Learning Lessons from Latin America

Opponents of Socialism seem to delight in dissecting the ongoing disaster that is Venezuela. Unfortunately, however, young supporters of Corbynism are not listening – their eyes glaze over when Venezuela is mentioned; they fail to see the relevance.

Perhaps we should instead shift our attention to a country further round the Caribbean coast clockwise from Caracas, namely Costa Rica, a country that puts a high priority on education, healthcare, welfare and environmental protection, is relatively egalitarian, and what is more doesn’t have a standing army: what is there for a typical millenial leftist not to like?

Costa Rica is nearly two and and half times the size of Wales, with a population density of about two-thirds that of Wales. Over a quarter of the country is protected, being dedicated to national parks and other wildlife reserves and refuges. Only a tiny proportion of the protected area — 0.003% — is accessible by tourists.

In terms of its politics, I had been vaguely aware that Costa Rica was different to its neighbours for a number of years, but what really brought it home to me was, perhaps oddly, its national team’s approach to the game of football. During the last football World Cup in Brazil, Costa Rica was in the same group as England; they played with such a sense of joy made such an impact on me that I did not begrudge the fact that their victories over Uruguay and Italy knocked England out before the final group game. 

Costa Rica is supposed by many to be one of the happiest countries on the planet. Having recently visited it, and having also visited other reputedly happy countries such as Australia, Canada and Switzerland, I can quite believe that to be true.

So why is Costa Rica so happy? Is it happy because it is a stable liberal democracy? Or is it a stable liberal democracy because it is happy?

I have seen some theories that its happiness is helped by its weather, with some parts of the country enjoying plenty of sunshine. But much of the country has large amounts of rainfall, with uncomfortably high humidity, and plenty of nasty biting insects. That does not therefore seem to account for it.

Other theories indicate that it is related to the importance placed upon family and community. Each small town of any significance almost invariably has 4 things: a church, a school, a bar and a football pitch, perhaps ideal ingredients for social cohesion.

The most cogent explanation I have seen is that, at the time of colonisation, it lacked both mineral resources and an indigenous population to exploit. Indeed, in 1719, a governor pronounced it “the poorest and most miserable Spanish colony in all America”. The early Costa Rican settlers therefore had to work the land themselves, discouraging the establishment of large plantations, thus avoiding the import of slaves, and leading to it becoming a far more egalitarian nation than its neighbours.

Its society should therefore appeal to not just those attracted to leftist philosophies but also to classical liberals and libertarians.

Costa Rica has been changing in recent times, however. It is now a mainstream (if not mass) tourist destination, there being direct flights not only from the USA and Canada but also now from European cities (BA flies to San Jose twice a week from Gatwick, for example).

Costa Rica has also set out to attract foreign investment, in the shape of free trade zones, with investment and tax incentives. As a result it has become substantially more prosperous, with GDP increasing by nearly 50% between 2011 and 2017.

This increase in prosperity is giving rise to some issues: coffee plantation owners are finding that they can’t recruit Ticos (as the Costa Ricans call themselves) for the harvest, and are having to import labour from Nicaragua and Colombia instead. Indeed, Nicaraguans and Colombians now make up more than 10% of the population.

It will be interesting to see whether, as Costa Rica becomes more prosperous, it remains as happy. So why is it that hardly anyone else is writing about Costa Rica?

Labour economic policy and cake

As I was reading Ben Kelly’s excellent piece on Labour’s misguided education policy, I encountered something which has been bothering me for some time about Leftist understanding of wealth, and which I do not recall seeing addressed properly by anyone:

It’s safe to say that Jeremy Corbyn’s chilling threat of a “reckoning” is exactly what we don’t need; he thinks it will mean giving back wealth to “the people”, actually it will mean wealth rapidly leaving the country.

Leftists seem to assume that the country’s wealth is like a cake of fixed size — so they just need to decide how to slice it up. And Ben’s rebuttal has not tackled that — the implication is that a slice of the cake would head abroad as a result of Labour’s policies, which, while undoubtedly being correct, is not the whole story, nor indeed the major impact.

The reality is that the national cake would diminish in size under Labour’s policies even if none of the slices emigrated. Wealth is not static, but is constantly being consumed, and so new wealth needs to be created to replace it. At a basic level, some forms of wealth might be durable, but others are perishable; since we are talking about cake, people don’t just exchange a fixed number of slices of cake with each other; some of them get eaten. And since we know that you can’t both have your cake and eat it, once some the cake has been eaten, someone needs to bake a new one in order to restore the overall amount of cake available to everyone.

The point is that Socialist economic policies result in less wealth creation, due to the “strawberry picking effect” — hence the national cake would shrink, and those who would suffer the most — ironically the intended beneficiaries of Labour policies — being the poor.

Why recessions happen: the Theory of Crud

Essentially, recessions happen when there are too many people not engaged in wealth-creating activities being supported by those who do actually create wealth, as explained by the following work of genius:

http://bedejournal.blogspot.co.uk/2012/01/why-recessions-happen.html

This should be widely read and understood - not that linking to it on my own modest blog is going to help very much!


Also worth reading by the same author, on the general uselessness of macro-economists:

http://www.huffingtonpost.co.uk/dr-james-hannam/economics_b_6953320.html

Bad Luck

“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as "bad luck.”

― Robert A. Heinlein


I'm a little hesitant at quoting Robert A Heinlein; I have read the majority of his science fiction output, and certainly don't agree with all of his apparent ideas, but in this case I think he has a point.

The point in question is made in more detail by Daniel Hannan:

http://www.capx.co/nelson-mandela-was-wrong-about-poverty/

One thing that leftists don't seem to take into account is that wealth is not a static thing - there isn't a fixed amount to be shared out; instead, wealth is dynamic, with it constantly being destroyed as well as created.

(If you find that concept a little alien, think of the most basic forms of wealth creation: the production of food. Food, once harvested, has a value, but not once it has been consumed; moreover, even when not consumed, it mostly deteriorates over time. It's similar with other forms of wealth; who wants a 10 year old mobile phone? Even houses wear out eventually.)

Of course, a large proportion of economic activity is neutral, and just shifts wealth from one person to another: for example, a rock concert can hardly be said to create any lasting value.

Therefore, if a large number of people are engaged in activities that do not create any lasting wealth, and yet are consuming wealth themselves, then it surely must follow that others are creating a substantial amount of wealth, enough to account for the wealth consumed/destroyed by everyone else, with what's left over accounting for economic growth.

On a personal level, how many people genuinely create the wealth themselves that they consume? If not, then they are dependent upon those who do create wealth.

My impression is that we, as a society, having progressed so far from an agricultural economy, have become dependent for our standard of living on a very small minority of wealth creators. The point being that, if we do anything to deter them, our own standard of living will surely suffer grievously.

Welfare Reform

This cartoon was widely circulated amongst leftists on social media in the aftermath of the 2015 General Election:

(You can find the original here: http://wondermark.com/c1122/)

The inference I draw is that this is a criticism of Ian Duncan Smith's reforms to the welfare state (unless they think that Tories are completely against all forms of welfare?).

If so, and if taking things to absurd levels is acceptable in political discourse, then perhaps the welfare state could be visualised as a system whereby a drowning person is rescued from the water, and then has their clothes dried out for them by placing them in front of a fire, but in such as way as to tether them close by, with the fire being fed by equipment that would otherwise be used for future rescue attempts. Meanwhile the person rescued is slowly being roasted...

Seriously, though, can leftists not realise that welfare is a double-edged sword?

People need four things from life to avoid misery:
1) a basic standard of living;
2) purpose;
3) self-determination;
4) meaningful interaction with other humans.

Welfare provided by the state might address the first of these, but subverts the second and the third, and over time can result in an erosion of the fourth (partly due to the disengagement of remainder of the population).

Employment can address all four (in this country, anyway - but clearly not in the case of migrant workers in Qatar, for example).

I'm not saying that welfare isn't a necessary short-term measure, nor that those who are genuinely unable to care for themselves in the long-term should not be provided for generously; instead, I'm saying that we need a better system than something provided remotely and facelessly by the state. There needs to be engagement with welfare claimants from the wider community, especially with assistance to retrain those lacking in skills to find employment, but there also needs to be some sort of reciprocity. We are all interdependent on each other, so we need to sweep away the culture of entitlement.

A question I would like to ask is: why should welfare claimants in this country be entitled to a better standard of living not only than those in most other countries in the world, but also than that enjoyed by a typical worker in this country in the days of their great-grandparents?

If the answer is "because we're a rich country and we can afford it" then my response would be: we might be rich, but even we are not that rich; if we were, then we wouldn't have such a large budget deficit. Isn't it immoral to borrow now for consumption? That's the same as throwing the rescue equipment on the fire - eventually, we will run out and not be able to save anyone else in danger of drowning...