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07 jan 2016
The Chilean success appears to be of very little interest to the voters in Argentina and Venezuela.
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Power of Bad Ideas: Why We Keep Choosing Failed Policies
By Marian L. Tupy
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It is not easy to change the economic direction of a nation state. Sometimes, like in former East Germany and present-day North Korea, a switch from central planning to the free market is held back by the brute force of the state. The people might know or “suspect” that life is better in neighboring capitalist countries, but are powerless to affect change.

 

But, what explains repeated experimentation with discredited economic policies in countries with a relatively high degree of political freedom? What, for example, accounts for Argentina’s periodic bouts of populism and the concomitant lack of curiosity about the success of free market reforms in Chile? And why do many South Africans favor catastrophic economic policies of Robert Mugabe’s Zimbabwe rather than trying to emulate the meteoric rise of free-market Botswana?

 

Bad ideas have a remarkable staying power. Statism, for example, keeps on reappearing – in different forms, but with similarly disastrous consequences.

 

To begin with, consider the examples of Argentina and Venezuela. The voters in both countries have recently rejected statist economic policies by voting for a market-friendly presidential candidate in Argentina and an anti-Chavez parliamentary majority in Venezuela. The electoral outcomes in the two Latin American countries were not completely unexpected. Peronism and Chavism have benefited from high commodity prices and shady electoral practices throughout the 2000s. In recent years, however, both countries suffered serious economic reversals and saw an up-swell in popular opposition.

 

But high commodity prices and intimidation do not explain all of Hugo Chavez’s and Cristina Kirchner’s popularity. These leaders had a true following and reached beyond those who benefited economically or were threatened politically. Who, after all, can forget Sean Penn’s, Michael Moore’s and Oliver Stone’s infatuation with the chubby Venezuelan?

 

Remarkably, the latest bouts of Peronism in Argentina (2001-2015) and socialist policies in Venezuela (1999-2015) came after the success of the Chilean economic model of development became apparent. Beginning in the 1970s, Chile has introduced many market-friendly policies, becoming the economically freest country in Latin America. As a consequence, Chile grew.

 

Consider that in 1960, Chilean per capita income was 66 percent that of Argentina and 42 percent that of Venezuela. In 2014, the Chileans were 24 percent richer than the Argentines and 63 percent richer than the Venezuelans. What was once a very poor country became Latin America’s richest.
 

 

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I have spoken to a number of Latin American specialists who have noted that the Chilean experience appears to be of very little interest to the voters in Argentina and Venezuela.

 

In a similar vein, I have observed a curious lack of interest in the success of Botswana while living in South Africa and travelling to Zimbabwe. The three countries are immediate neighbors. For decades, Botswana had been economically freer than other African countries and became relatively wealthy as a consequence. Its rise from one of Africa’s poorest countries to one of Africa’s most prosperous has been meteoric. Yet South Africans remain unimpressed.

 

Since 1994, South Africa has been governed by a tri-partite coalition of the African National Congress, trade union COSATU and the South African Communist Party. The economic results have been deeply disappointing, though not outright disastrous.

 

The dissatisfaction with the ANC-led government has increased in recent years. Very few people, however, point to Botswana as an example to follow. The main beneficiary of South Africa’s economic woes appears to be a deceptively-named Maoist party called the Economic Freedom Fighters, which is led by a well-fed former ANC firebrand Julius Malema.

 

Malema’s heroes include the late Hugo Chavez and Zimbabwe’s nonagenarian dictator Robert Mugabe. Mugabe took over one of the better-run African countries and ruined it. By expropriating agricultural land and majority stakes many privately-owned enterprises, he presided over the second highest hyperinflation in recorded history and economic contraction that erased 50 years of economic progress.

 

Zimbabweans ought to be very interested in Botswana’s experience. South Africa has always been the region’s economic powerhouse, which imbued its citizens with a sense of superiority. Botswana and Zimbabwe, in contrast, started at the very bottom. But, while Botswana has prospered, Zimbabwe has stagnated. Between 1960 and 2014, Botswana’s GDP per person increased by an astonishing 1,935 percent. In Zimbabwe it shrunk by 3 percent.

 

It is true that Zimbabwe is no longer a politically-free country, but most Zimbabwe specialists would agree that Mugabe continues to enjoy considerable support in rural areas. Yet, in my travels to Zimbabwe, I have never encountered much interest in the actual policies that brought the Botswanan miracle about – even among those Zimbabweans who were forced by acute shortages to do their shopping in neighboring Botswana.
 

 

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For decades, free market policies have been vilified and statist policies promoted by parts of the media and intelligentsia, and many politicians, in Argentina, Venezuela, South Africa and Zimbabwe. Ideas have consequences. One of the most consequential outcomes of the anti-free market propaganda seems to be the willingness of some people to ignore reality – at least for a time.

 

This first appeared in CapX.

Marian L. Tupy is a senior policy analyst at the Cato Institute and editor of HumanProgress.org.

Topics Economic & Human Freedom/Global Competitiveness/Government & Democracy/Human Development/Wealth & Poverty/Economic Growth
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