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Nine Lessons from the Nineties
Learning From The "Neo-Liberal"
Failures in Latin America
by Alberto Mansueti, ISIL Rep – Venezuela
We are pleased to announce the appointment of Alberto Mansueti as the new ISIL Rep for Venezuela. In the last few years he has been the translator of many of ISIL's pamphlets into Spanish. He attended the 1999 ISIL World Conference in Costa Rica, and is scheduled as a speaker at the upcoming ISIL conference this July in Puerto Vallarta, Mexico.
Alberto has been a university professor, and a politically-active journalist and radio host fighting on behalf of free markets (Austrian economics) and limited government. While editing a daily economics journal during the last presidential election, Alberto was sharply critical of Colonel Chavez (an open fan of Fidel Castro). When Chavez won the election, Alberto was blacklisted. He now makes a meager living through translation work.
Mansueti is a co-founder of a new classical-liberal thinktank in Venezuela called "La Salida" (The Way Out). The group may soon form a political party, as all existing parties in the country are strongly socialist. La Salida is also part of a growing network of classical-liberal/libertarian activist groups around Latin America and includes in its ranks high energy academics and activists such as José L. Tapia (Peru); Ricardo Valenzuela (Mexico/US) and ISIL conference organizer Edgar Piña Ortiz (Mexico). All four will address the ISIL Puerto Vallarta
conference in July. – Vincent H. miller
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In Latin America, conventional wisdom has always considered the [classical] liberal way out of poverty to be "impractical". The so-called "economic reforms" adopted in the Nineties were generally "middle of the road" – thus very timid, incomplete, vacillating, and contradictory. They were intended to be short-cuts to prosperity, but they evaded the basic changes required – and consequently they failed.
As in Eastern Europe, the "Neo-Liberalism" in Latin Amercia has not been Liberal, but merely a continuation of the statist status-quo by other means. The results have been a grotesque charicature of Capitalism – which opens the door to the left-wingers, now reinforced with new ideological and political vigor.
Such new energy is afforded them by movements that converge like the tributaries of the Amazon River. Which ones? Ecologists, women's rights, native rights, protests against globalization, and the extensive and weird list of so-called "human [group] rights". There is a renewed super-loyalty to political parties and reinvigorated enthusiasm for direct democracy – ideas promoted by many international NGOs (Non-Governmental Organizations) – which, given the origin of much of their funds, make the "Non" name laughable.
To this leftist mixture, add bureaucrats of inter-governmental Agencies, confused philosophers pursuing post-modernism, and politicized segments of "New Age" Cults. Finally, ingredients that must be included in this anti-liberal cocktail are populism, militarism, and leftist Christianity.
How to face this new list of left-wing enemies? Undoubtedly, Liberalism is the antidote. Such a wide range of socialist ideas and vision can only be defeated by a comparably wide Liberal vision, but with alternate solutions.
But here arises a question. Why did the "neo" liberals of the 90's fail? There are clear lessons from this experience.
I. The real changes required are purely negative – not positive in character.
What was required for prosperity was the repeal of bad laws, and the privatization of government companies, schools, hospitals, and trust funds to allow for competition. Also the removal of taxes and protective barriers, and all other obstacles that have impeded the creation of wealth that would normally have emerged from the resulting free markets!
So what were the "changes" of the 90's? "Positive" – but only in the sense of more, or at least different controls! Certain statist instruments were done away with – but many others were created. For example, government companies were privatized, but government regulatory agencies were installed and state monopolies were merely replaced by private monopolies. Inflation was slowed by increasing taxes – which left less money for private spending. Differential exchange controls for equally-fixed currencies distorted trade patterns. Interest rates were established by edict, and bank reserves were manipulated. Price controls were imposed – supposedly to protect the consumer, and antidumping legislation cut imports and protected overpriced domestic producers.
And now the left wing is restoring old controls and interventions without removing the new ones.
Obstacles to progress come from several generations of "reforms" supposedly installed to "promote development", "redistribute wealth", "improve competition", etc.
To remove these "reforms" which have continued to mount one on top of the other, is vital! If we are to eliminate poverty and pave the road to prosperity, it is essential to do away with all of them. Latin America must eliminate the obstacles that block investment and capital accumulation, the creation of new jobs, entrance into the global economy, and economic growth.
We were on the way to this in the 20's and 30's when our incipient development was abruptly curtailed by the sequence of anti-liberal "reforms".
To undo the regrettable "reforms" is not anarchistic. Today it is the "law of the jungle" (rule by the strongest political force) which reigns supreme!
In the true classical-liberal tradition, the Government will not disappear, it will just be limited to its proper role of protecting individuals from assaults on their life and property, which especially attack the defenseless poor. Independent judges will also play an important role to repair damages in a truly liberal society.
II. IDEAS, for bad or for good, whether economic or political, are most important.
Most of the reforms of the 90s were undertaken in the interest of Big Governments to save them from imminent bankruptcy. For that reason, expenses were rarely reduced, but their revenues were increased – through monopolistic privatizations, external loans and taxes. And instead of eliminating regimentation, it was legitimized and expanded.
As with their immediate predecessors of the "social market', the neo liberals did not find their inspiration in the tradition of political liberalism with its foundations of limited government and individual freedom. Instead, governments in the 90's were inspired by ideas of certain Anglo-Saxon economists whom they incorrectly labeled as classical and neoclassical, rather than to the French physiocrats and their vision of natural order of the market and their rejection of the "Police State".
III. The Liberal tradition is Limited Government, not "good economic policy."
"Laissez Faire" (let free markets alone) is the limited economic face of Liberal governments, restricted to constabularies and arbitrational functions, which are appropriate. The economy should be a matter as private as religion.
Previously, Kings had "religious policies" by means of dynastic marriages, alliances and wars which aided some religions and churches while regarding others unfavorably. Today this is with good reason considered an anachronism., but it is accepted that governments support some economic sectors to the disadvantage of the others, and can interfere in the economic lives of individuals, families, and businesses.
The concept "Economic Policy" implies that "market failures" would not have occurred under the "wise" guidance of the State, and justifies its intervention. A true liberal would not propose a "good economic policy" to the government – the only good one is one that does not exist! This should be determined by individuals, families, and businesses. All government "Economic Policy" can be summarized in the idea of "Enriching One's Self" at the expense of others, which appeals greatly to bureaucrats and politicians who run the show.
IV. Free-market capitalism benefits the poor by eliminating poverty; corporate statism benefits those already rich.
Liberalism, in the true sense of the word, is the only force in the political spectrum which can break the bonds of poverty in Latin America. It is not collectivistic (socialistic) as all the others are.
Liberalism is not egalitarian; it seeks only equality in the recognition of the individual rights. Respect for private property is recognized as the foundation for a rational social order. An individual can change his social and economic level if he has success in his activites – one is not born into an economic caste system. By the same token that one can raise his economic position, this can be lost if his services or goods are not competitve in a free market. This flexibility permits the best development of any economy.
To liberalize does not require "doing" anything, but rather undoing the strong chains of corporatism, which benefit special-interest groups, and forge the "chains of poverty".
V. Dismantling statist structures is a political, not economic matter.
Correct political measures can bring great social and economic benefits. Important steps are:
- Complete privatization of state companies, without granting any monopoly.
- Privatization of government health, medical, and cultural centers.
- General deregulations of the economy and reestablishment of Common Law Codes
- Monetary freedom, which includes that any money issued by the State not be designated "legal tender", which one is obliged to accept. One should be able to choose the currency, metal, etc. that one prefers for transactions.
- Elimination of government spending for those functions which do not apply to the legitimate functions of government, and increase those necessary for the protection of life and property of the individuals (which are the only legitimate ones).
- Reduction, simplification, and unification of the tax system.
- It may include some transitional help to the poverty program, but with coupons [vouchers] rather than government programs. Those who receive it have their voting rights suspended.
VI. Reduction of state powers should be accomplished on all fronts and as quickly as possible.
Any collectivistic elements that remain entrenched in government cause detrimental effects, and provide ammunition to the statists to disqualify the free-market concept.
Once society is freed economically, prosperity will soon be on the way for all! This is explained by Mark Skousen, who predicts a period of months or a few years for a dramatically favorable transition.
VII. Economic liberation from state controls is on the "supply side" to recover so-called micro-economic balances.
Markets are never in complete "equilibrium" – the time preference and demand for products is continually changing. There are always wasted opportunities, unsatisfied needs , and faulty use of resources – but these are multiplied many times if the market is controlled by the government.
The producers are the correct ones to make decisions, since it is to their personal financial advantage to estimate the market possibilities correctly. They must make accurate calculations to have positive balances, which permit them to recover their investments and collect a profit.
So-called "macro" economics is a Keynesian depravity. It is not liberal! Liberalism is founded on the importance and development of the individual – as explained by Hayek. Individuals – not collective abstractions act!
VIII. There is no substitute for Liberalism to bring individual freedom and prosperity.
Other systems give only lip-service to these ideas, and all have been tried and failed! Those truly interested in eliminating poverty and unchaining the productive part of society should give their active support to Liberalism.
As the famous author Ayn Rand wrote:
"Capitalism is not compatible with other systems. Changes must be complete with the philosophy which recognizes the right of the individual to his own life, since it is philosophy which determines everyone's judgment. Capitalism does not glorify sacrifice, but rather freedom for all individuals."
IX. Liberal Political Power is required to break our chains!
Existing political parties have been unable to change the status quo. I believe a Libertarian Party is required to improve the economy. The poor and middle class will very likely be drawn to such a movement, which can be developed through a wide variety of cellular organizations.
It is my opinion that many origins of the ideas of Capitalism are found in Christian writings and that not all of religion is the enemy of reason. We Christians have a place in the Liberal party, not out of it, nor in opposition to it. In the Bible, an ancient document, there are many liberal messages to be shown.
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