Economist and frustrated politician Jorge Castaneda tells Huw Richards that Latin America's neo-liberal consensus is leading to a divided, violent society. His solution is to tax the middle class to spend on the poor

It possibly was not the best time to interview Jorge Castaneda. It was the week immediately before his regular Mexico City colloquium bringing together academics and politicians from the Latin American centre-left - and his secretary had gone down with toothache, leaving nobody else to deal with frequent phone calls.

Still, it offered the chance to note the facility with which he could begin an answer in fluent English, switch to expressive Spanish at the summons of the phone and then resume where he had left off in English. The book by Regis Debray on his table and a Paris doctorate on his CV imply that he could do the same in French as well.

Castaneda, 45, belongs to a generation of Mexican academics for whom this sort of cosmopolitanism has been a financial lifeline. Since the first debt crisis of 1982, Mexican salaries have plummeted. Journalism and private-sector consultancy work are two possible sources of extra income. Working abroad is, for the most successful at least, a third.

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A professor at the National University, Mexico City (UNAM) since 1978, Castaneda has been on exchange programmes at Oxford and London's Institute of Latin American Studies. He admits to long wishing to teach at Cambridge. Since 1985 he has worked regularly in the United States, and in 1995 he was appointed to a chair in politics and Latin American studies at New York University.

The benefits are not solely financial: "First, it allows me to see this country from afar. Second, I can maintain contacts and access to research facilities of the sort we do not have (in Mexico). And third, though it is complicated for my family, I think it is good for them."

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Castaneda, son of a former foreign minister, is firmly rooted in and preoccupied by Mexico, but his interests range far. His next book will be his 12th and the first devoted entirely to his native country. The first, El Economismo Dependentista (with Enrique Hett, 1978), attacked then-fashionable dependency theory, which argued that economic progress in the first world was contingent on underdevelopment in the third world. More recent works such as Companero (1997), a biography of Che Guevara, and Utopia Unarmed (1993), a history of Latin America's left that is also something of a personal manifesto, have won most international attention.

Just as novelist Mario Vargas Llosa has justified setting most of his work in his native Peru by pointing out that the country is sufficiently diverse and complex to provide a variety of near-universal themes, Castaneda recognises Mexico as a good training-ground for a political economist:

"There is something of everything here - mystery, intrigue, violence, stability, idiosyncratic economic and political structures." What is more, with over 100 million people, Mexico is the largest Spanish-speaking nation, is second in regional importance only to Brazil, and is the point where the first world (the US) meets the third.

It is also an immensely frustrating country. "It is natural to find change more interesting than stability, and it takes so long for anything to change here. Everything happens over centuries, punctuated by explosions such as the revolution, in which things change very fast. For instance there has been virtually no social mobility since the 1950s."

Mexico is nominally democratic, but it is in practice a virtual one-party state, with the Institutional Revolutionary Party (PRI) pervading all of national life. Vargas Llosa once labelled it "the perfect dictatorship". A consistent theme in the work of Castaneda, who rejects the Latin American neo-liberal economic consensus - which calls for small government, low taxes and privatisation - has been a desire to dent the PRI monopoly and set Mexico on one of its spells of movement.

This has been done in part through his books and journalism, which alone would have made him a controversial figure: "Intellectual debates in Latin America are often a contact sport," he has written.

But Castaneda has also sought more direct involvement in politics, admitting that he is to a great extent a frustrated politician. In spite of his background, he sees no possibility of a political career, citing the monopoly of the process enjoyed by members of the political parties and the absence of media-driven politics in Mexico. "It is not necessarily a bad thing that to be a politician in Mexico it is much more important that you visit as many villages as possible than that you should be good on television. But it is very frustrating for somebody like me," Castaneda says.

He was for some years a leading adviser to Cuauhtemoc C rdenas - the son of L zaro C rdenas, the outstanding president (1934-40) this century - who broke from the PRI to form the PRD opposition party, challenged strongly for the presidency in 1988 and is now the first elected mayor of Mexico City. "I was never a member of the PRD," Castaneda says, "but I was very close to C rdenas between 1988 and 1993."

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Though still friendly, they broke politically over the PRD's direction. Castaneda believes that C rdenas can win the presidency in 2000 but that it would make little difference: "One way of testing this is to ask if his becoming mayor of Mexico City has made a difference. There is no doubt that his people are much more honest, hard-working and nicer than those they replaced. But they have not really worked out what they are trying to do."

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In 1994 Castaneda launched the Grupo San Angel, an independent ginger group to discuss the political reforms that might have followed an inconclusive presidential election in that year. "We provided an arena in which the representatives of the three serious political parties could meet to discuss issues and build trust." The group foundered, however, on the unexpectedly decisive victory of the PRI candidate, Ernesto Zedillo.

The broadest, and so far the most promising, of Castaneda's political initiatives is the series of colloquia for Latin America's centre-left. Launched in Princeton in 1993 and co-hosted with Roberto Mangabeira Unger, a Brazilian law professor from Harvard, its purpose is to provide a modern alternative to the neo-liberal status quo.

Latin America, Castaneda has argued, has a history of importing inappropriate foreign ideologies. Thus, neo-liberalism is simply a rather more successful successor to Marxism. "The difference is that Marxism never won power in Latin America outside Cuba and, to a point, Chile. Neo-liberalism has become the ruling ideology. The one advantage of that is that its supporters will have to account for its failures, and for that reason I suspect it will have less staying power than Marxism."

Far from addressing Latin America's problems - above all grotesque income inequality and widespread, grinding poverty - neo-liberal solutions accentuate them. Castaneda acknowledges some of Chile's economic successes but notes that the country is more unequal than before.

Castaneda explained the prehistory of his quest for a viable alternative in Utopia Unarmed and continued it via his colloquia for the centre-left. "There have been six so far, and we have had success in two ways. One is that we have built up a network of people in five or six countries who discuss issues and find common ground. The other is in terms of publicity, with papers such as The Economist and The New York Times taking what we are trying to do seriously."

If Latin America continues its current trends, he believes: "You will have an increasingly fragmented, unequal, violent society in which people will still, via television, be able to see how much better many others live. Within that will be well-off enclaves cut off from the rest of society, linked instead to the US via business and education. These exist in parts of Monterrey, Sio Paulo, Santiago and Mexico City."

To address this, Castaneda argues for a political approach based on redistribution of income to narrow the gap between Latin America's hugely rich and desperately poor. To critics of such a "tax and spend" policy, he says: "It is all very well for the US and European countries to ask how much more they want to tax and spend after 40 years of doing it. The level of gross domestic product taken by tax in Latin American countries is far lower than in any of the advanced countries."

Such a policy would inevitably squeeze the the middle classes: "There is no alternative. The truly rich are too few in number and the poor don't have any money." Castaneda says this should be supplemented by economic and social cooperation among the countries of Latin America without the intervention of the US and other advanced economies. He is critical of the North American Free Trade Agreement, which links Mexico with the US and Canada. "There is too great an imbalance between the US and Mexican economies for Nafta to be sensible."

Will Americans buy this? Castaneda has no illusions about the US past: "I think that in the past 50 years they have done just about every dirty trick from Guatemala through Cuba and Chile to Nicaragua. I would like to see them open the archives, examine their actions and judge themselves. If by their own standards they have acted wrongly or criminally, they should apologise."

He thinks it is in Americans' interests to start seeing Latin America as more than just an export market: "The consequence of Latin American countries opening their markets to North America is often that their industries are destroyed by US competition. The workers displaced end up emigrating to the US, legally or otherwise."

This argument, he has noted, applies particularly to Mexico, which loses about 300,000 people a year across the US border. Castaneda believes that if those people had the better opportunities at home that his approach would provide, the US would see one of its major political worries eased.

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