article-single

Economic Observations in South America

This past August I was in the process of finishing a large book project. I was not happy with much of what I was doing. To change my attitude I committed myself to finally visit Brazil. I say finally because for 15 years, since my friend from graduate school returned to his home country, I have wanted to visit him and his family at his home in Rio de Janeiro.

Many people believe it is valuable to know a second language. For example, the economy is global so this knowledge might improve one's income. Of course knowing a second language is nice when traveling. But knowing a second language is much more fundamental to me.

Linguists, behaviorists, and anthropologists disagree about the precise relationship between language and thinking, but there is no question that they are closely linked. To speak is essentially to think, which is the defining characteristic of our species. Therefore, to only speak one language is to understand only one way of thinking. At least one language beyond the native tongue should be mandatory for all students, just as it is necessary to know how to read or count. Thus, it is an example of the gross malpractice of educators in the US that second language instruction typically begins with a pathetic attempt during middle school. Languages should be a fundamental part of all curriculums all through primary and secondary schools. This is the common standard throughout most of the world. The failure of US schools has been well documented at LRC. However, I do not recall anything specific about language instruction, but I would not be surprised if the trouble began during that wellspring of bad thinking, the Progressive Era.

So I believe one must know at least two languages to be considered educated. This hole in my education has spurred me to take language courses over the years. But these isolated courses have had little lasting effect. To be honest, for me, learning a second language has been the most difficult academic endeavor. I came to think an immersion course was necessary. Also, I chose Spanish as my second language because of the availability of classes and many opportunities to hear the language on TV, and to practice with Spanish speakers in the US. I love Spain too! Of course Portuguese is spoken in Brazil, but Spanish (or something close to it) is the language of Argentina. So I threw the proverbial dart at the Internet board and found a small school in Cordoba, Argentina to enroll in a two-week immersion course.

This trip was my first visit to South America. I quickly became enchanted with the people and the places I visited. I also was able to make economic observations that may be of interest to LRC readers.

My first impression of Brazil, with the exception of the plane graveyard at the So Paulo airport, was that of a first world country, possibly Spain or Italy. While the relaxed pace of life would imply a lack of ambition, on the contrary, the people I met exhibited intelligence, education, and creativity that match what I have seen in the US or Europe. In fact, I think the Brazilians have a unique sense of style in everything from clothing and interior design to toilets that is beyond what is typically seen in the US. But I did not meet the people in the vast slums called favelas, though I wanted to visit a children's center that my friend's wife supports. And I learned that the people I had met with the ideas and dynamism are typically frustrated in their plans to better themselves, which in turn limits the opportunities of the people in the favelas. The cause of the frustration is the parasitic class who control the state. They maintain a bureaucratic swamp whose progeny is massive corruption. Furthermore, the elite are steeped in the socialist or Keynesian thinking that has kept the multitudes mired in poverty the world over. It is such a tragedy that this naturally rich country, with so many wonderful people, should be stained with so much poverty.

Examples of this state of affairs abound. On the side, my friend runs a gas station. One of his employees qualified for a position with one of the police forces. On his first day on the job his commander told the new recruit that he was required to make a monthly payment to him. Of course this income was supposed to be generated by fleecing motorists or other innocent citizens. The former employee could not bring himself to do it, so he returned to the gas station. My friend's wife started a jewelry store with her sister. It took her many months to obtain permission to open her shop as she refused to pay any bribes. An American friend with connections to Brazil had wanted to have some of his manufacturing done there. But it was impossible for him find his way through the bureaucratic morass. He is now having the work done in China.

Some of the more hard-working people are driven out of the country. On the flights to and from Brazil I sat next to young men who worked in the US. One man could make more money making pizzas in a month than he could working in Brazil all year. He was going back to Brazil to check on his properties, properties he had purchased with his saving from making those pizzas! The other gentlemen wanted to start a shoe store outside of New York City. Most of the flight he complained about Brazilian people as if her were an ugly American, or a New Yorker. I had to kid him about this and told him he must maintain a more tranquil attitude.

One hundred years ago Argentina was in the top 10 in the wealth table of nations. But the usual socialist and Keynesian errors have driven Argentina into the third world, making her a poster child for Richard Weaver's observation that "ideas have consequences." Argentina has its own world-class corruption that has recently dovetailed with the meddling of the International Monetary Fund in keeping US banks profit and Argentine state solvency supported on the economic backs of the people.

The economy, I mean real people beyond aggregate statistics, is still reeling from the sudden eruption of inflation in 2001. For 11 years the peso was pegged to the US dollar. But the state was still borrowing and the inflation was hidden from the people. Argentines falsely believed their cash in the bank was safe and that their dollar-based mortgages were financially sound. The Argentine inflation was not unprecedented in amount, a 70% fall in the value of the peso, but it was particularly bad on the psyche in how it occurred. In contrast, the dollar lost about 40% of its value over the same 11-year period, a period that is considered one of the very best economically in US history. When overnight the currency went into freefall and the government closed the banks, the people suddenly realized they had been robbed but could do nothing to mitigate the problem. The gradual and sudden inflations are in effect like paying protection money and being robbed by a pickpocket, respectively. Both are morally repugnant. But your problem is compounded when you attempt to pay for the dinner you have already eaten and find that your wallet is missing. Thus, many Argentines were over-committed after the revaluation of the peso. My Spanish teacher in Cordoba, young, attractive, educated, and bright, told me she could not make any plans for the future. Thus, the economic crimes echo in the souls of the people.

A case study on the economic theory of supply and demand and the interference of the state is the prevalence of the medical house call in the US as compared to Argentina. In the 19th century the American Medical Association purposefully and successfully created a cartel for the practice of medicine, thus severely limiting the number of doctors. The 20th century saw the corporatization of private medical insurance through the tax code, the nationalization of military veteran's health care and medical research, and the creation of Medicare and Medicaid. In the 21st century we have already seen the prescription drug boondoggle foisted on the public. LRC readers are well acquainted with this history. The result is a fascist health care system in the US; fascist in that production, though not totally owned by the state, is controlled by the state. My father was a physician but passed away before he could reap the high returns for MDs from this system. In a general practice, he still made house calls up until his death in 1967. Now the house call, presumably a service still desired by patients, is extinct in the US. In Argentina, medical education is free and newly minted physicians barely make a living wage. And house calls? The going rate is 5 pesos, which is less than $2US!

The economic star of South America is Chile and it is about to enter the first world, if it has not already done so. How does Chile differentiate itself? According to the Heritage Foundation's Freedom Index Chile is freer than the US. My friend told me a most telling anecdote regarding his work for an American energy company preparing a bid for a contract in Chile. He specified to his contact in Santiago that he must have the input of a tax attorney. His contact told him that would be impossible. My friend was adamant; no bid could be prepared without expert knowledge of how the taxes would affect the profitability of the project. The best his contact could do was to make an appointment for the top law firm. The lawyer also explained to my friend that no tax attorneys were available. What seems amazing to us is the reason. The taxes are so low and so simple that there are literally no tax attorneys in Chile!

In Brazil and Argentina what is considered clean, sanitary, in order, and safe is much different than in the US. In other words, many Americans would think it was dirty, unsanitary, disordered, and dangerous. It is undoubtedly true that it is not as clean and not as safe in Brazil as in the US. But the concern for safety in the US has reached neurotic and totalitarian proportions. The attempt to take all of the risk out of life, for total security and sterility, makes life itself sterile and constrained. An example of the difference in attitude is the warning on cigarette packages. In Brazil the package shows the picture of a drooping ash and the warning is not for cancer or heart disease but impotence. Now that is an example of a different set of priorities!

While the economic climate is not nearly as good as it could be, life in general seems better because the most important traditional institution has not been replaced by the state. Family life in South America is more vibrant than in the US. It is typical for students to go to their local university while living with their parents. When they do move out of the house it is usually within the same city if not down the street. Adult siblings are best friends and business partners. The extended family of aunts, uncles, and cousins are participants in everyday life. Thus, the financial resources of an extended family mitigate the lack of economic opportunity. Even more telling, retirement income and health care in old age, the source of so much anxiety is the US, is much less of an issue because loved ones, not bureaucrats, provide these services.

There is much more to observe in South America than economics. The wonderful people express the charm of a vibrant culture in a beautiful and exotic setting. I highly recommend that you visit.

February 18, 2005