Tag: Bolivia

Paul Krugman’s Distorted Views on Inequality in Latin America

When it comes to discussing Latin America, Paul Krugman has a tortuous relationship with facts. Let’s take a look at a post he wrote last week on inequality in the region. Krugman claims that Latin America’s decline in inequality in the last decade is due to the region “partially turning its back on the Washington Consensus” (a term that has misleadingly become short hand for free market policies). Is that the case?

First, note how the graph in Krugman’s post actually shows inequality going up in Latin America during the 1980s, before the implementation of policies related to the Washington Consensus (which for most countries begins in the early 1990s), and then sharply declining before the arrival of what he calls the “new policy approach” of left-of-center governments. The rise of inequality in Latin America in the 1980s coincides with the periods of hyperinflation that crippled the economies of Argentina, Brazil, Nicaragua, Peru, and Bolivia. Central banks in Latin America were all too busy in those years financing the acute fiscal imbalances of their central governments through the emission of money. And Latin American countries were deep in the red precisely because their bloated public sectors became unsustainable, leading to the serious debt crisis of 1982. Thus, it was an inflationary spree, caused by the crisis of big government, that exacerbated inequality in the region. Of course, Krugman fails to mention this.

Can we assign the recent decline in inequality in Latin America to any specific ideology? A recent study by Kenneth Roberts of Cornell University on the politics of inequality in Latin America looked at inequality trends from 2000 to 2010 and found that “countries that experienced net declines in inequality were governed by diverse administrations of the left, centre, and right, including non-leftist governments in Colombia, Mexico, Peru, Paraguay, El Salvador, Guatemala, and Panama.” According to Roberts, “there was no strict correspondence between declining inequality and either the ideological profile of national governments or any specific set of redistributive initiatives.”

Second, it’s quite a stretch to state that Latin America as a region moved away from the Washington Consensus. I’m not going to dwell here on the virtues of all the policy recommendations identified by John Williamson back in 1989 or discuss the extent to which they were actually implemented by the various Latin American governments. However, even though some countries such as Venezuela, Ecuador, Bolivia, and Argentina have turned their backs on responsible macroeconomic policies in the last few years, most governments in the region, including those called “left of center,” still implement macroeconomic policies related to the Washington Consensus such as freer trade, fiscal and monetary discipline, and attraction of foreign direct investment.

It is telling that despite the serious deterioration in economic freedom in countries such as Venezuela, Ecuador, and Argentina economic liberty has actually increased—slightly—in Latin America as a region in the last decade. According to the Economic Freedom of the World , Latin America went from a regional average grade of 6.56 (out of 10) in 2000 to 6.62 in 2009. Implying that Latin America has somehow turned its back on market-friendly policies is misleading.

Third, Krugman looks at the economic performance of Latin American governments based on their ideological affiliation, suggesting that social democratic regimes have a better record than non-left-of-center governments. However, the study on which he bases his post relies too heavily on analyzing governments by their ideological labels, rather than looking at their actual economic policies. This can be very misleading. For example, during the period covered by the study (2000s), Chile is ranked as left of center, even though during that decade the country increased its level of economic freedom, moving up in the ranking of the Economic Freedom of the World index from 28th place in 2000 to 5th in 2009.

Finally, Krugman finished his post questioning Chile’s free market model and private pension system (even though the study he was referencing categorizes Chile as “left of center” and thus credited that ideological camp for Chile’s healthy economic indicators). Krugman doesn’t provide evidence to substantiate his criticism other than making a presumable reference to the recent student protests in Chile. If he looked at the facts, he would see a different picture. He would find that Chile is the country with the most impressive record in poverty reduction in Latin America (the poverty rate fell from 45 percent in the mid-1980s to just 15 percent in 2011), that it has tripled its income per capita since 1990 to $16,000 (the highest in Latin America), and that it is set to become the first developed nation in Latin America within a decade. What is it about this record that Krugman finds so annoying?

Tuesday Links

  • Still think the War on Drugs is a good idea, or that it’s working? Decreases in cocaine production in Colombia have been almost fully offset by increases in Peru and Bolivia.
  • Why is nobody talking about the right of Wisconsin taxpayers to not deal with unions?
  • “If you’re the rare bird who favors limited government at home and abroad, you can hardly expect good news from a poll of this generation’s Tracy Flicks.” (Maybe not.)
  • NPR and PBS are using taxpayer dollars to lobby for… more taxpayer dollars. But that’s hardly a new game in Washington.
  • Afghanistan: nation-building on crack.
  • Saying no to a no-fly zone over Libya should be a no-brainer:


Evo Morales’ Soccer Behavior Mirrors His Governing Style

The video speaks volumes: During a “friendly” game played in La Paz, Bolivia’s President Evo Morales (wearing green jersey number 10) approaches a rival player to confront him for a previous foul. Suddenly, Morales takes justice into his own hands and savagely knees the player in the groin. The referee sees the action but doesn’t red card Morales. Even the teammates of the assaulted player don’t complain. Instead, the referee expels the attacked player. The game goes on and Morales scores the tying goal for a 4-4 match. It was later reported that Morales’ security detail tried to arrest the player.

Evo Morales’ thuggish attitude towards his soccer rivals mirrors his attitude towards political opponents (actually, the team he was playing against was led by the mayor of La Paz, a political foe of the president). Before and since becoming president in 2006, Morales has repeatedly resorted to violence in order to advance his socialist agenda. A couple of other episodes are indicative of Morales’ governing style:

In November 2007, after months of impasse in the Constitutional Assembly in which the text of a new constitution could not be approved because of a lack of an absolute majority, the government called for a session of the Assembly to be held at a military base. When the opposition delegates tried to enter the premises, they were prevented from doing so by the military, the police and Morales’ supporters. The text of Bolivia’s new constitution was thus approved by the unrepresentative Assembly.

To become the law of the land, the new constitution had to be approved by a national referendum. However, the opposition-controlled Senate refused to call a referendum on a constitutional text that was rightly viewed as illegitimate. In February 2008 Morales called the leaders of the opposition to his official residence for a negotiation. Upon arrival, they were told that the president wasn’t there and that the bill to call for a referendum was about to be submitted for a vote on the Senate floor. When the legislators tried to return to the Congress, they were prevented doing so by Morales’ supporters and the police. The Senate passed the bill and Morales went on to win the referendum by a wide margin.

A couple of years ago, Evo Morales candidly recounted his attitude to following the rules: “When some lawyer tells me ‘Evo, you’re making a judicial mistake; what you’re doing is illegal,’ well, I keep going even though it’s illegal. I then tell the lawyers: ‘If it’s illegal, go ahead and make it legal. That’s what you went to school for.’”

Nobody should be surprised by Evo’s soccer antics. They are just a metaphor for his governing style.

More Censorship in Venezuela

More than 16,000 murders occurred in Venezuela in 2009. That compares with 4,550 homicides reported in 1998, the year Hugo Chavez was elected president. The fact that Venezuela now has one of the world’s highest violent crime rates underscores the Chavez revolution’s utter neglect of the basic and proper functions of government.

Yet the problem is downplayed by the government, which inexplicably blames capitalism and poverty even though official figures show a fall in poverty rates. As if to highlight the government’s insensitivity, the president of state-run TeleSUR TV station recently laughed off the problem in a widely-seen CNN interview.

Last week, El Nacional newspaper published this graphic front-page photo of crime victims in a morgue. The official response from a government-controlled court has been to ban media from publishing violent images for one month. Thus, today El Nacional ran the front-page photo below, which reads “Censored” in the space where photos should be. The way the Bolivarian Revolution is going, Venezuelans can expect the government to continue resolving social problems in the same way.

The Importance of Institutions: A Bolivian Perspective

Following what has become an ominous tradition during his presidency, Evo Morales celebrated Labor Day (May 1st in most of the world) by expropriating energy companies. Early Saturday, Bolivian troops occupied the facilities of four private electrical utilities, which were owned until then by local and foreign companies.

In explaining his tough-handed modus operandi, Morales shared his views [in Spanish] on the importance of government institutions in solving legal disagreements in Bolivia:

“We made every effort to reach an agreement with the private multinational companies, and if there’s no will to reach an agreement through dialogue, then we have government institutions such as the army and the national police.”

Evo Morales’ Biometric Identity System

It was with interest and concern that I read about the new election law recently signed by Bolivian President Evo Morales. The AP reports that it “sets stricter standards for voter authentication, introducing a $30 million system of biometric identification, based on voters’ fingerprints.”

It is important to secure voting systems against fraud, but be careful how you do it. Identity systems are powerful administrative tools which historically haven’t mixed well with authoritarian governments.

A biometric voter identification system was apparently a demand of Morales’ right-wing opposition. Don’t be surprised if he uses it to consolidate power or do far worse than that to his political rivals.

Some advocates have dabbled in supporting a national ID in the United States for election administration, but that would be error. I wrote about the many risks of uniform identity systems in my book Identity Crisis: How Identification is Overused and Misunderstood.