By Axel Kaiser
In a 1981 interview by the Chilean newspaper “El Mercurio,” Nobel Prize-winning economist Friedrich Hayek argued that the different economic performance of North and South America was due to the influence of two opposing intellectual traditions. In North America, Hayek explained, English liberalism, with its commitment to individual freedom, had enabled the creation of institutions that favored progress. In Latin America, on the other hand, the influence of the French democratic tradition, with its emphasis on collective action, had created omnipotent governments that hindered prosperity. This tradition of unlimited democracy is at the heart of what is today known as “democratic socialism.” It has been one of the primary causes of much of the misery in Latin America.
A cursory glance at any rate of economic freedom would be enough to confirm that crucial institutions for prosperity, such as private property and open markets, remain extremely weak in most Latin American nations, among other reasons, because democracy crushes liberalism. None of these countries, except Chile, was in the top thirty in the 2019 Fraser World Economic Freedom Report. The region faces a dearth of freedom and solid policies. Instead, populism, patronage, redistributionism, corruption, and economic mismanagement continue to define the political and economic landscape of Latin America, all in the name of equality, democracy, and social justice.
During the Cold War, democratic practices that, for decades, had so damaged Latin America’s prospect of achieving sustainable progress took the form of a more coherent and radical set of political principles. In 1970, Chilean Senator Salvador Allende became the first Marxist politician to come to power by popular vote. Allende understood that socialism was not a means to an end but an end in itself and that the use of overt violence to impose a collectivist economic system would create powerful counter-reactions that the democratic media would not find. Therefore, it favored what it conceived as “democratic socialism. However, after three years in office, the economic and social chaos caused by his socialist, albeit democratic, policies was so widespread that the lower house of the Chilean Congress asked the military to end his regime. On September 11, 1973, shortly after the approval of the Congress resolution, the military assumed control of the country, and Allende committed suicide. Allende’s vision of a democratic socialist state in Latin America, however, did not end with him. After the fall of the Berlin Wall, the doctrine was updated, and Hugo Chávez revived it under the new label of “21st-century socialism.” With a speech deliberately designed to appear moderate, Chávez was elected President of Venezuela in 1998, claiming that he would eliminate the supposed evils of capitalism without overthrowing capitalism itself. But once in office, Chávez used Allende’s misleading formula to legitimize every step of his socialist project.
To varying degrees, countries such as Bolivia, Ecuador, Argentina, and Nicaragua joined Chávez’s agenda of democratic socialism. In doing so, these nations completely wasted the opportunity offered by record commodity prices to make the long-term investments necessary to elevate their populations. What’s worse, the weakening of the rule of law that allowed the expansion of democratic control over the economic sphere seriously damaged the potential to create sustainable prosperity once the boom ended.
In Venezuela, where the Chavista regime took over control of the armed forces, the democratic socialist agenda finally led to the worst economic failure in the history of the region, as well as a dictatorship. This result should come as no surprise: for the term “democratic socialism” to have any integrity, it must mean something totally and absolutely opposed to capitalism and individualism. Therefore, he has to disagree with the idea of limited government and free markets postulated by English liberal philosophy that Hayek correctly saw as the source of North American prosperity. This is why democratic socialism in Latin America has been so dilapidated. And it is also the reason why the dangerous rise of democratic socialism in the United States must be taken seriously.
Despite confusing statements about what “democratic socialism” means, American democratic socialists undoubtedly adopt the same anti-capitalist mindset that has created so much misery and social conflict throughout Latin American history. Declarations, such as those of Alexandria Ocasio Cortez (AOC), that claim that capitalism is “irredeemable” or that billionaires need the working class but not vice versa are typical of the Latin American left’s class struggle mentality. They reflect a vision of capitalism as a moral and economic evil that we must fight. In this struggle, democracy is seen as the primary weapon to overthrow oppressive capitalist structures and socialism as the higher moral good that drives systemic change.
Ultimately, for those who defend free society, the battle is not about facts but about moral principles, a point that AOC made clear when in an interview with Anderson Cooper stated that being morally right was more important than getting the facts correct. In Latin America, and increasingly in the United States, classical liberals (mostly conservative in the United States) win all the arguments but lose most of the debates because, despite having the facts on their side, they fail to convincingly defend the moral superiority of capitalism at the rhetorical and cultural level. Unlike their adversaries, they appeal to reason rather than moral feelings, forgetting that stories are more effective than facts in creating mental frameworks and driving human behavior. Time will tell how far the anti-capitalist and irrational program of American democratic socialists will end up being implemented here in the United States. In any case, it would be a serious mistake to underestimate the power of these types of ideas and an even greater mistake to minimize how attractive young populist and charismatic leaders such as AOC can be over time. It is true, as Hayek pointed out, that the United States is not Latin America. But as Hayek himself pointed out, and history has taught us ever so often, in any country, no matter how advanced, a collectivist ideology can gain enough public acceptance to take over its political system and turn an exemplary nation into a failure.
Axel Kaiser is Senior Fellow of Atlas Network for Latin America.