By Donella Meadows

–February 26,1987–

In the circus of politics, some national leaders are strong-men, some are clowns. Very few are high-wire artists, taking on the most challenging jobs and struggling for balance, while the world holds its breath. One of those is Alan Garcia, the 37-year-old President of Peru.

I ran into my Peruvian friend Francisco Sagasti in August 1985, a month after Garcia had come to power. Francisco, like most Peruvians then, was dazzled.

“He’s firing corrupt police chiefs! He put a ceiling on government salaries, including his own! He’s limiting payments on the foreign debt! He’s doing things we thought were impossible!”

To understand Francisco’s excitement, you have to imagine what it was like to live in Peru then. The people had endured 12 years of a military government, followed by an inept democratic one. Peru was a poor country, getting poorer.

Half the pre-school children were malnourished. In 1985 the annual inflation rate was 160%. The rate of economic growth was negative. The real income of the average worker had fallen by 40%. The country was using half its export earnings just for the interest on its foreign debt. A virulent group of rebels, the “Shining Path” guerillas, was randomly blowing up power plants, trains, and mayors. The people lived in despair.

But in an election with nine candidates, 47% of the voters chose Alan Garcia, the young man with wild ideas. Then they looked on with delight as he began to carry out those ideas.

What impressed me most about what Francisco Sagasti told me was that Francisco himself, with a Ph.D. in economics from the Wharton School, a man who had been awarded the U.N. Peace Medal and who could have worked anywhere in the world, had decided to stay in Peru. He saw that new ideas could finally be tried. He felt he could make a difference in his home country.

That was 18 months ago. Recently I asked Francisco what has happened since.

“There’s good news. Price controls have reduced inflation from 160% to 62%. The economy grew by 8.5% last year, the highest growth rate in Latin America. The income of workers has gone up by 15%. There’s been a crackdown on drugs and a reduction of arms expenditures. Nearly $3 billion that would have been budgeted for debt service and the military has been reallocated to education, agriculture, and health. There’s a free milk program for children.”

“The guerillas are still a terrible problem. Garcia thinks social and economic reforms will eventually defuse their power. He doesn’t use the rebels as an excuse to abuse the rights of the rest of the population. But when they persist in lawlessness, he tries to isolate them and conduct surgical strikes against them. I think that policy will work, but it will take time.”

Garcia’s announcement that Peru would pay no more than 10% of its export earnings toward its foreign debt produced a sharp, punitive reaction. Credit from private banks dried up — Peruvian notes are now being sold on the international market for 22 cents on the dollar. Last August the International Monetary Fund cut off credit.

The financial institutions are putting enormous pressure on Garcia, but he says he will restore Peru’s economy his way, not theirs. He says economic growth will come from within, from Peru’s private sector investing in the country rather than draining off profits to Miami. He has opened a partnership between the government and the private sector. He sees the state as the promoter, not the antagonist of economic life.

You would think that line would win raves in Washington, but Washington has trouble figuring Garcia out. He doesn’t fit into capitalist or socialist categories of good guys and bad guys. For example, here are the major elements of Garcia’s recently-announced goals for Peru in the year 2000:

– double the national income, – double the share of income going to the poorest half of the population, – redistribute development away from Lima and toward 15 smaller cities, – manage foreign debt so there is no net flow of capital out of Peru, – keep a strictly independent foreign policy, beholden neither to Washington or Moscow, – maintain a strong private sector. That list is surprising not only because of its blend of ideas from the left and right, but also because a man grappling with so many immediate problems is thinking of the year 2000.

“Remember,” Francisco says, “Garcia will only be 50 then. He may be even be in power. By our constitution he can’t have two successive 5-year terms, but he could go out in 1990 and run again in 1995.”

If he lives that long, I found myself thinking. The more successful Garcia is, the more dangerous his tightrope act becomes. Garcia has a 70% approval rating in opinion polls, but he also has high-powered enemies on both the left and the right.

Francisco says, “It’s a fragile government, as your own was 200 years ago. Garcia is searching for a way to strengthen the country from within, so obligations to the outside can finally be honored. He needs a special kind of support — not to be interfered with, but to be given time and encouragement. When a guy’s on the high wire, you don’t push him and you don’t jiggle the wire.”

Copyright Sustainability Institute 1987