In his new book, the Nobel Prize-winning economist Joseph Stiglitz describes why he sees America as becoming the most unequal advanced country in the world.
The U.S. economy has struggled recently with high unemployment, stagnant wages, and growing national debt. The downturn in the global economy is partly to blame. But while the U.S. has been struggling, South America has been booming. And its political influence is growing too. In his new book “Latin Lessons: How South America Stopped Listening to the United States and Started Prospering” author Hal Weitzman says it’s time to rethink a relationship we once took for granted. Join us to discuss why we might now need Latin America more than it needs us.
- Hal Weitzman Chicago and Midwest correspondent for the Financial Times
In the last decade as the U.S. has struggled with problems at home and abroad, Latin America has prospered. It’s also quietly built relationships with some of the U.S.’s biggest rivals – China and Iran. Our influence in
the region has now fallen to an historic low. Hal Weitzman talks about how – and why – he thinks we lost the south.
Our Shifting Priorities
Prior to 9/11, Weitzman said George W. Bush had made some efforts to put Latin America more at the heart of U.S. foreign policy. But afterward, the centerpiece of U.S. foreign policy became the fight against violent Islam. “When the U.S. withdrew and effectively shoved Latin America down to the bottom of a very long list of foreign policy priorities, where it’s effectively remained ever since,” Weitzman said. “That created a kind of power vacuum in Latin America.” Countries like China, Russia, and Iran stepped in to the vacuum.
The Brazilian Story
Brazil has emerged as not only the powerhouse of South America, but also as a global economic power, Weitzman said. Last year, Brazil overtook the U.K. to become the sixth biggest economy in the world. “The real challenge for the U.S. is how to build a partnership with a country like
Brazil that will enable the U.S. to find a new kind of global role in this multi-polar world that’s emerging, where the U.S., in a few decades, may no longer be the top dog,” Weitzman said.
U.S.’s Attitude Toward Cuba Is A Symbol
Weitzman thinks the U.S.’s attitude toward Cuba is a larger symbol of our attitude to the region as a whole. The U.S. is seen as a somewhat bullying, “We’ll tell you what to do” presence in Cuba, he said. In contrast, the U.S. deals with China and Saudi Arabia with a more pragmatic approach. “It doesn’t tell them how to run their countries,” Weitzman said. There has been an inertia about our Cuba policy, and Weitzman thinks it’s time to revisit that.
Resource Exports And Sustainability
Although South America has seen many improvements and successes in recent years, there are still areas where it stands to make progress. Its economies have become very dependent on exporting natural resources and agricultural commodities, Weitzman said. It’s hard for them to diversify. South America sends many of its natural resources to China, where they’re used to make cheap manufactured goods that are sent back to Latin America. Brazil, for example, is very concerned about shoe, textile, and car industry being undermined by Chinese exports. “Education would be the path out of that…Latin America has not been particularly good in doing that,” Weitzman said.
You can read the full transcript here.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. In the last decade as the U.S. has struggled with problems at home and abroad, Latin America has prospered. It's also quietly build relationships with some of the U.S.'s biggest rivals -- China and Iran. Our influence in the region has fallen to an historic low. Joining me to talk about how we lost the South, Hal Weitzman.
MS. DIANE REHMHe's the author of the new book titled, "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering." I'll be interested to hear your comments, questions, 800-433-8850. Send us email to email@example.com. Join us on Facebook or Twitter. And good morning to you, sir.
MR. HAL WEITZMANGood morning, Diane.
REHMTell me, have we truly lost the South?
WEITZMANWell, I mean, U.S. influence in Latin America is, as you said in your introduction, at an all-time low. And there's an irony there because at a time when the U.S. economy is still deeply wounded, as you said, South America has been growing and prospering. This is exactly the time that Washington needs to build partnerships with emerging economies. And at the same time, U.S. influence has never been weaker.
REHMAnd why is that? How did we get to this point? Is it simply the current economic crisis in this country? How far back does this deterioration go?
WEITZMANWell, let's go all the way back to the 1830s, to the Monroe Doctrine. Since then, the U.S. has engaged in this long history of military interventions and gunboat diplomacy and dirty wars and assassinations and coups and all the rest of it in Latin America. And some U.S. policy still remains from that era if you think about the Cuban embargo, think about the war on drugs. And all this has fed a streak of ant-Americanism in Latin America indeed.
WEITZMANSome people think that Latin America was kind of the birthplace of anti-Americanism because it was the first region where the United States really intervened in the world. But interestingly, I think it wasn't that history or at least not that history alone that led the U.S. to lose South America, at least not this time around. If you go back as recently as 1994, there was a big Summit of the Americas meeting in Miami. And at this meeting, Bill Clinton, the president at the time, sketched out this vision of a free trade block that would stretch from Alaska down to Argentina.
WEITZMANHe called it a partnership for prosperity. And every leader in the region enthusiastically backed it apart from Fidel Castro in Cuba. So, it's really -- the question is, what happened in the decade or so after that that caused the U.S. to lose South America? Now a key reason is because the United States voluntarily withdrew from the region after 9/11. So, the George W. Bush administration had made some efforts to put Latin America more at the heart of U.S. foreign policy, but 9/11 changed all that and the focus shifted very quickly to the fight against violent Islam.
REHMAs I recall, George W. Bush's first international visit was with the president of Mexico at the time. But what happened to this Clintonian vision of all the way from the United States straight on down including Latin America. What happened to that?
WEITZMANWell, when the U.S. withdrew and effectively shoved Latin America down to the bottom of a very long list of foreign policy priorities, where it's remained pretty much ever since, that created a kind of power vacuum in Latin America. And into that vacuum, as you said in your introduction, came principally China, but also other countries, like Russia and Iran. And they were interested both in the natural resources that Latin America possesses in abundance, but also in the idea of establishing a foothold in a region that Washington had traditionally thought of as its backyard.
REHMHal Weitzman, he's Chicago and Midwest correspondent for The Financial Times. He previously reported from Peru, Bolivia, Ecuador, Venezuela and Chile. Talk about Brazil and what has happened economically with Brazil.
WEITZMANWell, Brazil has really emerged as not only the powerhouse of South America but as a global economic power. And Brazil, last year, overtook the U.K. to become the sixth biggest economy in the world. And the projections that we have by 2050, Brazil will be the fourth biggest economy in the world. So, the Brazilian story is just incredible. And the real challenge for the U.S. is how to build a partnership with a country like Brazil that will enable the U.S. to find a new kind of global role in this multi-polar world that's emerging, where the U.S., in a few decades, may no longer be the top dog.
REHMAnd has China already established that relationship?
WEITZMANWell, not so much on the political side but very much on the trade side. So, when we talked about that vacuum that was being filled by China, very much that was a commercial relationship that developed there. So, China, not the United States, is now the top trading partner of Brazil. It's also the top trading partner incidentally of Chile and Peru. So, U.S. influence is not just -- we shouldn't just think in political terms, we should also think in commercial terms.
WEITZMANIn fact, interestingly, if you look at the trade relationship 10 years ago, Latin American exports primarily came to the U.S., most Latin American came to the U.S. And that figure has progressively dropped. The amount of Latin American exports, the proportion that goes to China has exploded. And at the same time, the proportion exports that go to Latin America have been increasing. So while we're becoming more dependent on them, they've been becoming less dependent on us.
REHMSo, what are we getting from Latin America now in the way of goods?
WEITZMANWell, our key relationship is energy. When we talk about the United States being dependent on foreign oil, we used to think of the Middle East. Well, actually, Latin America is a bigger source of oil imports than the Middle East.
REHMA bigger source?
WEITZMANAbsolutely. And the key suppliers are countries like Mexico and also of course notoriously Venezuela.
REHMSo, with Venezuela, with Mexico in these powerful positions, what does the U.S. need to do to win back that kind of trust, not only economically but politically as well?
WEITZMANWell, first of all, I think you have to look at U.S. policy towards Latin America as a whole. And it's a real muddle, Diane. You know, you have remnants of bits from the Cold War. You've got remnants of other initiatives. So the first task for Washington really is to undo some of the things it's been doing that have hurt its reputation in recent decades. And the first thing I think is the Cuban embargo.
WEITZMANYou know, the Cuban embargo was designed to unseat the Castro regime. And it's been a failure in that regard. And not only that, but it's fed a narrative within Cuba, all this sort of plucky David standing up to this bullying Goliath. The second thing I think is the war...
REHMLet me interrupt you...
REHM...there for a moment. So, what you're saying is, all of Latin America is watching what the U.S. is doing in regard to Cuba?
WEITZMANI think it's a symbol, Diane, of U.S.'s attitude towards the region. And, you know, we talked about the relationship in the past, it's very much been seen as a kind of we'll tell you how to behave. And if you do that, then we'll reward you. And Cuba is kind of seen as an example of that, the sort of bullying we'll tell you what to do. So, it's a hostile relationship. What is the logic for the Cuban embargo? I mean, the United States deals with China. It deals with Saudi Arabia.
WEITZMANIt has a pragmatic approach. It doesn't tell them how to run their countries. What is the reason for the United States to have this Cuban embargo? Now one of the reasons has been a domestic lobby. But even that has been weakening in recent years. It's time for a real reassessment of has that succeeded? And if not, what can we do to reshape and reform this relationship?
REHMIt does go back to the Bay of Pigs. It goes back to certainly to the Kennedy assassination, the belief at first that there were some Cuban elements involved. It has a long history. But it's old at this point.
WEITZMANYeah. Well, as I said, I mean, it's a remnant, isn't it? You know, you wouldn't base a China policy on what your attitude have been to China in the 1960s. It is definitely something that has -- that's kind of have been an inertia about it and it's definitely time to revisit that.
REHMAll right. So, interrupted you, so Cuba...
WEITZMANSo, number two, I would say in terms of undoing the things that we've been doing is the war on drugs. And the war on drugs has a long history, too, 30 years. And, again, it's failed to stem the flow of drugs into the United States. It's failed to raise the price of drugs. It's failed to end the cultivation of coca. And on top of that, it's brought death and destruction to, you know, to countries. It's caused thousands of deaths. Fifty thousand people have been killed in Mexico alone in the past six, seven years in drug-related violence. So, the war on drugs is another policy that really needs to be reassessed.
REHMHal Weitzman, he is the author of the book. It's titled "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering." I look forward to hearing questions, comments. Stay with us.
REHMWelcome back. Hal Weitzman is with me. He's Chicago and Midwest correspondent for the Financial Times, previously reporting from Peru, Bolivia, Ecuador, Venezuela, and Chile, which gives him the background and certainly the interest to write a new book titled "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering."
REHMHere's an email from Phil in Detroit who says, "Could you please comment on the effect IMF debt had on Latin American countries and if the reason paying off of such debts has enabled the economies of countries like Argentina to grow?"
WEITZMANGreat question. Well, in the 1980s and 1990s Latin American countries put in place a whole range of free market reforms known as the Washington Consensus. And these were essentially telling them that the only way to develop your economy was to get the state out, remove the state from the economy and make your countries attractive as possible for foreign investors to come in.
WEITZMANThe IMF and the World Bank were the agencies that promoted these policies. And of course the U.S. government enthusiastically backed them. And to be fair, it wasn't something that was imposed. You know, the countries of Latin America wanted to change their economies. They'd come out of a period of severe indebtedness and hyperinflation. And these policies did help stabilize the economies. In that sense they got them out of those crises. However, they failed to make a real impact on poverty and inequality.
WEITZMANAnd they also led to this period between 1998 and 2003 of economic stagnation, which is known now as the lost half-ed decade in Latin America. And the rise of leaders like Hugo Chavez in Venezuela and Abel Morales in Bolivia, Rafael Correa in Ecuador really came in reaction and a backlash to those policies of the Washington Consensus, those free market policies.
WEITZMANWhen growth started again in roundabout 2004 really fueled by the rapid industrialization of China, India and other emerging economies many countries in South America reversed some of those free market policies. So they raised taxes on foreign investors. They brought the state back in. They expanded the role of state-owned companies. And in some extreme cases they nationalized industries and actually kicked out the foreign corporations.
WEITZMANNow the result of that is that there's more and more money in the hands of the state. And of course the commodities that South America's been producing and exporting, the oil, the minerals, the metals, the grains, the soy beans and everything else, the price for those commodities has been soaring. So there's been a huge amount of money flowing in and flowing specifically into central governments. And they've used a lot of that to pay for social programs, particularly aimed at bringing down poverty.
WEITZMANAt the same time they have paid off much of the debts that they've owed. And part of that is the memory of the fact that when they owed money to multilateral institutions, they essentially had them in a vice and they could tell them what to do.
REHMSo does that mean that the so called free market reforms that the U.S. was pushing onto Latin America have not only been turned around and put aside but that in effect they failed?
WEITZMANWell, that's a real debate, Diane. I mean, there are a lot of economists who are more on the free market end who say that the reforms didn't go far enough or they were implemented in the wrong way. And my response to that is it sounds to me a bit like, you know, the people who say, well you know, the Soviet Union didn't prove that Marxism was wrong. You know, they didn't do it right. Well, they did what they did. I mean, you have to implement these policies in the real world. And in the real world, the Washington Consensus was not seen, in Latin America importantly, as a successful package of policies.
WEITZMANAnd, you know, the term Washington Consensus is never used now in Latin America. The term is really sullied. And instead it was replaced by this term neo-liberalism, which is a real term of abuse in Latin America. So did they fail? As I said, I mean, I think just to stick to the facts they did not bring down poverty and inequality. And that's important because poverty and inequality were really holding back development in Latin America.
WEITZMANYou know, they prevented the development of a mass consumer society in a robust workforce. Poverty and inequality created social tension and social conflicts. And they sort of killed ambition and social mobility. So you could have headline growth but if you still had this kind of grinding and trench poverty then you're holding back economic development.
REHMSo how would you look at Latin America now in terms of individual wealth, in terms of poverty, in terms of fair distribution of wealth?
WEITZMANWell, the story's just a marked contrast to the United States. And the thing that really intrigues me, having been a reporter in South America and seen the boom and then being transferred up to the United States and seeing the bust here, was the dichotomy between the two. And something -- you know, a real reversal of fortunes in these two continents that I think a lot of Americans hadn't really noticed.
WEITZMANIn terms of poverty, when these South American countries turned their back on some of the policies that the United States had promoted and moved more towards what we called resource nationalism, getting the state back into the economy, redirecting the wealth toward social programs aimed at reducing poverty, you know, they succeeded in reducing poverty. So the poverty rate in Latin America across the whole continent went from 44 percent in 2002 to 33 percent in 2010.
WEITZMANAnd so, you know, there is a debate, as I said, about the wisdom of these policies and the wisdom of the nature of how they were put into place. But you can't really deny that that's a good thing that poverty has been reduced.
REHMAnd what about levels of education, for example?
WEITZMANThat's much more challenging and I think -- you know, I don't want to paint for you a picture, everything's great in Latin America.
WEITZMANIt isn't. I mean, there are significant policy challenges ahead. Education is a big one. Now, one of the problems is that the economies of South America in particular have become very, very dependent on exporting natural resources and agricultural commodities. And it's hard for them to diversify in a way. So when we talked about the relationship with China, for example, China is obviously a huge manufacture of cheap manufactured goods.
WEITZMANAnd just as, you know, South America was sending its natural resources over to China, China has been sending its cheap manufactured goods over to Latin America. And that has taken a big dent out of Latin American manufacturing. So if you look at Brazil, for example, they're very concerned about their shoe industry, their textiles industry, their car industry being undermined by Chinese exports. Education would be the path out of that, to educate their workforce to create, you know, a workforce that's more equipped to innovate, to compete in the global economy. Latin America has not been particularly good in doing that.
REHMI realize your book is about Latin America but it seems to me that some of the same principles you're talking about might indeed apply to Greece, to Spain, to Italy, to what's going on there now. How do you see the contrast or the comparison?
WEITZMANFascinating. I mean, one of the most interesting things about what's happened in Europe is that if you went back less than a decade ago, commentators on Latin America were saying, if you want to see what your economy should be like -- they were saying to Latin American countries -- if you want to see what your economy should be like look at Ireland, look at Spain. Well, we all know how that story ended.
WEITZMANSo, you know, I think something that's very, very interesting to me is that one of the key criticisms of, for example, Hugo Chavez's Venezuela and other similar regimes has been that their policies are simply unsustainable. You can't go on spending money on social programs like this and not generating more money from your oil industry, for example, by investing. And that's something -- that's a very, very valid criticism. It's a criticism in the book that I share.
WEITZMANAnd I talk about what I call Hugonomics, this kind of topsy-turvy world that clearly is not sustainable. I compare it to kind of a wild party at Studio 54 in the old days that you know everyone's going to wake up in the morning with a horrible hangover. But you're just enjoying it while it's going on. So a key criticism has been that these policies are unsustainable. But to my mind the whole financial crisis has brought into question the very idea of what is sustainable.
WEITZMANI mean, was the Eurozone or is the Eurozone sustainable? Was the over-the-counter derivatives market that gave us the credit default swaps and the collateralized debt obligations, was that sustainable? Is the U.S. federal debt sustainable? So I think the whole question of sustainability has been brought into question. And the idea that one system is sustainable, another system is unsustainable is much more in question.
REHMTalk about Venezuela and Hugo Chavez. There is an election this week -- or Sunday I think it is, in Venezuela. Talk about what he has managed to accomplish, what his people now think of him and how that election could affect Venezuela going forward.
WEITZMANWell, Chavez is the kind of character who people either love or hate generally. And in this book. I try to kind of find the middle ground. I think there's a lot to criticize Chavez about. I mean, he has not really respected democracy and the rules of the game and separation of powers, you know, his policies really are unsustainable. He's not invested in infrastructure and in education and developing a sustainable growth in Venezuela. In fact, growth in Venezuela has been very, very weak. It's really lagged countries like Peru and Brazil.
WEITZMANBut at the same time the government has transferred a huge amount of wealth to the poor and it's managed to bring down poverty rates. And that was kind of its central focus. So if you judge them by what they wanted to do, in that sense they have achieved something. But Chavez is probably -- he's still popular among those, you know, those who like him like him still. But he has lost a lot of popularity and (word?) because of the soaring crime rates in Venezuela, terrible, terrible crime rates, very, very high homicide rates, at times the highest in the world.
REHMWhy is that happening?
WEITZMANWell, there's a lot of guns in Venezuela. And, you know, I guess he has not been a law and order president. You know, if you compare him to Colombia where they're very, very hot and strong on law and order, it's a completely different society. Venezuela is a much more lawless place. So his popularity has really dropped. And of course inflation has been sky high in the past few years so...
REHMAnd the election this weekend?
WEITZMANThe election this weekend is a primary election to select an opposition candidate to stand against Chavez in October's general election, the presidential election. And people who follow Venezuela closely reckon that this is the best chance that the opposition has ever had to unseat Chavez. And bear in mind that they've tried many times to get rid of him.
REHMAnd he really wants to be president for life, does he not?
WEITZMANYes, I think that's fair. Well, he's changed the constitution a couple of times...
WEITZMAN...to enable him essentially to serve as long as he wants.
REHMHal Weitzman of the Financial Times. His new book titled "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering." And you're listening to "The Diane Rehm Show." We're going to open the phones now, 800-433-8850. Send us your email to firstname.lastname@example.org. Visit us on Facebook or send us a Tweet. First to Panama City, Fla. Good morning, Glen, you're on the air.
GLENDiane, I really enjoy your show and thank you.
GLENI'm going to make a comment and I'll listen to your response. This actually sort of ties into your last -- the first half of the program and that is that contraceptives in Brazil have enhanced their women, allowing them to limit their family size. And it has really been an economic boom for them. And I wish that our policymakers in Washington would see how this has made a good effect. While we seem to be, you know, basically slogging our way back to the Stone Age of women's health rights, look at Brazil.
REHMAll right, sir. Thanks for your call. Hal.
WEITZMANYes. I mean, the falling birth rates in Latin America has been a huge boost to economic fortunes. And the caller's absolutely right and not just in Brazil but across the continent. That has been an incredibly important factor in helping spur economic progress.
REHMWhat about health insurance? What about the role the government plays there?
WEITZMANThat's been much more touchy. And, you know, I mean, in Venezuela what they essentially tried to do was import wholesale Cuban doctors over, so kind of import national health service. And they did the same in Bolivia and to a lesser extent in Ecuador. But, you know, that's not really -- that is really back to the sustainability question. It's not sustainable to staff your healthcare system with a whole load of foreign volunteers. There has been poor investment in health.
WEITZMANAgain, so we talked about education. Health is another hole. There's been poor investment in health spending across the region. And that's another real challenge for Latin America.
REHMSo do you see any progress moving forward on that ground?
WEITZMANYeah, I mean, I think, you know, the government of all the political persuasions are aware of these problems and they talk a good talk about investing in education and healthcare. But it -- there's not been a kind of coherent plan either within countries or across the region to do that. But that certainly is a challenge that they're aware of, put it that way.
REHMWhen you think about women's health, are they having fewer children in parts of Latin America?
WEITZMANYes, absolutely. Yeah, across Latin America birth rates have really fallen. And as I said, that's really helped, you know, people to progress and to enter into the middle class. I mean, that's been a huge contributory factor. I mean remember, to go back to the comment your caller made, that birth rates in Latin America were much higher than the United States. So they've come down.
REHMHal Weitzman. His new book is titled "Latin Lessons." When we come back, more of your calls, your comments. I look forward to hearing from you.
REHMAnd if you've just joined us, Hal Weitzman is with me. He's Chicago and Midwest correspondent for The Financial Times, previously reported from Peru, Bolivia, Ecuador, Venezuela and Chile. His new book titled "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering." Here's a caller in Salt Lake City, Utah. Good morning, Mary, you're on the air.
MARYGood morning. Thank you for taking my call.
MARYI just wanted to ask your guest a question. I'm an American and I'm going to marry a Uruguayan citizen this summer. And he lives in Spain. His family immigrated there eight years ago. They are sustaining themselves on property that they rent in Uruguay. And that is actually the only thing that is allowing them to maintain a life in Spain now that their economy in Spain has plummeted.
MARYAnd we're also noticing in Spain so many of these immigrants from Latin America are now returning to their various countries of origin in South America. And I guess I'm just wondering what the impact is of all of these immigrants that came to Spain and are now trying to return because the economical situation's actually better in those countries.
WEITZMANYeah, I mean, isn't that fascinating. Great question, Mary. You know, one of the things that really struck me recently was Christine Lagarde, the head of the IMF, was in Latin America. And she went around, did a tour, spoke to all the leaders and asked them to give money to the IMF to help bail out Europe. I mean, what an irony. Yes, and of course these workers left Latin America because they wanted to take advantage of the opportunities in Europe. And now sadly because of the situation in Europe, they're returning back.
WEITZMANBut and also how interesting that Mary said that her perspective...
WEITZMANYeah, her perspective in-laws were depending on money that they were earning from their props in Latin America.
REHMSo what she is asking really is, is it worth his going back to Uruguay?
WEITZMANWell, I'm not sure I'm qualified to answer that question. I mean, there are certainly opportunities in Latin America and it's not something you only see with Latin America. I mean, we've seen that here in the U.S. with, you know, Indians going back to India because there are more opportunities to make money in India than there are in the United States...
WEITZMAN...in certain sectors so...
REHMAll right. And here's an email from John, "If life is so great down in Latin America, why are people fleeing here whenever they get the chance? Ecuador, Columbia, Central America, Mexico, Brazil, we have millions and millions of people here who have voted no about their own countries with their feet. Surely that contradicts all the stuff about how rapidly these places are growing, or at least indicates that the growth is not tied to rising living standards."
WEITZMANThat's a really good -- but the second part of that's an excellent point. And actually, a good example is in Peru. So in Peru, you saw in 2010 they had 9 percent economic growth, you know, incredibly fast, one of the fastest growth rates in the world. And yet, the next year, they elected as president a guy called Ollanta Humala who was really threatening to overthrow all that and to focus much more on social inclusion. Why? Because people felt that the process from this economic growth were passing them by and really benefiting the wealthiest. Does that sound familiar, similar to the U.S. there?
WEITZMANSo to go back to the main point, the question asked about just because Latin America is booming and growing faster and the United States is growing slower, doesn't of course mean that Latin Americans are wealthier than Americans. I mean, there's still a huge gap. But what it does mean is the trajectory between the two continents is narrowing. And you see that across a whole range of indicators, you know, not just that their economy's growing faster, but if you look at unemployment rates, you know, well, unemployment has been stubbornly high in the U.S., joblessness has been falling in Latin America.
WEITZMANWe talked about debt being spiraling out of control in the U.S. and Latin American countries paying off their debts. Poverty and equality are moving in the opposite directions. The middle class here feeling a squeeze and under attack. And in Latin America tens of millions of people are joining the middle class. That doesn't mean they're joining the middle class at the same income level as they would be in the United States. So for many people, the simple economic calculation is still going to be that they will be better off coming to the United States and sending money home.
REHMAll right. To Nelson in Little Rock, Ark. Good morning.
NELSONGood morning, Diane. Great show.
NELSONI'm looking forward to reading this book. I was born in Cuba and I immigrated here in 1980. And, you know, I know most Cubans that live in the United States probably wouldn't agree with me, but I believe that embargo in Cuba hasn't worked, will not work, has been completely unfair. And it hasn't hurt the Cuban government. The only person that -- you know, it's only hurt the population of Cuba, you know, my grandmother, my aunts, my uncles. You know, and it's always been the one excuse that the Cuban government has always used that, you know, things are bad because of the imperialist Americans.
NELSONWell, if we had gotten rid of the embargo, you know, back then, that excuse wouldn't be available to the government there. And then, you know, maybe the people would recognize that. But really enjoying the show.
NELSONAlso I'd like to get the comments from the author about how, you know, the U.S. is, you know, interfered a whole lot in Latin America.
REHMAll right. Nelson, thanks for calling.
WEITZMANYeah, well, I mean, a really great story that he told us there. And as I said, you know, the attitude among the Cuban American community is changing. So it's not as if there is one view within that community that says, or more broadly within the Latin American community in the U.S. that says, you know, we have to keep the embargo. Attitudes are definitely changing on that scale.
REHMHere's an email from a listener, who says, "I travel often to (word?) Columbia. The Chinese and French presence there is huge. The U.S. seems to only supply bullets and guns to fight a drug war that ended in the 1980s. The Chinese are building cars, have invested in six Columbian airports by expanding them. The French are building Renault automobiles. It's sad to see the U.S. losing opportunity here."
WEITZMANYeah, I mean, Columbia's actually a wonderful example because Columbia for a long time has been the United States' best friend in South America. And when other countries have turned against the U.S., Columbia's always been a strong ally and has suffered for that from its neighbors. But the United States -- the Bush administration signed an agreement with Columbia for a free trade agreement. And the Congress here just refused to approve the deal until last year.
WEITZMANAnd those five last years were quite damaging in terms of the U.S. commercial relationship. And Columbia was really holding out for the United States, you know, to show it some love. And it failed to do so. And in response I think Columbia's really tried to ramp up its trading relationship with China, so it's a very interesting example that the caller had.
REHMAll right. To Hammed (sp?) in Houston, Texas. Good morning, you're on the air.
HAMMEDGood morning, Diane. Awesome show.
HAMMEDI have a comment regarding the abolishment of Milton Friedman's free market economic model in South America and moving toward the socialism which has helped those countries and maybe we can learn from those models too.
REHMWhat do you think? Milton Friedman's open market policy.
WEITZMANWell, as I said, you know, it had a mixed record, but it certainly didn't do a lot in terms of bringing down poverty and inequality. I just wanna make one clarification though about what the caller said. Socialism, it's a difficult term. You know, well, you could easily say that Chavez and Venezuela is following a socialist path. You know, it's much harder to say that about countries like Brazil that are more moderate.
WEITZMANBut the way that I like to think about it is that it's really about the rise of economic nationalism. And that's something that you do see in Brazil as well as in Caracas. It's something that touches a moderate left regimes as well as radical left regimes. And that's something that did involve bringing the state back in, as I said, and expanding the role of state owned enterprises. That's something that Friedman very much would've been opposed to.
REHMI'm interested in the fact that in your book you use the disappearance of the Panama hat to explain the flipside of globalism for Latin American. What happened to the Panama hat?
WEITZMANThe poor old Panama hat, I know. And it used to be such a kind of mark of debonair elegance, didn't it? You know, in Britain the cricket umpires always wear a Panama as kind of a fancy hat. Yeah, well, I'm sure your listeners will know that Panama hats don't actually come from Panama, right? They come from Ecuador. It's a very traditional Ecuadorian hat. And they got the name Panama because the U.S. bought so many of them to give to the workers who were building the Panama Canal.
WEITZMANBut the Panama hats are made in a few regions in Ecuador. And they're made by workers who are paid, let's say, something like $20 per hat. And then some of the hats retain for tens of thousands of dollars...
REHMOf course they do.
WEITZMAN...here in the United States. And it's a real art. You know, it's obviously done by hand, very carefully, painstakingly, takes a long time and it's woven from a particular kind of straw that grows in Ecuador. And that has -- that whole industry has been undermined by two things. One is by China and China's making what they call Panama hats. They're...
REHMA fake Panama hat.
WEITZMANThey're fake Panamas. They're actually made out of paper. I mean, they're straw hats, but they're actually...
REHMMade out of paper?
WEITZMANThey're actually made out of kind of resilient paper, yeah. And, in fact, people who know about hats say that they're actually kind of a better quality, in a sense, the Panama, they're more durable. You know, somebody said to me when I was researching this Panama hat section that, you know, they have all the advantages except authenticity. You know, so they are actually good hats.
REHMBut do they bend as beautifully and shape?
WEITZMANI think they do. Yeah, I think they do. I think it's quite likely if you bought a Panama that did not say made in Ecuador, it was made in China...
REHMAnd what's the...
WEITZMAN...and quite likely out of paper.
REHM...and what's the difference in price?
WEITZMANOh, the difference will be huge. I mean, if you were buying a job lot of Panamas, you would not be buying them from Ecuador. Ecuador is really -- if you were buying one from Ecuador, you're buying a very, you know, a very fine hat that you're probably gonna pay a lot of money for. But I call them -- in the book I call them globalizations loses because these are people who are really stuck in an industry, much as, you know, many of the workers were in Detroit, let's call it before halftime in Detroit.
WEITZMANBut in the old days workers were kinda stuck in an industry that at one time had been, you know, booming and very profitable. And that was true of the Panama hat industry in the old days. And now they find themselves kind of overtaken by globalization. And at the same time these villages where they weave these Panama hats, because there are so few opportunities, people have really left, so they kind of -- you know, many of the houses are abandoned.
WEITZMANThey have these kind of, what I call, migration widows, women whose husbands have left and are living in the U.S. It's a very sad story. And this has kind of fueled the sort of disenchantment with globalization that has also contributed to the rise of the left in Latin America.
REHMAnd you're listening to "The Diane Rehm Show." So what you're saying is that China's engagement with Latin America, example being the Panama hat, has a big downside.
WEITZMANAbsolutely. Yeah, we talked about that earlier with Brazil being concerned about, you know, Chinese cars, Chinese textiles, Chinese shoes coming in. We're all plugged into the global economy now and it's -- Latin America very much found its specialism in natural resources. And that has taken a real toll on its manufacturing sector.
REHMSo you begin to wonder as you talk about all of this growth and wealth and prosperity and turning away from America's -- the United States' lessons, could Latin America be heading for the same kind of bubble that we have experienced here in this country?
WEITZMANThat's certainly been a big concern. I mean, the bubble is really in the commodity markets, right? Latin America has boomed as it's been exporting oil, it's been exporting, you know, copper and other metals and minerals and soy beans and wheats. And all these markets are notoriously fickle. They go up and down very quickly. And the fortunes of Latin America's economies are very much related to those markets.
WEITZMANHaving said that, you know, this increased commercial relationship with China, although it's a danger in a sense because if China slows down sharply, it will really hurt Latin America. On the other hand, my response to that is, well, if China slows down sharply, we're all gonna be in trouble. You know, this is the second biggest economy in the world. You can't insulate yourself from that. So if you look at the long-term strategic plan that Latin America might have for itself, hitching its wagon to China is not necessarily a terrible idea.
WEITZMANThere are some commodity analysts who think we're in a super cycle, so these higher prices we've been paying for oil and other commodities could continue for decades, not just for a few years as they have in the past. And that super cycle is fueled by this rapid industrialization in China.
REHMBriefly, what do you believe the United States needs to do to win back the love, the respect, the relationship with Latin America?
WEITZMANWell, I talked about the Cuba embargo and I talked about the war on drugs. I think another aspect would be enacting a fundamental reform of U.S. immigration policy. My idea is that rather than making that an internal debate, an internal issue, that, you know, it would really help to put that in a framework with other countries from where these migrants are actually coming. So if we were able to talk to Latin America about how to start to tackle the issue of migration in this continent, I think that would, and not only (unintelligible) in Latin America, but it might actually have a chance of solving the problems.
WEITZMANBeyond that I think the U.S., you know, shouldn't look to remove leaders it doesn't agree with, but to promote an agenda by building strategic partnerships, particularly Brazil as particularly important in that.
REHMHal Weitzman, his book is titled "Latin Lessons: How South America Stopped Listening to the United States and Started Prospering." Very interesting. Thank you so much for being here.
WEITZMANThank you for having me.
REHMAnd thanks for listening all. I'm Diane Rehm.
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