[Antara Haldar] Alberto Fujimori's neoliberalism

The script of Latin American politics too often reads like a “dictator novel,” and on Sept. 11, another chapter drew to a close with the death of Alberto Fujimori. As the president who most defined -- and divided -- modern Peru, Fujimori’s legacy remains a topic of heated debate. One version of Fujimori’s epitaph would commend his economics and condemn his politics, but the deeper lesson his life story offers may be that it is impossible to separate the two.

Fujimori’s Peru was yet another poster child of the Chicago Boys’ neoliberal project in Latin America. Known as “El Chino” (“the Chinese”), Fujimori (whose heritage was Japanese) was a political and ethnic outsider, which made him relatable to many ordinary Peruvians. He was particularly popular among nonwhite indigenous people and Asians who had migrated to Peru largely as agricultural labor, but, at least initially, less so among the European-origin Lima elites who dominated Peruvian politics.

After winning an election against the novelist Mario Vargas Llosa in 1990, Fujimori soon addressed the country’s two biggest challenges. He tackled the raging hyperinflation that had been undermining macroeconomic stability and food security; and he confronted the terrorist threat posed by the Maoist insurgent group Sendero Luminoso (Shining Path), led by another former professor, Abimael Guzman.

The “Fujishock” proved effective in restoring relative peace and prosperity, thereby burnishing Fujimori’s reputation and turning him into a national hero. “Fujimorism,” as the local brand of neoliberalism came to be known, included a heady mix of tariff reduction, privatization, and reforms to boost the “flexibility” of the labor market. These changes gave Peru a facelift for the era of hyper-globalization, winning the approval of elites in Washington and Lima alike. At the same time, Fujimori worked with a special police unit to track down and capture Guzman, who was soon put ostentatiously behind bars. Riding these victories, Fujimori was easily re-elected in 1995, in a race against former United Nations Secretary-General Javier Perez de Cuellar.

In all the coverage of Fujimori’s life and death, relatively little attention has been paid to a key alliance that defined his entire approach: his relationship with Peruvian economist Hernando de Soto, whose 1986 bestseller, The Other Path: The Economic Answer to Terrorism, offered a pointed refutation of the Shining Path’s philosophy.

It was the Swiss-educated De Soto who charted Fujimori’s course when he was still a fledgling politician in the early 1990s. The New York Times described De Soto as Fujimori’s “overseas salesman,” while others have argued that he was the country’s “informal president.” In a face-off that The Economist described as “the economist versus the terrorist,” De Soto devised the strategy of undermining support for the Shining Path by granting land titles to coca farmers.

Moreover, it was De Soto’s economic policies that defined Fujimori’s new constitution in 1992, following the “self-coup” in which he dissolved parliament and shut down the country’s courts and newsrooms. John Williamson would later credit De Soto as a key player in implementing neoliberal “Washington Consensus” policies on the ground; as the man who coined that term, he should know.

Since then, De Soto has fashioned himself as a benign development specialist, founding the Institute for Liberty and Democracy and advising governments around the world. He remains well-known for the land-titling program that sought to turbocharge capitalism in Peru by unleashing the “dead capital” under the feet of rural squatters. Once these informal economic actors had land titles, they could, in theory, use them as collateral to secure loans from the formal banking system. It was a classic, yet highly innovative, application of Chicago School economics, which held that property and contracts were the only institutions that an economy needs. As De Soto presented it, titling would be the antidote to everything from poverty to terrorism.

As a doctoral student in law and economics, I spent considerable time conducting field research in Peru, particularly in the Pachacutec settlements outside of Lima. At the time, despite little empirical evidence that squatters were succeeding in converting formal titles into loans, De Soto’s proposal was all the rage. Academics and policymakers in the West loved the idea that they could transplant peace and prosperity by simply exporting their own laws to “the rest” (formalizing the informal and making the extra-legal legal). But I wondered whether De Soto’s theory was really about institutions in a vacuum, rather than about the state. After all, how were the new property rights and contracts underpinning his scheme supposed to be enforced? What was the true nature of these mysterious “institution-free institutions,” as the Nobel laureate Elinor Ostrom called them?

One answer lies in the political workings of Fujimori’s regime, which was anything but an exemplar of the rule of law. During his tenure as president, he not only ignored term limits but also presided over rampant corruption; conducted forced sterilizations; tortured, kidnapped, and killed his political opponents; and organized military death squads via the Grupo Colina. After escaping to Japan, which granted him refuge, he eventually was extradited from Chile and convicted in Peru on a wide range of crimes relating to the Grupo Colina’s killings and kidnappings.

And yet, Peru’s current government -- which is propped up by Fujimori’s daughter, Keiko, the opposition leader -- reacted to his death by declaring three days of national mourning, and Peruvians lined up to honor his body as it lay in state. The two faces of Fujimori reflect the Janus-headed quality of neoliberalism and the tension at its core. There is no separating the political from the economic. Fujimori’s legacy offers another reminder that neoliberalism’s economic triumphs have often been accompanied by state violence, suggesting that the ideology is not really about law or institutions, but about power. If we want to leave the bloody path of the “dictator novel” narrative in Latin America and elsewhere, the obituary we should be writing is that of neoliberalism.

Antara Haldar

Antara Haldar is a professor of empirical legal studies at the University of Cambridge. The views expressed here are the writer’s own. -- Ed.

(Project Syndicate)