Tag: market reforms

NCLB a Barrier, Not an Aid

Sandy Kress, former Bush administration official and architect of NCLB, took issue last Friday with my post criticizing the law. Today, education writer Rishawn Biddle publishes and expands on Kress’ critique. Sandy’s objection was that Idaho, one of the states planning to start ignoring the law, isn’t performing well academically and so “is hardly a poster child for arguing against a federal role.”

As it happens, I wasn’t using Idaho—or any “poster child”—to make the case against against NCLB. I was using the experiences of real children. More specifically, I was using the performance of nationally representative samples of students on the National Assessment of Educational Progress Long Term Trends tests. The LTTs for students near the end of high school are the best gauge we have of the performance of the nation’s public schools over time. The stagnation and decline in those results across subjects are not the only evidence or argument against NCLB, but they are compelling.

Rishawn offers little in the way of argument or evidence to support his own comments, but one of them is nevertheless worth responding to because it represents a common view that is not only wrong but exactly backwards: the notion that NCLB helps to advance the kind of market reforms that actually work. Au contraire.

The state tests NCLB focuses on are all but worthless for comparing states to one another or for determining trends over time, so the law tells us considerably less than we could already discover from the NAEP.  NCLB has, however, been an epic, expensive distraction, pulling the efforts of countless activists, policymakers and educators away from the market reforms that work and consuming their time arguing about the details of a policy that never had a sound research base to support it and still does not. Adding insult to injury, NCLB exacerbated the unconstitutional overreach of its earlier form, the ESEA. If NCLB worked better and more efficiently than alternative policies, and had no deleterious side effects, I would be all for amending the Constitution to allow it. It doesn’t.

So no, NCLB is not an aid to meaningful reform. It is a barrier. The sooner we get over it, the better.

A Georgian Constitution of Economic Liberty

The former Soviet Republic of Georgia is a late economic reformer, having started such liberalization after the Rose Revolution in 2004. But it is one of the most successful post-Soviet reformers, and it may be the country that has implemented the largest range of serious market reforms in the shortest period of time. Its growth rate from 2004 through 2008 averaged 7.6 percent per year (which includes the comparatively low 2.1 percent rate of 2008 that resulted from the global financial crisis and the war with Russia).

Last month, the government submitted a draft act to Parliament that calls for amending the country’s constitution so that it would safeguard various elements of economic freedom. The amendments would put caps on public debt, spending and deficits; and ban any kind of price controls, state ownership of banks and financial institutions and restrictions on currency convertibility, and any kind of control over the movement of capital. New taxes or increases in tax rates would require approval through a national referendum.

With the possible partial exception of Hong Kong’s Basic Law, I’m not aware of any other constitution that explicitly enshrines economic freedom. I’m told by Georgian colleagues that prospects for passage of the law looks good, with the constitution being amended as early as next month.

Reflections on China’s 1949 “Liberation”

During a speaking trip to China three years ago, the young tour guide in Beijing kept referring to “the liberation.” I soon realized that she meant the October Revolution of 1949, in which Mao Tse Tung and the communists seized power and began their rule 60 years ago today.

Far from liberating China, the reign of Mao represents one of the worst tyrannies in the history of mankind. Opposition parties, free speech and freedom of religion were quickly eliminated. The Great Leap Forward of 1958-61 forced the collectivization of agriculture, resulting in a famine that killed tens of millions. The Cultural Revolution of 1966-76, while not as deadly, unleashed chaos that crippled the economy and scarred a generation. As Gordon Chang writes in a Wall Street Journal op-ed this morning, the celebration by the Chinese people will be understandably muted.

China’s real liberation began not 60 years ago, but 30 years ago, with the reforms of Deng Xiaoping. While China remains an oppressive, one-party state politically, its economy has taken a true great leap forward in the past three decades because of market reforms in agriculture, industry, and trade. China’s liberation has far to go, but the Chinese people today are much more free of government interference in their personal, daily lives than they were in the time of Mao.

When I point to China’s economic progress as an example of what trade liberalization can deliver, my debate opponents will sometimes counter that China is a communist country. But China’s dramatic growth has not occurred because of its residual communism. For 30 years now, its government has been in the process of abandoning the communist economic policies of Mao and his fellow “liberators,” much to the benefit of the Chinese people and the world.

Why Chile Is More Economically Free Than the United States

42-16335429In the 2009 Economic Freedom of the World Report, Chile is now #5, one place ahead of the United States.

In 1975, of 72 countries, Chile was No 71. How did this happen? The explanation lies in what I call the “Chilean Revolution,” because it was as important and transformative to my country as the celebrated American Revolution that gave birth to the United States.

The exceptional political circumstances of this period have obscured the fact that from 1975 to 1989 a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward economic and political freedom (from a starting point where there was neither one nor the other). This revolution not only doubled Chile’s historic rate of economic growth (to an average of 7% a year, 84-98),  drastically reduced poverty (from 45% to 15%), and introduced several radical libertarian reforms that set the country on a path toward rapid development; but it also brought democracy, restored limited government, and established the rule of law.

In 1998, The Los Angeles Times described the importance of the Chilean Revolution to the world:

In a sense, it all began in Chile. In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports. In 1981, Chile privatized its social-security system. Many of those ideas ultimately spread throughout Latin America and to the rest of the world. They are behind the reformation of Eastern Europe and the states of the former Soviet Union today… which demonstrates, once again, the awesome power of ideas.

The role and achievements of Chile’s team of classical liberal economists is well known. They were the ones who in 1975, once the quasi-civil war was over, decided to carry out a principled, “friendly takeover” of the military government that had arisen from the breakdown of democracy in 1973 (here is my essay, published in “Society”, on that drama). Much less well-known, however, is that they were also the foremost proponents of a gradual and constitutional return to a limited democracy.

In fact, on August 8, 1980, a new Constitution, containing both a bill of rights and a timeline for the restoration of full political freedom, was proposed and approved in a referendum. In the period 1981-1989, what Fareed Zakaria has called the “institutions of liberty” were created—an  independent Central Bank, a Constitutional Court, private television and universities, voting registration laws, etc—since they were crucial for having not only elections but a democracy at the service of freedom. Then on March 11, 1990, an extraordinary event happened: the governing military Junta surrendered its power to a democratically elected government in strict accordance to the 1980 Constitution (here is my note on the restoration of democracy in Chile).

Since 1990, Chile has had four moderate center-left governments and, despite minor setbacks on tax, labor and regulation policies, the essence of the free-market reforms are still intact. The 1980 Constitution is the law of the land, and has been amended by consensual agreements among all parties represented in Congress. Not only is Chile now at the top of rankings on free trade (number 3 in the world after Hong Kong and Singapore) and transparency (less corruption that in most western European countries), but it is expected to be a developed country by 2018, the first in Latin America.

Nobel Laureate Friedrich Hayek proved, again, to have been a visionary when he stated in 1981: “Chile is now a great success. The world shall come to regard the recovery of Chile as one of the great economic miracles of our time.”

NPR and El Salvador: Setting the Record Straight

NPR had a story this morning on “social inequalities and growing discontent in El Salvador.” Relying exclusively on anecdotal evidence, the story was full of mischaracterizations about the economic and social reality of that country.

Let’s see: Regarding the upcoming presidential election this Sunday, NPR says,

…whichever candidate wins, he faces a faltering economy, entrenched poverty, rampant crime and a population that’s still recovering from a civil war.

Granted, rampant crime is a major problem—unfortunately El Salvador is the most violent country in the world—but a faltering economy? NPR didn’t provide any evidence aside from anecdotes.

Actually, El Salvador has made enormous progress thanks to an aggressive agenda of market reforms. Once you account for revised population data due to a new census, El Salvador’s per capita GDP has grown by 3.3 percent since 1992—the third highest rate in Latin America during this period, after the Dominican Republic (3.8) and Chile (3.6). And as I point out in my new paper on El Salvador, there is ample evidence that official figures significantly underestimate the performance of the economy, mostly because the service sector—an area in which El Salvador leads the region—is grossly undervalued in the country’s estimation of GDP. The economy is probably more than 30 percent larger than indicated by the official data. Thus the average per capita growth rate since 1992 has been approximately 5.2 percent per year.

Entrenched poverty? Since the end of the civil war in 1992, the number of households below the poverty line has diminished by more than 25 percentage points. Extreme poverty has also declined by almost 18 percentage points. During the first decade of the market reforms, net enrollment in primary education increased by close to 10 percentage points, infant mortality declined by 40 percent, and the population without access to safe water was halved. Yes, almost 35 percent of Salvadoran households still live in poverty, but by any indicator, poverty is in retreat.

One of the most telling facts about how tough life is in El Salvador right now is that a quarter of its population chooses not to live here. An estimated 2 million Salvadorans out of a population of less than 7 million live and work in the United States.

It is true that approximately 2 million live outside, but the bulk of Salvadorans who immigrated to the U.S. left during the period of civil conflict. Immigration has certainly continued, but presenting it in its entirety as a sign of economic hardship, as NPR correspondent Jason Beaubien does, is misleading.

El Salvador has moved aggressively under the conservative Nationalist Republican Alliance, or ARENA party, to align its economy with the U.S. In 2001, it adopted the U.S. dollar as its sole currency, and in 2006, it ratified a free-trade deal with the United States. The trade agreement led to a modest boost in exports, but in the market, shoppers and shopkeepers say it hasn’t helped them.

How does adopting free market reforms constitute an effort to “align” the economy to the U.S.? By liberalizing their economy, Salvadorans authorities are protecting the cash value of pensions and salaries, lowering interest rates, have incentivized savings,  and provided modern and affordable public services, etc. Their goal was to make the Salvadoran economy more dynamic and competitive, not to “align” it to the U.S.

Also, the increase in exports since CAFTA was implemented three years ago has been anything but “modest.” Exports were 34 percent higher last year than in 2005, the year before CAFTA went into effect. From 1991 to 2007 El Salvador had the highest export growth rate in all Latin America.

This is not to say that there aren’t serious challenges facing El Salvador. As I said earlier, crime is the most serious of all, and the main source of popular discontent in the country. The country is feeling the consequences of the global economic downturn, as are most developing countries. But the way that NPR presents life in El Salvador demands a serious reality check.