Progress Backwards

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“The mortgage-stones that covered her, by me, removed — the land that was a slave is free…”

~ Solon, recorded by Plutarch,
boasting of reducing Athens’ debt burden by inflating the currency

“Two years ago, there was nothing on this beach. And nobody. The guy who lived here with his family, he was just a caretaker.”

We were sitting on the porch of a beach shack, on a small hill overlooking Los Perros beach. The beach was broad, with white sand stretching out around a point of palm trees and then continuing a mile or two to another clump of hills. The effect of the green trees, white sand and blue water was a bit like a huge flag laid out on the ground before us.

We sat on tree trunks under a rusty tin roof, our backs against the rough boards of the house, enjoying the warm breeze.

“When I was a boy I used to come here to swim. This is the best swimming beach…and there was never anyone on it.”

But things have changed. Now, your editor is building a house on the hills near the beach. His children played in the surf as he and Antonio talked. And down the beach, right on the high-tide mark, a developer has begun a group of condominiums.

“I don’t know what he was thinking,” Antonio remarked. “I tried to tell him. Anyone who knows the ocean can tell that he’s too close. If we get a bad storm, the river will rise on one side and the ocean on the other. He’ll have real problems.”

The last real problems came about 10 years ago. A tidal wave washed away one of Antonio’s own houses. The old folks say that such a wave only comes along once every 100 years. The developer must have done the math; he, the buyers, and even the insurers will be long dead before the next one hits.

So progress continues. Now, at least, they put the footings deep in the sand…and hope the building holds together in high water.

All over Nicaragua, or at least everywhere we went, we saw evidence of progress. In Managua, there are new roads, new buildings, new restaurants, and shiny new gas stations on nearly every street corner.

Out in the country, the progress one sees is yesterday’s progress, not tomorrow’s. The invention of corrugated tin roofing changed the look of the place. Where once the traveler only saw graceful old houses with their clay tiled roofs…or hovels covered with palm fronds…he now sees cinder blocks and rusty tin. Everywhere he looks, he sees tin in various stages of decomposition. The tin is meant to be galvanized, of course, resistant to rain and weather. But in this climate, Galvan’s process seems to do little good. Rarely do you see a piece of tin in good condition; it is almost always brown from rust. Perhaps some day, rusty tin will be regarded as quaint or picturesque. But for now, like leprosy in a Siamese brothel, it corrupts the beauty of the tropics all over the world.

Another friend has taken it upon himself to become the Freddie Mac of one little corner of Nicaragua.

“You ought to require tile roofs,” we suggested.

“I put $5,000 into a building fund,” he had explained. “I told the staff that it was available to anyone who wanted to build a house. I just did it to try to help these people. I don’t really care if I get paid back or not.”

And so, by an act of charity, people who never owed a penny to anyone are seduced into the consumer credit economy. Previously, they might have spent the day fishing…happy to catch only enough for dinner. Or, they might have traded an extra fish with a neighbor and walked home with some rice and beans, too.

But the new mortgagee has no choice; he must work in the money economy in order to make his payments. Soon, he will open an account at the local bank…and get a credit card, too. He will borrow more to buy a car…and to install central air conditioning. In a matter of time, he will not be able to do without them. And then…what joy!…his living standards will rise to those of Americans. He will have all the comforts of modern life…and live paycheck to paycheck to pay for them. His debts may rise to the level of Americans’, too…and like them, he will hope he never has to pay them.

Progress comes in fits and starts…with occasional tempests to carry off mistakes.

Plutarch tells how the debt burden in ancient Athens rose so high that its “mortgage-stones” had begun to crush the city. Solon, a famous politician from the 6th century B.C., found a solution…”for he made a pound, which before had passed for seventy-three drachmas, go for a hundred; so that, though the number of pieces in the payment was equal, the value was less; which proved a considerable benefit to those that were to discharge debts.”

The old Solon may or may not have been the first; he was definitely not the last. People build up debts on sunny expectations…and hope some act of God will wash them away. But it is not God, but man, who erases debt. And he does so not by acts of nature…but by acts of fraud, that is, by cheating lenders. Today, Americans put their faith in Alan Greenspan and the Feds, trusting that these modern Solons have mastered the art.

Antonio stood up and leaned against the porch post…looking down the beach.

“If he sells those condos, he’s going to build them all down the beach. I guess we could turn this old place into a bar. Then, at least the people who buy there will have a place to get a cold beer.”

“Put some clay tile on the roof,” was our advice.

“We could keep it just as it is,” Antonio continued. “I think people would like it….they could sit on these stumps…The guy who buys the condo will be able to pay $5 and sit on this porch drinking beer just like the caretaker used to.”

The customer will look out on the beach…with its new condos and new visitors. He can sit and wonder how he will make his monthly payments…then, he will drink his beer, served by a bartender with his own monthly payments to make.

He may have paid $150,000 or so for the condo…maybe more. But even if he paid a million, he’ll never be able to enjoy the beach that the caretaker had, all to himself, for free.

Is that progress, or what?

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.

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