Category: Globalization

Discourse: Nationalization, Private Companies and Crony Capitalism

The neoliberal (a.k.a. crony capitalism) ruling of the world during the last 50 years is usually generalized as a “big fish eats small fish” relationship. The story continues, with the big fish in Washington, Brussels and Moscow fed themselves with the riches of the world and profited from globalization.  Meanwhile, the small fish continued breeding and feeding the always hungry lords.  This general discourse is repeated in most if not all the academic papers dealing with postcoloniality and globalization.

The impact of the ideas of these intellectuals is widespread and not easily observable for the ignorant masses.  As such, when you read the newspapers in Latin America or Africa in regard to the “new” nationalizations being undertaken by the “new” socialist/anti-neoliberal governments in Argentina, Bolivia, Brazil, Greece, Lithuania, and Sri Lanka since 2011 people usually ignores that there is nothing “new” in these actions.

These nationalizations of privately owned assets have been in many of the cases actual renationalizations of companies that were not owned by the principles of free market ideas, but that had been privatized by corrupt social democratic governments 50, 40 or 10 years before and who created new privately owned privileged companies.  As a result of these social democrat and socialist governments many privately owned companies emerged as the bastions of crony capitalism, inefficiency and corruption.  The previous, generally increased as closer the national industries were owned by crony private companies that owned single-crop cultive exports and resource rich regions.

To mention short examples of the previous, recently in Argentina Yacimientos Petrolíferos Fiscales (YPF; English: “Treasury Petroleum Fields”) was renationalized (not nationalized) by the government under claims of corruption, inefficiency and negative benefits to their national interests.  In Bolivia, Transportadora de Electricidad (TDE) was nationalized by Evo Morales government.  However, TDE was also a fruit of the neoliberal and crony capitalist deals established in 1952 after a coup d’état that established a military socialist democracy with the party  Revolutionary Nationalist Movement (MNR) which allied into a military-nationalist clique that lasted for 50 years.

Privately owned companies produce always more efficient and better products than state-owned companies.  However, privately owned companies that have benefited from government granted privileges for decades not necessarily will produce more and better services and products than state-owned companies.  The previous is something that few of us dare to identify and explain with a non-contradictory historical and philosophical background.  Meanwhile, the great majority of academics influenced by collectivist philosophies will start writing articles and books applauding the “successful” renationalizations and condemning those free-market authors who will write back and fight.

Indeed, there is a difficult road in defending private property and privately owned businesses in the context of countries and regions that lack respect for individual rights and the rule of law.  As such, to defend the private vs collective in those circles it is necessary that first we identify how the societies are currently organized around the collective inefficient systems of social and economic organization.  In the case of Bolivia and Argentina it is necessary for us to identify how these business and societies are not structured and organized around the principles of free market and individual rights.  By understanding and explaining this clearly there will be a chance to change the discourse of discussion from “why is renationalization good?” to “why laissez faire capitalism is better than the privately owned business of crony capitalism?”

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April 23, 2012. World Book and Copyright Day

Today I am joining the celebration of the World Book and Copyright Day (also known as International Day of the Book or World Book Days) a yearly event on 23 April, organized by UNESCO to promote reading, publishing and copyright. The Day was first celebrated in 1995 and in 2012 the UK World Book day was celebrated on March 1, 2012.[1]

As part of my celebration I am sharing with you some quotes from one of my favorite books.  This year I have chosen the book “The Law” written by Frederic Bastiat.  The book was first published as a pamphlet in June, 1850  and later became widely read in Europe and the world.

“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” ― Frédéric Bastiat, The Law

In The Law, Bastiat states that “each of us has a natural right — from God — to defend his person, his liberty, and his property”. The State is a “substitution of a common force for individual forces” to defend this right. The law becomes perverted when it punishes one’s right to self-defense in favor of another’s acquired right to plunder.

Bastiat defines two forms of plunder: “stupid greed and false philanthropy”. Stupid greed is “protective tariffs, subsidies, guaranteed profits” and false philanthropy is “guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works”. Monopolies and Socialism are legalized plunder which Bastiat emphasizes is legal but not legitimate.

If you are interested in reading more about this ideas here are the links to the book,

The Law (English Edition) via Amazon.com

La Ley (Spanish Edition) via Amazon.com

La Loi (annoté) (French Edition) via Amazon

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On Earth Day 2012

Yesterday, April 22 many people gathered to celebrate “Earth Day” in order to call for a stop of human action and creativity in the process of transforming our planet.  Fortunately, against these destructive minds and philosophy many men and women have been working to show why the transformation of the world is something good, positive and beneficial for all of us.

I invite you to watch this wonderful video titled “If I wanted America to fail”

Furthermore, I also invite you to read the essay written by Alex Epstein (Founder and Director of the Center for Industrial Progress) in which he elaborates why human transformation of Earth is the product of our success in being more efficient and productive.  Because as Epstein wonderfully elaborates,

“It is only through technology–transforming the world around us for human purposes–that we eventually lessened that load. Technology, by creating a human environment in which our goals are easier to accomplish, buys us time–time to enjoy ourselves as we please, or time to create more technologies that will buy us even more time by improving our environment even more.” Read his essay here

Inequality in India

By 2011 the BRIC economies had some of the highest rates of income inequality adjusted to the Human Development Index among developing nations.  At the same time, the BRIC countries had consistently had the highest GNP growth versus the previous 10 years among developing nations.  How is it that there is not a parallel growth of the Human Development of its citizens?  The answer and one of the biggest challenges for the BRIC countries is the fact that a large amount of the GNP is distributed among small elites that control their market economies.

Economists and investors such as O’Neill, Krugman and others largely emphasize the expected growth of the BRIC economies as indicators of where to invest their money.  Unfortunately, they have not paid the same interest to what many other economists consider important: the human development of the people.  Fortunately, there are still some economists who since the decade of 1970 paid a lot of attention to the issues of freedom and equality.  Economists leaded by Milton Friedman, the Economics Nobel Prize of 1976, argued that economic policies should be focused in the freedom of its citizens as a primary value.  To them, stressing equality per se could lead to economic inefficiency as well as it would put in risk Freedom itself.  However, the same economist argued that it was necessary for developing economies that the government took a central role in poverty alleviation in order to keep the pace with the economic growth of its economies.  Unfortunately, this poverty alleviation is not being done in the BRIC countries and the economic difference between the poorest and the richest continues to grow. Since the 60s, a large group of economists emphasized the negative effects of not paying attention to a free and equal development in emerging markets; economists like Friedman and Hayek wrote a lot in this regard and even recently Elinor Ostrom’s ideas, who won the Nobel Prize in Economics in 2009, are still not listened by those who have forgotten the importance of good governance economic policies.

India is the country in which this income inequality versus human development is more pronounced.  Currently, India occupies the position #93 with an IHDI of 0.392 and the country has descended in the rank many positions since the last decade.  Inequality in the earnings among Indians has doubled over the last two decades, making it one of the worst performers among developing economies.  Why? This is again the result of the failed attempts by the Indian government to combat corruption, bad administration and under-payments and also of the unawareness of foreign investors.

The fact that foreign investors have no interest in securing the welfare of the Indian people is a problem.  To them, the investment opportunities of this specific BRIC country are of value until they find a better economy to move their money to.  However, the real stakeholders are not the foreign investors but the Indian Government and its groups of interest who should aim to secure the welfare of all of its citizens now that they have a chance.  While the growth of this economies will continue the effect it will have in such unequal societies will result in some of the worst rates of poverty and hunger ever seen in history. By 2025 India will be the most populous country in the world but also, it will have 268 million people (20.3%) living still with less than US$1.25 a day as reported by economists in the World Bank. The Indian government should go aligned with the current trade liberalization in order to support higher productivity in the private sector and to exploit its comparative advantage of having a labor-intensive industry to foster the production of goods and services.

Global integration of trade

National Geographic is running a wonderful website on Globalization, the international exchange of goods, services, cultures, ideas, has brought increased wealth for many and transformed forever the way humans interact. But while its roots may be in commerce, globalization‘s effects can be very personal.

Advances in communication and transportation have created a rich, unprecedented mixing of cultures throughout the world. But there is a drawback. As international travel, economic migration, and the global spread of music, films, and literature bring more people than ever into intimate contact, human diversity is vanishing.

A shared language is perhaps the most profound expression of group identity and a critical tool for passing cultural knowledge from one generation to the next. But globalization is about integration. Whether by choice, by circumstance, or under duress, thousands of cultural and linguistic traditions are disappearing as their new generations adopt dominant national and global languages.

Workers, from wealthy consultants to unskilled laborers, are also on the move as never before. Some migrants are encouraged by host countries or regional agreements; others avoid official avenues and often live a shadowy, parallel existence once they arrive. Immigration is high, but it is economic migrants—seeking work more than a new homeland—who define our age.

Read more from them here: EarthPulse by National Geographic