Foreign Aid Can’t Fix Bad Economics

Foreign Aid Can’t Fix Bad Economics

Some myths in politics die hard.

We are constantly reminded by the managerial classes that foreign aid is crucial to lifting the developing world out of poverty. With the magic wand of public spending, money is sent to the developing world in hopes of pushing these countries out of their economic stupor. We’ve seen this story play out domestically when politicians call for wealth transfer programs with the purported intent of “investing” in economically beleaguered sections of America. With the universalist ethos of American politics, inevitably the domestic redistributionist logic is taken to the international level.

The mythos of foreign aid lives on in politicians’ constant appeals to the Marshall Plan as a source of inspiration for pushing new foreign aid ventures. The Marshall Plan refers to the economic recovery package sent to western European countries after World War II. Per conventional wisdom, Europe’s ability to bounce back from the devastation wrought by World War II is largely attributable to the Marshall Plan’s disbursements of aid, which totaled more than $100 billion in 2018 dollars.

Using the western European foreign aid program as a template, policymakers regularly search for the next region to experiment on. During a news conference at the 2017 G-20 summit, French president Emmanuel Macron was asked about the viability of a Marshall Plan for Africa. In a surprisingly brusque manner, Macron threw cold water on the idea. The French leader averred, “The Marshall plan was a reconstruction plan, a material plan in a region that already had its equilibriums, its borders, and its stability. The problems Africa faces are completely different, it is much deeper. It is ‘civilizational.'” Macron’s blunt commentary disappointed the journalist class, who were hoping to get a politically acceptable response.

Political commentators did not have to wait long. When former United States Secretary of Housing and Urban Development Julian Castro Julian Castro ran for the 2020 presidential candidacy, one of his selling points was a Marshall Plan for Central America—a region notorious for its socioeconomic and political strife. In the former 2020 Democratic Party candidate’s view, a Marshall Plan is the missing ingredient in getting Central America over the hump.

Allow me to express some skepticism. I previously noted that foreign aid is no silver bullet for the developing world. As a matter of fact, foreign transfers can foster bad behavior and prop up regimes with long-standing records of corruption. Macron was correct in his assessment of the Marshall Plan and why replicating it in Africa will not yield similar results. Europe was already prosperous and institutionally stable before most of the continent was ravaged during World War II. It was only a matter of rebuilding infrastructure and letting private actors return to the private sector to resuscitate many of the factors of production that had been destroyed during the war. Strictly speaking, the Marshall Plan wasn’t working with a blank slate, and functioned as a reconstruction plan that nominally sought to restore the pre–World War II equilibrium in the region. Europe already had enough know-how and capital accumulated in previous decades that it could work around the tragic circumstances of World War II and get back on its feet in no time.

Like most historical narratives of twentieth-century events, several key points tend to be omitted about the Marshall Plan. Contrary to what many court historians would have us believe, the Marshall Plan may have not been the sole cause of Europe’s success in the postwar period. Historian Tom Woods has argued convincingly that the economic liberalization in countries such as West Germany facilitated robust economic growth more than the aid from the Marshall Plan.

West German minister of economic affairs Ludwig Erhard’s economic reforms, such as lifting price controls and ending rationing, contributed to Germany’s incredible comeback after World War II. Other countries such as Austria and Greece, which received considerable aid on a per capita basis, witnessed more sluggish growth and didn’t really take off until aid was phased out. Despite what college textbooks say, the lifting of wartime economic controls was the decisive factor behind many European countries’ growth following World War II, not the Marshall Plan.

All things considered, foreign aid is a feel-good policy that strokes the egos of DC do-gooders but has suboptimal results in the real world—the one place politicians seem to be perpetually detached from. Due to institutional shortcomings inherent to the region and the flawed nature of foreign aid, a Marshall Plan for Central America would not pan out the way that many of its boosters such as Julian Castro would have us believe. Just look at the region’s corruption levels.

According to Transparency International’s 2019 Corruption Perception Index, El Salvador, Guatemala, Honduras, and Nicaragua are ranked 113th, 146th, 146th, and 161st, respectively, for overall levels of corruption. On the Heritage Foundation’s 2020 Index of Economic Freedom, El Salvador, Guatemala, and Honduras are middle-of-the-road countries at best, ranked 90th, 73rd, and 93rd. Nicaragua found itself in shoddy 113th place. Sending the modern-day equivalent of a Marshall Plan to the aforementioned countries is asking for corruption to proliferate and the compounding of previous problems.

Central America does find itself in a bind, but it can look at other developing countries for inspiration. For example, Panama has steadily become one of the more unheralded economic success stories in the last three decades due to its efforts to open up its economy to trade and foreign investment. Now Panama is being dubbed the Dubai of Central America. Chile is another successful model for Central America to look at. The Southern Cone country escaped the clutches of Marxism and became Latin America’s greatest economic miracle of the last century by adopting deregulatory measures, privatizing previously state-owned enterprises, and opening up trade. Even Botswana, which is situated in a part of the world not known for its stability, freed itself from the typical stagnation that marks the developing world. By embracing the rule of law, defending property rights, and opening up its economy, it has separated itself from its Sub-Saharan rivals, such as South Africa and Zimbabwe, both of which have witnessed their share of economic trials and tribulations, the latter being a poster child for hyperinflationary collapse.

When most developing countries have been buying into Keynesian or Marxist development ideas hook, line, and sinker, we should not be surprised when they continue languishing. Intricate policy papers calling for tweaks in foreign aid won’t cut it. The idea of the developing world breaking out of its self-imposed shackles is not so far-fetched thanks to a select few countries that have broken from the interventionist norm. The question is: Will their political elites ignore Western policy wonks’ half-baked advice and embrace markets instead?

The key to economic success is not a matter of technocratic rocket science. Comedian Jane Bussman has spent years abroad in Africa trying to figure out how to alleviate the region’s poverty. After witnessing the foreign aid racket firsthand, she came to the following conclusion:

If you want to help a country that’s troubled, buy their s&*t. Do a three-day stopover, even, and spend spend spend.

Economist Joseph Salerno simplified Bussman’s observation: “In other words, trade (and investment) and not aid” will break the poverty cycle. At this point, the developing world should take its chances by following the advice of comedians rather than that of haughty elites who do not understand the intricacies of wealth creation.

At least the comedians actually understand the concept of value creation. The same cannot be said about your typical IMF or USAID bureaucrat.

José Niño is a Venezuelan-American freelance writer. Sign up for his mailing list here. Get his e-book The 10 Myths of Gun Controlhere. Follow him on Facebook and Twitter, or email him here. This article was originally featured at and is republished with permission.

The Crisis Has Exposed the Damage Done By Government Regulations

The Crisis Has Exposed the Damage Done By Government Regulations

As we watch in real-time how governments respond to the novel coronavirus pandemic, some of the most predictable forms of state overreach—from restrictions on the freedom of assembly to the suppression of regular commerce—have been rolled out. Thankfully, there is no unified world government, so there exist various examples of how certain countries are dealing with the crisis that we can closely examine and learn from.

Pessimism and cynicism are generally warranted under the political climate we’re living in. However, there are some silver linings we can take away from America’s response to the coronavirus. In a previous article, I noted that several states have started adopting deregulation on a whole host of issues. With the coronavirus still raging on, now elected officials are slowly beginning to recognize the absurdity of some of America’s regulations.

Despite how much the experts downplay people’s ability to coordinate on a voluntary basis, civil society is stepping up to face the crisis in a heroic manner. However, regulation has largely hamstrung their and state and local governments’ ability to work in a synergistic manner to stem the crisis without the federal government putting its boot on our throats. Americans have caught somewhat of a break now that some elected officials are behaving rationally by reconsidering some of America’s most misguided regulatory policies.

Several reasonable deregulation actions stand out in the last month.

FDA Loosens Up Some Restrictions, Still Has a Lot of Work to Do

The Food and Drug Administration is treated as unassailable by some, and if you dare speak out against it, you clearly want millions to die because of defective products. Well, the real world shows that the FDA’s lengthy approval process—which is consists of three phases of drug trials that can span years—actually puts many lives at risk. In the current coronavirus context, people do not have the luxury of time, so bureaucracy is quite literally killing them when they can’t access restricted treatments or medicine.

Although we’re not seeing the FDA’s budget getting trimmed or a private organization such as Underwriters Laboratories take its place anytime soon, politicians are starting to at least notice that its requirements are patently absurd in certain regards. Cooler heads have prevailed at the FDA, for the time being, as the agency gave a new coronavirus testing kit emergency use authorization (EUA) after weeks of delays.

However, we should not let the FDA completely off the hook. As is to be expected from a government agency, the FDA is taking its sweet time in approving at-home testing kits for the COVID-19 coronavirus. On a similar note, billionaire Elon Musk was able to acquire over one thousand ventilators from China and ship them off to hospitals in California along with other supplies such as respirator masks. But no entrepreneurial story is complete without its section on red tape. Musk initially hit a snag when the masks were held up at Los Angeles International Airport. Fortunately, everyone could breathe a collective sigh of relief after both customs and the FDA cleared the supplies.

Let’s not kid ourselves, though. Close calls like these could be lethal in circumstances where time constraints are even less flexible.

Texas Offers Level-Headed Deregulation Actions

Various states have issued orders to shut down restaurants and bars, which has compelled many businesses to limit their services to takeout. Some governments, such as that of Texas under Governor Greg Abbott, have been reasonable in their approach to dealing with the coronavirus crisis by lifting regulations on alcohol delivery and letting restaurants deliver alcohol along with food purchases, which was previously prohibited.

Additionally, Abbott made sure to waive regulations that would have weakened Texas supply chains in the face of this crisis. Trucks generally confined to delivering alcohol to liquor stores are now able to deliver grocery supplies to supermarkets. This move serves to bolster Texas supply chains during a time of uncertainty. “By waiving these regulations, we are streamlining the process to replenish the shelves in grocery stores across the state,” Abbott declared.

Healthcare systems across the country are under great pressure, which has prompted state legislatures to become more flexible with their otherwise stringent medical regulations. The Lone Star State has fast-tracked temporary licensing for doctors, assistants, and nurses coming from out of state to help Texas health professionals. States such as Maryland and South Carolina have taken similar approaches, recognizing that their medical restrictions may put them in a deadly bind as more coronavirus cases pop up and they don’t have enough staff to handle them. The federal government soon caught up with the states when Vice-President Mike Pence announced a new directive coming from the Department of Health and Human Services (HHS) that now lets healthcare providers treat patients across state lines.

Surprise! Some Reasonableness from the TSA

Quite possibly one of America’s most hated government agencies, the Transportation Security Administration (TSA) showed a shred of human decency by allowing travelers to have twelve-ounce bottles of hand sanitizer in their carry-ons. This well exceeds the 3.4-ounce limit that other liquids are subject to. Talk about an earth-shattering exemption. It’s almost as if the TSA’s security measures are theater at best and only make travelers’ experiences a total headache. But these days, we’ll take what we can get.

Any civil liberties–respecting person should always be skeptical about the role the government plays during a crisis. The ratchet effect is no joke, and any powers that government agencies obtain during this crisis will be maintained and likely expanded after it has subsided. To prevent such abuses of power, the case should not only be made for decentralized approaches to governance, but also for deregulation by showing how there is so much regulation on the books that private actors and civil society are kept from bringing a solution to the many problems mankind must muddle through.

Liberating these actors allows them to cooperate in a symbiotic manner with local and state entities to tackle these crises. If we just concede that the government should have total monopolies over health responses, we make centralization inevitable and let the federal government steamroll state governments, municipalities, and individuals further down the line.

The Moral Case for Deregulation

Politicians’ present-day fetish for regulation subjects hundreds of thousands of Americans to unjust criminal penalties, and further expansion of government overreach will put the country on the road to bureaucratic despotism.

This is a time when free market advocates should go beyond their mundane talking points about tax policy and start talking more about the regulations that make people’s everyday lives a hassle. Deregulation saves lives, and we should use this chance to demonstrate how free people who are allowed to cooperate can find solutions to societal problems.

Organizations such as the Competitive Enterprise Institute have already established that regulations cost the country a significant amount in economic activity—$1.9 trillion to be exact. Imagine what America’s most entrepreneurial citizens could do without those constraints. In terms of human costs, regulations can turn out to be deadly in pandemic scenarios. So we’re not just talking about numbers or abstractions here. Real, flesh-and-blood lives are on the line when we entrust the regulatory state with dominion over our activities.

The road to sound policymaking won’t be smooth, but we can only hope that the coronavirus will be the final pin that pops the regulatory balloon that politicians have recklessly inflated during their time in office. Crises do not have to automatically be associated with power grabs. Instead, they can provide opportunities for us to move forward and correct some of the errors of the past.

Reprinted from The Mises Institute

Greater Idaho Movement Is the Latest Indicator of a Shift toward Decentralization

Greater Idaho Movement Is the Latest Indicator of a Shift toward Decentralization

Recently disgruntled residents of rural counties in southwest Oregon have been organizing a petition to move Idaho’s border westward to form a “Greater Idaho” that could also potentially include parts of Northern California. This petition mirrors a recent proposal in Virginia in which rural countries in the state would separate and join West Virginia in protest of Virginia’s latest push for gun control. In both cases, rural residents would have the option of joining states that align more with their cultural and political values.

Although not secession per se, the Oregon/Idaho border readjustment is a sign of the growing discontentment many Americans have with the political jurisdictions they live under. The impulse toward border realignment is to be expected given how some states have cities or metropolitan areas that completely dominate the political scene while the rest of the state is shunned. We observe this with New York City and Chicago: both cities suck up the majority of the political energy of their respective states. Oregon’s rural constituents share the same enmity toward Portland.

Mike McCarter, president of Move Oregon’s Border for a Greater Idaho, pulled no punches when airing his grievances with Oregon politics. He noted that “Oregon is controlled by the northwest portion of the state, Portland to Eugene. That’s urban land, and their decisions are not really representing rural Oregon.”

McCarter continued voicing his political frustrations in a news release: “Rural counties have become increasingly outraged by laws coming out of the Oregon Legislature that threaten our livelihoods, our industries, our wallet, our gun rights, and our values. We tried voting those legislators out but rural Oregon is outnumbered and our voices are now ignored. This is our last resort.” The border readjustment activist conceded that the Oregon Legislative Assembly has its own agenda and that they’re moving forward with it regardless of what rural counties have to say about it.

McCarter’s political desires are not some pipe dream conjured up by fringe political activists. Political players such as Idaho governor Brad Little are ready to embrace McCarter and his colleagues with open arms. In an interview onFox & Friends, Little expressed his sympathies with rural Oregonians:

They’d like to have a little more autonomy and a little more control and a little more freedom, and I fully understand that.

Although this Greater Idaho proposal would have to go through the typical approval process both at the state and federal level, this effort is another indicator of a profound realignment that is on the cusp of taking place throughout America. Specific developments, such as the county revolt against gun control, are raw manifestations of the pent-up political anxiety many Americans feel toward their governments at every level. Now, they’re expressing their dissatisfaction in a localist manner.

Oregon was one of the first states where local political bodies attempted to stand against state gun controlSecond Amendment preservation ordinances were established in eight counties during the 2018 election cycle. Under the voter-approved ordinances, local resources cannot be used to enforce unconstitutional gun laws or regulations if they are first determined to be unconstitutional.

Soon other counties in states such as IllinoisNew Mexico, and Virginia followed suit. Even a solidly red state, Texas, has caught a case of the sanctuary resolution fever, as several counties have declared themselves pro-gun sanctuaries. No matter how elites try to spin it, the thirst for local self-governance is strong, and the ruling class may not be able to keep a lid on it.

Regardless of what people think about the Trump presidency, the silver lining of the era has been the shift in the political mindset of many Americans. Doubts about the viability of America’s political union are at an all-time high. Americans of all walks of life are now questioning whether the nation can continue as one cohesive political unit. Milquetoast political commentators will decry American’s growing distrust of politics as a sign of troubled times. The commentariat insists it can somehow channel the national unity of yesteryear to make things right. We’re told it’s the recalcitrant rubes with their parochial ways that are keeping this “unity” from happening.

The believer in radical decentralization has a different view. For them the shifts in political boundaries should be thoroughly embraced. It is the necessary correction that the American polity must undergo to peacefully transition into the twenty-first century after the substantial social engineering of the twentieth century both domestically and abroad. Radical decentralization is one of the key steps in correcting the errors of the previous century.

Although Ludwig von Mises left the physical realm in 1973, his spirit of self-determination lived on in the 1991 dissolution of the Soviet Union, during which numerous republics begin to separate from the latter’s bailiwick and form new nations in accordance with their historical ethnolinguistic groups. Even the Soviet satellite state of Czechoslovakia was able to split peacefully in 1992 in a matter of months.

Unlike his contemporary liberals, Mises uniquely positioned himself as a champion of radical decentralization, which Hans-Hermann Hoppe acknowledged in an interview with the Austrian Economics Newsletter. Although Mises believed in a constitutionally liberal framework, Hoppe pointed out that he had “a unique idea of how government should work.”

In the Misesian context, to check the power of government, “every group and every individual, if possible, must have the right to secede from the territory of the state.” It would be misleading to lump the Misesian prescription with that of failed entities such as the League of Nations, however. Instead, Hoppe made it clear that “villages, districts, and groups of any size” would be leading the charge towards decentralization. This is in line Mises’s bold declaration in Nation, State, and Economy that “The size of a state’s territory therefore does not matter.”

National boundaries and political units have constantly shifted throughout the course of human history. There is no reason for America’s political boundaries to remain static, especially in a generation that has witnessed the collapse of the Soviet Union, the breakup of Yugoslavia, and Great Britain’s recent departure from the European Union.

It’s now America’s turn to carry out the very legacy that Mises left behind.

Reprinted from the Mises Institute.

Foreign Aid Just Empowers Corrupt Regimes. End It.

Foreign Aid Just Empowers Corrupt Regimes. End It.

The Senate’s vote to acquit Donald Trump on both articles of impeachment this month brought a much-needed end to the tiring impeachment saga America has been subject to in the last few months.

The impeachment controversy arose when President Donald Trump initially withheld military aid from Ukraine unless President Volodymyr Zelensky provided revelatory information about political rivals such as presidential candidate Joe Biden and his son Hunter Biden’s business dealings. After a whistleblower alleged that Trump may have abused power, the managerial class was off to the races to launch an impeachment inquiry against him. For the past few months, DC pundits have yammered on about the implications of impeachment while the rest of the country has been busy getting on with their lives the way that normal people not living off government largesse do.

Now that the impeachment trial is over, maybe we can actually talk about more relevant issues like foreign aid. For more than seventy-five years, foreign assistance has played an integral role in American foreign policy. In 2019, a total of $39.2 billion was spent on foreign assistance, and at a quick glance it has left a lot to be desired.

School textbooks tend to make foreign aid look like a simple process, but as with anything the government runs, foreign aid has its obligatory share of red tape. Fergus Hodgson of Econ Americas noted that “Little of the development funds trickle down to the target communities,” in explaining why countries like Ethiopia and Haiti remain backwards. More importantly, Hodgson provided an unpleasant depiction of where foreign aid money generally goes:

A confiscatory portion goes to the pockets of federal bureaucrats and U.S. contractors, and another sizable chunk goes to urban, middle-class, or affluent partners in recipient countries. Further, one-fifth of U.S. aid goes through local governments, which tend to be corrupt and incompetent.

As far as the countries where the bulk of foreign aid is going, they’re not necessarily the most institutionally sound. War-ravaged countries such as Afghanistan ($5.1 billion), Iraq ($880 million), and Yemen ($565 million) received substantial aid in the fiscal year of 2018—be it in economic or military form. The first two countries have been subject to US invasions, in which the US government may have spent more than $5 trillion trying to turn them into Western-style democracies. In the case of Yemen, the US has been dragged into a proxy war all thanks to its “special relationship” with the Kingdom of Saudi Arabia. After nearly two decades of nation building, there appears to be no end in sight to American involvement in the region.

Thanks to the ruling class’s Russophobia, Ukraine was easy to side with in the Crimean conflict after Russia ramped up its intervention in the Crimean Peninsula. This resulted in the US disbursing a total of $559 million in aid to Ukraine in 2018. Foreign aid to Ukraine was at the center of the now concluded impeachment charade.

None of the aforementioned countries are exemplars of clean governance. Transparency International’s 2018 Corruption Perceptions Index revealed that Afghanistan, Iraq, Ukraine, and Yemen have putrid corruption rankings of 172nd, 168th, 120th, and 176th place, respectively.

Foreign Aid Encourages Bad Behavior

Foreign aid is not a get-rich-quick scheme for developing countries. Instead of building wealth, it comes with some not-so-pleasant consequences for the recipient nation. Also, such programs aren’t free. Someone ultimately has to pay for them. At the 2011 Conservative Political Action Conference, former congressman Ron Paul famously declared that

Foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country.

Thanks to a steady flow of outside funding, governments receiving aid no longer have to be accountable to their citizens. Knowing that US taxpayers will bail them out, some governments have no incentive whatsoever to innovate or keep corruption in check. Like subsidizing American banks making bad decisions at the domestic level, giving foreign aid to corrupt governments or factions within a country only encourages bad behavior.

DC has become so detached from the concept of rational economics that it treats the blood and sweat of taxpayers as malleable inputs that can be squeezed out of the population and sent abroad on a legislative whim. All of this is done with complete disregard for the unforeseen consequences that these policies inevitably produce.

Economist Frédéric Bastiat’s essay “That Which is Seen, and That Which is Not Seen” offers various points to consider when approaching the subject of government transfers such as foreign aid. What is seen is the recipient government being propped up thanks to the aid injection, which pleases both the recipient country’s elites and US foreign policy wonks.

However, what is not seen are the potential reform movements that would emerge under normal political circumstances. These movements often hold the key to breaking free of the cycle of corruption and poverty that many of these countries find themselves in. But when foreign aid enters the equation, the establishment government is artificially propped up at reformist factions’ expense. Domestically speaking, foreign aid money is clearly coming from American taxpayers. In an ideal world, this money would be in the hands of American taxpayers and put to use in the private sector. Sadly, most political leaders will never take these concerns into consideration. The signing ceremonies of foreign aid agreements and the subsequent ego boosts are too irresistible to DC do-gooders, so they’ll work diligently to keep the foreign aid gravy train in place.

Let’s not kid ourselves. It is the height of naivete to believe that developing countries will magically become rich via wealth transfers from First World countries. It ignores many of the institutions of freedom—private property and federalism—that enabled countries like the US to become the most prosperous societies in human history. Policymakers will have to think outside the box if they want to see more nations join the ranks of the developed world.

Some Alternatives to Consider

Indeed, there are more practical alternatives to using heavy-handed state measures to help developing countires. First off, bilateral free trade is a much better way to handle the issue of economic development. Expanding trade relations makes sense with regions such as Central America, which stand to benefit from the inflow of North American capital. Increased trade and investment will raise living standards in these capital-starved regions while also providing American consumers and entrepreneurs access to a new market of goods and services.

Another foreign aid alternative to consider is the revival of exchange programs such as the renowned collaboration between the University of Chicago and the Pontifical Catholic University of Chile in the 1950s. This program helped create a new generation of free market economists who would craft the very policies that catapulted Chile into the highest echelons of economic development in Latin America. The exchange program between the two universities still exists, but these efforts could be replicated and expanded to other countries without much state sponsorship.

Neither of these solutions involve dumping foreign aid into these regions or using military intervention to help them. The key to beating poverty from Santiago de Chile to Kinshasa (in the Congo) is still to increase these countries’ capital stock, not confiscate Americans’ wealth and ship it off in the form of foreign aid packages. The only serious way to do this is through policies which reduce regulatory barriers, respect property rights, expand commerce, and otherwise facilitate capital formation.

But this may be too much to ask of Western politicians who are fixated on using the government to solve every conceivable socioeconomic problem they encounter.

Reprinted from the Mises Institute.

7 out of 10 Millennials Would Vote for a Socialist Candidate

7 out of 10 Millennials Would Vote for a Socialist Candidate

According to a YouGov–Victims of Communism Memorial Foundation poll released in late October, 70 percent of millennials indicated that they are “somewhat or extremely likely to vote for a socialist candidate.”

This same poll also found that 50 percent of millennials — those between 23 and 38 years of age, and 51 percent of Generation Z — those aged 16 to 22, have somewhat or very unfavorable views of capitalism. This represented an increase of 8 and 6 percent, respectively, from the previous year. In comparison, 44 percent of Generation X, 33 percent of Baby Boomers, and 33 percent of the Silent Generation responded that they were somewhat or extremely likely to vote for a socialist candidate.

Overall, capitalism is still viewed more positively than any other system. Pollsters found that 61 percent of people viewed it favorably in 2018. The overall takeaway was that millennials don’t have as much hostility towards socialism and communism as the generations who lived during the Cold War.

What could be the driving force behind socialism’s appeal among the youth?

American culture has gone through numerous transformations during the last 50 years. Mass public schooling and an increasingly politicized society have made interventionist ideas become more mainstream. One of the easiest ways to get people behind an idea is by promoting it to them while they’re young, i.e., conditioning them in their early years of schooling.

Then, universities finish this process off by promoting socialist ideas in economics, history, political science, and other liberal arts fields. Even when young Americans leave educational settings and become professionals, they will likely consume entertainment with left-wing bias. At that juncture, they’ll have had thousands of hours of exposure to collectivist ideas.

The rise of Bernie Sanders and Alexandria Ocasio-Cortez is no coincidence when considering these factors. The current socialism these two political figures espouse may not be the same as the socialism of the 20th century, which produced mass killings, but it’s still worthy of condemnation. In contrast to the proletariat versus bourgeois conflict that marked 20th-century socialism and communism, present-day socialists focus more on identity politics and using the state to benefit certain “disadvantaged” groups.

No matter how we slice it, what the present-day youth increasingly desire is a controlling system that undermines economic and civil liberties. The state does not operate in a vacuum. Services that are “free” and compulsory require that resources be expropriated from the private sector, while people are forced against their will to comply with these programs. No respectable society that truly cherishes freedom would accept such policies.

However, it would be a mistake to believe that a simple political campaign can be used to defeat the ideas that Sanders and AOC are promoting. Economist Ludwig von Mises asserted that “Thoughts and ideas are not phantoms. They are real things. Although intangible and immaterial, they are factors in bringing about changes in the realm of tangible and material things.”

To even confront the rise of socialist ideas, we must go back to the fundamentals. That means understanding the basic principles of freedom and finding the best ways to spread them. This could consist of building media outlets, educational organizations, mutual aid societies, alternative schooling methods such as homeschooling, etc.  To move away from a society where the state is the common denominator in virtually all affairs requires a shift in consciousness. There are no quick fixes for this.

It should be stressed that this is a multi-pronged process that could take decades to carry out. The Left has taken note of that and has played the long game in gradually taking over both public and private institutions over the span of decades. But it all starts with ideas.

There is no “right” moment to start disseminating these ideas. The sooner we can build a lasting infrastructure to do so, the better. Future generations are counting on us to get this right.

Republished from the Advocates for Self-Government

Argentina’s Faux “Neoliberalism”

Argentina’s Faux “Neoliberalism”

On August 11, 2019, the presidential ticket of Alberto Fernández and Cristina Fernández de Kirchner pulled off a major electoral upset against incumbent President Mauricio Marci in the Argentine primary elections. Based on their performance last month, they’ll be able to compete in the general election on October 27, 2019. Winning by a 16-point margin, many on the political Left see this as a sound rejection of Macri’s supposedly neoliberal policies.

Neoliberalism: Fact or Fiction?

The aforementioned accusations of Macri’s administration being “neoliberal” is a typical slur in Latin American politics and is usually directed toward right-wing administrations and their nominal devotion to markets. Conventional wisdom states that these regimes are working day and night to implement radical free-market policies consisting of the privatization of every sector of the economy, drastic spending cuts, and the down-sizing of the regulatory state.

If these critiques were taken at face value, we would be under the impression that Latin American countries were well on their way toward a libertarian political order every time they turned to the International Monetary Fund for aid. However, careful inspection of actual policy moves, not sensationalist media takes, shows that this perception is erroneous. In many cases throughout Latin America, as we’re now seeing in Argentina, there was never really a genuine move toward free markets. At best, most of these governments are trying to patch up the fiscal misbehavior of previous populist administrations.

The heads of government may talk a big game about free markets, but their policy actions tell a different story. Once in a blue moon, certain governments may get a few policies right, but institutional inertia and a lack of a political will to carry out market reforms put these countries back on the path to economic mediocrity. Macri’s Argentina is a prime example.

Macri’s predecessor Cristina Fernández de Kirchner (CFK) implemented a series of interventionist policies such as currency controlsprice controls, and subsidies to correct the errors of the previous “neoliberal” decade of the 1990s. Thanks to high commodity prices in its agricultural sector, Argentina could coast economically throughout the first decade of the twenty-first century. However, the chickens eventually came to roost once commodity prices dropped and CFK’s policies began to take a serious toll on the Argentine economy. By 2014, Argentina defaulted on its debt and inflation began to rise well into the double digits. Naturally, the growing discontent following Argentina’s 2014 default paved the way for Macri’s election in 2015.

The Macri Administration’s Over-Hyped Free Market Credentials

Described as a “non-Peronist,” Macri’s presidency was viewed as a rejection of the previous populist politics of the Kirchner era. However, Macri’s administration morphed into another phase in the repetitive cycle of economic instability that has characterized Argentina’s political economy during the last 70 years. Winning by a slim margin and not having control of the Argentine Congress, Macri faced considerable institutional inertia in trying to pass any meaningful economic reforms.

Juan Carlos Hidalgo, a Latin American policy analyst for the Cato Institute, provided a sobering analysis of the dilemma Macri has faced throughout his presidency.

Dismantling currency and price controls, cutting back subsidies, reducing overall spending, bringing the deficit under control, and taming inflation was not going to be easy. The question from the beginning was, what kind of approach would Macri adopt to reforms? He opted for gradualism. Macri was quick to lift currency controls and return Argentina to international bond markets, but he failed in cutting spending. Thus, the fiscal deficit remained high, taxes continued to be punitive, and high inflation endured.

Instead of implementing bold market reforms, Marci opted for the road most traveled — gradualism. With his back against the wall, Macri ended up having to negotiate a $57 billion bailout with the IMF. When dealing with the IMF, it’s always a mixed bag. On one hand, Macri was able to reduce spending. On the other, he raised taxes and even brought back price controls in a futile attempt to tame inflation. Not exactly what Argentina’s economy needs at this very moment.

Argentina Needs Free Markets

What Argentina is going through is a sad situation that could have been avoided had the country made a concerted effort like Chile made during the 1970s and 1980s to liberalize its economy. Sadly, Argentina has not learned this lesson and is now just meandering its way along the played-out populist cycle that it has gone through for decades. Although it’s not Venezuela, Argentina’s refusal to embrace coherent market policies will make it susceptible to more economic reversals and leave its political system wide open for demagogues to exploit.

Argentines have every reason to be mad at Macri’s current administration. Inflation is expected to rise to 53 percent by December 2019. Now, there are talks about the country potentially defaulting on its debt, which would make it the ninth time the country has defaulted in its history. Since 1950, Argentina has defaulted 7 times.

In Argentina’s case, it seems that old political habits die hard. So, no matter who ends up winning the presidency in October, the Argentine people are set to lose.

Permission to republish from The Mises Institute. 

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