Showing posts with label The Imaginary Economist. Show all posts
Showing posts with label The Imaginary Economist. Show all posts
Saturday, May 17, 2008
Remittances and the Latin American Dream
A major shift in the United States official immigration policy occurred in 1965 that, in time, shaped this country's demographic and economic prospects for the 21st century.
Ever since the 1920s, the United States had limited the number of immigrants admitted. Visas were awarded on the basis of a national-origins quota system. According to this scheme, Germany and the United Kingdom were among the "most favored countries."
One of the goals—though certainly not the only one—of the 1965 new policy was family reunification; applicants who had relatives already residing in the United states were thus granted entry visas.
A distinguished Harvard scholar, George J. Borjas, wrote back in 1996, "the social, demographic, and economic changes initiated by the 1965 legislation have been truly historic. The number of immigrants began to rise rapidly. As recently as the 1950s only about 250,000 immigrants entered the country annually; by the 1990s the United States was admitting more than 800,000 immigrants a year, and some aliens entered and stayed in the country illegally. [This] led to a momentous shift in the ethnic composition of the population."1
See also George J. Borjas's article, "Immigration," in the Concise Encyclopedia of Economics.
The 1910 census yielded some 13.5 million foreign-born people in the American population. According to the Census Bureau, by the mid-nineties, foreign-born people living in America amounted to 22.5 million. Over the past 25 years the foreign-born population had almost doubled in the U.S., going from 6.2% in 1980 to 12% today. By the 1990s more than 800,000 legal immigrants admitted to the United States yearly while 300,000 aliens entered the country illegally.
Prior to 1965, the heaviest immigration influx that preceded WWI lasted almost a quarter of a century. It was then when most of the tired, poor and huddled masses that Emma Lazarus so movingly ennobled in her famous poem came in from Europe.
The current heated debate about immigration laws in the United States underscores the novel fact that during the past quarter of a century half of the immigration has arrived from just eight countries: Mexico, the Philippines, Korea, Vietnam, China, Taiwan and the Dominican Republic.
These are Asian and Latin American countries with disparate economic performances, but their nationals' motives to emigrate are in many ways identical to those that triggered the great European migration more than one hundred years ago.
For the text and historical context of Emma Lazarus's 1883 poem, the inscription on the Statue of Liberty, see "The New Colossus" at the U. of Virginia, Capitol Project.
A recent New York Times editorial (April 12, 2006), commenting on the immigration rallies organized in recent weeks for the "national day of action" in several big cities all across the country, says, "This nation is deeply divided and undecided about illegal immigration. The ambivalence runs deep. Americans can hardly even agree on whom they are talking about. Listen to debates from talk radios to the Senate, and you will hear utterly incompatible descriptions of the same group of people. The nation's 11 million to 12 million illegal immigrants are either an occupying army of thieves, snatching jobs and subverting our laws, or the are a wholesome community of strivers, eager to build families and chase the American dream."
According to various estimations, there are now 34 million immigrants in the United States, one third of them illegal. The Center for Immigration Studies estimates that 35 percent of immigrants lack health insurance and 26 percent receive some sort of federal benefit. Mexicans have become the single largest group of U.S. immigrants: 30 percent of the total in 2000.
A recent study by Harvard economists George J. Borjas and Lawrence Katz affirms that Mexican immigration "is historically unprecedented, being both numerically and proportionately larger than any other immigrant influx in the past century." Apparently, non-Hispanic whites will form a minority in America sometime after 2050.
As debates rage on, several economists, newspaper columnists and public policy pundits have contended that illegal immigrants compete for jobs with the nation's most disadvantaged citizens.
The received wisdom on the economics of immigration tells us that unskilled illegal workers bid down wages thus harming low-skilled job opportunities for the native born labor force. But there are studies that cast doubt on this supposed damage to the wages of the least educated domestic workers.
According to study by David H. Autor of the Massachusetts Institute of Technology, Mr. Katz of Harvard and Melissa S. Kearney of the Brookings Institution,2 income inequalities in the bottom of the ladder have not grown significantly since the mid-1980s.
Be that as it may, an unsettling notion comes to mind when you realize what millions of unskilled immigrant Mexican workers' effort, illegal or not, represent in Mexico's economy. Indeed, Mexico has become the largest remittance-receiving country in the region.
Remittances have become a fashionable academic subject nowadays; there is considerable global awareness about them. But only a few years ago we all had only a shallow knowledge of how "trans-national families" have shaped a kind of money flow that had been hidden to the eyes of both multilateral research teams and finance market's analysts.
Only in 2005, remittances to Latin America and the Caribbean (LAC) reached over US $53.6 billion. A recent report by the Inter-American Development Bank says that these figures make the region "the largest remittance market in the world. This amount exceeded, for the third consecutive year, the combined flows of all net Foreign Direct Investment (FDI) and official Development Assistance (ODA) to the region."
The same report shows how remittances from Mexican immigrant workers living in the United States equal to 2.8% of Mexico's GDP, and 10% of its annual exports. Only in 2005, remittances reached US $20,034 million, representing 13772% of ODA and 178% of FDI.3
Mexico is by far the largest recipient of remittances, at over US $20 billion. Dominican Republic and Central America combined reached over US $11 billion. Brazil and Colombia reached over US $6 and US $4 billion respectively. How such enormous amount of money could go unchecked in front of so many specialists' eyes for so long?
The IADB's report estimates that more than 25 million LAC-born adults are living outside their country of origin. Some 65% send money home on a regular basis. But they do so in small amounts; $100/$200/$300 a month. More than 200 million separate bank transactions are made in any given year.
Illegal immigrants cannot have bank accounts in the United States so they rely on an encomendero, a Spanish word derived from encomendar, meaning "to entrust". Encomendero's networks carry and deliver the money from the USA to remote Central American or Andean villages.
The system works much in the same way that halawa, the informal Middle East financial channels, do. Tracking the encomendero underground transactions can be a complicated process. Money traveling through the hand-to-hand encomendero informal networks can make actual flows at least 10% higher.
That illegal immigrants low-wage workforce subsidizes the host economy is a widely accepted notion among economists. But consider that 75% of LAC remittances (US $40 billion) are sent from the United States. Since most remittances going into Mexico pass through a modern banking system, the Government is able to tax them. Money thus raised goes into road maintenance all over Mexico.
Intraregional flows are scarce in Latin America. Remittances from Spain and other Western Europe countries, including the United Kingdom, account for US $7.5 billion, which represents almost 15% of the market.
"Unskilled" is the word most frequently used by specialists to qualify most of the immigrant labor force that every year sends US $40 billion back to their country. Such an impressive achievement can only be explained by something in the "physiology" of the host economies.
Reading the IADB's report and other authorized sources on the subject reminded me of the obsessive ideas that Latin American policy-makers and multilateral officials have had about education of the workforce as a sine qua non tool for economic growth.
How come, then, illiterate Mexican immigrants can end up financing Mexico's road maintenance federal agency, not to mention the 2.8% remittances' share of Mexico's GDP?
Productivity seems to be the answer.
Discussing the findings on productivity made by the McKinsey Global Institute during a 12-year research project, William W. Lewis says, "the importance of the education of the workforce has been taken away too far. In other words, a high education level is no guarantee of high productivity."[...] "Whatever weakness exists in the U.S. education system, it is being made-up for by on-the-job training.[...] If illiterate Mexican immigrants can reach world-class productivity, building apartment houses in Houston, there is no reason why illiterate Brazilian agricultural workers cannot achieve the same in Sao Paolo".4
For the definition and a discussion of productivity, see Sylvia Nasar's article, "Productivity," in the Concise Encyclopedia of Economics.
As his very illuminating book shows, and contrary to what used to be conventional wisdom pertaining German and Japanese economies, U.S. workers achieve the highest productivity in the world in most economic sectors. Obviously, this also applies to immigrant workers, illegal or not, whose countries of origin are plagued by all kinds hindrances to individual initiative and legitimate ambitions of affluence. Viewed this way, immigrant remittances are a trustworthy index of hard work, thrift and family devotion.
Are not these the proverbial moral qualities that made market economy and capitalism in America not only possible but endurable?
Notes:
1 George J. Borjas; The Atlantic Monthly; November 1996; "The New Economics of Immigration"; Volume 278, No.5, pages 72-80. 2 Quoted by Eduardo Porter; The New York Times; Economic View; "Cost of Illegal Immigration May Be Less Than Meets The Eye", April 16, 2006. 3 Inter-American Development Bank; Remittances 2005: Promoting Financial Democracy. Washington, D.C. March 2006. 4 William W. Lewis; The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability; The University of Chicago Press, 2004. Pages 11-12.
Latin Baseball: A Frontier Story
[The Pride of Havana. By Roberto González Echevarría, Oxford University Press, 1999.]
"The Pride of Havana" by Roberto González Echevarría, offers an impressive collection of penetrating ideas about certain sports in Latin American culture.
Imagine a history of the Cuban national pastime written by a Cuban-born distinguished professor of Hispanic literature at Yale who has also been a semipro catcher and you will only have an inkling of what this wonderful book can convey.
Addressing the "cultural imperialism" issue, for example, Professor González Echevarría writes: "Though an island, Cuba is really a frontier. In colonial times it was the first border betwen the Old and the New worlds, later the embattled line betwen the Spanish Empire and the other europeans powers. Since the nineteenth century, and most poignantly in the last forty years, it has been either a bridge or a wall between itself and the United States. Crossings in either direction have always entailed a more or less radical transformation, at times to sharpen the differences, at others to erase them, or, more often than not, to mask them. Though this play of transformations, fueled by powerful feelings of attraction or rejection, finds a stage in politics, literature, and the arts, its most visible and telling exhibition is found in popular culture and sports, particularly baseball and music."
"Cuban independentists... got to favoring baseball over bullfights.... The crowd attending a bullfight dutifully had to pay homage to Spanish colonial authorities."
González Echevarría then goes on to affirm that his book is, therefore, "a partial history of a border, an account of the transformations that occur in that border." The main thesis of this most illuminating book is—let me quote one more time professor González Echevarría's own words—"that American culture is one of the fundamental components of Cuban culture, even when historically there have been concerted and painful attempts to fight it off or deny it. [...] Baseball is the clearest indication of this, but not the only one. It is a process in which the antagonist is absorbed instead of repelled, which shows that in any relationship of cultures, even rejection is mutually influencing, because cultures are dynamic ensembles."1
While today many baseball fans in the Caribbean Basin assume the game was brought to our countries as a result of countless early 20th-century U.S. military interventions in the region, the proven fact is that it was not a U.S. Marine Corps serviceman who first took baseball to Cuba.
Don't miss Roberto González Echevarría's latest NYTimes op-ed piece, Jan. 11, 2006, "Castro at the Bat".
Nemesio Guilló, who is believed to have brought the first bat and baseball to the island in 1864—while the American Civil Secession raged and Cubans were still subjects of the Spanish king—was one of three well-to-do young Cuban men sent by their parents to Mobile, Alabama in 1858 to study at Springhill College. One of the other two was Nemesio's brother, Ernesto.
According to González Echeverría, the Guilló brothers and a number of their contemporaries had, by 1868, founded a baseball team—the Habana Base Ball Club— that allegedly defeated the crew of an American schooner anchored at the Matanzas's harbor for repairs. The team did not have much time to celebrate this exploit and actually had to go underground because the first and ill-fated Cuban War of Independence—called "the Ten Years War (1868-1878)—broke out and the Spanish colonial authorities outlawed the game.
It is easy to imagine the Spaniards' motives for this ban: Cuban independentist young men and women got to favoring baseball over bullfights. In those times, and at certain precise moments of this ageless ritual, the crowd attending a bullfight dutifully had to pay homage to Spanish colonial authorities.
Putting aside all the fun and excitement a baseball game can provide, Cubans committed to their independence from Spain seemed to find in baseball a symbol of freedom and egalitarianism and, probably, democracy too.
Many Cubans had to flee their country because of the ruthless methods unleashed by the colonial Spanish troops against the rebels. Some escaped war and turmoil by migrating with their families to the Dominican Republic. "Young Dominicans emulated them—writes Rob Buck in The Tropic of Baseball—and joined with compatriots who had studied in the United States to establish a self-organized matrix of teams and tournaments well in place before the U.S. Marines arrived in 1916 for their eight-year occupation."
I was raised during the fifties in various oil-fields all over Eastern Venezuela and all around the Maracaibo Lake basin, where baseball is part of everyday life.
Like many other Venezuelans of my age, I grew up in the belief that the game had been brought to my country by American oilmen. In fact, and as if following step-by-step Mr. Nemesio Guilló's example, it was a Venezuelan bunch of "merry pranksters", the offspring of rich coffee-trading Caracas' families who, during the last decades of the 19th century, first introduced the game in my country... with a little help from Cuban cigar manufacturer, don Emilio Cramer of Havana.
In 1911, Ralph Arnold, a noteworthy American geologist who led the first comprehensive geological survey of Venezuela, arrived in an impoverished, malaria-plagued country. Mr. Arnold's work helped Venezuela to become one of the biggest oil exporting countries of the 20th century. He was amazed to find that Venezuelans had been playing baseball ever since the 1890s.
At the time of his arrival, Venezuela was a poor country ravaged by the endless civil wars that had been going on all through the 19th century. Here, as almost elsewhere in the region, there was no sports tradition. We only had a very degraded form of rodeo... and occasional bullfighting, but none is exactly what you'd call a sport. As elsewhere, here too the forerunners of the game belonged in the élite. But the poor soon learned everything about the game by intently watching the rich play it.
Later on, all along the first half of the 20th century, a kind of cross-pollination put Caribbean and Mexico's professional baseball leagues in permanent contact with the U.S. Black Leagues, a kind of relationship that surely is worth attention.
If the rise and fall of black professional baseball can give us a window into important issues of African American history, this cross-pollination betwen black leagues and the Cuban, Venezuelan, Dominican Republic and Mexican professional leagues can provide a window on the Spanish speaking Caribbean Basin modern cultures. For one thing, long before the 1947 landmark Jackie Robinson-Brooklyn Dodgers breakthrough major league contract, many African Americans were playing side by side with American white players in the integrated Mexican and Venezuelan leagues.
Take strategy, take surprise plays. The guile, hustling and cunning typical of black league baseball were rapidly absorbed by the Cubans and Dominicans who came to the United States to play in those leagues. These strategies, this playful ethos involved in playing on the brink of the rules, once back in Cuba or Venezuela, began to be called "pelota caribe"—"Caribbean ball"—an allusion to the bold and guileful Carib aborigines who, long before Columbus arrived oin the continent, came out of the Amazonian jungles and daringly took to the sea in wooden canoes from what now is Eastern Venezuela up to the Greater Antilles and subjugated the island tribes.
Hiding the ball is perhaps one of the most difficult tricks of the pelota caribe repertoire. It entails cutting behind a runner in the bases and steal an out.
My countryman, Oswaldo "Ozzie" Guillén, used to look awful in the end-of-season stats, but he could make odd plays nobody else would make. He reportedly made the hidden-ball trick twice in two days, against the same team! His controversial "small ball" managing that helped the Chicago White Sox swiftly win the 2005 World Series is, in my view, simply the quintessential pelota caribe frame of mind that evolved from the now long vanished U.S. black professional leagues.
Reading out loud the names and surnames of any U.S. professional line-up you can get a sense of the place that this more than a century old "border story" occupies in the cultural history of both the United States and its neighbors.
"Whatever the reasons", writes Milton Jamail in Full Count, "the talent pool for baseball in the United States clearly is shrinking, thus making it necessary to look elsewhere for players. [...] Statistics provided by the baseball industry show that almost 35 percent of players in professional baseball at all levels, from rookie to big league, were born outside the United States.(Puerto Rico is included in this figure.) Baseball clearly is no longer just a U.S. sport."
I think he is right. Baseball is today an international sport that is played at its highest level by many Latin Americans in the United States. Cuba's participation in the forthcoming World Baseball Classic would salute good old Nemesio Guilló, the founding father of Latin American baseball.
Notes:
1 Roberto González Echevarría, The Pride of Havana, A History of Cuban Baseball, Oxford University Press. New York. 1999. P.12.
"The Pride of Havana" by Roberto González Echevarría, offers an impressive collection of penetrating ideas about certain sports in Latin American culture.
Imagine a history of the Cuban national pastime written by a Cuban-born distinguished professor of Hispanic literature at Yale who has also been a semipro catcher and you will only have an inkling of what this wonderful book can convey.
Addressing the "cultural imperialism" issue, for example, Professor González Echevarría writes: "Though an island, Cuba is really a frontier. In colonial times it was the first border betwen the Old and the New worlds, later the embattled line betwen the Spanish Empire and the other europeans powers. Since the nineteenth century, and most poignantly in the last forty years, it has been either a bridge or a wall between itself and the United States. Crossings in either direction have always entailed a more or less radical transformation, at times to sharpen the differences, at others to erase them, or, more often than not, to mask them. Though this play of transformations, fueled by powerful feelings of attraction or rejection, finds a stage in politics, literature, and the arts, its most visible and telling exhibition is found in popular culture and sports, particularly baseball and music."
"Cuban independentists... got to favoring baseball over bullfights.... The crowd attending a bullfight dutifully had to pay homage to Spanish colonial authorities."
González Echevarría then goes on to affirm that his book is, therefore, "a partial history of a border, an account of the transformations that occur in that border." The main thesis of this most illuminating book is—let me quote one more time professor González Echevarría's own words—"that American culture is one of the fundamental components of Cuban culture, even when historically there have been concerted and painful attempts to fight it off or deny it. [...] Baseball is the clearest indication of this, but not the only one. It is a process in which the antagonist is absorbed instead of repelled, which shows that in any relationship of cultures, even rejection is mutually influencing, because cultures are dynamic ensembles."1
While today many baseball fans in the Caribbean Basin assume the game was brought to our countries as a result of countless early 20th-century U.S. military interventions in the region, the proven fact is that it was not a U.S. Marine Corps serviceman who first took baseball to Cuba.
Don't miss Roberto González Echevarría's latest NYTimes op-ed piece, Jan. 11, 2006, "Castro at the Bat".
Nemesio Guilló, who is believed to have brought the first bat and baseball to the island in 1864—while the American Civil Secession raged and Cubans were still subjects of the Spanish king—was one of three well-to-do young Cuban men sent by their parents to Mobile, Alabama in 1858 to study at Springhill College. One of the other two was Nemesio's brother, Ernesto.
According to González Echeverría, the Guilló brothers and a number of their contemporaries had, by 1868, founded a baseball team—the Habana Base Ball Club— that allegedly defeated the crew of an American schooner anchored at the Matanzas's harbor for repairs. The team did not have much time to celebrate this exploit and actually had to go underground because the first and ill-fated Cuban War of Independence—called "the Ten Years War (1868-1878)—broke out and the Spanish colonial authorities outlawed the game.
It is easy to imagine the Spaniards' motives for this ban: Cuban independentist young men and women got to favoring baseball over bullfights. In those times, and at certain precise moments of this ageless ritual, the crowd attending a bullfight dutifully had to pay homage to Spanish colonial authorities.
Putting aside all the fun and excitement a baseball game can provide, Cubans committed to their independence from Spain seemed to find in baseball a symbol of freedom and egalitarianism and, probably, democracy too.
Many Cubans had to flee their country because of the ruthless methods unleashed by the colonial Spanish troops against the rebels. Some escaped war and turmoil by migrating with their families to the Dominican Republic. "Young Dominicans emulated them—writes Rob Buck in The Tropic of Baseball—and joined with compatriots who had studied in the United States to establish a self-organized matrix of teams and tournaments well in place before the U.S. Marines arrived in 1916 for their eight-year occupation."
I was raised during the fifties in various oil-fields all over Eastern Venezuela and all around the Maracaibo Lake basin, where baseball is part of everyday life.
Like many other Venezuelans of my age, I grew up in the belief that the game had been brought to my country by American oilmen. In fact, and as if following step-by-step Mr. Nemesio Guilló's example, it was a Venezuelan bunch of "merry pranksters", the offspring of rich coffee-trading Caracas' families who, during the last decades of the 19th century, first introduced the game in my country... with a little help from Cuban cigar manufacturer, don Emilio Cramer of Havana.
In 1911, Ralph Arnold, a noteworthy American geologist who led the first comprehensive geological survey of Venezuela, arrived in an impoverished, malaria-plagued country. Mr. Arnold's work helped Venezuela to become one of the biggest oil exporting countries of the 20th century. He was amazed to find that Venezuelans had been playing baseball ever since the 1890s.
At the time of his arrival, Venezuela was a poor country ravaged by the endless civil wars that had been going on all through the 19th century. Here, as almost elsewhere in the region, there was no sports tradition. We only had a very degraded form of rodeo... and occasional bullfighting, but none is exactly what you'd call a sport. As elsewhere, here too the forerunners of the game belonged in the élite. But the poor soon learned everything about the game by intently watching the rich play it.
Later on, all along the first half of the 20th century, a kind of cross-pollination put Caribbean and Mexico's professional baseball leagues in permanent contact with the U.S. Black Leagues, a kind of relationship that surely is worth attention.
If the rise and fall of black professional baseball can give us a window into important issues of African American history, this cross-pollination betwen black leagues and the Cuban, Venezuelan, Dominican Republic and Mexican professional leagues can provide a window on the Spanish speaking Caribbean Basin modern cultures. For one thing, long before the 1947 landmark Jackie Robinson-Brooklyn Dodgers breakthrough major league contract, many African Americans were playing side by side with American white players in the integrated Mexican and Venezuelan leagues.
Take strategy, take surprise plays. The guile, hustling and cunning typical of black league baseball were rapidly absorbed by the Cubans and Dominicans who came to the United States to play in those leagues. These strategies, this playful ethos involved in playing on the brink of the rules, once back in Cuba or Venezuela, began to be called "pelota caribe"—"Caribbean ball"—an allusion to the bold and guileful Carib aborigines who, long before Columbus arrived oin the continent, came out of the Amazonian jungles and daringly took to the sea in wooden canoes from what now is Eastern Venezuela up to the Greater Antilles and subjugated the island tribes.
Hiding the ball is perhaps one of the most difficult tricks of the pelota caribe repertoire. It entails cutting behind a runner in the bases and steal an out.
My countryman, Oswaldo "Ozzie" Guillén, used to look awful in the end-of-season stats, but he could make odd plays nobody else would make. He reportedly made the hidden-ball trick twice in two days, against the same team! His controversial "small ball" managing that helped the Chicago White Sox swiftly win the 2005 World Series is, in my view, simply the quintessential pelota caribe frame of mind that evolved from the now long vanished U.S. black professional leagues.
Reading out loud the names and surnames of any U.S. professional line-up you can get a sense of the place that this more than a century old "border story" occupies in the cultural history of both the United States and its neighbors.
"Whatever the reasons", writes Milton Jamail in Full Count, "the talent pool for baseball in the United States clearly is shrinking, thus making it necessary to look elsewhere for players. [...] Statistics provided by the baseball industry show that almost 35 percent of players in professional baseball at all levels, from rookie to big league, were born outside the United States.(Puerto Rico is included in this figure.) Baseball clearly is no longer just a U.S. sport."
I think he is right. Baseball is today an international sport that is played at its highest level by many Latin Americans in the United States. Cuba's participation in the forthcoming World Baseball Classic would salute good old Nemesio Guilló, the founding father of Latin American baseball.
Notes:
1 Roberto González Echevarría, The Pride of Havana, A History of Cuban Baseball, Oxford University Press. New York. 1999. P.12.
Simón Bolívar: 200 Years Of Failure?
[ Simon Bolivar: A Life. By John Lynch, Yale University Press, 368 pages, 2006]
John Lynch's superb biography of Simón Bolívar1 is no doubt a major achievement, a key book for anyone who wishes to make any sense of where many independent Latin American nations stemmed from and what they have made of themselves.
Bolívar became a mythical revolutionary warrior as well as an outstanding intellectual who elaborated the ideals of national liberation. His undaunted soul and astonishing military prowess eventually put an end to Spanish rule in what are now the six republics of Venezuela, Colombia, Panama, Ecuador, Peru and Bolivia, the recently newsworthy country that bears his name.
Mr. Lynch is Emeritus Professor of Latin American History and former director of the Institute of Latin American Studies at the University of London. More than thirty years ago he wrote "The Spanish American Revolution, 1808-1826, (Norton, NY, 1973), a comprehensive and illuminating work frequently referred to by leading Latin American historians as The Book on the subject.
His biography of "The Liberator", as Bolívar is also known in some of the Andean countries, departs from the bulk of hero-worshipping literature that, sadly enough, passes for History in Latin American countries. Yet Lynch is well aware that, "the independence of Spanish America is incomprehensible without the presence of the liberators and its subsequent history would be empty without the intervention of personal authority. In the action of Bolívar we observe the dynamics of leadership, the power to command and the modes of ruling (emphasis mine) in the diverse society of Spanish America, not the whole history of the age, but a great part of it."
Those modes of ruling foreshadowed modern incarnations of Bolívar's military authoritarianism that patterns current authoritarian populist projects throughout the region. Two centuries after the first independentist movements broke out in Spanish America, most of them inspired by the French Illustration and decidedly intent on the creation of liberal republics, what can be said on balance about liberty—about all liberties— in our nations?
Many enraged Latin American writers and scholars have denounced the poor opinion in which Mr. Joseph Conrad held our newly-born "liberal" republics. They think his views are supremacist and/or imperialistic. I concur with the few who believe that the fictional Republic of Costaguana—where Conrad set the action of Nostromo—is still a vividly accurate depiction what the "modes of ruling" we inherited from our founding fathers brought about.
Nostromo, a short novel by Joseph Conrad centered on the fictional country of Costaguana, is available at Amazon.com.
(I cannot but digress briefly only to note that among Latin Americans you do not really speak of "founding fathers" but of "liberators", "protectors", "benefactors" and the like. One of our infamous 19th century "liberal tyrants" had himself unabashedly titled "the civilizing autocrat".)
We can, as Mr. Lynch engagingly suggests, see Bolívar life and times as times of transition from colonial societies based on absolutist hierarchies, nobility values and inequality to nation states, but then one can only ask how Bolívar, an aristocrat revolutionist par excellence, conceived liberty in the many inceptive Costaguanas his epic gave birth to.
In his review of Lynch's book, the Peruvian writer Alvaro Vargas Llosa addresses this question in a most incisive way:
Bolívar's blunder was to contain, rather than to open, the doors of social mobility. He did not quite recognize the disjunction between the theoretical constitutions that he and his men passed and the kind of stratified society that existed beneath them. In his elitist view of the economy, shopkeepers and small traders were "vulgar people."... As Lynch aptly states, "In Venezuela, where the colonial aristocracy was reduced both in numbers and importance, the great estates passed into the hands of a new creole and mestizo oligarchy, the successful warlords of independence." So the faces may have changed, but the system was left almost intact.... Some of the measures taken by Bolívar were just, such as abolishing the Indian tribute and unpaid labor services, but for many Indians this simply meant having to pay more taxes as normal citizens. The real problem was that they were not in practice equal before the law, they owned very little property, and they could not engage in productive and commercial activities of their own because property rights essentially depended on the ruling elite.2
As almost any other post-colonial people, 19th century Latin Americans nurtured war myths and hero worshipping that helped themselves move ahead into their future without a Spanish king. Thus el culto a Bolívar—the Bolívar cult—was born, first as an spontaneous outpouring of popular devotion, almost immediately after Bolivar's death. But soon a "more regimented and government inspired" doctrine was to be preached from on high.
Lynch's rendering of the essentials of the official Bolivar cult and the way it has worked so far is worth quoting in extenso: "The cultists had a good story. A hero of pure Venezuelan lineage, after a tragic marriage and golden youth in Europe, assumes the leadership of national independence, provides the intellectual base for a continental revolution, and the military and political talents to create a union of states and win international respect, all the time asserting his manhood as a glorious lover. There were many Bolívars here, with any of whom people could identify. Venezuelan nationalist, American hero, macho male, Bolívar conformed to the roles. But hero-worship was not the same as the cult. This had a greater purpose. Bolívar was a model for the nation. A post-colonial people who, through no fault of their own, had been rendered incapable of improvement or of enjoying the liberty he had won for them, could be saved by his example and his guidance."3
Many Latin American countries won independence for Spain in the early 1820s. In those times, standards of living were low, but as the economic historian Victor Bulmer-Thomas adverts, "not much lower than in North America, probably on a par with much of central Europe and perhaps higher than the newly discovered countries of the antipodes. All that was need, it was thought, were capital and skilled labor to unlock the natural resources in Latin America's vast unexploited interior and unrestricted access to the wealthy markets of western Europe."
Nearly two centuries later, that dream is still elusive. Few of the republics in the region can be deemed as developed. To the contrary, some remain extremely poor. Of course, you can always find pockets of wealth within any of our Costaguanas but these pockets do not make up for the deprivation suffered by the poor majority of the population. In the process, the region's achievements in literature, art, music, popular culture, and yes, myths, has rightly won the world's admiration. But, as Bulmer-Thomas rightly asserts, "this is only partial compensation for failure to bridge the enormous gap of the levels of economic development n the region and in the developed counties."
Liberation myths instead of true, significant liberties: that's something we have had plenty of, from Bolívar to "Evita" to "Ché" Guevara , myths that almost always signal towards a scapegoat that may be called "oligarchies' unrelenting greed" or "yanqui imperialism."
The "dynamics of leadership" that Lynch observes in his compelling magnus opus, dates back to colonial days and echo in Conrad's depicting of the "liberal" Republic of Costaguana's founding myths and popular caudillo's "modes of ruling": "the exaggeration of a cruel caricature, the fatuity of solemn masquerading, the atrocious grotesquenes of some military idol of Aztec conception and European bedecking, awaiting the homage of worshippers…".
Two centuries later those dynamics still are at work as the major threat that hovers on the frail democracies of our many Costaguanas.
Notes:
1 John Lynch, Simón Bolívar: A Life, Yale University Press, 2006 2 Álvaro Vargas Llosa, "Democracy's Caudillo," The New Republic, June 19, 2006. Available online at The Independent Review. 3 John Lynch, Ibid, page 301.
John Lynch's superb biography of Simón Bolívar1 is no doubt a major achievement, a key book for anyone who wishes to make any sense of where many independent Latin American nations stemmed from and what they have made of themselves.
Bolívar became a mythical revolutionary warrior as well as an outstanding intellectual who elaborated the ideals of national liberation. His undaunted soul and astonishing military prowess eventually put an end to Spanish rule in what are now the six republics of Venezuela, Colombia, Panama, Ecuador, Peru and Bolivia, the recently newsworthy country that bears his name.
Mr. Lynch is Emeritus Professor of Latin American History and former director of the Institute of Latin American Studies at the University of London. More than thirty years ago he wrote "The Spanish American Revolution, 1808-1826, (Norton, NY, 1973), a comprehensive and illuminating work frequently referred to by leading Latin American historians as The Book on the subject.
His biography of "The Liberator", as Bolívar is also known in some of the Andean countries, departs from the bulk of hero-worshipping literature that, sadly enough, passes for History in Latin American countries. Yet Lynch is well aware that, "the independence of Spanish America is incomprehensible without the presence of the liberators and its subsequent history would be empty without the intervention of personal authority. In the action of Bolívar we observe the dynamics of leadership, the power to command and the modes of ruling (emphasis mine) in the diverse society of Spanish America, not the whole history of the age, but a great part of it."
Those modes of ruling foreshadowed modern incarnations of Bolívar's military authoritarianism that patterns current authoritarian populist projects throughout the region. Two centuries after the first independentist movements broke out in Spanish America, most of them inspired by the French Illustration and decidedly intent on the creation of liberal republics, what can be said on balance about liberty—about all liberties— in our nations?
Many enraged Latin American writers and scholars have denounced the poor opinion in which Mr. Joseph Conrad held our newly-born "liberal" republics. They think his views are supremacist and/or imperialistic. I concur with the few who believe that the fictional Republic of Costaguana—where Conrad set the action of Nostromo—is still a vividly accurate depiction what the "modes of ruling" we inherited from our founding fathers brought about.
Nostromo, a short novel by Joseph Conrad centered on the fictional country of Costaguana, is available at Amazon.com.
(I cannot but digress briefly only to note that among Latin Americans you do not really speak of "founding fathers" but of "liberators", "protectors", "benefactors" and the like. One of our infamous 19th century "liberal tyrants" had himself unabashedly titled "the civilizing autocrat".)
We can, as Mr. Lynch engagingly suggests, see Bolívar life and times as times of transition from colonial societies based on absolutist hierarchies, nobility values and inequality to nation states, but then one can only ask how Bolívar, an aristocrat revolutionist par excellence, conceived liberty in the many inceptive Costaguanas his epic gave birth to.
In his review of Lynch's book, the Peruvian writer Alvaro Vargas Llosa addresses this question in a most incisive way:
Bolívar's blunder was to contain, rather than to open, the doors of social mobility. He did not quite recognize the disjunction between the theoretical constitutions that he and his men passed and the kind of stratified society that existed beneath them. In his elitist view of the economy, shopkeepers and small traders were "vulgar people."... As Lynch aptly states, "In Venezuela, where the colonial aristocracy was reduced both in numbers and importance, the great estates passed into the hands of a new creole and mestizo oligarchy, the successful warlords of independence." So the faces may have changed, but the system was left almost intact.... Some of the measures taken by Bolívar were just, such as abolishing the Indian tribute and unpaid labor services, but for many Indians this simply meant having to pay more taxes as normal citizens. The real problem was that they were not in practice equal before the law, they owned very little property, and they could not engage in productive and commercial activities of their own because property rights essentially depended on the ruling elite.2
As almost any other post-colonial people, 19th century Latin Americans nurtured war myths and hero worshipping that helped themselves move ahead into their future without a Spanish king. Thus el culto a Bolívar—the Bolívar cult—was born, first as an spontaneous outpouring of popular devotion, almost immediately after Bolivar's death. But soon a "more regimented and government inspired" doctrine was to be preached from on high.
Lynch's rendering of the essentials of the official Bolivar cult and the way it has worked so far is worth quoting in extenso: "The cultists had a good story. A hero of pure Venezuelan lineage, after a tragic marriage and golden youth in Europe, assumes the leadership of national independence, provides the intellectual base for a continental revolution, and the military and political talents to create a union of states and win international respect, all the time asserting his manhood as a glorious lover. There were many Bolívars here, with any of whom people could identify. Venezuelan nationalist, American hero, macho male, Bolívar conformed to the roles. But hero-worship was not the same as the cult. This had a greater purpose. Bolívar was a model for the nation. A post-colonial people who, through no fault of their own, had been rendered incapable of improvement or of enjoying the liberty he had won for them, could be saved by his example and his guidance."3
Many Latin American countries won independence for Spain in the early 1820s. In those times, standards of living were low, but as the economic historian Victor Bulmer-Thomas adverts, "not much lower than in North America, probably on a par with much of central Europe and perhaps higher than the newly discovered countries of the antipodes. All that was need, it was thought, were capital and skilled labor to unlock the natural resources in Latin America's vast unexploited interior and unrestricted access to the wealthy markets of western Europe."
Nearly two centuries later, that dream is still elusive. Few of the republics in the region can be deemed as developed. To the contrary, some remain extremely poor. Of course, you can always find pockets of wealth within any of our Costaguanas but these pockets do not make up for the deprivation suffered by the poor majority of the population. In the process, the region's achievements in literature, art, music, popular culture, and yes, myths, has rightly won the world's admiration. But, as Bulmer-Thomas rightly asserts, "this is only partial compensation for failure to bridge the enormous gap of the levels of economic development n the region and in the developed counties."
Liberation myths instead of true, significant liberties: that's something we have had plenty of, from Bolívar to "Evita" to "Ché" Guevara , myths that almost always signal towards a scapegoat that may be called "oligarchies' unrelenting greed" or "yanqui imperialism."
The "dynamics of leadership" that Lynch observes in his compelling magnus opus, dates back to colonial days and echo in Conrad's depicting of the "liberal" Republic of Costaguana's founding myths and popular caudillo's "modes of ruling": "the exaggeration of a cruel caricature, the fatuity of solemn masquerading, the atrocious grotesquenes of some military idol of Aztec conception and European bedecking, awaiting the homage of worshippers…".
Two centuries later those dynamics still are at work as the major threat that hovers on the frail democracies of our many Costaguanas.
Notes:
1 John Lynch, Simón Bolívar: A Life, Yale University Press, 2006 2 Álvaro Vargas Llosa, "Democracy's Caudillo," The New Republic, June 19, 2006. Available online at The Independent Review. 3 John Lynch, Ibid, page 301.
The Curse of the Petro-State:The Example of Venezuela
What makes oil a poisoned chalice?" Why do so many people lead such poor lives while sitting on King Midas' throne, especially during an oil boom? That is a question millions of Nigerians, Algerians, Indonesians, Iranians, Mexicans and Venezuelans have been asking themselves for decades without getting a convincing explanation.
More often than not, oil booms plague certain oil-rich countries with all sorts of calamities and the calamity of extreme poverty can be the most demoralizing for an oil-rich Third World country's population.
At the peak of the Arab oil embargo in the mid 1970s, Terry Lynn Karl, an American student of political science, went to Venezuela to do some field research for the dissertation she was writing on the history of OPEC. "Don't study OPEC," the late Juan Pablo Pérez Alfonzo, a brilliant Venezuelan lawyer considered to be the "father" of OPEC, told her. "It is boring. Study what oil is doing to us," he added. As they parted, Pérez Alfonzo presented her with these prophetic words: "Ten years from now. Twenty years from now, you will see. Oil will bring us ruin."
Karl followed Perez Alfonzo's advice and eventually wrote what is probably the best book on what oil-booms can do to countries like Venezuela. Truly, The Paradox of Plenty: Oil Booms and Petro-states (University of California Press, 1997) reads like a treatise on the morbid "brain chemistry" of the decision-making elites which rule oil-rich countries such as Venezuela, Nigeria or Indonesia.
What exactly is a petro-state? It could be described as a mining country with weak institutions and a malfunctioning public sector. Its most important feature are laws that grant subsoil rights to the government, from which spring the extraordinary size and duration of the "petro-rent" which is much, much greater than the profits which can be made in the private sector.
Petro-states are structurally different from other countries in the advanced and developing worlds, especially the agricultural or manufacturing exporters, whose products are not thought to be depletable. Large oil revenues imply exchange rates that inevitably encourage imports and hinder exports. To complicate matters, state-owned companies must face the fact that oil is a "capital-intensive" business: the more crude you pump out, the more money you must "reinject" into the same oil well to keep it pumping at the same rate of productiveness. Finally, unlike other economies, petro-states are prone to all kinds of "externalities"; the most unsettling of these is that the petroleum industry is prone to booms and busts.
An externality occurs when the actions of one person affect those of another. For more on externalities, see "Public Goods and Externalities" by Tyler Cowen in the Concise Encyclopedia of Economics.
Global exploitation of petroleum during the 20th century coincided with state building in many Third World countries. This process was closely related to how quickly the major oil companies learned to operate profitably in politically volatile countries, most notably their ability to help shape the "institutions" which were beginning to emerge and the passing of laws that could guarantee property rights.
Some petro-states considered by Karl are senior members of OPEC and some are not. Many of them became fully independent nations only after the swift process of decolonization that followed World War II, such as Indonesia, Nigeria or Algeria. Others are Latin American nations, like Venezuela, Mexico and Ecuador, which are a product of the early 19th century wars of independence from Spanish colonial rule. Karl also studied the economic performance of Iran, a non-Arab Islamic petro-state. Karl found out that most oil-exporting countries "tend to bear a striking resemblance to each other in state capacities and macroeconomic performance, despite differences in types of political regimes, cultures, geostrategic locations, and the like" (emphasis added).
Venezuela is a very illuminating case of the impact of oil-booms in oil exporting countries whose institutions have been shaped by oil-led development. Karl compares Venezuela's performance during the last two oil booms of the 20th century with that of similarly capital-deficient oil exporting countries like Mexico, Algeria, Indonesia, Nigeria, Iran, Ecuador, Oman or Cameroon. The study left out capital surplus countries such as Saudi Arabia, Kuwait, Libya, Qatar or the United Arab Emirates.
Two "behaviours" can be discerned with amazing regularity in petro-states going through an oil-boom. Their governments first seem to be seized by a sort of schizoid "manic" spell and urgently demand from their citizens special powers to direct the capital accumulation from oil revenues into other productive activities and thus try to catch up to the developed world. "We have plenty of resources so now is the time; everything can be done so everything must be done!" become watchwords for these governments. It's no wonder that for Venezuelan politicians of all colors, including Lt. Col. Hugo Chávez, "sowing our petroleum" has been their only "program" for almost 80 years.
As Karl points out in chapter three of her book, "(b)ecause oil revenues poured into the state and not into the private enterprise, each new discovery or price increase enhanced the role of the public sector". So it is only natural that new agencies and jurisdictions are born. And since it is the state, not the private sector, which has first access to the petro-rent, rent-seeking becomes the name of the game for everyone, including of course the small private sector. Deadly fights over who controls the country's oil revenues become the only important issue in domestic political life. These "wars" over petro-rents annihilate already weakened institutions, favor the concentration of power, promote the bending of the law, and, last but not least, increase corruption which is already all-pervasive.
Furthermore, the very large oil revenues which come into the hands of the state put pressure on exchange rates that foster imports and discourage exports. Inevitably, inflation sets in. The market is soon saturated with imported automobiles, electronic gadgetry, luxurious home appliances and name-brand whisky. The currency becomes overvalued because the oil sector is the core of the economy and extensive reliance on imports undermines local production. To make matters worse, the oil industry employs comparatively few people. In Venezuela, for instance, by 2003 only about 40,000 people out of an economically active population of 11.7 million worked in the oil industry.
A second "behavior" closely associated with the idea of "sowing our petroleum" appears when the benefits of government spending are cancelled out by an overheated economy. Again according to Karl, "(t)he boom not only provokes a grander, oil-led economic model but also simultaneously generates new demands for resources from both the state and the civil society. Policymakers, once torn between their twin preoccupations with diversification and equity, now think they can do both. The military demands modernized weapons and improved living conditions; capitalists seek credit and subsidies; the middle class calls for increased social spending, labor for higher wages, and the unemployed for the creation of jobs. As demands rise, unwieldy and inefficient bureaucracies, suddenly thrust into new roles, find themselves incapable of scaling down expansionist public-sector programs or warding off private-sector requests. Thus they ultimately contribute to growing budget and trade deficit and foreign debt. The boom effect is instantly at work." (p. 65 )
While inflation is likely under a system of fixed exchange rates (including various forms of managed float, such as Venezuela's), note that under a flexible rate system such as in the United States, inflation will not occur unless the Federal Reserve monetizes the increase. Instead, the exchange rate will adjust. For the definitions of fixed for flexible exchange rates, see "Does the Exchange Rate Regime Matter for Inflation and Growth?" [1997, IMF]. For descriptions of the differences between the systems, see "Exchange Rates" by Paul Krugman in the Concise Encyclopedia of Economics.
Petro-states apparently cannot cope with oil booms without running into almost unrepayable debt and without undermining democracy in the end. Such seems to be the curse of the petro-state: "you shall never attain economic diversification and your people will grow poorer and angrier at you with each passing day." Since the Arab oil embargo in the 1970s, the number of Venezuela's poor has climbed to almost 65% of a population of 22 million. Today, most Venezuelans agree that it was the harvest of inequality, frustration and political unrest, generated by the oil booms of the mid-1970s and 80s that made possible Lt. Col Chávez's ascent to power in 1998.
The irony of it all is that, according to a well-respected research group at the Universidad Católica "Andrés Bello" led by Luis Pedro España, an expert on the study of poverty, after seven years of the longest oil-boom in Venezuelan history, with OPEC crude prices reaching unprecedented peaks, there are 2 million more Venezuelans living below the poverty line than in 1998 and, with 117 billion more dollars having passed through the hands of the Venezuelan state, there are almost twice as many government ministries than there were seven years ago.
Despite its radical rhetoric and its denunciations of "neo-liberalism" and "Yankee imperialism" as the enemies of Lt. Col. Chávez's "revolution," the Venezuelan petro-state seems unharmed and relatively sound whilst it continues to enjoy the longest oil-boom it has experienced in more than 80 years. But if Karl's comparative analysis of "the paradox of plenty" is correct, the Venezuelan petro-state's extravagant squandering of resources, its massive subsidies which only reward inefficiency, the crude inequalities of income and opportunity, and the rampant corruption will mean that "the curse of the petro-state" will prove to be the real enemy of Chávez's "revolution."
More often than not, oil booms plague certain oil-rich countries with all sorts of calamities and the calamity of extreme poverty can be the most demoralizing for an oil-rich Third World country's population.
At the peak of the Arab oil embargo in the mid 1970s, Terry Lynn Karl, an American student of political science, went to Venezuela to do some field research for the dissertation she was writing on the history of OPEC. "Don't study OPEC," the late Juan Pablo Pérez Alfonzo, a brilliant Venezuelan lawyer considered to be the "father" of OPEC, told her. "It is boring. Study what oil is doing to us," he added. As they parted, Pérez Alfonzo presented her with these prophetic words: "Ten years from now. Twenty years from now, you will see. Oil will bring us ruin."
Karl followed Perez Alfonzo's advice and eventually wrote what is probably the best book on what oil-booms can do to countries like Venezuela. Truly, The Paradox of Plenty: Oil Booms and Petro-states (University of California Press, 1997) reads like a treatise on the morbid "brain chemistry" of the decision-making elites which rule oil-rich countries such as Venezuela, Nigeria or Indonesia.
What exactly is a petro-state? It could be described as a mining country with weak institutions and a malfunctioning public sector. Its most important feature are laws that grant subsoil rights to the government, from which spring the extraordinary size and duration of the "petro-rent" which is much, much greater than the profits which can be made in the private sector.
Petro-states are structurally different from other countries in the advanced and developing worlds, especially the agricultural or manufacturing exporters, whose products are not thought to be depletable. Large oil revenues imply exchange rates that inevitably encourage imports and hinder exports. To complicate matters, state-owned companies must face the fact that oil is a "capital-intensive" business: the more crude you pump out, the more money you must "reinject" into the same oil well to keep it pumping at the same rate of productiveness. Finally, unlike other economies, petro-states are prone to all kinds of "externalities"; the most unsettling of these is that the petroleum industry is prone to booms and busts.
An externality occurs when the actions of one person affect those of another. For more on externalities, see "Public Goods and Externalities" by Tyler Cowen in the Concise Encyclopedia of Economics.
Global exploitation of petroleum during the 20th century coincided with state building in many Third World countries. This process was closely related to how quickly the major oil companies learned to operate profitably in politically volatile countries, most notably their ability to help shape the "institutions" which were beginning to emerge and the passing of laws that could guarantee property rights.
Some petro-states considered by Karl are senior members of OPEC and some are not. Many of them became fully independent nations only after the swift process of decolonization that followed World War II, such as Indonesia, Nigeria or Algeria. Others are Latin American nations, like Venezuela, Mexico and Ecuador, which are a product of the early 19th century wars of independence from Spanish colonial rule. Karl also studied the economic performance of Iran, a non-Arab Islamic petro-state. Karl found out that most oil-exporting countries "tend to bear a striking resemblance to each other in state capacities and macroeconomic performance, despite differences in types of political regimes, cultures, geostrategic locations, and the like" (emphasis added).
Venezuela is a very illuminating case of the impact of oil-booms in oil exporting countries whose institutions have been shaped by oil-led development. Karl compares Venezuela's performance during the last two oil booms of the 20th century with that of similarly capital-deficient oil exporting countries like Mexico, Algeria, Indonesia, Nigeria, Iran, Ecuador, Oman or Cameroon. The study left out capital surplus countries such as Saudi Arabia, Kuwait, Libya, Qatar or the United Arab Emirates.
Two "behaviours" can be discerned with amazing regularity in petro-states going through an oil-boom. Their governments first seem to be seized by a sort of schizoid "manic" spell and urgently demand from their citizens special powers to direct the capital accumulation from oil revenues into other productive activities and thus try to catch up to the developed world. "We have plenty of resources so now is the time; everything can be done so everything must be done!" become watchwords for these governments. It's no wonder that for Venezuelan politicians of all colors, including Lt. Col. Hugo Chávez, "sowing our petroleum" has been their only "program" for almost 80 years.
As Karl points out in chapter three of her book, "(b)ecause oil revenues poured into the state and not into the private enterprise, each new discovery or price increase enhanced the role of the public sector". So it is only natural that new agencies and jurisdictions are born. And since it is the state, not the private sector, which has first access to the petro-rent, rent-seeking becomes the name of the game for everyone, including of course the small private sector. Deadly fights over who controls the country's oil revenues become the only important issue in domestic political life. These "wars" over petro-rents annihilate already weakened institutions, favor the concentration of power, promote the bending of the law, and, last but not least, increase corruption which is already all-pervasive.
Furthermore, the very large oil revenues which come into the hands of the state put pressure on exchange rates that foster imports and discourage exports. Inevitably, inflation sets in. The market is soon saturated with imported automobiles, electronic gadgetry, luxurious home appliances and name-brand whisky. The currency becomes overvalued because the oil sector is the core of the economy and extensive reliance on imports undermines local production. To make matters worse, the oil industry employs comparatively few people. In Venezuela, for instance, by 2003 only about 40,000 people out of an economically active population of 11.7 million worked in the oil industry.
A second "behavior" closely associated with the idea of "sowing our petroleum" appears when the benefits of government spending are cancelled out by an overheated economy. Again according to Karl, "(t)he boom not only provokes a grander, oil-led economic model but also simultaneously generates new demands for resources from both the state and the civil society. Policymakers, once torn between their twin preoccupations with diversification and equity, now think they can do both. The military demands modernized weapons and improved living conditions; capitalists seek credit and subsidies; the middle class calls for increased social spending, labor for higher wages, and the unemployed for the creation of jobs. As demands rise, unwieldy and inefficient bureaucracies, suddenly thrust into new roles, find themselves incapable of scaling down expansionist public-sector programs or warding off private-sector requests. Thus they ultimately contribute to growing budget and trade deficit and foreign debt. The boom effect is instantly at work." (p. 65 )
While inflation is likely under a system of fixed exchange rates (including various forms of managed float, such as Venezuela's), note that under a flexible rate system such as in the United States, inflation will not occur unless the Federal Reserve monetizes the increase. Instead, the exchange rate will adjust. For the definitions of fixed for flexible exchange rates, see "Does the Exchange Rate Regime Matter for Inflation and Growth?" [1997, IMF]. For descriptions of the differences between the systems, see "Exchange Rates" by Paul Krugman in the Concise Encyclopedia of Economics.
Petro-states apparently cannot cope with oil booms without running into almost unrepayable debt and without undermining democracy in the end. Such seems to be the curse of the petro-state: "you shall never attain economic diversification and your people will grow poorer and angrier at you with each passing day." Since the Arab oil embargo in the 1970s, the number of Venezuela's poor has climbed to almost 65% of a population of 22 million. Today, most Venezuelans agree that it was the harvest of inequality, frustration and political unrest, generated by the oil booms of the mid-1970s and 80s that made possible Lt. Col Chávez's ascent to power in 1998.
The irony of it all is that, according to a well-respected research group at the Universidad Católica "Andrés Bello" led by Luis Pedro España, an expert on the study of poverty, after seven years of the longest oil-boom in Venezuelan history, with OPEC crude prices reaching unprecedented peaks, there are 2 million more Venezuelans living below the poverty line than in 1998 and, with 117 billion more dollars having passed through the hands of the Venezuelan state, there are almost twice as many government ministries than there were seven years ago.
Despite its radical rhetoric and its denunciations of "neo-liberalism" and "Yankee imperialism" as the enemies of Lt. Col. Chávez's "revolution," the Venezuelan petro-state seems unharmed and relatively sound whilst it continues to enjoy the longest oil-boom it has experienced in more than 80 years. But if Karl's comparative analysis of "the paradox of plenty" is correct, the Venezuelan petro-state's extravagant squandering of resources, its massive subsidies which only reward inefficiency, the crude inequalities of income and opportunity, and the rampant corruption will mean that "the curse of the petro-state" will prove to be the real enemy of Chávez's "revolution."
Barter and "Magic Realism"
Toddlers barter.
Wars, natural disasters, and distressful economic crisis have forced barter among adult people in all times, too. So mankind's oldest form of exchange would seem to be related to strong, basic human instincts.
Yet the invention of money hints at a kind of enigmatic human ingenuity that defied definition for centuries as if it was a godlike gift akin to that of the invention of writing.
In recent years, however, the enormous difficulties faced by former communist countries in their transition to a market economy fostered the emergence of barter, especially in Russia, where it showed a phenomenal growth since 1993. At approximately the same time, barter burgeoned in Argentina and reached amazing levels of activity.
Russia's departure from conventional monetary transacting during the 1990s began almost at the very start of the transition. 1992 double-digit hyperinflation rates per month literally wiped the savings of most Russians.
An ill-timed liberalization of prices added to the common citizen's plight. National production fell by almost 60% during 1990-99. Over that same period of time, Russia's GDP had a fall of 54%.
One favorite explanation for both inflation and a barter upsurge in Russia during the early 1990s emphasizes the all-pervading disorganization that followed the Soviet system collapse. But a working paper prepared for the Chief Economist of the European Bank for Reconstruction and Development (EBRD) in 1998, suggests that Russian barter cannot be explained away merely by sudden social system "disarray".1
According to its authors, a tremendous liquidity squeeze would account for the shift to non-monetary transactions in post-communist Russia. Of course, there is no way to get around a certain inherited "cultural" element: Russian barter built on large networks and skills developed during the previous shortage-plagued system of centralized planning.
Thus, many state firms that had fallen into arrears took to paying their employees in bartered goods. But the remaining fact is that both private persons and firms lost confidence in the ruble. Everyone feared an imminent devaluation.
To be true, barter was something of a "cultural remnant" of Soviet-era daily practices, not only among individuals but also among state-owned firms that made extensive use of various surrogates of money for decades.
It looked natural that high inflation, just one of the many transition problems faced by Russia in the 1990s, reinforced non-monetary transactions, be it among individuals or groups of firms, as well as between firms and tax authorities. Macroeconomic stabilization programs that were attempted in those days implied a sharp tightening of monetary policy.
Nevertheless, fiscal sources of instability somehow remained unattended, or just could not be reined in, by local officials. This had consequences for the integrity of the banking system that ultimately collapsed.
Lack of current capital then led many firms to keep on bartering simply to "stay alive" in a cash constrained "capitalist" environment. Inevitably, barter also raised the potential of many "sick" firms to survive without restructuring nor downsizing. The largest and the worst managed firms prevailed over the few small but sound Russian entrepreneurial ventures.
Barter among large firms brought about incentives to "cook the books" by inflating costs and understating revenues. Such tremendous lack of transparency of a large-scale non-monetary economy soon curtailed outside finance. On top of all this, tax authorities took to accepting payments in kind. As it soon turned out, massive tax paying in kind became another incentive for corruption.
In early 1998 the use of barter and other money surrogates in Russia reached an historical peak. In August of that same year, only a few weeks after a long-awaited $4.8 billion IMF "rescue" loan finally came in, Russia declared a suspension of payments and a devaluation of the ruble. As consequence, a global financial crisis set in.
Now comes a telling paradox: devaluation encouraged local goods-production that, in time, took a significant share of the Russian domestic market, leading to the growth or a real economy as opposed to a black one. This, and an unexpected windfall of oil revenues—linked to a sustained rise of crude oil prices once the East Asian crisis came to an end—marked the beginning of the end of barter in the former USSR.
For more on black markets, see these references from the Concise Encyclopedia of Economics.
A fact worthy of attention is that during those "barter years" almost no one in Russia ever thought of building an alternative to capitalism based in money surrogates, nor was anyone looking for "a third way" to national wealth and social justice propelled by a non-monetary economy.
Russians relied on barter only to survive in a cashless environment while striving, at the same time, towards a full-fledged market—and, yes, monetary—economy. This was not the case in Argentina.
Unlike what happened in Russia, Argentina's barter was seldom used by firms. Right from the outset it was favored almost exclusively by millions of private individuals, mostly middle-class people, who were trying to find a way around a crippling economic downfall.
The intriguing fact is that, after a full decade, the kind of barter that emerged in Argentina in the 1990s to cope with problems somewhat similar to those the Russians were going through, has remarkably attained an appealing ideological quality throughout the rest of Latin America.
Indeed, barter "activism" in Latin America no longer advocates payment in kind as a provisional resort to cope with hyperinflation, lack of credit or unemployment.
It has grown into an extravagant proposal of social organization based on a disjointed assortment of anti-capitalist slogans. Barter is described as a paradigm for a new economy. This anti-capitalist bias is best illustrated by such fuzzy expressions as "social money", "market economy without capitalism", or "market anarchism".
Latin American academic industry has found in "el trueque"—the Spanish word for barter—an unexpected subject for lucubration: "culturally sustainable economy."
Wherever you cast an eye in Latin America you can sort out barter pundits who write papers on barter and attend to conferences on the future of barter organized by barter-oriented NGO's (Non-Governmental Organizations) that somehow manage themselves to raise government's funding for multiple-discipline research on, say, forms of payment that date back to Pre-Columbian times. Words like "tlaloc"—the Aztec god of fertility—are in vogue in Latin America's academia.
Overstatements abound and prophecies are profusely offered to the believers in barter, that unselfish germ of the future. And all this regardless of the unquestionable failure of barter as a substitute for a sound economy. How did all this come to be?
In 1995, unemployment reached 18.7% in Argentina. On a May night, a group of neighbors of Bernal, a small city in the Buenos Aires Province, met to discuss ways to face an appalling economic recession characterized not so much by hyperinflation but by asphyxiating cash constraints.
The group was led by three young men that had been involved in activities aimed at boosting communal kitchen gardens, garbage recycling and the use of wind and solar energy.
Success in kitchen gardening and garbage recycling—they never got very far in solar energy—made them think that they could also put their talents to the improvement of global economy. So the first Argentinean "club de trueque"—Spanish for "barter club"—was founded in May 1995.
"We read a lot", recalls one founder in a recent interview,2 and then goes to tell that authors as disparate as Alvin Toffler and Mahatma Gandhi modeled their weltanshchauung. He insists, however, that the main source of their ideas was Jean Silvio Gessel, a 19-century Belgian merchant and finance theoretician who, in 1906, wrote his most famous book: The Natural Economic Order. Gessel advocated a currency which would depreciate over time, at scheduled intervals, as users chipped off portions of it.
The recession caused by the Mexican currency crisis rippled down the continent, striking Argentina. Public servants went without pay for months once the government ran out of cash for salaries. Why not try barter?
People would meet in weekly "barter fairs" where they took an old electric appliance or a leather jacket and exchanged them for bread or dairy products. They would write their names and professions or the line of products they manufactured. They also would write what their wants were. One barter club's tenet: "Don't bring money, just bring something to sell."
Barter clubs became, at their best, an improbable safety net for a middle class unaccustomed to the hardships that were a way of life elsewhere in the continent. The idea caught on and spread throughout the country. In a matter of months barter clubs began trying exchanges with other barter clubs.
A trueque club receipt (a barterable chit or scrip): Front: Back:
But when you have almost 5,000 barter clubs involving 2.5 million people unknown to each other, you have to face the problem of how to asses the value of such a variety goods and services recorded in barter clubs' databases.
Barter clubs began printing scrips in a futile attempt to cope with barter's essential drawback, one that Mr. John Stuart Mill sorted out long ago in his famous "tailor and baker" fable. Barter just cannot ensure "double coincidence" as money does.
Argentina's barter club vouchers are, to my mind, a fine example of "magic realism", a literary genre in which Latin America novelists like Gabriel García Márquez excel. The coupons were never called "money". Still they were supposed to be reservoirs of value, hence could be accepted as payment. Who backed the scrip? The barter club, of course. Did the barter club adopt a measure of value unit? Yes, and it was called "credit". The face value of one credit equaled that of the national currency unit, the peso.
Barter club's activity dwindled after a couple of years, and remained no more than a trend at the outer edge of economy. But then economic crisis broke out again and reached its lowest point in 2002 with the government's default on $141 billion in foreign debt. The barter craze once more gained tremendous momentum. That's when they took to printing "social money". US $7 millions of scrip went into circulation and, allegedly, $400 millions in goods were traded.
In January 2003, a gang of burglars broke into the vaults of a printing house where millions of barter coupons were kept. The gang then went into a shopping spree. Apparently, they were in the know about an upcoming agreement between Argentina's government and the IMF, because once the IMF's "fresh money" had flooded the country; the burglars sold the goods—mostly used home appliances—at incredibly discount prices, but paid themselves in US dollars.
Only a few weeks ago, Argentina, along with Brazil, decided to pay its entire debt with the IMF, thus canceling a controversial conditionality that have been bitingly criticized by many economists the world over. You would say that no better sign that enough cash is flowing back into Argentina could be found. Well, here is one: barter clubs are gone.
J. S. Mill wrote:
"A tailor, who had nothing but coats, might starve before he could find any person having bread to sell who wanted a coat: besides, he would not want as much bread at a time as would be worth a coat, and the coat could not be divided." Principles of Political Economy, par. III.7.3.
For a recent application, consider Paul Seabright, The Company of Strangers: A Natural History of Economic Life. Princeton University Press, 2004, Chapter 4, page 74:
"Even with sophisticated computer– and internet–based systems for bringing about a double coincidence of wants, barter will always run up against a fundamental problem: when searching for someone who wants to buy what I have to sell, how can I be sure that what he has to offer in return is of the quality I require? The attraction of money is precisely that I can be more confident of its quality than I can of almost anything else a buyer can offer. Barter will always survive where participants have already overcome the problem of trust in other ways: in small communities where people know each other well, and even on a larger scale where the goods exchanged are sufficiently standardized for their quality to be quickly verifiable without much effort. But as a means of mediating the exchange of inscrutables between strangers, on which more and more of modern life is based, no realistic alternative to money has ever yet been found."
For some early uses of the term "double coincidence of wants", see Jevons, Wicksteed, and Marshall.
Yet the jargon, the academic industry, the pundits and the websites linger on. That's why a Brazilian-born social scientist who co-founded the so-called "Red Global de Trueque—Global Barter Network"—an NGO based in Buenos Aires, travels extensively throughout the region lecturing on "Barter in the Third Millennium: Alternative Money and Citizen's Empowerment".
I'd rather have those scrip burglars lecture me.
"The world makers and the world improvers responsible for these notions feel no obligation to follow up their ideas inexorably to their final consequences. They prefer to call a halt where the difficulties of the problem are just beginning. And this, incidentally, accounts for the longevity of their doctrines; so long as they remain nebulous, they offer nothing for criticism to seize upon." (Ludwig von Mises, The Theory of Money and Credit, par. I.6.9)
Notes:
1 Simon Commander and Christian Mumssen, Understanding barter in Russia, December, 1998. 2 Lectures
Wars, natural disasters, and distressful economic crisis have forced barter among adult people in all times, too. So mankind's oldest form of exchange would seem to be related to strong, basic human instincts.
Yet the invention of money hints at a kind of enigmatic human ingenuity that defied definition for centuries as if it was a godlike gift akin to that of the invention of writing.
In recent years, however, the enormous difficulties faced by former communist countries in their transition to a market economy fostered the emergence of barter, especially in Russia, where it showed a phenomenal growth since 1993. At approximately the same time, barter burgeoned in Argentina and reached amazing levels of activity.
Russia's departure from conventional monetary transacting during the 1990s began almost at the very start of the transition. 1992 double-digit hyperinflation rates per month literally wiped the savings of most Russians.
An ill-timed liberalization of prices added to the common citizen's plight. National production fell by almost 60% during 1990-99. Over that same period of time, Russia's GDP had a fall of 54%.
One favorite explanation for both inflation and a barter upsurge in Russia during the early 1990s emphasizes the all-pervading disorganization that followed the Soviet system collapse. But a working paper prepared for the Chief Economist of the European Bank for Reconstruction and Development (EBRD) in 1998, suggests that Russian barter cannot be explained away merely by sudden social system "disarray".1
According to its authors, a tremendous liquidity squeeze would account for the shift to non-monetary transactions in post-communist Russia. Of course, there is no way to get around a certain inherited "cultural" element: Russian barter built on large networks and skills developed during the previous shortage-plagued system of centralized planning.
Thus, many state firms that had fallen into arrears took to paying their employees in bartered goods. But the remaining fact is that both private persons and firms lost confidence in the ruble. Everyone feared an imminent devaluation.
To be true, barter was something of a "cultural remnant" of Soviet-era daily practices, not only among individuals but also among state-owned firms that made extensive use of various surrogates of money for decades.
It looked natural that high inflation, just one of the many transition problems faced by Russia in the 1990s, reinforced non-monetary transactions, be it among individuals or groups of firms, as well as between firms and tax authorities. Macroeconomic stabilization programs that were attempted in those days implied a sharp tightening of monetary policy.
Nevertheless, fiscal sources of instability somehow remained unattended, or just could not be reined in, by local officials. This had consequences for the integrity of the banking system that ultimately collapsed.
Lack of current capital then led many firms to keep on bartering simply to "stay alive" in a cash constrained "capitalist" environment. Inevitably, barter also raised the potential of many "sick" firms to survive without restructuring nor downsizing. The largest and the worst managed firms prevailed over the few small but sound Russian entrepreneurial ventures.
Barter among large firms brought about incentives to "cook the books" by inflating costs and understating revenues. Such tremendous lack of transparency of a large-scale non-monetary economy soon curtailed outside finance. On top of all this, tax authorities took to accepting payments in kind. As it soon turned out, massive tax paying in kind became another incentive for corruption.
In early 1998 the use of barter and other money surrogates in Russia reached an historical peak. In August of that same year, only a few weeks after a long-awaited $4.8 billion IMF "rescue" loan finally came in, Russia declared a suspension of payments and a devaluation of the ruble. As consequence, a global financial crisis set in.
Now comes a telling paradox: devaluation encouraged local goods-production that, in time, took a significant share of the Russian domestic market, leading to the growth or a real economy as opposed to a black one. This, and an unexpected windfall of oil revenues—linked to a sustained rise of crude oil prices once the East Asian crisis came to an end—marked the beginning of the end of barter in the former USSR.
For more on black markets, see these references from the Concise Encyclopedia of Economics.
A fact worthy of attention is that during those "barter years" almost no one in Russia ever thought of building an alternative to capitalism based in money surrogates, nor was anyone looking for "a third way" to national wealth and social justice propelled by a non-monetary economy.
Russians relied on barter only to survive in a cashless environment while striving, at the same time, towards a full-fledged market—and, yes, monetary—economy. This was not the case in Argentina.
Unlike what happened in Russia, Argentina's barter was seldom used by firms. Right from the outset it was favored almost exclusively by millions of private individuals, mostly middle-class people, who were trying to find a way around a crippling economic downfall.
The intriguing fact is that, after a full decade, the kind of barter that emerged in Argentina in the 1990s to cope with problems somewhat similar to those the Russians were going through, has remarkably attained an appealing ideological quality throughout the rest of Latin America.
Indeed, barter "activism" in Latin America no longer advocates payment in kind as a provisional resort to cope with hyperinflation, lack of credit or unemployment.
It has grown into an extravagant proposal of social organization based on a disjointed assortment of anti-capitalist slogans. Barter is described as a paradigm for a new economy. This anti-capitalist bias is best illustrated by such fuzzy expressions as "social money", "market economy without capitalism", or "market anarchism".
Latin American academic industry has found in "el trueque"—the Spanish word for barter—an unexpected subject for lucubration: "culturally sustainable economy."
Wherever you cast an eye in Latin America you can sort out barter pundits who write papers on barter and attend to conferences on the future of barter organized by barter-oriented NGO's (Non-Governmental Organizations) that somehow manage themselves to raise government's funding for multiple-discipline research on, say, forms of payment that date back to Pre-Columbian times. Words like "tlaloc"—the Aztec god of fertility—are in vogue in Latin America's academia.
Overstatements abound and prophecies are profusely offered to the believers in barter, that unselfish germ of the future. And all this regardless of the unquestionable failure of barter as a substitute for a sound economy. How did all this come to be?
In 1995, unemployment reached 18.7% in Argentina. On a May night, a group of neighbors of Bernal, a small city in the Buenos Aires Province, met to discuss ways to face an appalling economic recession characterized not so much by hyperinflation but by asphyxiating cash constraints.
The group was led by three young men that had been involved in activities aimed at boosting communal kitchen gardens, garbage recycling and the use of wind and solar energy.
Success in kitchen gardening and garbage recycling—they never got very far in solar energy—made them think that they could also put their talents to the improvement of global economy. So the first Argentinean "club de trueque"—Spanish for "barter club"—was founded in May 1995.
"We read a lot", recalls one founder in a recent interview,2 and then goes to tell that authors as disparate as Alvin Toffler and Mahatma Gandhi modeled their weltanshchauung. He insists, however, that the main source of their ideas was Jean Silvio Gessel, a 19-century Belgian merchant and finance theoretician who, in 1906, wrote his most famous book: The Natural Economic Order. Gessel advocated a currency which would depreciate over time, at scheduled intervals, as users chipped off portions of it.
The recession caused by the Mexican currency crisis rippled down the continent, striking Argentina. Public servants went without pay for months once the government ran out of cash for salaries. Why not try barter?
People would meet in weekly "barter fairs" where they took an old electric appliance or a leather jacket and exchanged them for bread or dairy products. They would write their names and professions or the line of products they manufactured. They also would write what their wants were. One barter club's tenet: "Don't bring money, just bring something to sell."
Barter clubs became, at their best, an improbable safety net for a middle class unaccustomed to the hardships that were a way of life elsewhere in the continent. The idea caught on and spread throughout the country. In a matter of months barter clubs began trying exchanges with other barter clubs.
A trueque club receipt (a barterable chit or scrip): Front: Back:
But when you have almost 5,000 barter clubs involving 2.5 million people unknown to each other, you have to face the problem of how to asses the value of such a variety goods and services recorded in barter clubs' databases.
Barter clubs began printing scrips in a futile attempt to cope with barter's essential drawback, one that Mr. John Stuart Mill sorted out long ago in his famous "tailor and baker" fable. Barter just cannot ensure "double coincidence" as money does.
Argentina's barter club vouchers are, to my mind, a fine example of "magic realism", a literary genre in which Latin America novelists like Gabriel García Márquez excel. The coupons were never called "money". Still they were supposed to be reservoirs of value, hence could be accepted as payment. Who backed the scrip? The barter club, of course. Did the barter club adopt a measure of value unit? Yes, and it was called "credit". The face value of one credit equaled that of the national currency unit, the peso.
Barter club's activity dwindled after a couple of years, and remained no more than a trend at the outer edge of economy. But then economic crisis broke out again and reached its lowest point in 2002 with the government's default on $141 billion in foreign debt. The barter craze once more gained tremendous momentum. That's when they took to printing "social money". US $7 millions of scrip went into circulation and, allegedly, $400 millions in goods were traded.
In January 2003, a gang of burglars broke into the vaults of a printing house where millions of barter coupons were kept. The gang then went into a shopping spree. Apparently, they were in the know about an upcoming agreement between Argentina's government and the IMF, because once the IMF's "fresh money" had flooded the country; the burglars sold the goods—mostly used home appliances—at incredibly discount prices, but paid themselves in US dollars.
Only a few weeks ago, Argentina, along with Brazil, decided to pay its entire debt with the IMF, thus canceling a controversial conditionality that have been bitingly criticized by many economists the world over. You would say that no better sign that enough cash is flowing back into Argentina could be found. Well, here is one: barter clubs are gone.
J. S. Mill wrote:
"A tailor, who had nothing but coats, might starve before he could find any person having bread to sell who wanted a coat: besides, he would not want as much bread at a time as would be worth a coat, and the coat could not be divided." Principles of Political Economy, par. III.7.3.
For a recent application, consider Paul Seabright, The Company of Strangers: A Natural History of Economic Life. Princeton University Press, 2004, Chapter 4, page 74:
"Even with sophisticated computer– and internet–based systems for bringing about a double coincidence of wants, barter will always run up against a fundamental problem: when searching for someone who wants to buy what I have to sell, how can I be sure that what he has to offer in return is of the quality I require? The attraction of money is precisely that I can be more confident of its quality than I can of almost anything else a buyer can offer. Barter will always survive where participants have already overcome the problem of trust in other ways: in small communities where people know each other well, and even on a larger scale where the goods exchanged are sufficiently standardized for their quality to be quickly verifiable without much effort. But as a means of mediating the exchange of inscrutables between strangers, on which more and more of modern life is based, no realistic alternative to money has ever yet been found."
For some early uses of the term "double coincidence of wants", see Jevons, Wicksteed, and Marshall.
Yet the jargon, the academic industry, the pundits and the websites linger on. That's why a Brazilian-born social scientist who co-founded the so-called "Red Global de Trueque—Global Barter Network"—an NGO based in Buenos Aires, travels extensively throughout the region lecturing on "Barter in the Third Millennium: Alternative Money and Citizen's Empowerment".
I'd rather have those scrip burglars lecture me.
"The world makers and the world improvers responsible for these notions feel no obligation to follow up their ideas inexorably to their final consequences. They prefer to call a halt where the difficulties of the problem are just beginning. And this, incidentally, accounts for the longevity of their doctrines; so long as they remain nebulous, they offer nothing for criticism to seize upon." (Ludwig von Mises, The Theory of Money and Credit, par. I.6.9)
Notes:
1 Simon Commander and Christian Mumssen, Understanding barter in Russia, December, 1998. 2 Lectures
Economic Imagery: Open Veins or Latin America
What is an "influential" author?
Conventional wisdom suggests that he is someone who writes about public-interest matters—economic policy not the least—and manages to garner attention from either the governing elites or the business community or both.
There are not many "public intellectuals" in Latin America who can exert any discernible influence in their countries' economic decision-makers. Op-ed columnists and TV commentators, of course, tend to think otherwise.
Nevertheless, in at least one case, a very distinguished economic scholar was elected presidente: Brazillian professor Fernando Henrique Cardoso (Rio de Janeiro, 1931), whose work used to be abundantly quoted by left-leaning fellow savants throughout Latin America during the 1970s—and well into the 1980s—as those of an authority in a theory termed "of neocolonial dependence". He was elected president in 1994, then reelected in 1998. He left office in 2002.
Becoming the president of one's own country can be a sobering experience, even for the most uncompromisingly radical professor doktor. Your two selves are lonely at the top, but which one will seek re-election? There is a handful of things about Latin American economics that Mr. Cardoso, in his own admission, does not hold to be true any more. I find this quite telling about Mr. Cardoso's intellectual integrity. This article, however, will rather delve into the work of another kind of Latin American intellectual.
I have always been intrigued by Uruguayan writer Eduardo Galeano and the strong following he enjoys among my fellow Latin Americans. To be sure, he's been the laughingstock of economic historians for decades. Still, only he can take pride in having a readership that counts up to hundreds of thousands of Latin Americans from all tracks of life who take Mr. Galeano's dictums as nothing but the truth.
A self-taught journalist, Mr. Galeano (Montevideo, 1940) first went into a newsroom, hired as a cartoonist, when he was only 14. In time he became director of several important Uruguayan and Argentinian weeklies. He developed an interest in Latin American economic history during the late Sixties and ended up writing a book that has been on and off the region's best seller lists for more than thirty years. Thousands of pirated copies attest to the importance of Las venas abiertas de América Latina (1970) (Open Veins of Latin America: Five Centuries of the Pillage of a Continent, Monthly Review Press, New York, 1973) in the shaping of what I can only describe as the Latin American collective "economic imagery".
Many stories have been circulated for years, all of them attesting to a certain magic that allegedly surrounds this book. There is, for example, the story of a Colombian Social Sciences student who, while reading a fragment of Mr. Galeano's work to her boyfriend as they rode in a public bus, suddenly became so enraptured by Open Veins that she couldn't help standing up and reading out loud for all the passengers to listen. Thus, so the story goes, during an interminable traffic jam in Bogotá, a public transport bus became willy-nilly the conference room of an enthralled audience of Colombian down-and-outs.
Another story, set in Santiago de Chile during the days that followed the military coup that overthrew President Salvador Allende, in 1973, tells of a woman who diapered his baby together with a copy of Open Veins and then ran for it, holding the bundle in her arms, in a last-minute escape from a police raid.
According to this unsettling urban legend, the copy of Open Veins worked time and again as an invisibility charm that kept the woman and her baby from detention. Now, what kind of economic history book is this?
The international division of labor consists in this: some countries specialize in winning and some others in losing.
Such are the opening lines of Open Veins. It goes on:
Our part of the world, the one we currently call Latin America, was precocious. So the minute Renaissance Europeans threw themselves across the seas to snap at our continent's throat we all began specializing in losing.
Only three more paragraphs into the book you can read,
...the more freedom you award to business, the more jailhouses you will be forced to build for those who suffer business in their flesh.[...] This is Latin America: the open veins region.[...] Our defeat is always implied in someone else's victory; our [natural resources] richness only nurtures our poverty in order to feed someone else's wealth: that of the empires and their native managers. Thanks to colonial and neo-colonial alchemies, here gold turns into junk and food becomes poison.
In an afterword to his book, written in 1977, Mr. Galeano asserts that he only set to write a "manual for spreading public knowledge", not a scholarly full-fledged source book. He also warns in his introduction that
...this book is a history of pillage, hence it focuses on current mechanisms of plundering. That's why Spanish conquistadores and their caravels are shown side-by-side with modern day technocrats boarding their airliners, Hernán Cortés sides with the U.S. Marine Corps, 16th century Spanish Crown corregidores (magistrates) are measured against today's IMF's mission officials and the slave-trade earnings are compared with General Motors balance-sheets.
Mr. Galeano's guileful writing may result in fascinating reading to the candid layman, but history cannot be enslaved by our partisan opinions on current world affairs nor are historians expected to moralize on their subject every other paragraph. What's amazing about Open Veins is that it has been used as an economic history textbook by many college faculties all over the continent for years now and has became a regular journalist's worktool.
I think that self-victimizing debases the very theory of neocolonial dependence that Open Veins purports to sustain. But this does not suffice to explain why Mr. Galeano's extreme oversimplifications on our failed societies are shared by so many otherwise knowledgeable Latin American intellectuals.
The answer, I guess, might be in a sharp remark recently made by Mr. Tony Judt, as he probes into the lingering appeal of Marxism despite the collapse of the Soviet civilization:
...the attractions of one or another version of Marxims to intellectuals and radical politicians in Latin America, for example, or in the Middle East, never really faded; as a plausible account of local experience, Marxism in such places retains much of its appeal, just as it does to contemporary anti-globalizers everywhere. The latter see in the tensions and shortcomings of today's international capitalist economy precisely the same injustices and opportunities that led observers of the first economic "globalization" of the 1890s to apply Marx's critique of capitalism to new theories of "imperialism."1
"There is no other solution for Latin America than violence", writes Mr. Galeano, misquoting Brazilian historian Josué de Castro. After reading this it becomes very difficult not to concur with Mr. Judt's prediction that "since no one else seem to have anything very convincing to offer by way of a strategy for rectifying the inequities of modern capitalism, the field is once again left to those with the tidiest story to tell and the angriest prescription to offer."
Tidy, angry Open Veins of Latin America provides the perfect example.
________________________________________
Notes:
1 Tony Judt, "Goodbye to All That?," The New York Review of Books, Vol. 53, Number 14, September 21, 2006
________________________________________
Conventional wisdom suggests that he is someone who writes about public-interest matters—economic policy not the least—and manages to garner attention from either the governing elites or the business community or both.
There are not many "public intellectuals" in Latin America who can exert any discernible influence in their countries' economic decision-makers. Op-ed columnists and TV commentators, of course, tend to think otherwise.
Nevertheless, in at least one case, a very distinguished economic scholar was elected presidente: Brazillian professor Fernando Henrique Cardoso (Rio de Janeiro, 1931), whose work used to be abundantly quoted by left-leaning fellow savants throughout Latin America during the 1970s—and well into the 1980s—as those of an authority in a theory termed "of neocolonial dependence". He was elected president in 1994, then reelected in 1998. He left office in 2002.
Becoming the president of one's own country can be a sobering experience, even for the most uncompromisingly radical professor doktor. Your two selves are lonely at the top, but which one will seek re-election? There is a handful of things about Latin American economics that Mr. Cardoso, in his own admission, does not hold to be true any more. I find this quite telling about Mr. Cardoso's intellectual integrity. This article, however, will rather delve into the work of another kind of Latin American intellectual.
I have always been intrigued by Uruguayan writer Eduardo Galeano and the strong following he enjoys among my fellow Latin Americans. To be sure, he's been the laughingstock of economic historians for decades. Still, only he can take pride in having a readership that counts up to hundreds of thousands of Latin Americans from all tracks of life who take Mr. Galeano's dictums as nothing but the truth.
A self-taught journalist, Mr. Galeano (Montevideo, 1940) first went into a newsroom, hired as a cartoonist, when he was only 14. In time he became director of several important Uruguayan and Argentinian weeklies. He developed an interest in Latin American economic history during the late Sixties and ended up writing a book that has been on and off the region's best seller lists for more than thirty years. Thousands of pirated copies attest to the importance of Las venas abiertas de América Latina (1970) (Open Veins of Latin America: Five Centuries of the Pillage of a Continent, Monthly Review Press, New York, 1973) in the shaping of what I can only describe as the Latin American collective "economic imagery".
Many stories have been circulated for years, all of them attesting to a certain magic that allegedly surrounds this book. There is, for example, the story of a Colombian Social Sciences student who, while reading a fragment of Mr. Galeano's work to her boyfriend as they rode in a public bus, suddenly became so enraptured by Open Veins that she couldn't help standing up and reading out loud for all the passengers to listen. Thus, so the story goes, during an interminable traffic jam in Bogotá, a public transport bus became willy-nilly the conference room of an enthralled audience of Colombian down-and-outs.
Another story, set in Santiago de Chile during the days that followed the military coup that overthrew President Salvador Allende, in 1973, tells of a woman who diapered his baby together with a copy of Open Veins and then ran for it, holding the bundle in her arms, in a last-minute escape from a police raid.
According to this unsettling urban legend, the copy of Open Veins worked time and again as an invisibility charm that kept the woman and her baby from detention. Now, what kind of economic history book is this?
The international division of labor consists in this: some countries specialize in winning and some others in losing.
Such are the opening lines of Open Veins. It goes on:
Our part of the world, the one we currently call Latin America, was precocious. So the minute Renaissance Europeans threw themselves across the seas to snap at our continent's throat we all began specializing in losing.
Only three more paragraphs into the book you can read,
...the more freedom you award to business, the more jailhouses you will be forced to build for those who suffer business in their flesh.[...] This is Latin America: the open veins region.[...] Our defeat is always implied in someone else's victory; our [natural resources] richness only nurtures our poverty in order to feed someone else's wealth: that of the empires and their native managers. Thanks to colonial and neo-colonial alchemies, here gold turns into junk and food becomes poison.
In an afterword to his book, written in 1977, Mr. Galeano asserts that he only set to write a "manual for spreading public knowledge", not a scholarly full-fledged source book. He also warns in his introduction that
...this book is a history of pillage, hence it focuses on current mechanisms of plundering. That's why Spanish conquistadores and their caravels are shown side-by-side with modern day technocrats boarding their airliners, Hernán Cortés sides with the U.S. Marine Corps, 16th century Spanish Crown corregidores (magistrates) are measured against today's IMF's mission officials and the slave-trade earnings are compared with General Motors balance-sheets.
Mr. Galeano's guileful writing may result in fascinating reading to the candid layman, but history cannot be enslaved by our partisan opinions on current world affairs nor are historians expected to moralize on their subject every other paragraph. What's amazing about Open Veins is that it has been used as an economic history textbook by many college faculties all over the continent for years now and has became a regular journalist's worktool.
I think that self-victimizing debases the very theory of neocolonial dependence that Open Veins purports to sustain. But this does not suffice to explain why Mr. Galeano's extreme oversimplifications on our failed societies are shared by so many otherwise knowledgeable Latin American intellectuals.
The answer, I guess, might be in a sharp remark recently made by Mr. Tony Judt, as he probes into the lingering appeal of Marxism despite the collapse of the Soviet civilization:
...the attractions of one or another version of Marxims to intellectuals and radical politicians in Latin America, for example, or in the Middle East, never really faded; as a plausible account of local experience, Marxism in such places retains much of its appeal, just as it does to contemporary anti-globalizers everywhere. The latter see in the tensions and shortcomings of today's international capitalist economy precisely the same injustices and opportunities that led observers of the first economic "globalization" of the 1890s to apply Marx's critique of capitalism to new theories of "imperialism."1
"There is no other solution for Latin America than violence", writes Mr. Galeano, misquoting Brazilian historian Josué de Castro. After reading this it becomes very difficult not to concur with Mr. Judt's prediction that "since no one else seem to have anything very convincing to offer by way of a strategy for rectifying the inequities of modern capitalism, the field is once again left to those with the tidiest story to tell and the angriest prescription to offer."
Tidy, angry Open Veins of Latin America provides the perfect example.
________________________________________
Notes:
1 Tony Judt, "Goodbye to All That?," The New York Review of Books, Vol. 53, Number 14, September 21, 2006
________________________________________
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