Putting People First; A radical prescription for curing Latin America's ills.(Liberty for Latin America)(Book Review)

Byline: Carlos Lozada (Lozada is a Knight-Bagehot fellow in economics and business journalism at Columbia University.)

In the early 1990s, before the term "emerging markets" went from applause cue to punch line, Latin America was everyone's next big thing. Cheered by Wall Street and the IMF, the region's nations rushed to shed decades of misguided, state-directed economic policies and seemed to embrace a future of free markets and buoyant economies.

Just a few years later, Latin America is mired in stagnation and strife. Civil conflict besets Venezuela; 40 percent of Argentines live in poverty, and Bolivia is a battleground for farm leaders and anti-globalization activists. From 1998 to 2003, the region's per capita income did not grow.

What went wrong? Peruvian journalist Alvaro Vargas Llosa offers a provocative answer in his sweeping new work, "Liberty for Latin America" (276 pages. Farrar, Straus and Giroux) . The market reforms of the 1990s failed, Vargas Llosa says, because they failed to uproot the five principles of state oppression: corporatism, state mercantilism, wealth transfer, privilege and politicized law. These principles have subjugated Latin American citizens to a meddling and pervasive state, thus concentrating wealth, stifling individualism and creating a "moral and cultural abyss."

In this setting, the privatizations and financial openings of the 1990s were simply the latest of the region's many stalled revolutions. State monopolies became private ones, foreign elites replaced domestic ones, crony capitalism persisted, and the legal system remained "the prime source of ...