Author Archive
Vaclav Havel on Cuba
Czech writer Vaclav Havel, who died on Sunday, was a lifelong champion of freedom. The former dissident, and later, president of his country, was especially active in denouncing Cuba’s totalitarian system and in stressing the importance of solidarity with that country’s many brave dissidents. In the video below, he discusses Cuba.
On a related note, Cuban cyber-dissident Yoani Sanchez had this to say by Twitter upon the death of North Korean dictator Kim Jong Il: “Nature accomplishes what citizens have not been able to.”
New Video: Ending the Global War on Drugs
In the new video below from Reason TV, leading critics of the global drug war provide some thoughts about why they oppose prohibition. The conservative and former Colombian Senator Enrique Gomez Hurtado blames the drug war for the high levels of violence and cruelty his country has experienced. India’s former drug czar and expert on Afghanistan, Romesh Battacharji, says of current drug policy: “You just can never win it…Ever since the war on drugs, everything has hit the fan.”
The video is based on last month’s Cato conference, “Ending the Global War on Drugs.” You may see videos of the talks here, including a video of former U.S. Secretary of State George Shultz and former Mexican President Vicente Fox.
Palestine To Adopt Chilean Private Pension Model
Hashim Shawa, the head of the Bank of Palestine, says that in 2012 Palestine will adopt the private pension system that Chile pioneered 30 years ago and has exported throughout the world. As you can see from the map below, it will become the second Arab territory after Egypt to do so. Of course, the devil is in the details, and for the reform to be as successful as it has been in Chile, Palestine should introduce a whole set of complimentary economic reforms. But if done right, at least in this regard Palestinians will be ahead of almost all of their neighbors, including Israel.
Bill Niskanen on Inequality
Our longtime colleague Bill Niskanen passed away yesterday. I will miss him dearly for his good nature, scholarship, wisdom and insight. In light of the debate on inequality, here’s an example of such insight in which he critiques philosopher John Rawls’s views. It is from footnote 21 (page 23) of his book, Autocratic, Democratic, and Optimal Government.
Rawls recognizes that individual well-being is dependent on more than income and wealth, but he does not acknowledge the implications of the fact that the other dimensions of well-being are not fungible. Consider the following example.
One young man is healthy and handsome, spends his days on the beach, has his pick of young women companions, and makes $10,000 a year by busing tables in the evening. Another young man is confined to a wheelchair, has congenital body odor, has never had an intimate relationship, and, with no other life, makes $100,000 a year as an expert computer programmer. In this case, who is worse off? Who should redistribute what to whom and how?
Vicente Fox on Legalizing Drugs
Last week, former Mexican President Vicente Fox spoke at a Cato forum on the need to legalize the consumption, production and sale of all drugs. (You may also see C-Span’s coverage of the event.) President Fox took time to do a BBC interview below on the same topic.
By calling for an end to the drug war, he joins prominent figures from around the world—including former Brazilian President Fernando Henrique Cardoso, former Mexican foreign minister Jorge Castañeda, former U.S. Secretary of State George Shultz, and many others—who are calling for policies that treat drug abuse as a social problem, rather than a criminal one. Join us for a major Cato conference, “Ending the Global War on Drugs,” on November 15, where the above opinion leaders will address the harm of prohibition and realistic policy alternatives.
Advice to a Free Libya on Turning the Resource Curse Into a Blessing
Former Libyan dictator Moammar Qaddafi is dead. The Transitional National Council can now get on with the challenges ahead, including setting up elections for a future government deemed legitimate by Libyans.
At the heart of Libya’s many problems is the so-called natural resource curse. Libya’s economy is based heavily on oil and gas. Yet the abundance of natural resources like oil or minerals has often slowed growth, over-expanded the state’s role in society and strengthened authoritarianism in places as diverse Russia and Iraq. In developing countries with weak institutions, such resources tend to be channeled, if not monopolized, through government, which then becomes corrupted, less responsive to the desires of citizens, and less interested in advancing policies and institutions that create wealth.
But not all resource-rich countries suffer from the curse. Chile overcame the resource curse while Venezuela has not. A study by the Fraser Institute used measures of economic freedom, including rule of law measures, to find what set successful countries apart from the rest. The difference was the level of economic freedom or institutional quality. On a scale of 0-10, where 10 represents better institutional quality, the paper found a resource curse threshold of about 6.9—the level above which countries broke the so-called curse. More economic freedom turns the curse into a blessing.
The graph below shows selected countries and regions with regard to the resource curse threshold.
For lack of reliable data, the Middle East and North Africa indicator does not include Libya and a number of countries in the region whose scores would surely bring the region’s average down notably. What is clear is that the region is below the point at which countries can take advantage of their riches to also make their people rich. Libya’s new leaders should pay heed to the central role of economic freedom in political and economic progress. After all, as our friends in the region remind us, the Arab spring began when Tunisian street vendor Muhammad Bouazizi set himself on fire after he was prevented from selling his goods, i.e., after being denied his economic freedom.
Why Slovakia May Not Support Europe’s Bailout Plan
Slovakia is set to vote today on the European bailout plan and may well become a holdout. As my colleague David Boaz noted yesterday, this is due to Slovakia’s libertarian speaker of the house, Richard Sulik, who spoke at a Cato Institute conference in Bratislava last year, and who opposes bailouts of Greece and other EU countries based on sound ethical, political, and economic reasoning. Greece is already bankrupt and a bailout will only add to the country’s debt; an EU “rescue” will continue to create moral hazard, thus encouraging bad policies by reckless governments; relatively poorer and better behaved Slovakia should not be forced to support the irresponsible governments of richer European countries; the EU’s response to the Greek debt crisis has led to blatant violations of EU and European Central Bank rules, thus undermining democratic principles and the EU itself; the scare stories of not approving the bailout should not be believed; the best solution is for Greece is to declare bankruptcy once and for all.
In this document by his Freedom and Solidarity Party, Richard Sulik lays out his party’s opposition to the bailout fund. It is consistent with the views of other leading scholars including that of John Cochrane of the University of Chicago (and a Cato adjunct scholar) as expressed in his recent Wall Street Journal op-ed on how to save the Euro.
Sulik has tapped into popular sentiment among Europeans about the “democracy deficit,” or huge gap between the designs of Europe’s ruling elites and the desires of the region’s citizens. The widespread (and accurate) perception of Eurocrats imposing their agenda on Europe to the benefit of their cronies (e.g., big business, labor unions, and politicians in power) and at the expense of the majority is becoming increasingly difficult to ignore. The Slovak government, which supports the bailout, may well fall on account of this vote, but the prime minister has already indicated that the vote on the bailout fund will be held repeatedly until it is approved. (No doubt there will be little possibility of a repeat vote repealing the bill.)
On a related note, a new Finnish think tank, Libera, provides more evidence that Europeans are rethinking big government. It published a study today which reassesses the record of the Swedish welfare state and praises the numerous market reforms that country has introduced out of necessity since the 1990s.
The Decline in Global Economic Freedom
After having risen for decades, global economic freedom has fallen for a second year in a row. That’s according to Economic Freedom of the World: 2011 Annual Report co-published today with the Fraser Institute. The average global economic freedom score rose from 5.53 (out of 10) in 1980 to 6.74 in 2007 and has fallen to 6.64 in 2009, the last year for which data is available.
As the graph below shows, the United States has had one of the largest declines in the past decade. It now ranks in 10th place compared to 3rd in 2000, largely due to higher government spending and lower ratings on “rule of law” measures. The report documents the strong, positive relationship between economic freedom and a range of indicators of standard of living including wealth, economic growth, longer life spans, better health care, lower poverty, civil and political liberties, and so on. Economic freedom is central to human progress. As the response of activist governments to financial and ongoing debt crises fails to address underlying issues responsible for low growth and high unemployment, this report is an important empirical reminder about the wide-ranging consequences of politics or markets in determining the use of resources.
Questioning the Beijing Consensus
Two good op-eds take a critical look at the so-called Beijing Consensus that purports to be an alternative to liberalism because of China’s economic success under authoritarian rule with its mix of interventionist and market-oriented policies. The key to China’s impressive progress in the past few decades has of course been its move from extreme poverty and a highly repressed economy toward economic freedom. In today’s Wall Street Journal, Liu Junning, a champion of liberal democracy in China, reminds readers of that fact and of “The Ancient Roots of Chinese Liberalism” (as noted in an earlier post by David Boaz). Writing in an Indian daily, Cato senior fellow Deepak Lal explains that state capitalism has not been the source of Chinese growth and warns against “China’s Hubris,” which is leading to a more assertive state and a decrease in personal liberty.
When Che Guevara Met Nat Hentoff
In the new video below, renowned civil libertarian and Cato senior fellow Nat Hentoff talks about his meeting with Che Guevara when Hentoff wrote for the Village Voice. (See it also here with Spanish subtitles.) El Che is romanticized by college kids and those on the left as a champion of the oppressed, but he was in fact a main architect of Cuban totalitarianism, a cold-blooded murderer whose defining characteristic was sheer intolerance of those with differing views. The best essay on Che, “The Killing Machine,” was written by Alvaro Vargas Llosa for the New Republic some years ago.
It is hard to imagine a symbol in popular culture in which the represented ideal is more far apart from the historical reality than in the case with Che. Surely that gap helps explain Che’s appeal among people all over the world with little knowledge of Latin America. Four years ago on a visit to Hong Kong’s Legislative Council I saw pro-democracy activist and Council member Leung Kwok-hung, a.k.a. “Long Hair,” wearing a Che Guevara T-shirt on the floor of the chamber. (Hong Kong is not yet a democracy and its Legislative Council is quite limited in its powers; in practice, the city is ruled by the communists in Beijing, which has ironically upheld the city’s free-market model and rule of law tradition inherited from the British.) Does Long Hair not know that Che despised democracy?
In his classic book, The Latin Americans, the late Venezuelan intellectual Carlos Rangel explained how outsiders, especially Europeans, have since their earliest contact with Latin America idealized the place, projecting their fantasies and frustrations, and promoting ideas there that they themselves would not find acceptable on their own turf. Thus the early inhabitants of the region were “noble savages” despoiled and degraded by the Europeans; the noble savages later evolved into the good revolutionaries, those authentic Latin Americans who fight for everything that is good and reject the imposition of all forms of oppression. Simplistic and wrong, but effective. So it is even in Latin America, where, as Rangel explains, that storyline has served political leaders well as they justify the imposition of any number of restrictions on freedom, from tariffs to censorship. Che’s image still abounds in the region. (For an excellent and eminently relevant video in Spanish of Rangel speaking in Caracas in 1980 about the central problems with Venezuela, see here.)
Incidentally, another Cato scholar had close ties to Che. The rebel was a cousin to well-known Argentine libertarian and adjunct scholar Alberto Benegas Lynch (Che’s complete last name was Guevara Lynch). In this article in Spanish, Alberto discusses his cousin Che.
Peru’s Election
The last 10 years have probably been the best decade in Peruvian history in terms of economic growth and social progress. As I’ve described before, Peru has become an increasingly successful market democracy. Growth averaged a yearly 5.5 percent since 2001 and the poverty rate fell from 54 to 30 percent in the same period. And yet, Peruvians elected leftist Ollanta Humala as president on Sunday in a contentious, polarizing and very tight race.
Humala narrowly beat Keiko Fujimori, daughter of former President Alberto Fujimori, now serving a 25-year prison term for corruption and human rights abuses conducted during 10 years in power (1990-2000) that also saw the defeat of the Shining Path guerrillas and the liberalization of the Peruvian economy. Fujimori had trouble condemning violations committed under her father’s rule. Humala is a nationalist, former army officer and coup leader who for years advocated populist, anti-market policies of the kind practiced by Venezuela’s Hugo Chavez or Bolivia’s Evo Morales.
Though the election pitted two aspirants with questionable democratic credentials against each other, it would be a mistake to interpret it as a rejection of Peru’s market-liberal path. The two candidates got to the second round of elections because the various other presidential contenders broadly supportive of democratic capitalism carved up almost half the popular vote among themselves in the first round of elections. Humala’s initial vote was still high (32 percent), but it is doubtful he could have been elected president had only one market democrat run.
Compared to other Latin American countries, Peruvians’ support for a liberal society should not be surprising. The country set itself apart by introducing perhaps the most far-reaching market reforms of the early 1990s, sticking to those reforms, deepening some of them after the return of democracy last decade, and avoiding major public policy mistakes that led to economic crises in other countries. The result has been a transformation of large parts of the economy and society. Non-traditional exports and industries have flourished; wages have increased; economic growth has spread throughout the coast and much of the interior traditionally little affected by economic progress; successful Peruvian multinational corporations have emerged from humble roots; and poverty reduction has meant both the rise of a middle class and a narrowing gap between the rich and the poor.
The IMF—A Reading List
Now that Dominique Strauss-Kahn has resigned as head of the International Monetary Fund, the debate has turned to who will lead the lending agency as it goes through its usual non-transparent and politicized selection process. (Of course, virtually all decisions at the IMF are politicized since it is primarily a political institution, a club in which rich countries’ governments with diverse interests and political priorities typically lend money to governments with track records of mismanaging their economies.)
The IMF is a fundamentally flawed institution, a problem independent of whether the new Fund chief is French or South African. Here’s a brief reading list for anybody more interested in the scandal of IMF lending than of the scandals of IMF personalities.
- In this Cato Handbook essay I provide an overview of the IMF’s poor record at promoting growth or reform, and of the moral hazard of providing big bailouts to countries, beginning with Mexico in 1995.
- In “The IMF’s Imprudent Role as Lender of Last Resort,” Charles Calomiris describes how IMF rescue packages undermine global financial stability.
- In this Cato study, I review the evolution of the IMF, show that its lending tends to last for decades rather than be short term, and that it tends to slow rather than accelerate reforms. I argue for market solutions to debt crises.
- In “International Financial Crises: Myths and Realities,” Anna Schwartz explains that financial contagion during the Asian financial crisis—a key justification for IMF intervention—was not occurring. Only countries with flawed economic policies suffered crises.
- Here, Swami Aiyar argues that the IMF has no business lending to Greece.
- In “Asian Problems and the IMF,” Allan Meltzer criticizes the Fund’s subsidization of risk.
- Here Anna Schwartz takes on the Fund’s “dubious proposal” to turn itself into a sort of bankruptcy court for nations.
- In this study Swami Aiyar takes on another bad idea: creating an IMF currency to rival the dollar.
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