The Free Market 18, no. 5 (May 2000)
Until a few months ago, the sum of my experience with Latin America had been a few trips to border cities like Juarez, Nogales, and Tijuana. Beyond that, I had to depend upon Dan Rather, the New York Times, and various social activist groups to find out what was true about life South of the Border. All had a sad story to tell.
Places like Guatemala City had little to offer except for pollution and poverty, according to these folks. American oppression consisted not only of CIA-sponsored coups but also of evil US multi-national corporations sucking the economic life out of the people. Capitalism and free markets have only perpetuated the injustice of the giant gap between the rich oligarchies and the poor.
Thus, it was with fear and trepidation that I recently journeyed to Guatemala City to adopt a baby girl. There is no doubt that Guatemala is a “Third World” country, which means that it has a lot of poor people. Guatemala has also been part of the larger battleground of the mostly defunct cold war, which meant that every change of government (and there have been many) was always seen through the ideological lens of that conflict. Finally, for more than a century, the United States has been an imperialistic power, which has meant that those in power in Washington, D.C., have believed they have had a God-given right to interfere in the affairs of every nation in the Western Hemisphere.
Our new excuse for massive intervention and imperialistic rampages comes in the name of the War on Drugs. Tax-funded aid to armies and police forces of the cocaine-producing Latin American nations has had a most corrupting effect upon those countries-and has done little or nothing to stem the flow of cocaine, marijuana, and other illegal drugs into the United States.
Despite our unhappy history in dealing with nations like Guatemala, however, I must report that at least the people of Guatemala City are quickly shaking off any shackles we have been placing on them and proceeding ahead at full speed. This place has much to offer, and it didn’t take my wife and me long to realize that we could live there. I have seen the future of Guatemala City, and it is capitalism and free markets. If this trend continues, we are sure to see increases in the overall standard of living for Guatemalans.
First, it is a city filled with hard working people. Having expected people to be less than attentive to their jobs, I instead found folks who were as service oriented as anyone I had seen in the states. Cell phones abound in this city, and it is not just those who are wealthy who own them. Judging from the clientele I saw coming in and out of the PCS office at the shopping mall connected to the Hyatt Regency, wireless communications are extremely popular in this city.
Yes, Guatemala City is developing a real middle class. If the crowds at the mall fast food court are any indication, not to mention the thousands of cars which crowd the streets during the working day, living standards are rising.
Not so fast, declares your common leftist. Have you not seen the appalling slums near the garbage dump? What about the children selling flowers and other trinkets at the traffic lights, not to mention the dirty-faced “squeegee children” cleaning windshields of cars stopped at red lights for a quetzal (about 13 cents)? How can free markets make their lives better? In fact, aren’t free markets the main reason that such enormous poverty exists in places like Guatemala City?
To answer these questions, I first offer the experience of other Latin American nations which have embraced socialism at one time or another. Take Cuba, for example. Forty years ago, when Castro’s communist revolution was going full force in that country, Havana was one of the jewels of Latin America, and certainly a much more lively and viable place than Guatemala City.
What remains of Havana today is a grim reminder of the failures of socialism. The once magnificent structures which graced the city’s boulevards and narrow streets have deteriorated and much of the economy is at the subsistence level. What keeps Cuba afloat today are the numerous luxury tourist hotels and the dollars sent to citizens by their relatives in the United States. In other words, the Cuban economy is almost totally dependent upon tourists and what amounts to charitable donations.
One of the lies told by advocates of socialism is that socialism is the best way to raise the living standards of the poor. This is done by confiscating the wealth of those who are deemed rich, then turning it over to those less fortunate, all based upon the premise that the economic gains by those richest among us have come “on the backs of the poor.”
At best, this “solution” is only short term and actually gives unsatisfactory results both short term and long term. If places like Cuba, Chile, and Nicaragua are any indication, the “confiscatory solution” is enacted as following. First, the government seizes the homes of wealthy people (the upper-middle class), then takes whatever physical assets the people might have. Those who are most wealthy usually leave the country with at least their cash assets intact, as they have usually converted them to dollars and placed them in overseas banks.
Next, the government either moves poorer people into the former luxury homes or, as was the case in Nicaragua, government honchos move into the homes themselves. For example, the ruling clique of the former Sandinista government of Nicaragua took over the homes of wealthy Nicaraguans who had fled the country. Thus, the only wealth distribution that occurred was a transfer from private property owners to government officials.
Soon after, the government takes over private businesses, then organizes the workforce into its own party apparatus. The workplace ceases to be a place where real production takes place but, instead, is used as a tool to keep workers in line. In Chile, for example, the Marxist regime of Salvador Allende seized companies, tripled the wages of those workers by printing money, then watched the rate of inflation rise to about 1,000 percent.
The end result is a society that economically becomes frozen in time. Havana’s streets are popular with 1950s buffs because of the large number of US cars from that era which are still being driven. In the meantime, overall living standards slowly but surely decrease. Thus, while places like Guatemala City have grown economically, Havana has gone the other way and would be like Haiti if it were not for the European and Canadian resorts and dollars sent to Cubans from relatives. After the 1959 revolution, Castro pledged that Cuba would cease to be dependent upon tourism and charity. What he ultimately created was a nation that depends even more upon tourism and charity.
What role should countries like the United States play in Guatemala? The nation does have its share of very poor people, and in my mind, those with medical and other expertise who give medical care to those who otherwise could not afford it or dig wells in remote villages are heroes. On the other hand, those leftist activists who want to turn places like Guatemala into sixteenth-century museums with everyone wearing Indian costumes and living in huts are just as villainous as the CIA.
The best thing we can offer people in places like Guatemala are our products and an opportunity to sell freely their own goods and services to us. To paraphrase the great Christian missionary Elisabeth Elliot who came to realize that she had nothing socially to offer the Auca Indians of the Ecuadorian jungle, we Americans have nothing politically to offer these folks.
We have been taught from grade school that “our form of government” or, more specifically, democracy, is our Great Gift to the rest of the world. Such ideas are patent nonsense. If we should offer anything in the political realm, it should be rule of law. However, since few people who hold public office in the United States actually keep their pledge to “protect and defend the Constitution,” we don’t even offer rule of law here, so it is absurd to think we can export it to countries like Guatemala.
William L. Anderson [banderson@ngc. edu] teaches economics at North Greenville College.
