The long, wide, bleak streets of cobblestones and tufts of petrified grass reach for the sacred mountain Illimani, whose pyramid of snow is like a watchtower. There was almost no life here when I first came to Bolivia as a young reporter - only the freezing airport and its inviting oxygen tent; now almost a million people live in El Alto, the highest city in the world, the creation of modern capitalism.
El Alto is as symbolic of Latin America today as Cerro Rico is of the past. A hill almost solid with silver, it was mined by slave labour and served to bankroll the Spanish empire for three centuries. Both places are in the poorest country on a continent of 225 million inhabitants, half of whom are poor. Debt bondage, even slavery, still exists secretly in Bolivia, whose hill of silver now takes second place to other natural treasures of gas and water.
I arrived in El Alto in the early hours of the morning. Through skeins of fog, the moonlit streets were deserted save for silhouettes of hunched men swaying in the cold, framed in doorways, waiting, hoping, for the morning's first auctioned work.
Bolivia was second only to Chile as a laboratory of "neoliberalism", the jargon for capitalism in its pure, Hobbesian form. The Harvard economist Jeffrey Sachs designed the "shock therapy" that the IMF and World Bank administered in Bolivia, adding another dimension of poverty and suffering. With the privatisation of the mines, tin finally collapsed, and the miners and their families headed for La Paz, settling on the bitter plain at El Alto, a thousand feet above the capital, without water and power and with little food. Farmers forced off their land by IMF diktats followed them, and their mass migration was typical of that of millions driven out of secure work by the foreign managers of the "Washington consensus", a fanaticism conceived at Bretton Woods in 1944 as a tool of empire. (Sachs sees himself as a liberal and is mentor to the gormless Bono, of Live Aid et cetera fame.)
Until now, Bolivia's modern presidents have all been rich, white men who ran the country on behalf of a tiny wealthy minority. Owners of vast tracts of land control the lowlands around Santa Cruz, reminiscent of their equivalent in South Africa. The pre-Inca indigenous majority were the "blacks" who were politically invisible, except as occasionally troublesome workers, especially the miners. People chewed coca leaves to relieve hunger; many died in their early middle years and their children were stunted. "My mother was worked to death on a big estate near Santa Cruz," a campesino told me. "If she was found learning to read, she was severely punished."
The last president but one, Sánchez de Lozada, a multimillionaire mine-owner now exiled in Maryland, had grown up in the United States and spoke better English than Spanish. He was known as "El Gringo". In colluding with the IMF and selling off the country's gas and water at knock-down prices to Brazilian, American and European multinationals, he fulfilled his role, like so many Latin American presidents, as Washington's viceroy. Indeed, Richard Nixon's contemptuous remark about Latin America - "People don't give a shit about the place" - was quite wrong; America's imperial design was inscribed on the lives of the people in its "backyard".
Last year I interviewed Pablo Solón, son of the great Boliv- ian muralist Walter Solón, in an extraordinary room covered by his father's epic brush strokes. More visceral than Diego Rivera's images of the Mexican revolution, the pictures of injustice rage at you; the barbaric manipulation of people's lives shall not pass, they say. Pablo Solón, now an adviser to the government of Evo Morales, said: "The story of Bolivia is not unlike so many resource-rich countries where the majority are very poor. It is the story of the government behind the government and what the American embassy allows, for in that building is the true source of power in this country. The US doesn't have major investments here; what they fear is another Chávez; they don't want the 'bad example' to spread to Ecuador and beyond - even to Nigeria, which might be inspired to tax the oil companies as never before. For the US, any genuine solution to poverty spells trouble."
"How much would it cost to solve the poverty of Bolivia?" I asked.
"A billion dollars; it's nothing. It's the example that matters, because that's the threat."
I drove out of El Alto with Juan Delfín, an indigenous church deacon, taxi driver and artist, who spoke about the conquistadores as if they were within his memory. This is a society where a half-millennium of history is a presence and its subjugation and impoverishment are understood with anger. With Illimani looming ahead of us, a cemetery consumed the horizon. On the other side of the road was a small hill not of silver, but rubbish: a stinking, smoking, acrid hell of dust and dead dogs and wild pigs and women in traditional bowler hats digging with pickaxes for something, anything. "Here you have the symbol of everything we live and reject," said Delfín.
He took me to a plaque with the names of 24 people shot to death by the army in October 2003 when de Lozada tried to stop the people of El Alto marching down to La Paz in protest against his selling-off of gas. Juan Delfín linked their deaths to the lines of ordinary graves, many of them children, "who also died violently, from poverty". A shepherd boy emerged from a pile of stones where he lived, looking too small for his age.
After de Lozada was driven from Bolivia, his successor Carlos Mesa capitulated to the demands of the social movements, such as El Alto's Federation of Neighbourhood Committees. These are a new phenomenon of Latin America; the Landless People's Movement in Brazil is the best known, but the most effective, politically, have been in Bolivia. For more than five years, the movements included almost the entire population of the city of Cochabamba as they fought the "water wars" against a foreign consortium led by a subsidiary of the American multinational Bechtel, which de Lozada had handed the city's public water supply, causing water bills to consume a third of meagre incomes. Even the right to collect rainwater belonged to Bechtel. With an annual revenue of more than $17bn, the company's power is such that it expected and got (without the inconvenience of bidding) the contract to rebuild the US fortress in occupied Iraq. Yet, not only was Bechtel driven out of Bolivia in 2000, shortly followed by its mentor de Lozada, but the company has now dropped its compensation action against the government. It is a victory of huge significance, because it warns other multinationals in Bolivia (such as British Gas) that even if the government is prepared to compromise the wrath of the people, the movements are not.
It is also a warning to Evo Morales, whose electoral victory in December remains largely symbolic here. An indigenous man now leads Bolivia for the first time; the chequered pre-Inca flags are proudly on high everywhere. "The elections aren't something we asked for, ever," said Oscar Olivera, the Cochabamba union leader who led the anti-Bechtel revolt. "What the social movements need to do now is to continue accumulating popu- lar forces, to build up our ability to pressure whatever government that comes. A Morales government would be less difficult to love, but it will still be difficult."
Unlike his absurd caricature abroad - a previous American ambassador to Bolivia likened Morales to Osama Bin Laden and his party (MAS) to an Andean Taliban - "Evo", as he is known here, is not a "radical", not yet. His theatrical announcement of "nationalisation" on 1 May did not mean expropriation, and he made it clear the multinationals would not lose any rights. What they will lose is their grotesque share of profits and benefits; they will now have to pay true market prices for Bolivia's gas, along with a proper rate of tax. His vice-president, Álvaro García Linera, has said "capitalism will last for 50 years in Bolivia". Before the election he told me: "In a small country like Bolivia, you can't be heroes."
But many have been heroes, in the blockade of Cochabamba, in the surge of people from El Alto down into La Paz, facing bullets and expelling their El Gringo president. Out of the new spirit abroad in Latin America, perhaps the Bolivians and Venezuelans have brought true revolutionary change closest. The contrast is with the "left-wing" Luiz Inácio Lula da Silva in Brazil, who agreed to IMF terms even before he took office and who has distributed less land than his right-wing predecessor.
The likeable Evo is on notice above all with his own people, but also with the Americans, the "government behind the government". Unless Washington can "lobotomise him" (as it did with Jean-Bertrand Aristide in Haiti), it is likely to encourage a secessionist movement in the landowners' heartland of Santa Cruz, where the gas is and where the government has promised to redistribute unused land. Bolivia, like Venezuela, has glimpsed its freedom and demands our support.
John Pilger's new book, Freedom Next Time, is published by Bantam Press on 8 June (£17.99)