Maybe it’s the altitude or the Xanax hangover from the long night flight in, but political culture in Bolivia seems to have changed radically in the past year. Awakening in a shabby La Paz hotel, I turn on the TV. Onscreen sits the usual Barbie doll-style hostess, but she is interviewing Raul Prada, a short, thickset Marxist intellectual with permanently bent eyeglasses. The last time I saw Prada he was in the streets dodging tear gas with the masses. Now an adviser to Evo Morales and his party, the Movement Toward Socialism (MAS), Prada is explaining why the government just nationalized a big part of Bolivia’s natural gas industry.

“Nationalization of hydrocarbons has been a demand and a state policy since the defeat of the traditional elites during the Chaco War of 1932-35,” says Prada, referring to a cataclysmic bloodletting with Paraguay that was to Bolivia what World War I was to Europe. In 1937 the Bolivian government confiscated Standard Oil’s operations in the country–all of them, without compensation.

“By those standards, the current policy isn’t even really nationalization,” says Prada with a tone of resigned disappointment. The Barbie doll TV hostess nods and follows up with interesting and informed questions: How, exactly, will Bolivia “industrialize” its natural gas reserves? How much will the planned infrastructure cost?

Where is the redbaiting fury, the racist gibes about the Indio Presidente being in over his head? Surprisingly, Morales’s May 1 nationalization decree is hardly controversial here. Even large sections of the Bolivian business class support the move.

To be fair, this “nationalization” is really only a limited takeover of three key companies that together control the heart of the Bolivian energy industry. Nor is it radically precipitous. Morales’s decree is the culmination of a process that started with the “gas war” of October 2003, which brought down President Gonzalo Sanchez de Lozada and later his successor, Carlos Mesa. In all, the new moves should earn the government more than $700 million a year in revenue.

The three firms in question were partly sold off–or “capitalized”–during the 1990s. Under the new rules, the government’s petroleum company will gain a 51 percent stake in Transredes (owned by Shell), which manages most gas and oil transport including pipelines, as well as in Andina (owned by the Spanish-Argentine firm Repsol YPF) and Chaco (BP and Britain’s BG Group), both of which do exploration and primary production. The government is also taking over Bolivia’s two main refineries, formerly controlled by Brazil’s Petrobras. The twenty or so other foreign companies are left untouched.

For the next six months the government and the three big firms will split gas royalties 82 to 18 percent in the government’s favor. During that time new contracts will be negotiated and prices will be raised. But the eventual royalty split will not be as favorable to the government. Right now it seems that most oil companies operating in Bolivia will continue to pay 50 percent royalties, as they have since the Hydrocarbons Law passed in May 2005.

But Morales has promised to go beyond gas. He has announced plans to nationalize mining and forestry, and to confiscate and redistribute unused land to landless farmers. In March the Bolivian government decided it would not renew an expiring three-year financing deal with the International Monetary Fund, after decades of following IMF-imposed austerity programs. The government has boosted the minimum wage, has promised to increase next year’s spending on healthcare by 300 percent and has told a major Brazilian mining firm to leave the country because it is allegedly operating illegally.

Morales has also appointed a number of radical outsiders and indigenous activists to his Cabinet. Most prominent among them is Justice Minister Casimira Rodriguez, who started working at age 13 in Cochabamba as a maid. For the mostly white men of the Bolivian bar, this appointment was an insult beyond comprehension. When I interviewed Rodriguez in her awkwardly large office, she seemed genuinely hurt by the attacks against her but politically unfazed. She recounted how she and other maids–some of whom were held as virtual prisoners–used their only free day each week to organize a union for domestic servants. “I have lived with injustice and inequality,” said Rodriguez. “It is hard to fight corruption, but I can show the people that this is their house, too.”

Despite these moves, many on the Bolivian left still consider Morales a sellout. They point to the 600,000 or more children who go to bed malnourished every night and demand more. One social movement-connected think tank, CEDLA, issued a hyperbolic report blasting the MAS government’s first 100 days as “a ratification of neoliberalism.” At the offices of CONAMAQ, one of several large Bolivian indigenous federations made up of autonomous ayllus, or communities, of Quechua-, Aymara- and Guaraní-speaking people, the critique of brother Evo is more abstract: “He doesn’t have an indigenous vision,” says the group’s president, Anselmo Martinez Tot, who approves of the nationalization but worries that the MAS vision of economic development will erode traditional ways and draw off young people to the city.

“We want independence for Tawantinsuyu,” says one of the maluk, or local leaders, in the office. He is referring to the huge indigenous nation comprising Bolivia and parts of Chile, Argentina, Peru and Ecuador. The radical fringe of Bolivian indigenismo–a force that is politically quite strong–will not be happy with MAS reformism.

True, the new government’s first five months have not seen all-out class war or Indian separatism. Instead, MAS officials say they are pursuing a realistic, though less heroic, strategy of reducing poverty by growing and guiding Bolivia’s market economy, rather than overthrowing it.

Nonetheless, the policy changes have been enough to seriously irritate George W. Bush and the US pundit class. The President has grumbled about the “erosion of democracy in Bolivia,” while others cast their displeasure as mere technocratic concern. Michael Shifter of the Inter-American Dialogue and formerly with the US-funded National Endowment for Democracy said that nationalization “risks alienating natural and otherwise sympathetic partners.” Still others suggest that nationalization will end new investment in Bolivian gas exploration.

Bolivian petroleum experts disagree, saying that firms are “standing in line” to get access to the gas fields. But even some in the Morales government express concern about Bolivia’s long-term access to Brazil’s huge market.

In a long, ornate drawing room in the presidential palace, I meet Vice President Álvaro García Linera, who is sometimes said to be “the brain of the government”–Evo is clearly its soul. Only 42 years old, García Linera has a résumé that already includes stints as a former guerrilla, ex-prisoner, powerhouse author and intellectual, and now one of the most important politicians in Latin America. Over coffee and papaya juice, he explains the economic logic of the new government.

“Transnational corporations are welcome in Bolivia, but they will not dominate the economy. They should expect to pay taxes and submit to reasonable environmental and social regulations. But they will still make profits,” says the boyish VP. As García Linera sees it, all that the state can do at this stage is impose equilibrium and a minimal humanity on the savageness and chaos that is otherwise Bolivian capitalism.

Looking for the class war and panicking capitalists, I head to the offices of the National Industrial Chamber, but all I find is reasonableness. In retrospect, that makes sense, as this chamber of commerce represents 1,500 mostly small and medium-sized firms involved in textiles, food processing, furniture, metalwork and agriculture, all of which are threatened by free trade on US terms and none of which are oil companies.

“Evo had to nationalize the gas,” says Daniel Sanchez, the chamber’s president. “We had a referendum in July 2004 and nationalization won overwhelmingly. This is democracy.” In two weeks of canvassing politicians, businesspeople and the social movements, I hear this sentiment again and again: Nationalization had to happen because of the July 2004 referendum. If Morales had been any more restrained, he would have faced the wrath of street mobilizations. Even some right-wing ranchers in Bolivia’s lowland eastern province of Santa Cruz–where Morales won a stunning 33 percent of the vote–told me that though they disliked nationalization, it was inevitable.

“As an industrialist I think the new government is going to help us a lot,” says Sanchez, who owns and runs two chemical factories that make products for water purification. “The government showed us part of their economic plan. It’s very human– they want to fight poverty. But there’s also a heavy emphasis on national industry. They want to build the internal market.”

According to Sanchez, many industrialists in La Paz have come around to seeing the virtues of the MAS growth strategy. Particularly popular is the idea of a new government bank to provide local industry with cheap credit. They also like proposed programs to support technology transfer: “So we can upgrade to cleaner, more efficient technology and compete better in regional markets.” It’s a simple equation but one that was for too long obscured in the ideological mumbo jumbo of the Washington Consensus. Having tasted the low-growth, austerity and multinational domination of neoliberalism, many Bolivian business owners finally get it: If poor people have more money, they’ll buy more products from local industry.

Nowhere is the link between poverty reduction and the national market clearer than at the office of Cifabol, the industrial organization that represents most of Bolivia’s twenty-two small pharmaceutical companies. About 5,000 people work in pharmaceutical manufacturing here, and none of the Big Pharma firms have plants in Bolivia.

A frazzled Joseph Stiglitz has just swept through town as a guest of the Foreign Ministry. His speeches were only tepidly Keynesian, but it was enough to allow many La Paz intellectuals and businesspeople to look favorably on regulation, mild redistribution and state planning. Among those wooed was Cifabol’s Dr. Victoria de Urioste Blanco. “The government wants to expand healthcare. We want to expand the internal markets,” she explains with a dramatic pause so this dialectical connection between production and consumption can sink in.

Cifabol members have looked into the intellectual property details of various US free-trade proposals and they see that the deck is stacked against them, so they’ve switched sides and are now backing MAS’s economic nationalism.

“Did you know that today the average Bolivian takes only two pills every year? Maybe one aspirin and one Viagra,” says Urioste with a sly grin. The Bolivian drug market is only $120 million a year, so any growth could help Cifabol’s firms.

Thus, some local elites have started to see beyond Evo’s dark skin (that is to say, their own racism) and look at the logic of his policies. And some have even weaned themselves from their sycophantic intellectual habits of believing whatever comes out of Washington. Ranchers, however, are still hostile–there is simply no version of land reform that they favor.

If there are dark clouds on the horizon for MAS, they come from two directions: a discontented far left and a bellicose, possibly US-backed lowland-rancher-based right wing. But the two threats are almost mutually exclusive. If the right moves against MAS, the left will likely unite. If the right sits by and tolerates a few defeats, then the left could make Morales’s term hell with demands for accelerated social change and economic redistribution.

Most frightening so far seems to be the Santa Cruz-based far right. Rumors abound of Colombian mercenaries training on big Bolivian ranches. And several Cruzano political figures, like Ruben Costas, prefect of Santa Cruz province, have intimated that they will “resist domination” from the central government. Branko Marinkovic is one of the Cruzano heavies. He is president of the Federation of Private Industries in Santa Cruz, a big rancher and like many elites in Bolivia’s east a descendant of Croatian immigrants. He tells me he’s made his peace with the gas nationalization, but he sounds ominous, if conflicted, on other issues. “Land reform could lead to civil war,” says Marinkovic in Texan-flavored English, the product of six years studying at the University of Texas, Houston. When I ask if he is building a private militia, as is rumored, he is dismissive. “That’s BS. Just BS. I am running a huge business here. I am not involved in anything like that.” What else could he say?

Then, sounding less menacing, Marinkovic tells me he’s even “OK with” the government’s plans to tax land sales. “If that stops speculation, fine,” he says. The Cruzanos were also relieved when García Linera said the government would not limit the size of ranches. The point seems to be that big, even huge, ranches are acceptable as long as the owners are investing their capital to employ people and produce food. The government’s threat of confiscation might even cause some Cruzano speculators to take money out of distant financial markets and invest in real economic activity in Bolivia. For the time being, that’s all MAS can ask for–a less parasitic, less volatile, fairer version of market economics.