Volume 4, Number 112
1 December 2004

Note: With this issue, Loren Cobb joins me as co-editor of TQE. I am 84 years old and cannot live forever. We now have 796 subscribers, and I do not want to leave you all in the lurch. I have tried to make TQE a summary of my over 50 years as a Quaker and practicing international economist, and I believe I have shot my wad. Loren, a Quaker, is now in the height of his international career. Click here to read his credentials. I'll do a few more Letters on current problems, but mainly Loren will take over.

— Jack Powelson

A Portrait of Paraguay

Democracy Hanging by a Thread

by Loren Cobb

Dear Friends,

I have just returned from ten days in Asunción, Paraguay, where I fear that democracy is hanging on by a thread. All the normal institutions of justice and democracy appear to be in place and functioning in this country, but these appearances are deceiving. A curious flavor of Orwellian "double-think" pervades this energetic and entrepreneurial society, cloaking awkward facts behind a thin veil of fantasized normalcy.

You may remember Paraguay as a little peanut-shaped country, tucked below the southwestern flank of Brazil. But this country is not so little: it is in fact about the same size as the state of California. It appears small only because Brazil is so huge, and because the Mercator map projection makes all of South America appear much smaller than it really is. As with everything else about this strange and wonderful country, even physical appearances are not quite what they seem.

In the nineteenth century, "little" Paraguay was the most prosperous and powerful state in South America, respected by its neighbors and immensely proud of its military and economic strength. Then, in an explosion of blind hubris, Paraguay became involved in a war with the two largest countries in South America, Brazil and Argentina, in 1865. The resulting five-year war of attrition became a true holocaust for the Paraguayan people: when nearly all the men had been killed in battle the women and children formed into suicide battalions to continue the fight, and then a cholera epidemic struck the surviving population. By the time it was over 60% of all Paraguayans had died in that war, leaving just 28,000 men and 193,000 women estimated to remain in the entire country. Marks of the trauma of that war on the Paraguayan psyche are still visible today, 140 years later.

Modern Paraguay is an eclectic mixture of indigenous and Hispanic peoples, in addition to a large colony of Mennonite farmers of German ancestry and floods of Brazilian immigrants, all eager to find economic opportunities in a new land. The native Guaraní language is spoken and loved almost universally across Paraguay, as a supplement or alternative to the dominant Spanish language. Soft and supple and a joy to hear, it is used whenever emotional nuances need to be expressed. The seamless integration of Guaraní into everyday spoken language never fails to confound and amaze Spanish speakers from abroad.

A military coup d'etat by Alfredo Stroessner in 1954 ushered in a 35-year dictatorship and cult of personality. Stroessner protected his power by changing the topology of government from the normal hierarchical form to a radial form in which every public servant with decision-making power reported directly to him. Ministers, vice ministers, department heads, generals, admirals, colonels, everyone of consequence received direct orders from El Dictador. Stroessner's political arm, the Colorado Party, exercised almost total control over access to all lower levels of employment in government. As in most Latin American countries, the party in power financed itself by extracting tribute from its office holders: Paraguayan public servants still pay about 20% of their salaries directly to the party from which they obtained their jobs.

The Rule of Law had never been particularly strong in Paraguay, but under the dictatorship the independence of the justice system eroded until finally it too became subservient to the Colorado Party. As has happened in essentially every dictatorship in history, the justice system became an instrument of political repression, with the military serving as the ultimate guarantor of the authoritarian regime.

Despite outward appearances of similarity, dictatorships vary tremendously in their long-term effects on government and society. A few lucky countries survive their dictators with enough institutional strength and economic stability to make a successful transition to democracy, but most are not so fortunate. Some dictators loot their countries’ treasuries, some engage in pointless foreign wars, while others eviscerate their countries’ critical social institutions. Alas for Paraguay, Alfredo Stroessner fell into the third category.

When Stroessner was finally overthrown by another military coup in 1989, the country was ready to experiment with democracy. A handful of hopeful new political parties appeared, and free elections were held for the Presidency and Congress in 1993. But soon a new troubling pattern began to emerge. It seems to be Paraguay’s fate always to suffer from the most extreme forms of every social malady that it contracts, and in this new malady the story was no different.

Lacking dictatorial powers for the first time in 35 years, the surviving fragments of the Colorado Party of Paraguay needed a way to gain and hold on to political power, and most especially to the income derived from what amounts to the leasing out of governmental jobs. In an ideal democracy legislators represent and are answerable to the people who elect them, but in the newly free Paraguay of the 1990s there were countervailing forces at work. At their party’s urgent behest, legislators embarked on a dramatic increase in public employment. The size of the civil service more than doubled, from 21 per thousand population to 44 per thousand. Under enormous budgetary pressure, the system of national accounts disintegrated: the annual amount legislated by Congress for each department of government became a fictional figure, and only the executive branch knew how much could be made available in reality. As real salaries and financial accountability collapsed, so did the last vestige of controls over bureaucratic practices. Much of the tax income received by the treasury was diverted from its legislated purposes before it ever arrived in a departmental budget, and underpaid civil servants learned to find every means available to supplement their salaries with under-the-table fees and payoffs.

With the legislative and executive branches of government now thoroughly compromised, the judicial branch became the last and best hope for Paraguayan democracy. But here too the Stroessner legacy once again subverted a critical democratic institution: the judicial system had not achieved independence from political influence, and prosecutors were already corrupt. Therefore, civil servants at all levels worked in a climate of impunity. Even when convicted, they seldom suffered more than a peaceful interval of house arrest.

Let us step back from this story for a moment to recap the damages. Once efficient and competent, the civil service has been inflated in size with questionable appointments. Salaries are woefully inadequate. Financial accountability has all but disappeared. Legislators receive both money and power from political parties, who in turn are financed by the people they appoint to civil service jobs. Prosecutors are indirectly controlled by the political parties. In sum, the democratic sovereignty of the people over their government has eroded to such an extent that it has almost ceased to exist in any practical sense.

Not surprisingly, the voting public is left to wonder what is supposed to be so special about democracy.

Since 1995, Transparency International has been monitoring the extent to which countries are perceived to be "transparent" (i.e. not corrupt) by the international community. In this ranking, Paraguay has been close to the very bottom since it first appeared on the survey, in 1998. This year there were only five countries rated as more corrupt than Paraguay: Bangladesh, Haiti, Nigeria, Chad, and Myanmar (formerly known as Burma).

A View of Asunción, with the Paraguay River in the Background

Yet, somehow, Paraguay still manages to function as a nation. Infant mortality continues to decline, literacy rates continue to rise, electricity flows, buses run, and some sectors of the economy are doing well. Despite the appalling structural problems, many individuals in government are dedicated, honest, and talented. The Paraguayan people themselves are highly entrepreneurial, and the informal economy is a wonder to behold. Due in part to the lack of any effective government, small- and medium-sized businesses operate in a state of nearly complete freedom. Partly as a consequence of this freedom, Paraguay is a world center for copyright and trademark piracy. This illegal but thriving industry supplies the world with brand-name knockoffs, competing head-to-head in this market with the best that Asia can offer.

Frankly, I am almost at a loss to characterize this amazing country. There seems not to be any aspect of this land and people that is average or ordinary. For any social scientist with a theory of society or politics or economics to test, I suggest that they start with the toughest case first: Paraguay. But there is a saying here: Paraguay is the cemetery of all theories.

Despite all its problems, there are good grounds for hope for the future of Paraguay. The new president, Nicanor Duarte Frutos, is unlike most politicians of the past. He grew up in poverty, became a politician only late in life, and has made a better start at reform than I would have believed possible. Best of all, there is strong public support for reform, both in the countryside and in the elite of Asunción. It will be exciting to watch.

Sincerely your friend,

Loren Cobb

Readers Comments

Note: Please send comments on this or any TQE, at any time. Selected comments will be appended to the appropriate letter as they are received. Please indicate in the subject line the number of the Letter to which you refer! The email address is tqe-comment followed by @quaker.org. All published letters will be edited for spelling, grammar, clarity, and brevity. Please mention your home meeting, church, synagogue (or ...), and where you live.

I especially enjoyed your letter because of an interest in Paraguay that I've never had the money to pursue with a visit there. You mentioned the German Mennonites there. They came, I believe, as refugees fleeing Hitler's militarism in the 1930's. Am I correct that Paraguay is the only military dictatorship to offer asylum to a pacifist group and to stick to its pledge to exempt them from military service?

— Allen Treadway, Yellow Springs (OH) Meeting

The Mennonites of Paraguay were German by origin, but they came from Canada, Russia, and Mexico. Their relationship to Nazism was very complicated, and not at all what you have been told. Click here for an online reference. Google can give you a lot more. It's a fascinating story.

As a teenager I spent a year in Düsseldorf, Germany, where they still speak the same Platt Deutsch that the Mennonites speak. Your question has encouraged me to try to find and read some of these sources, most of which are available only in the original German. Thanks!

— Loren

Jack, I certainly can't blame you for stepping down — at 84 you have more than done your duty. Thank you for sharing your wisdom and experiences with us. Loren has certainly made a fine debut. All of us, I'm sure, are relieved that TQE has been left in such good hands.

— Greg Swarny, no affiliation, Austin TX

One has to wonder what Jack Powelson, a noted pacifist, was shooting at when he "shot his wad," and whether it was a peaceful engagement? Perhaps he meant to say he had "played out his string" or "exhausted his resources." However, as one who meets with Jack almost weekly, I can say that he is still shooting or playing out his string or finding reserve resources or whatever. But after a job well done Jack deserves to take on a co-editor without having to justify the move. I see Loren Cobb regularly and know he will ably keep on shooting at us, peacefully, of course.

— Bob Davis, Humanist, Boulder CO

Thank you, Jack, for educating me and other Quakers about how economics works. It certainly isn't self-apparent to plain old liberal arts types. I'm so glad you have found Loren to continue this dialogue. All the best to you.

— Jean Lowe, Langley Hill Friends Meeting (McLean, VA)

I'm interested that you say nothing of the USA's role in Paraguay. Is that because there isn't any — surely a first for a South American country — or is it just a blind spot?

— Alan (no affiliation given)

Not a blind spot, just off-topic. Here's a link to a Foreign Affairs article that mentions a key concern of the US government with respect to Paraguay. — Loren

Jack & Loren,

A recent book, Confessions of an Economic Hitman by John Perkins (San Francisco: Berrett-Koehler, 2004) does not deal directly with your latest theme, but it is relevant to your long-time thesis on the fairness of international financial programs, and this author deals with its applications around the world, especially South America where both of you are knowledgeable...

Does the "hidden hand" need some type of opposition to be humane?

— Bob Michener, Boulder (CO) Monthly Meeting

Your letter is the second recommendation that I have received for this book, so I had better read it. With respect to the "hidden hand," it always needs legal controls, that is for sure. Political opposition helps a little, perhaps, but it is seldom sufficient. I think that all of the following are necessary:

  • Legally enforced transparency with respect to negotiations and their ultimate written agreements.
  • National and international laws that govern the conduct of financial aid programs and international banks.
  • An international judicial system to interpret these laws, with substantial power to enforce its rulings.

— Loren


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Publisher: Russ Nelson, St. Lawrence Valley (NY) Friends Meeting

Editorial Board

  • Chuck Fager, Director, Quaker House, Fayetteville, NC.
  • Virginia Flagg, San Diego (CA) Friends Meeting
  • Valerie Ireland, Boulder (CO) Friends Meeting.
  • Asa Janney, Herndon (VA) Meeting.
  • Jack Powelson, Boulder (CO) Meeting of Friends, Principal Editor
  • Norval Reece, Newtown (PA) Friends Meeting.
  • J.D. von Pischke, a Friend from Reston, VA.
  • John Spears, Princeton (NJ) Friends Meeting
  • Geoffrey Williams, Attender at New York Fifteenth Street Meeting.

Members of the Editorial Board receive Letters a week in advance for their criticisms, but they do not necessarily endorse the contents of any of them.

Copyright © 2005 by Loren Cobb. All rights reserved. Permission is hereby granted for non-commercial reproduction.

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