The Pendulum in Latin America
I just got back in time for Thanksgiving. I was in Mendoza and Buenos Aires, Argentina for a week, giving public seminars. I go to Latin America fairly regularly on business and pleasure, and I love it. Maybe it’s because I speak Spanish, maybe because the people are so gracious. I don’t know, but from the Mexico-U.S. border down to the Tierra del Fuego of Chile and Argentina-- it’s a great continent.
And it’s a continent that deserves a far higher and more stable economic status than it has had. With a few exceptions, countries in Latin America have for years suffered economic dislocations peppered with political chaos.
Many experts have attempted to explain why with detailed analysis and documentation. My own theory is simpler. I see Latin America as weighted by a metaphoric pendulum that swings wildly back and forth, left to right to left to right……
See, the right wing in Latin America (like the corporate moguls who have cozy relationships with protectionist government officials, the landowners and financiers who enjoy riches and power, etc.) is primarily concerned with hoarding and protecting wealth. The left wing (like old fashioned socialists, communists, Peronists, unionists, etc.) is primarily concerned with dividing and redistributing wealth. One wing gains power for a while, the economy goes south, and then the pendulum swings and the other wing gains power, and the economy goes south some more, and then the pendulum swings back to the first group, and so on—with the inevitable political instability that accompanies such pendulum gyrations. Right now, as seen by the examples of Venezuela, Bolivia, Nicaragua, Brazil, and Paraguay, the pendulum seems to be swinging left again.
But right or left wing yields economic stagnation, because both wings are working off a premise of established wealth. One group wants to protect it, the other to divide it. What’s missing is a wing that is primarily concerned with creating wealth. To create wealth, you need more than political democracy. You need fiscal and monetary policies that encourage growth. You need laws and institutions that honor contracts. You need accounting systems that track the flow of money honestly and accurately. You need capital access that encourages property ownership, entrepreneurship and R & D. You need an environment where it’s possible to start a business without a crushing burden of paperwork, rules, and regulatory hurdles. You need a business culture where merit and effort are more important than family ties. You need government oversight marked by a minimum of graft and corruption. You need an aggressive attack on government protectionism that currently exists with many entrenched, complacent, arrogant companies. You need leaders who champion free markets as well as free elections.
When that happens on a continent-wide, institutional basis, the pendulum will finally stabilize, and Latin America will achieve the potential is richly deserves.
And it’s a continent that deserves a far higher and more stable economic status than it has had. With a few exceptions, countries in Latin America have for years suffered economic dislocations peppered with political chaos.
Many experts have attempted to explain why with detailed analysis and documentation. My own theory is simpler. I see Latin America as weighted by a metaphoric pendulum that swings wildly back and forth, left to right to left to right……
See, the right wing in Latin America (like the corporate moguls who have cozy relationships with protectionist government officials, the landowners and financiers who enjoy riches and power, etc.) is primarily concerned with hoarding and protecting wealth. The left wing (like old fashioned socialists, communists, Peronists, unionists, etc.) is primarily concerned with dividing and redistributing wealth. One wing gains power for a while, the economy goes south, and then the pendulum swings and the other wing gains power, and the economy goes south some more, and then the pendulum swings back to the first group, and so on—with the inevitable political instability that accompanies such pendulum gyrations. Right now, as seen by the examples of Venezuela, Bolivia, Nicaragua, Brazil, and Paraguay, the pendulum seems to be swinging left again.
But right or left wing yields economic stagnation, because both wings are working off a premise of established wealth. One group wants to protect it, the other to divide it. What’s missing is a wing that is primarily concerned with creating wealth. To create wealth, you need more than political democracy. You need fiscal and monetary policies that encourage growth. You need laws and institutions that honor contracts. You need accounting systems that track the flow of money honestly and accurately. You need capital access that encourages property ownership, entrepreneurship and R & D. You need an environment where it’s possible to start a business without a crushing burden of paperwork, rules, and regulatory hurdles. You need a business culture where merit and effort are more important than family ties. You need government oversight marked by a minimum of graft and corruption. You need an aggressive attack on government protectionism that currently exists with many entrenched, complacent, arrogant companies. You need leaders who champion free markets as well as free elections.
When that happens on a continent-wide, institutional basis, the pendulum will finally stabilize, and Latin America will achieve the potential is richly deserves.
posted by Oren Harari at 5:37 PM
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