WASHINGTON, Oct. 1 (UPI) -- An International Foundation for Liberty/Cato Institute seminar Tuesday was suitably pessimistic on Latin America's economic prospects, but unenlightening, blaming the region's problems on long term cultural attitudes. As Spain has shown, this is unfair; Latin American failure results from politics, not culture.
Two speakers, from the free market-oriented panel epitomized this approach. Manuel Suarez-Mier, Senior Economist at the Bank of America, targeted (accurately) Mexico's "ejido" system of land tenure as a major obstacle to progress, whereupon Miguel Angel Rodriguez, former president of Costa Rica, picked up the point, and explained that Latin Americans were culturally ill-attuned to solid private property rights.
This is nonsense. The ejido system is not some time-honored Mexican tradition, lost in antiquity, it is a Trotskyite system of land tenure invented by Mexico's Institutional Revolutionary Party in the 1930s, with considerable technical assistance from Leon Trotsky himself, resident in Mexico from 1929 and a good friend of Mexican president Laszlo Cardenas. Under it, land is communally owned, and peasants have rights to part ownership in their village's land. They can neither sell, mortgage nor transfer this right, and if they move away, they lose it. Consequently, 25 percent of the Mexican population remains "employed" in agriculture, a percentage far higher than in other countries of similar wealth and development. It's perfectly clear that the ejido system is a major cause of the continuing impoverishment of the Mexican rural population, yet no Mexican politician, not even the supposedly reformist Vicente Fox, does anything about it.
Before the PRI, under the Mexican "dictator" (he won several elections) Porfirio Diaz (ruled 1876-1910), land was privately owned, as in Western societies, and modern agriculture and resource industries developed at a rapid rate. As I said, it's not culture, it's politics.
Manuel Vargas Llosa, president of the IFL, wrote in the Cato policy report of January 2003 that "for a liberal, a dictatorship is never in any case, justifiable" and therefore the Pinochet government in Chile was only "a beneficent accident." This kind of ideological blindness to economic reality makes me very glad I'm a conservative, not a liberal -- in the Vargas Llosa sense any more than in the Ted Kennedy (D.-Mass) sense. President Agosto Pinochet (1973-89) took over at a time of civil war in Chile, when businessmen were being assassinated by leftist thugs. Today, Chile is, with the partial exception of Alvaro Uribe's Colombia, the only economic success story in Latin America, scoring 42 out of 45 on an economic freedom progress chart prepared by Suarez-Mier. Almost none of that success has been produced by the democratically elected presidents since 1990, and indeed the socialist presidency of Ricardo Lagos has seen substantial backsliding in Chilean labor law, which will inevitably cause a drop-off in foreign investment and a decline in economic performance if it is not rapidly reversed. The progress was made under Pinochet, and Vargas Llosa is guilty of a monstrous distortion of the truth in denying him credit for it.
There are other examples. In Brazil, in the past 50 years, rapid economic growth was achieved only under the military governments of Humberto Castelo Branco (1964-67), Artur da Costa e Silva (1967-69) and Emilio Garrastazu Medici (1969-74), with their highly successful economic reform program primarily the work of the well regarded civilian economist Roberto Campos (minister, 1964-75.) Both before and since those military governments Brazil's history has been one of sluggish growth or outright decline.
In Argentina, the country's economic apogee came under the freely elected (but on a limited franchise) governments that were in power from 1860 until the Lei Roque Saenz Pena of 1912. Since 1943, at least, Argentina' story has been one of military populists alternating with democratically elected socialists, and therefore of government expansion and economic impoverishment. Most recently, of course, the story has been one of bankruptcy, followed by the election with 18 percent of the vote of yet another leftist, Nestor Kirchner.
In Venezuela, per capita gross domestic product has achieved a growth rate of less than zero since the dictatorship of Marcos Perez Jimenez (1952-58). His democratic successors expanded the public sector at a rapid rate, with ever-spiraling corruption and economic decline, until they were succeeded in 1998 by the Castroite chaos and economic degradation of current president Hugo Chavez.
For a further demonstration that it is politics, not culture that is at fault, consider Spain, a country culturally at least similar to the predominantly Hispanic societies of Latin America. Before the Spanish civil war (1936-39), Spain was a country descending into economic chaos, with per capita GDP less than a third of its northern neighbors France and Britain, considerably poorer at that time than the wealthier Latin American countries such as Argentina and Mexico (which is why those countries then attracted heavy Spanish immigration.)
Today, as eloquently expounded at Cato by Spain's deputy economy minister Luis de Guindos, Spain is pursuing predominantly free market policies, is growing economically at close to 4 percent per annum, is running a balanced budget and has reduced unemployment from 25 percent to 11 percent since the election in 1996 of current president Jose Maria Aznar. All this demonstrates that with good management, a Hispanic society is perfectly capable of protecting the rights of private property, curbing the public sector, reducing corruption, lowering taxes, and producing a rapid increase in its people's standard of living.
Yet this is not the full story. In 1996, Spain was already much wealthier than any country in Latin America, in spite of fourteen years of democratically solid but economically spendthrift socialist government. Its real transition, to a society in which an Aznar could get elected, came under the rule of general Francisco Franco (1939-75) and particularly from about 1950 onwards, when stability had been restored in Europe. Franco ran a regime of low taxation, compared to other European countries, and of a small public sector. Spain not only had largely private banking (unlike France or Italy) it also had the only private sector electric utilities in Europe, with Fuerzas Electricas de Catalunya, the Catalan power company, being owned by the wealthy entrepreneur Juan March, for example. The result, aided by rapid development of the Spanish tourist industry, was East Asian rates of economic growth from the middle 1950s to 1973, which catapulted Spain from Third World income levels, to a GDP per capita around 75 percent of the EU average in 1973, at which relative level it remained in 1996. Democratic transition was achieved after Franco's death, greatly assisted by his own choice to restore the Spanish monarchy under King Juan Carlos, but economic transition, to a point at which Spain was a modern western economy that just required good management to flourish, was achieved by Franco himself.
Democracy in Latin America has achieved big, corrupt government, with a class of bureaucrats, considerably richer than the average citizen, whose benefits and pensions are a huge burden on their societies. It has not however achieved an adequate living standard for its citizens, or even its professed goal of equality -- Latin American societies are among the most unequal on earth. Stable property rights, entrepreneurial incentives, freedom from excessive and corrupt regulation and non-burdensome taxes are all lacking in Latin America; without them economic growth and national prosperity has been proven repeatedly to be impossible.
One man, one vote democracy is not an ideal, it is only a mechanism for choosing politicians. Freedom and decent living standards for the Latin American people are the ideals to aim at. A new political choice mechanism needs urgently to be found to achieve them.
