settlement adopted in Latin America during the late 1940s. At this point the ancien régime oligarchies were increasingly undermined as urbanization created a middle class whose leaders had their own ideas about how politics ought to be conducted; as a working class began to emerge and to push for social change; and as military modernization (or alternatively its frustratingly slow pace) heightened political concerns among the officer corps.

The challenge to the ancien régime took the form of the aggrandizement and autonomy of the state. Modernizing elites sought to use an expanded state apparatus as a countervailing force to liberate themselves from the oligarchies and to provide patronage for their new middle-class and working-class clienteles. Beginning in the 1930s the growth of the state often resulted in Bonapartist regimes, variously labeled "populist" or "corporatist," that reflected the efforts of political leaders to mobilize and to control a broad popular base to challenge to the oligarchies. But in most cases conservative forces were able to defeat the reform movements and to retain their power under the old forms. More important, as yet in none of the Latin American countries were the new institutional forms linked to a new model of capital accumulation: the linkage could be forged only following the emergence of a new international economic order after 1945.

World War II accelerated the challenge to oligarchic parliamentarism that had been beaten back in the 1930s. At this point globally rising expectations of democracy and reconstruction generated a strong momentum toward change in Latin America.^[3] The war stimulated economic growth, industrialization, and a large expansion of the labor force. In countries in which the labor unions sought to contribute to the Allied victory by entering into no-strike agreements, inflation induced a decline in real wages. But as the end of the war approached, there was a burst of rank-and-file militancy, rapid growth in union affiliation, waves of strikes, and a general turn to the left.

These conditions formed part of a worldwide trend that began around 1942, following the defeat of the German armies at Stalingrad and the successful Allied offensives in North Africa. As the tide turned against the Axis powers, a wave of leftist mobilization followed, which in 1945 led the Bombay Chronicle , as far away as British India, for example, to remark: "the world is going to the left, as it must. The movement is both clear and

irresistible."^[4] At this juncture popular forces throughout the world began to demand major social change. In the areas caught up in the fighting, guerrilla and partisan units stepped into the vacuum left by the defeated Axis powers and challenged the old elites for control.

The outcomes of these struggles varied enormously and depended to a considerable extent on the role played by the Allied armies of occupation in each region. Thus in the areas taken over by the Soviet armies, the old ruling classes were rapidly pushed aside and Communist regimes installed. In France and Italy, in contrast, centrist forces supported by the Western Allies displaced the Communist-dominated resistance movements. In Germany and Japan the initial steps toward democratization and industrial deconcentration were soon reversed under the pressures of internal conflicts and mounting Cold War tensions.^[5] Elsewhere in Asia and in the Pacific, where the war had created strong nationalist and revolutionary movements, the political situation became even more complex.

Latin America remained physically unharmed by the war but was nevertheless caught up in its embrace. There too the war produced a turn to the left, and the Communist parties in the region expanded their memberships fivefold.^[6] Since this had been a war for "democracy," new democratic movements, often led by students and the middle classes, emerged in the countries ruled by dictators. In Nicaragua, El Salvador, Brazil, and Argentina mass rallies were staged to demand the overthrow or abdication of dictators or military juntas, and in several cases, notably Bolivia, Guatemala, Peru, Venezuela, and Brazil, the prodemocracy movements achieved at least temporary victories.

Thus the end of the war, combined with rising expectations and aspirations concerning a new world order, stimulated labor militancy, leftist radicalism, and prodemocracy movements. Reactions to these movements in the outside world often depended on the position each country had taken during the war. After the Japanese attack on Pearl Harbor, the United States pressured the Latin American republics to declare war on the Axis, and countries with neutralist foreign policies were generally regarded with suspicion as being pro-Fascist. The international Communist movement took a similar stance, describing regimes as "democratic" or "Fascist" according to their international alignments. In Argentina and Bolivia, for example, two countries where support for the Allies had been weakest, the new popular movements led by Juan Perón and Víctor Paz Estenssoro were seen by the U.S.

government (and by the Communist parties) as Fascist despite their workingclass base.

Toward the end of the war past international alignments bred some strange political alliances. In Nicaragua, for example, the Communists and labor leaders joined with the dictator Anastasio Somoza against the prodemocracy movement of the urban middle class and parts of the agrarian elite. Somoza had supported the Allies and was therefore aligned with the "democratic" camp; opposition to him was automatically defined as oligarchic and reactionary. In addition, during the war Somoza had adopd an authoritarian populist stance, promulgating a labor code and looking favorably on union organizing.^[7] Similar circumstances led much of organized labor in Brazil to support the dictator Getúilio Vargas in an unsuccessful bid to retain political power at the end of the war.

Postwar Options

When the war ended there was widespread discussion in Latin America of the place the region would occupy in the new world order. At this point segments of the reformist left in particular began to sketch out an alternative vision of Latin America's future development. The most articulate exponent of the new vision was the Mexican labor leader, Vicente Lombardo Toledano, who in 1938 used the large Mexican labor confederation, the Confederación de Trabajadores de México to set up the Confederación de Trabajadores de America Latina (CTAL). The CTAL gained the support of the largest union confederations of most of the Latin American nations, and by the end of the war around three quarters of the total organized labor force throughout Latin America, some three million workers in all, were affiliated with it.^[8] Making due allowance for exaggeration and the unreliable measures of unionization, this was an impressive and unprecedented achievement. However, the CTAL lacked the support of the labor movements of Argentina and Brazil. Argentina did not join because Perón was now pursuing his own brand of unionism, and he eventually established a Peronist international union organization, the ATLAS (Agrupación de Trabajadores Latinoamericanos Sindicalistas). In Brazil labor law prohibited unions from establishing international links, and Vargas, who like Perón was seeking to develop his own union following, made sure the prohibition was enforced.

Lombardo Toledano intended the CTAL to become a vehicle to develop

a new approach to Latin American development. He toned down his earlier anti-imperialism and urged national unity between labor and industrialists against what he portrayed as the twin menace of fascism and oligarchic reaction. His position became closely reminiscent of the "Browderism" supported by most Latin American Communists, who had now abandoned the notion of irreconcilable conflict between capital and labor in favor of a strategy of class compromise. Regardless of the merits or demerits of Browderism in the United States (where it originated), there was strong reason to support it in Latin America, where the emergent urban capitalists and the working class shared a strong common interest in industrialization. Lombardo Toledano and others saw workers and industrialists collaborating in a progressive development program based on protectionism. The intent was to clear away any remaining "feudal" remnants led by the landed classes and to provide a means to resist imperialist penetration. The state would coordinate and oversee this class alliance. The no-strike pacts during the war, despite their adverse impact on real wages, would serve as a model for future class compromise.

Leaders like Lombardo planned to harness the emerging corporatist institutions to the program of class compromise. Adopting themes later developed by Raúl Prebisch and the United Nations Economic Commission for Latin America (ECLA), Lombardo urged land reform and income redistribution to generate increased demand to fuel industrialization. The state would provide the infrastructure, protect domestic entrepreneurs, and remedy market weaknesses. This vision of the future drew heavily on the experience of the Mexican revolution, but it anticipated future ECLA doctrines and provided a Third World version of Keynesian demand stimulation. It appeared a brand of social democracy applied to Latin American conditions. Crucial to its success was a substantial redistribution of wealth and income from landed elites to the urban and rural poor. Such a transfer of resources, it was hoped, would provide the mass market demand to fuel a form of importsubstitution industrialization based on a relatively egalitarian distribution of income and wealth.^[9]

It is difficult to say whether the program would ever have succeeded had it been carried out. The program was credible and had the support of the Confederación de Trabajadores de América Latina, the Communist parties, and some members of the Latin American intelligentsia, such as Víctor Raúl Haya de la Torre.^[10] Had it been put into practice in a sustained way after

the war, the history of Latin America might well have been quite different. But the impact of the war on Latin America, important though it was, did not extend to the kind of disruption of elite control and mass mobilization that occurred in regions of the world where fighting had actually taken place. Indeed, in many ways, the Latin American elites emerged strengthened and invigorated after the war. As a result, instead of this approach a much more conservative version of ISI came to dominate economic strategy in the postwar period. The state continued to intervene to promote industrialization and resisted pressures from the United States for a return to free trade, but in an implicit compromise with landed elites, agrarian reform was removed from the political agenda. With agrarian relations of production largely unchanged, and with a relative neglect of agricultural exports, insufficient popular demand and perennial balance of payments problems marked the postwar experience of ISI. Without massive redistribution of income and wealth the conservative version of ISI that came to prevail in the postwar period was imbalanced and subject to recurrent crises. Latin American politics in the postwar period oscillated between populist attempts at income redistribution and inflationary growth that left intact the existing power relations, and authoritarian attempts to contain popular mobilization and to increase profitability.

The Hegemony of the United States and Its Economic Consequences

Despite strong opposition from those who wished to return to a growth model based on primary exports, at the end of the war several of the larger Latin American countries were ready to embark on a deliberate program of industrialization.^[11] The supporters of primary exports gained victories over the reformers in Peru and in most of the smaller, less developed countries. At different points during the 1940s, however, the advocates of change triumphed in the larger, more developed countries.

At the end of the war there were discussions between the United States and the Latin American states concerning future economic links between them. At the Chapultepec conference in February 1945 the United States pressed for a liberal economic regime, despite insistent pressures from the Latin Americans, headed by Mexico, for protectionism, a preferential inter American trading bloc, and agreements on commodities.^[12] One of the central objectives of Latin American policymakers was to attract foreign capital, either in the form of aid or as direct investment. The Latin Americans

preferred aid along the lines of the Marshall Plan, but at the inter-American conference at Rio de Janeiro in mid-1947 the United States delegation made it clear that aid on this scale would not be forthcoming.^[13]

The Latin Americans therefore had to choose between the unorthodox and largely self-reliant development strategy supported by Lombardo and the left or reliance on substantial inflows of private foreign investment to stimulate industrialization. Both approaches possessed major consequences for political alignments: the former implied social democracy, but the latter a conservative restoration. To attract foreign capital, a favorable "climate for investment" had to be created. This climate required stabilization policies and devaluations and reorganizing the institutions of labor control and capital accumulation. It was essential to prevent rank-and-file labor militancy that would threaten political stability and thereby jeopardize the climate for investment. These objectives underlay the great onslaught against labor during the early postwar period.

In several Latin American countries, led by Argentina, Brazil, Chile, and Mexico, by the end of World War II the industrial labor force had expanded substantially. A relatively tight labor market had developed, and several governments were attempting to build a political base by incorporating organized labor into the political system. As a result the unions were in a position to exert a degree of power that would strongly influence the "climate" that emerged for foreign investment. The war had induced an almost general shift to the left; almost everywhere, oligarchic forces were on the defensive. An increase in strikes, the growing independence of the unions, the rise in the vote for the left, and a general sense of political uncertainty prevailed. None of these conditions were conducive to future foreign investment: labor therefore had to be tamed.

The campaign was waged in a variety of ways. Governments toughened their stance against strikes and sometimes passed legislation making strikes more difficult to organize and carry out. In much of Latin America there was a major onslaught on the Communist party. At the same time, state elites sought to utilize existing corporatist arrangements or to develop new ones to bring organized labor into the system. This combination of repression and incorporation led to a series of bitter internal struggles within the major union confederations between the supporters of moderation and compromise on one hand and those who advocated independent and confrontational unionism on the other.

These largely internal conflicts were overlaid by tensions arising from the

international struggle for control of the world trade union movement that broke into the open in the immediate aftermath of World War II. At this point the world labor movement was riven by power struggles between Communists and proCommunists and a range of anti-Communist forces. In 1948 anti-Communists led a campaign to split the World Federation of Trade Unions, which bore fruit in January of the following year. In Latin America the campaign took the form of persuading labor organizations to disaffiliate from the CTAL. The CTAL conference in Lima in January 1948 saw a split led by the Chilean and Peruvian federations, which effectively marked the demise of the CTAL as a powerful labor organization.

These divisions at the international level reverberated through the national labor movements. Thus in Chile, Socialists and Communists fought bitterly for control of the labor movement and their respective roles in the Radical party government of Gabriel González Videla. They accused each other of sabotaging strikes and damaging independent working-class action. In this climate González Videla promulgated the Law for the Defense of Democracy, which outlawed the Communist party.^[14] In Cuba there were violent clashes between rival factions as the progovernment mujalistas moved to take over the Confederación de Trabajadores de Cuba.^[15] In Peru the Alianza Popular Revolucionaria Americana and Communists struggled for supremacy against one another during the turbulent government of José Luís Bustamante (1945–1948).^[16] In Venezuela union leaders loyal to Acción Democrática enjoyed the support of its short-lived government of 1945–1948 to oust the Communists from central positions in the labor movement.^[17] In Colombia the leftist Confederación de Trabajadores de Colombia was pushed aside by the newly formed, clerically inspired Unión de Trabajadores de Colombia. In Mexico the Confederación de Trabajadores de México (CTM) survived, but the Communists and lombardistas were purged in 1948. Based to a large extent on the powerful national industrial unions in the transport and export sectors, the militant wing of the Mexican labor movement began to reorganize and to oppose the government's stabilization plan. Using dubious legal devices, the government backed up one of the conservative leaders of the railway workers union, Jesés Díaz de León, nicknamed "el charro " because of his penchant for dressing up in classical Mexican cowboy suits, when he accused the radicals of financial irregularities in transferring money to anti-CTM organizations. Díaz de León used goon squads and the police, and with government support he forcibly took over union headquar-

ters and carried out a massive purge of rank-and-file militants. This charrazo (purge and takeover) was rapidly followed by similar events in the important oil and mining unions. Thus in one country after another the threat of independent and militant union opposition was removed or at least brought under control.

The Impact of the Cold War

The Cold War had a major impact on the Latin American labor movement, since it provided conservatives with an all-encompassing legitimation for the repression of labor. As a result, the requirements of capital accumulation coincided with the political dynamics of Cold War anticommunism. Beginning as early as 1946, but gathering momentum and reaching a peak in 1948, Latin American governments passed anticommunist legislation, intervened in labor unions, and took a hard line against strikes, often in the name of the "defense of democracy." Meanwhile, the American Federation of Labor (AFL), with backing from the State Department, embarked on a campaign to prevent the international labor movement from being dominated by leftists and particularly by Communists. During these struggles the AFL supported efforts by non-Communist forces to take over union organizations; when this approach proved impossible, the AFL encouraged splits and the creation of parallel unions.^[18]

In Latin America the endeavor focused on attempts to divide and weaken the Confederación de Trabajadores de América Latina, which controlled some vital union confederations in key countries in strategically crucial sectors of the economy like docks and shipping. The United States was particularly concerned that in the event of another world war a Communist fifth column entrenched in the ports would wreak havoc on inter-American trade. As early as 1943 the State Department began a campaign to increase its influence in the Latin American union movement, and in July that year key anti-lombardista union leaders were invited to the United States to discuss alternatives to the CTAL.^[19]

In 1943 these efforts proved prature, and nothing resulted from them, but the plots continued. Immediately after the war, with strong backing from the State Department, Serafino Romualdi became the AFL's "roving ambassador" in Latin America, and in 1946 he toured the region to line up support for a new confederation. Eventually, at a meeting of the CTAL in Lima in

January 1948 Romualdi successfully engineered a split that led to the formation of the Confederación Interamericana de Trabajadores (CIT). Although the CIT did not last very long, by splitting the CTAL it greatly weakened the influence of the left in the Latin American labor movement. There were similar splits in individual countries, some of them leading to considerable violence, as governments intervened in the labor unions to weaken radical labor activists. The charrazo in Mexico, for example, represented an attempt by the government to throw its weight behind the conservative forces in the railroad unions to oust the incumbent radical leadership. Purges of Communist and leftist union militants followed the adoption of anti-Communist laws. As a result in most countries by the end of the decade, and often earlier, labor militancy had been contained. The purge of the lombardistas in the Mexican CTM, and its takeover by conservative leaders in 1948, meant that an important source of funds for the CTAL dried up. The CTAL itself lingered on, but as a mere shadow of its former self until it finally disappeared in 1964. At this point, under the control of "responsible" leaders, most labor movements in Latin America had been domesticated, and they ceased to pose a threat to foreign investment.

The Specific Features of the Latin American Synthesis

In some ways these episodes can be seen as a Latin American version of the struggles in Europe, clubbed the "politics of productivity," that followed World War II.^[20] In Europe, as in Latin America, the war led to the mobilization of the working class and heightened the influence of the left. The counteroffensive launched by political forces of the right and center, backed by the United States, focused on the need to "discipline" unions and to ensure they worked together with employers to improve productivity and rebuild the European economies. However, since rapidly rising productivity was to prove such an illusory goal in Latin America, it is more accurate to describe the effort to contain labor there as the "politics of labor peace and foreign investment." In Latin America the primary task of unions was less to collaborate with employers in the pursuit of enhanced productivity than to refrain from militant industrial action that would prejudice the inflows of foreign capital.

The postwar settlement in Latin America should be understood as a conservative consolidation rather than as a reactionary restoration, because attempts by the agrarian export interests to turn the clock back to the past

were successful only in the less developed countries of the region. In the larger countries committed to industrialization, the institutional solution arrived at contained progressive elements: the state was to play an enhanced role in the economy, and the relatively small segment of the labor force that was unionized was to receive social security programs. Equally, the agrarian elites were displaced from the center of power and forced to share power with the emerging industrialists and the rapidly expanding state. But none of this meant that the interests of workers would be given high priority. Under the conservative version of ISI, in which foreign capital was critical and strict controls were placed on labor, income distribution would become increasingly regressive.

This outcome formed a striking contrast with that in Western Europe. There during the early postwar period intense conflicts over state ownership of industry, economic planning, social security, education, health, and welfare led to the emergence of social democracy as the dominant model of accumulation. Another quite different set of models emerged in much of Asia, where the war had weakened the old landowning elites and often created or stimulated armed popular rebellion. In Asia the nature of the postwar settlements varied greatly. They ranged from successful Communist revolutions in China, North Korea, and eventually Vietnam to defeated insurgencies in the Philippines and Malaya and U.S. -sponsored reconstruction in Japan and later South Korea. Even so, a common theme in Asia, notably in Japan, South Korea, and Taiwan, was the weakening of landlord control that led to land reform, income redistribution, a strong stimulus to demand, and changes in social structure which together ultimately provided a favorable environment for economic growth.

The contrast between these Asian nations and Latin America became particularly striking. In Latin America, which was physically untouched by the war, the agrarian oligarchy remained intact as a class, despite the structural shift in power away from it. Consequently, during the postwar period the landed interests found themselves still able to veto progressive development projects. As a result, one major component of postwar political instability derived from the continuing tensions over agrarian reform and peasant mobilization. This veto power among the landed classes persisted regardless of whether agrarians and industrialists continued as separate social classes or whether, by means of intermarriage and interlocking investments, the two became merged in a single dominant elite.^[21]

Finally, the conservative consolidation in Latin America was different

from the conservative consolidation in the United States. In the United States the war greatly strengthened American capitalism and gave liberal economic doctrines a new lease on life. At the same time, however, as in other parts of the world the war boosted both the left and organized labor. Even though the Communist party remained very small in the United States, at the end of the war it exerted considerable influence in important industrial unions such as the United Auto Workers (UAW) and the Congress of industrial Organizations (CIO).

Immediately after the war the Truman administration embarked on a campaign to contain industrial militancy and in late 1946 successfully challenged the miners and their union led by John Lewis. The Taft-Hartley Labor Act of 1947, passed by Congress over Truman's veto, made it illegal for union leaders to belong to the Communist party and was significant in rolling back leftist influence in the labor unions. In 1947–1948 the Communists were displaced from their leadership positions in the UAW and the CIO and isolated within a limited number of relatively small unions.

Thus by 1949 American labor had been contained, and the stage was set for the spectacular economic growth of the postwar period. Despite the virulent anti-Communism of the McCarthy years, Americans subsequently basked in mass consumption and celebrated the "end of ideology." There was no similar transition in Latin America, which remained deeply fractured and riddled with conflict. There, the conservative consolidation remained fragile, subject to the strains that sprang from an expanding and mobilizing polity and vulnerable to the vicissitudes of continuing dependency.

The ISI model adopted in Latin America in the postwar period proved a success to the limited extent that it brought an expansion of industry, improvements in employment and real wages, and a transfer of technology into the region. The model also had certain political successes. The postwar period in Latin America was characterized by intense struggles over distribution, often led by populists, and by a rapid and explosive expansion of the political arena as urbanization and industrialization created large and increasingly powerful classes of workers, industrialists, middle classes, and the urban poor.

The eventual containment of these forces represented a triumph for the institutions established by the conservative consolidation of the late 1940s. Foremost among these institutions were the corporatist systems of labor control, which functioned effectively because they were never simply instru-

ments to repress workers' demands; instead they structured these demands, defined the limits of legitimate action, and provided incentives to workers to operate within the system. Although the growth of real wages was slower than the rate of growth of national income as a whole, so that income distribution progressively worsened, (in most countries) average real wages were generally rising. While they lasted, these trends served to legitimize the system in the eyes of the organized working class, and in many countries labor leaders were incorporated into the status quo. Thus corporatism should not be seen simply as an instrument used by governments to control labor, but as a system in which workers and union leaders received real benefits as a reward for operating within the rules of the game. In spite of recurrent tensions the positive features of corporatism were perhaps most visible in Brazil and Mexico.^[22]

Even so the ISI model established after the war exhibited numerous shortcomings and became plagued by inefficiencies, inequities, instability, and permanent political strains. The continuation of protection during the postwar period led to growing inefficiencies in industry; overvalued exchange rates failed to stimulate exports; government subsidies and transfers produced numerous allocative inefficiencies; extensive government regulation of the economy proved a disincentive to efficient growth; many government enterprises were badly managed; the expansion of state employment usually obeyed the dictates of clientelist politics rather than administrative efficiency.

The bloated public administrations of Latin America produced fiscal deficits and inflation but were unable to produce effective policies. The economies of Latin America staggered between balance of payments crises, inflationary episodes, and draconian stabilization programs, conditions that engendered an atmosphere more conducive to speculation and capital flight than to long-term productive investment. The highly inequitable distribution of income in the region not only led to an inefficient use of human resources and cramped the growth of a mass market for low-income consumption items but also contributed to accumulating political tensions.

Throughout the continent the recurrent economic crises that characterized the ISI model heightened distributive conflict, and labor militancy constantly threatened to break free from corporatist control. On numerous occasions recourse to military intervention became the only way to rescue the system from spiraling mobilization. The fundamental reason for the sad history of

military intervention in Latin America lies there, in the tensions generated by the model of capital accumulation. Thus from a political perspective the distinctive feature of the conservative consolidation in Latin America was its fragility. In the postwar period none of the Latin American nations achieved an unbroken record of genuine democracy. Although the weaknesses of Latin American democracy had numerous historical roots, the linkages between import substitution, labor control, and political instability have been repeatedly documented.^[23]

Eventually, the institutional arrangements established in the immediate postwar period failed to sustain the process of accumulation. In the late 1970s, when Eurodollars became increasingly available on the world market, Latin American governments sought to use foreign borrowings to continue economic growth and to ameliorate the distributive conflicts simultaneously. But this strategy collapsed in August 1982 when Mexico defaulted on its foreign debt. The ISI model was now disintegrating, and by the 1990s a quite different neoliberal model had displaced it.

This chapter has emphasized the ways in which three factors interacted to shape the pattern of growth and political conflict in Latin America in the postwar period: (1) the international environment that fostered the need to attract foreign capital, (2) national development strategies that led to the conservative version of ISI, and (3) the growth of corporatist modes of labor control. These three factors combined to shape the distinctive pattern of development in Latin America during the postwar period. The model of accumulation enjoyed some successes but possessed numerous tensions and points of stress, and it was particularly vulnerable to shifts in the international economic environment, to crises of legitimacy, and to labor mobilization.