Why democratic Costa Rica going down the tubes

Costa Rica, Latin America's much-admired democratic welfare state, is in an economic crisis. The architect of that welfare system, three-time President Jose Figueres Ferrer, says Costa Rica's crisis does not stem from the sort of mismanagement exercised by many corrupt Latin dictatorships.

Costa Rica's plight, says the former President, arises largely from its virtues - from being a moderate, mixed-economy democracy dedicated to improving substantially the living standards of its people.

The case of Costa Rica, Mr. Figueres says, illustrates what happens to third-world countries developing along democratic, reformist lines when they run up against the bitter realities of international trade.

Figueres, known here by his nickname ''Don Pepe,'' calls for an international ''New Deal.'' International terms of trade must be revised to give the poorer countries a fairer shake, he says.

Until trade terms are revised, says this still-active social democratic politician, Costa Rica and other developing democratic nations will not be able to enter the industrialized world or to cope successfully with the problems of being a member of the third world.

Under the current trade situation, he says, no third-world country that depends on agricultural products for income can afford to provide a decent life for its people.

''Since the 1948 revolution,'' when Figueres led a revolt against a President who refused to accept an electoral defeat, ''Costa Rica has embarked on a course of democratic development which has greatly raised the standard of living of the population, raised it to one of the highest levels in Latin America.

''This has been done by means of both raising salaries and putting into effect socially progressive taxes,'' Figueres says.

The tax money obtained from the well-to-do has been used, in part, to create a social security, health, and education system, patterned along the lines of West European social democracies, which have vastly improved the lives of most of the population and brought more than three decades of political stability.

The policies of this era also led to the growth of a large middle class (the largest sector of the population) that consumed more and more imported goods. Foreign cars, foods, clothes, appliances, and travel were gradually taken for granted as a normal part of middle-class life.

The creation of a mini-welfare state and of a middle class living on foreign goods meant that Costa Rica spent increasingly large amounts on foreign exchange.

Costa Rica's way of earning back these dollars was to export agricultural goods, mainly coffee, to the developed world. But according to Figueres, who farms coffee, there was no way Costa Rica could keep from falling further into debt since the international terms of trade are skewed against developing countries. Agricultural goods are too cheap and industrial goods too dear, he says.

''By the late '60s,'' says Figueres, ''we had already reached the maximum amount of welfare and consumption that the country's economy could bear and the situation alarmed those who looked 5 or 10 years ahead.''

Suddenly in 1973 came the tremendous rise in oil prices. Costa Rica paid more for its oil and for imported industrial goods.

Industrialized countries passed their own added oil costs to the consumer by raising the prices of their goods.

At that point, Don Pepe says, ''it was imperative to cut back consumption, but no one was willing to do it. The strength of the workers' unions, of the middle-class office employees' unions, of the teachers' association, and of the political parties representing their interests was too strong.''

Costa Rica continued to plunge into debt. At the beginning of the 1970s there was already a foreign debt of $575 per person. Today, the country owes more than

Figueres says much of the third world's debt is the result of irresponsibility of both lender and borrower: ''The basic problem is the lack of social responsibility on the part of those sectors who control the wealth on both sides. In order to survive, capitalism must acquire a greater sense of social responsibility, just as socialism must acquire greater efficiency in production.''

''The most important change necessary in our times is a change in the trade relations between the industrial world and the world producing raw material,'' he says.

This is why he favors an ''international New Deal.'' Figueres states that Roosevelt's New Deal put more money into the hands of US workers, thus enabling them to consume more and therefore the companies to sell more. Both capitalists and workers were better off. Today, if agricultural goods and raw materials were more expensive and industrial goods were cheaper, the whole world would benefit, he says.

''It is absurd,'' Figueres says, ''that while the poor world can't buy the products of the rich world, there is in industrialized countries substantial unemployment. What a waste of human resources!''

In the meantime, he called on the International Monetary Fund to be cautious in its demands for austerity and to consider the social and political consequences. ''IMF demands to bring order into our economic existence are positive, but if a shift from a situation of lesser order, to a situation of greater order is carried out too suddenly, the results can be chaotic.''

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