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‘Latin America as a Source of a New Global Ethical Response in Economic Theory and Policy’ Remarks by President Higgins

University Of Diego Portales, Santiago, Chile, 4th October 2012

Rector Rector Carlos Peña, gracias por su amable invitación a esta Universidad y poder dirigirme a esta distinguida reunión. Estoy encantado de estar aquí. En particular, gracias a la Profesora Cath Collins, Directora del Observatorio de la Universidad de Derechos Humanos en el Instituto de Investigación en Ciencias Sociales, por la organización de mi visita aquí hoy.

[Rector Carlos Peña, thank you for your kind invitation to me to visit this University and to address this distinguished gathering. I am delighted to be here. In particular, my thanks to Profession Cath Collins, Director of the University’s Human Rights Observatory at the Institute for Social Science Research for her assistance with arrangements for my visit here today.]

He leído acerca de la Universidad y del profundo compromiso de la comunidad Diego Portales para involucrar y orientar la investigación de la Universidad y los esfuerzos académicos en el desarrollo social, político, cultural y económico del país y en el desarrollo de vínculos estrechos entre la enseñanza el personal y los asuntos públicos de Chile y la región. La reciente colaboración de su propio observatorio de Derechos Humanos con el Centro de Estudios Legales y Sociales de Argentina, por ejemplo, en el desarrollo de normas para la toma de testimonios de las víctimas sobrevivientes de la tortura es un ejemplo de la valiosa labor que emana de esta región, que pueden contribuir a la promoción de las prácticas de derechos humanos a nivel mundial.

[I know from my reading on your University of the deep commitment among the Diego Portales community to engage and focus the University’s research and academic endeavours on the social, political, cultural and economic development of the country and on the development of close ties between your teaching staff and the public affairs of Chile and within the region. The recent collaboration between your own Human Rights Observatory with the Centre for Legal and Social Studies in Argentina, for example, on the development of standards for the taking of testimony from surviving victims of torture is an example of the valuable work emanating from this region which can contribute to the advancement of human rights practices globally.]

La necesidad de nuestras universidades para estimular el cuestionamiento de las normas, su cumplimiento y reivindicación junto con el desarrollo de la capacidad crítica y el pensamiento creativo y emancipador, nunca ha sido más profunda, y quiero expresar una vez más mi más profundo agradecimiento por haber sido invitado a estar en una comunidad para quienes esta meta es tan transcendente.

[The need for our universities to stimulate the questioning of norms, their observance and vindication together with the development of critical capacity and creative, emancipatory, thinking has never been more acute, and I wish to acknowledge yet again, my deep appreciation at being invited to be among a community for whom this goal is so profound.]

Ireland has a strong historical relationship with many countries in this region and I am happy to be among you today in Santiago de Chile on one of my first overseas visits since my election and inauguration as President of Ireland at the end of last year. I am most grateful to have received from President Pinera a kind invitation to make this visit.

I am of course proud that Bernardo O’Higgins, the founding father of the independent Chilean state, was the son of an Irishman whose family came from the West of Ireland. I am also very moved to recall my visit here in 1988 at a crucial moment for the Chilean people.

I was the first International Observer to arrive – Observador Uno.

I recall very clearly my experience at that time throughout Chile from Punto Arena to Santiago and my admiration for the courage and the deep commitment to democracy that the Chilean people had– the people of whom the warm hearts of Pablo Neruda and Victor Jara have sung.

Chile, Latin America. have an old and complex relationship today. The close cultural and historic ties that bind the EU and Latin America are important as relationships now and into the future as a relationship above all between peoples. Given the multitude of individual and personal relationships that connect our continents, that has given our friendship a very special meaning, it is no surprise that the EU is the number one trading partner for Chile and also for Mercosur. As our economies have expanded and developed in recent times we have been drawn closer in economic, cultural and personal relationships.

The economic ties are stronger than ever, and are characterised by interdependence, through increasing flows of trade and investments in both directions. Latin America is a key emerging market and with its 575 million population the region will play a crucial role in the structure of world trade and all of its consequences; but it is much more than that. It is a continent where the process of change in a multitude of ways is offering new models of economy and society and their connection; of forms of participation, of debate as to the balance between state and society, between state, civil society and political parties, debate as to what constitutes democracy today and the institutional balance that will best serve an emancipatory democracy.

As to the social sciences, the political dynamic that is shaping the South American continent is having and will continue to have, I believe, such a result as will lead to new thinking in theory and policy. New thinking that will yield a result in terms of humanity for the future; a result from which not only the peoples of South and Central America will benefit, but we in Europe and the rest of the world as well. All of the benefits that Ireland and Europe have achieved from collaborating in a vision for a Europe at peace, cohesive, and with respect for rights, will no doubt be achieved and surpassed by the regional structures that you have created and are developing.
The experience of regional integration in Europe has taken a particular form of evolution from free trade through further economic, social, and indeed political integration.

This ebb and flow has embraced social cohesion and then in turn the concentration has moved to currency issues provoked by the response of unaccountable markets. The gradual progress through treaty development, has been dislodged by international and regional currency and public finance issues. Yet the European project continues to inspire, and not just as an ideal, but as a task in progress, as a region of the peoples of Europe at peace, in security; cohesive and competitive and offering, at its best moments we hope, models of such laws as are socially just and environmentally sustainable.

The changes and challenges in Mercosur – in which Chile is an associate Member – have had their own evolution from the obvious benefits of trade, through social Mercosur to the rich debate on social participation, sustainable economic growth and reduction of inequalities. The value of the social and productive dimensions of the Mercosur has been noted by regionalism specialist Jose Briceño Ruiz who has written:

“The Social and productive dimension of Mercosur implies a new way of responding to globalisation”.

It is in this environment and in response to that promise that some of the most valuable discussions and dialogue on the potential of State, civil society and popular movements are taking place, and we will all have much to learn from it.

My address is taking place against the background of our global economic crisis of course. Ireland and a number of EU member states in particular are experiencing deep, and sadly sustained recession. Solving this crisis and achieving such an economic stability as will be sustainable and just will require new thinking, and innovative models. We cannot, I suggest, simply seek to return to business as usual, and revert to approaches that have failed our people with the consequences of such unacceptable levels of unemployment as affects more than half our young people in several European countries.

The crisis in the global financial system is not of course just a technical failure or an unexpected quirk of fate. The problem is also an intellectual, indeed even a moral one. Certain assumptions about economic models were allowed to become a single determining hegemonic orthodoxy that went unchallenged – even in the face of empirical evidence and despite some exceptional warnings that were ignored; warnings that a speculation-based boom led by property values was unsustainable and would inevitably lead to disaster. The extremist demand of markets without regulation won out. The model of an unregulated banking system was allowed to create a property bubble within an international speculative bubble. It is evidence thus, inescapably of an ethical problem; an aggressively speculative model aimed at maximising short-term profits, that may have been legally compliant, but which was morally blind in its social consequences, was presented as a single hegemonic model of the connection of economy and society and sadly, I say it as an academic, that model was and is still taught in so many countries, to students in introductions to economic theory, as the single paradigm of such a connection.

If we are not to repeat the mistakes of the past and if we wish to ensure that that global economy we must now try to build as an alternative is just and sustainable, then we must encourage such a learning culture of real independent thought and critical capacity among academics, policy makers, and across the professions, as will ensure that these intellectual and ethical dimensions receive adequate attention.

It is critical for our shared future that students are encouraged to think critically, to challenge, and to ask the necessary questions; so that the professionals of the future do not fall victim in the future to old orthodoxies presented as incontestable truths, even as scientific fact. Our professionals of the future must have the capacity to critically evaluate the integrity and value of the work they do, and its consequences, to experience work itself not merely as the instrument that creates the capacity to consume, but as the experience at the full human development of the unique talented being that has the capacity to live creatively in the naturally accepted dignity of self and others.

The extreme neo-liberal policy paradigm that was developed by, among others, significant and influential papers from the Chicago School of Economics, was neither an accident nor a set of inalienable truths. It was, we must remember, a conscious assertion and incursion in economic theory, an exercise in intervention in policy formulation and manipulation to achieve particular policy goals, to serve particular interests. It was, let us accept, despite the many eminent disclaimers, an ideological enterprise.

If we reflect for just a moment or two on how it all came to be. In the wake of the Great Depression extremists of the laissez faire tradition might have fallen from favour. However, Friedrich Von Hayek’s
Road to Serfdom, in 1944 represented a new departure in the interpretation it placed on fundamental philosophical even moral, concepts such as freedom. Freedom was to be defined within this project as an ‘economic freedom’ of the markets, ideally unconstrained by any State regulation.

There is however a considerable distance between the highly formalized formulations of modern classical economics, which at best reach a selected number of areas, and political narratives that seek to translate the loose principles of laissez fair capitalism and supply side economics into public policies.

Even from such early writing as that of Eduardo Frei Montalvo who contributed to the Brandt Report, South America was to become of course familiar with the excesses of neo-liberalism and through its influence, on, for example, the Washington consensus, the dominant interpretive framework throughout the region at the end of the twentieth century. According to Uruguayan Political Scientist Francisco Panizza, the benefits throughout the region, even early on, of that variant were narrow. Panizza has written:

“Even when relatively more successful, in the early and mid – 1990s, the Washington Consensus over-promised and under-delivered on economic growth, poverty and inequality”.

The financial crises in Mexico, Argentina and Brazil went on to raise fundamental questions about the reforms demanded by the modernisation consensus or other neo-liberal initiatives. Neo liberal policies did not of course, just deliver economic crises, they had inter alia the consequence of polarising societies across the region. As Chilean economist Claudio Lomnitz puts it

“The neo-liberal era produced a deep fracture in every Latin American country between the segments of the population that thrived under free trade and the shrinking state, and those that were put at risk”.

Such economic fractures are often as we know at the root of deeper divisions that may challenge the democratic credentials of representative democracy itself; and these are issues we in Europe face as well.

We must recognise that it is urgent to identify such models of economy as are appropriate for the 21st century, models with a new global ethic that is cognisant of, and responds to, the lessons of the current crisis. We need to ensure, even insist, that the state plays its role as regulator, innovator, partner and protector of the greater intergenerational consequences of decisions of environmental impact, for example, and social justice, and that the state is allowed to do so. A world, where the state and its political institutions have surrendered, or have been stripped of, legitimacy by unaccountable markets, is not only a vulnerable world, it is a dangerous world.
So the world has much to learn from Latin America and from the courage of your leadership today. Former President of Brazil Lula da Silva gave an illustration of such courage and the need to to break away into new thinking when he addressed the United Nations in 2009 and said:

“More than a crisis of big banks, this is the crisis of big dogmas.”

And he went on:

“I refer to the absurd doctrine that markets could regulate themselves, with no need for so-called “intrusive” state intervention, and to the thesis of absolute freedom for financial capital, with no rules or transparency, beyond the control of peoples and institutions.”

As to the future, Latin America, I suggest, is leading the way in advancing a renewed critical evaluation and appreciation of the role of the state and the moral significance of its reassertion, and redefinition if necessary, in its relationship to its citizens. Claudio Lomnitz reflects this when he says:

“the current rejection of neo liberalism in many Latin American countries does not signal a rejection of the markets, but a repudiation of the ideology that places markets at the centre of the development model to the detriment of public institutions and their social context.”

Latin American economies, many of which have enjoyed high levels of growth since 2008, have, of course, demonstrated the important role of the state in development while at the same time facing the challenge of protecting the more vulnerable sectors of the population against economic volatility. As Francisco Panizza has written in evaluation of such approaches:

“there is much to be said for a combination of economic pragmatism and social inclusion.”

As to those of us in Europe, there is correspondence with such a view in some of the best thinking in Europe. Jurgen Habermas, a European public intellectual, who is among those leading a critical discourse in the northern hemisphere, has written:

“The whole program of subordinating the life world to the imperatives of the market must be subjected to scrutiny … The Agenda which recklessly prioritises shareholder interests and is indifferent to increasing social inequality, to the emergence of an underclass, to child poverty, of a low wage sector, and so on has been discredited. With its mania for privatization, this agenda hollows out the core functions of the state, it sells the remnants of a deliberative public sphere to profit-maximizing financial investors, and it subordinates culture and education to the interests and moods of sponsors who are dependent on market cycles.”

The solutions that best offer to assist our shared future must I believe reflect our interdependence and must not shrink from addressing the structures that operate at global level which are currently not assisting, and indeed may be even undermining, emancipatory and creative thinking.

We must be open and courageous in defining and seeking the type of globalised world we wish to pursue; the strategy which will enable us by working collectively for peace, for an expansion of justice, such a prosperity as allows us, across the globe to live in dignity. That is the kind of interdependence we must strive for.

We must honestly recognise, however that so much of the globalisation rhetoric has stifled debate and choked discussion.

Neither is it the case that the North South trade relationships or the renewed development debate are throwing up entirely new issues. As to trade in 1980 the authors of the Brandt Report, set out a vision for global development that went well beyond, indeed would contradict, the narrow economic growth objectives that have dominated economic policy these past three decades. The Brandt Report in 1980 in its moderate proposals suggested that the objective of development should be:

“to lead to the self-fulfilment and creative partnership in the use of a nation’s productive forces and its full human potential”.

The Report was in its time a modest and somewhat conservative appeal to all world leaders, and people from all backgrounds and nations, to participate in the shaping of our common future. Importantly, it called for new structures, new power relationships in the international financial institutions to ensure that lesser developed regions and those most vulnerable had a stronger voice in the development of policy frameworks which would protect their economies, their environment, their workers. It was allowed to fade away. Strong individualism came to the centre of thought. So many we must recognize have paid such a high price for the failure to respond to the Brandt Report at a global level even as a first step or partial solution.

We need to as a matter of urgency to reflect and ask what kind of society we are willing to accept, what kind of global society we are striving for and which are the arrangements and compromises we will seek and accept to realise such a kind of society. Eradicating poverty, achieving food security, and ending the scandalous inequalities that exist; these are the goals which will protect our planet, ensure our future.
Howard Stein, in a recent paper in Ireland, offered us a frightening example of the contradictions by which we as a global community live, the ethical contradictions – For example, we may express a concern for the elimination of world hunger which is admirable, yet at the same time we allow speculation in food to flourish. “In 2011 for example, it is estimated that 61% of the wheat futures market was held by speculators compared to only 12% in the mid 90’s prior to deregulation” Professor Stein told us.

Economies must be returned to an ethical and cultural context. Brazilian Economist Marcos Arruda is succinct in his description of the challenge that faces us now as a global community:

“In today’s world, nearly 90% of global consumption belongs to the richest 20%. Without reducing excess consumption and planning economic growth on behalf of those in need there is no solution to the social and environmental crises. Without sharing wealth, knowledge and power, humankind will not survive. Only a new consciousness and a new development paradigm will respond to this challenge.”

As you have shown in Latin America in a number of significant cases, there is indeed another way and yes, we can have growth of a sustainable kind and reduce poverty and inequality.
As Ms Alicia Bárcena, Executive Secretary of the United Nations Economic Commission for Latin America and the Caribbean noted at a meeting of the Commission in New York in March last, regional growth remains above global economic growth and is expected to be at 3.7% this year. But this growth is not at the exclusion of poverty reduction.

Perhaps one of the most significant aspects of Ms Barcena’s report was that the extremely high poverty rate of 48.8% in 1990 has fallen to 30.4% in 2011. It is also noteworthy that the region, even if so much remains to be done, has made substantial gains in reducing inequality, significantly in Argentina, the Bolivarian Republic of Venezuela, Brazil, Chile, El Salvador, Mexico and the Plurinational State of Bolivia. These important achievements are all the more striking against the backdrop of the global economic crisis. Beyond that they affirm the now proven and incontestable fact that more equal societies are healthier societies.

Finally I believe that the relationship between the EU and your region must work to recognize and to strengthen these achievements and address social and human dimensions as well as promoting growth.
I believe we can achieve interdependencies and meaningful connections which have both economic and societal benefits. One form of these interdependencies may indeed be trade – but there are other rich avenues of co-operation in the exchange of models. The new accord between the EU and Colombia and Peru creates possibilities and may offer a promise in its structure. Trade in both economies should possibly increase by 6% in the medium term leading to a direct and positive impact for manufacturers and agricultural producers, but the human rights guarantees and their transparency and delivery are a crucial context for such progress. They constitute a litmus test for such agreements.

- The agreement does indeed set out the core labour standards to be abided, as contained in the ILO Fundamental Conventions as well as eight key environmental conventions. Very importantly, the proposed agreement establishes an obligation of transparency coupled with mechanisms of consultation of and engagement with civil society organisations in its implementation.

It is essential that we establish parity of esteem for environmental law and labour law in comparison to international trade agreements. There are also of course the rights of indigenous groups not only their recognition but their vindication; rights not only of protection based on the past, but also as owners of resources and intellectual property that are valuable for all of humankind into the future.
As to institutional developments, if there is anything we have learned in Europe from the current economic crisis, it is that citizens’ trust not only in Government and its agencies, but also in so many professions in the private sector and its institutions, has been shattered. Regaining this trust requires a new accountable model of economy which serves society and its citizens, one that is ethical and characterised by human values and respect for the dignity of the human person and communities.

And as to democratic participation, it is only by centrally engaging citizens in policy development will that trust be regained. It will call for a genuinely participative society and decision making structures. Again in Latin America we have seen real increases in participation and new forms of consultation and innovations such as plebiscite democracy which constitute valuable models for us all, including those of us in Europe.
And solidarity and the unquenchable spirit of humanity will be important. I’d like to conclude my words with a brief reflection on a triumphant day for Chile, and indeed the world in recent years which we in Ireland shared with Chile and the whole world. In 2010 over 1 billion people across the globe watched as the last of 33 miners emerged unharmed after being trapped 700 meters underground for 69 days.

- During their 69 day entrapment the miners demonstrated an extraordinary power in holding on to hope, and the value of perseverance in overcoming what might present itself as an insurmountable challenge. In addition, the solidarity and steadfastness of the miners’ families, friends and communities across the world was remarkable. But the solidarity went beyond a shared hope for a positive outcome, and for the men’s safety: what occurred was multinational cooperation with a common purpose.

The rescue effort included the deployment of three large, international drilling rig teams, nearly every government ministry, the expertise of NASA from the US and more than a dozen multinational corporations. The skills, the experience and expertise of drilling companies, health and safety experts, project managers and medical experts from across the world combined to bring the miners home safely.

As President of Ireland, Uachtarán na hÉireann, I am so pleased that it was an Irish company called Mincon, based in the west of Ireland, which produced the reverse circulation drill that drilled through 2296.56 feet of rock which allowed the rescue official to gain access to the trapped miners. All of us in Ireland were proud that we could contribute and we were humbled to have been part of the global effort.

Estos hombres y sus comunidades, su resolución en caso de desastre y la respuesta de las labores multinacionales de rescate ilustran los principios y modelos de trabajo que nos pueden ayudar a atravesar la actual crisis económica mundial si somos lo suficientemente valiente como para involucrarlos. Como sugerencia, debemos hacer frente a la crisis económica, con el mismo tipo de creatividad, rigor intelectual, la misma esperanza y perseverancia, y el mismo tipo de cooperación global con el propósito común de un desarrollo sostenible, equitativo con dignidad. Nuestras dos regiones, en conjunto, tienen la posibilidad de alcanzar tanto, de poner un gran ejemplo en su lugar, en un momento crucial para la humanidad.

[These men, and their communities, their resolve in the face of disaster, and the response of the multinational rescue effort illustrate the principles and model of working that can see us through the present global economic crisis if we are courageous enough to engage them. We must, I suggest confront the economic crisis with the same kind of creativity, intellectual rigour, the same hope and perseverance, and the same kind of global cooperation for the common purpose of sustainable, equitable development with dignity.

Our two regions, together, have the possibility of achieving so much, of putting a great example in place, at a crucial time for humanity.]

Go raibh míle maith agaibh y muchisimas gracias.