Peru: Paths to Poverty by Michael Reid (Latin American Bureau, London, 1984).
Peru’s prominence in the modern world began with a period of boom in the nineteenth century based on the export of guano. Its economy has always struggled and as early as 1879, after attempting to pay off foreign loans by printing money, it declared itself bankrupt. The pattern that gradually emerged was one in which power came increasingly to be held by a small proportion of the population with interests in sugar and mining. It was also dominated by foreign capital, particularly American, and this trend continued until General Velasco took power in 1968.
The Velasco government, a military regime, expanded the role of the state in the economy through a series of nationalisations and takeovers of foreign and oligarchic enterprises. This was done partly out of fear that the poverty of the population might lead to insurrection, but more importantly represented a transfer of economic power from one section of capitalists to another. Reid sees this as radical and contrary to "capitalist orthodoxy” but does not explain how either process would have been beneficial or detrimental to the interests of workers. In the event, the interests of private capital were rejected in favour of a state controlled economy, although there were those who criticised the government "under the banner of anti-communism” (p.54). Such propaganda merely feeds the confusion over what is essentially a conflict between state and private capitalism and it is a fault of this work that it tends to be descriptive rather than analytical.
By 1974 the Peruvian economy was suffering the effects of economic stagnation and the government responded by printing money and taking on board foreign loans. In 1975 it began cutting wages to reduce the budget deficit, restricted public investment and devalued the currency. Reid provides a clear picture of the increasing poverty of most of the population as government spending on health and education was cut but arms purchases from abroad were increased. Popular protest continued to be met with repression.
Under Fernando Beluande in 1980 there was a transfer of resources to private ownership and a series of mini-devaluations to maintain the international competitiveness of Peruvian exports. Peru continued to fund state spending by foreign loans and printing money but by 1983 the former had dried up and the country was entrenched in a deep recession. As usual, those who suffered most were the impoverished majority. The government equated strikes with the subversion of democracy and the failure of the system to satisfy human needs was covered up by blaming those who suffer its consequences the most. Within Peru the unions have become ineffectual and this pinpoints the weakness of trade unionism as a means of coming to terms with capitalism.
The book does not explain why capitalism has failed to fulfil the Peruvian people's needs or even offer a practical alternative. The main response described by Reid is Sendero Luminoso, which seeks violent insurrection and a "rejection of the capitalist money economy in favour of barter” (p. 109). It also rejects modern technology as a tool of imperialist penetration and desires a return to some "golden age” before the advent of capitalism. What is really needed is a strategy of revolutionary transformation of society. Peru has failed to generate internal sources of capital development and this has exacerbated its problems at a time of world recession. It is not Peru’s failure, however, but that of world capitalism.
Philip Bentley
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