News From Mont Pelerin
SANTIAGO:--Nearly 400 of the world's freedom-minded economists met for the 33rd bi-annual reunion of the Mt. Pelerin Society. Started in 1947 by Friedrich von Hayek and 35 others including Ludwig von Mises, it remains a meeting place for many of their intellectual descendents. The meeting was hosted by Chile's Institute for Liberty and Development.
Topics included Family, Drugs and Society, Globalization in the 21st Century, Reducing Poverty, Environment and Property Rights, Patents and Copyrights, Education in an Open Society, and Social Security Privatization--the Second Berlin Wall, Rule of Law and Voter Referendums, and much about Latin America.
Although the meeting had its share of pessimistic economists, others spoke of how far freedom had come and argued how few would have imagined in the 1970's that Communism would be gone, the Berlin Wall tumbled down, millions would become shareholders, and that even socialists had to use free market words to camouflage their ideas and interests.
The Heritage Foundation used the occasion to issues its first Spanish Language edition of it famous Index of Economic Freedom, over 400 pages of analysis about every nation in the world. Each is rated comparatively for trade policies, property rights, tax rates, regulatory climate, monetary policy, inflation, and other aspects of economic and political conditions. Top rated in order are Hong Kong, Singapore, Ireland, New Zealand, Luxembourg and the U.S.
From the bottom up are North Korea, Libya, Iraq, Cuba, and Iran. Most of Latin America is rated in the 30's and 40's with some glaring exceptions such as Brazil at 93 out of the 155 nations listed. The study finds in most cases a direct corollary between economic freedoms and prosperity. It is also available on the internet.
The big news was a rumor that Heritage was planning to downgrade the United States for its next edition because of the erosion of property rights from growing police and bureaucratic powers.
Free trade and globalization were strongly defended. Henri Le Page, Director of Institut Euro 92 and past Mises Lecturer at the Austrian Scholars Conference, argued how Asia's 1997 crash and the backlash against globalization was caused by the "unfinished liberalization agenda"(quoting the Milken Institute). Half way measures towards free markets caused half way successes and much suffering without compensating economic growth.
Protectionism, he warned, often took new disguised forms, most recently "food safety," "child labor," "growth hormones," "environment," and so on. Le Page also warned of the rising power of single issue NGO's opposed to trade, as new threats. The basic theme of all attendees was that free markets and freer world trade were the key to prosperity and peace, while protectionism would lead to depression and wars.
Equally all movements for so called "fair trade," and equalization of taxes and regulations as being adopted in Europe are threats to the current system of competition among nations to become efficient and competitive. Le Page explained how NAFTA, which doesn't exclude non-member competition, was growing at twice the rate of Euroland which was becoming more and more exclusive and protectionist.
Mexico's economy was said to be the bright spot in the hemisphere and Brazil was declared as finally doing much better. Carolina de Bolivar, director of Mexico's Ludwig von Mises Cultural Institute, was very optimistic, saying, "Many of our members and friends are now in the new Congress or working with the transition for Fox (the new President). However, since the meeting, Fox has announced plans to increase taxes and crack down on the informal economy.Miseans may question that support if Fox follows traditional wrongheaded IMF-style advice.
Other Latin American nations had their problems. Argentina never went far enough in freeing up its economy and now also suffers from tying its economy to the dollar when its prime trading partners, Brazil and the European Union, have both devalued their currencies. Chile now has a moderate leftist regime, but is still free and dynamic.
Colombia has a classic guerrilla problem, with a semi-socialist economy. In the old days a strong government would suppress such a movement, but now with human rights considerations and drug money in the picture, it is much more difficult.
Colombia's disastrous civil war was explained by Colombian Think Tank Director Andres Mejia Vergnaud as coming because of the nation's low level of economic freedom and consequent growth; it rates no. 68 on the Heritage list and 88 on the Canadian Frazer Institute List, another economic rating. This prevented it from prospering and so contributed to support for Leftist guerrillas. Several conference attendees argued that it was Washington's solitary focus on the drugs which also led to Colombia's chaos.
The Drug War in America was addressed in a paper by David Friedman of the University of Santa Clara Law School. He showed statistics illustrating how U.S. murder rates and violent crime first rose during prohibition in the 1930's, then declined and then rose again with the drug war. Most attendees at the conference favored some type of decriminalization of drug use, because fighting drugs was leading to such erosion of civil freedoms.
Jose Piñera, architect of Chile's pension privatization plan, delivered a paper on developments in the 10 other nations which have adopted the Chilean model. Seven are in Latin America as well as Poland, Hungary and Kazakhstan. His study outlined all that is going on in the other nations which are proceeding with privatization.
Privatizations that went wrong were criticized in a paper by Alvaro Vargas Llosa, read by Enrique Ghersi, Director of Peru's think tank, CITEL. Companies were often sold at the highest price to raise money for governments, and then just preserved monopoly ownership for their new buyers, instead of being privatized in a way so as to create competition.
Ghersi added that about one million Peruvians had now received title to their properties, during the last years of President Fujimori's regime. This was one of the great achievements of The Other Path, a book he helped research for Hernando de Soto. The book focused on the lack of secure property rights and land records and mechanisms for transfer in most of the Latin world. However, mercantilism, Ghersi said, was still the main problem with Latin American economies. Peru still expects economic growth (1%) this year in spite of its Fujimori problems.
Fred Smith, President of the Competitive Enterprise Institute argued that GATT had been a better agreement than the World Trade Organization because the WTO allows cross retaliation from trade disputes. He and others also warned that allowing NGO's (Non-government organizations such as labor or environmental groups) into the WTO, as is now proposed, would disrupt world trade and turn the WTO into a political organization instead of a trade one. He also explained why some issues such as ozone depletion and global warming were so difficult to resolve, the reason was because they were not clear and precise. On the other hand precise, proven pollution can be cured by precise scientific methods.
Wolfgang Kaspar of Australia's Center for Independent Studies told how the European project for "tax harmonization" was really to stop tax cuts and competition. It was directed against member nations such as Ireland with low corporate taxes which were taking companies and business away from Germany and France. He praised examples such as China and Sweden where different provinces and cities were permitted to compete by advertising lower tax rates to gain industries and investment, something the European Union opposed.
New Zealand was the conference's great disappointment, switching almost overnight to policies of economic destruction. In particular, a new socialist government had "paid off" labor union support with a new law forbidding companies to lay off workers if their business turned down (unless they went bankrupt) and allowing any two workers to establish a legal trade union in any company. This happened just two months ago and already the economy is beginning to falter, after years of stunning freedom and growth.
Bruno Frey of the University of Zurich led a discussion about direct and indirect democracy. Referenda and voter initiatives, he argued, were great ways to break through the political cartel of established politicians and parties who hated them. However, he cautioned that a "federal framework" was a pre-requisite for allowing referendums, that is they could only apply to parts of a nation and so work their way by causing political competition between states. Arturo Fontaine of Chile's Centro de Estudios Publicos told how the ancient Athenians had established restrictions upon direct democracy, putting some issues off bounds to be decided by courts. However, in Athens so few citizens often turned out for votes that the state began to pay for attendance. Then issues were often carried by the votes of the poorest, because wealthier citizens were busy and still didn't go to the meetings.
Venezuela was the dark spot. Carlos Ball, editor of the press agency, AIPE, explained how Venezuela had lagged in adopting free market reforms under the previous governments, with the consequent poverty and stagnation. The prior regimes consequently became corrupt and left themselves unable to defend the economy from charges that globalization and privatizations were hurting the majority. So now the nation is saddled with semi-Marxist President Chavez.
Now the Chavez-dominated Congress has voted him virtual dictatorial powers, and his rule will just have to play itself out. However, it will do vast damage to the economy. Venezuela had never gone through the wrenching leftist chaos that had afflicted other Latin nations, and had never adopted real reforms. Its statism fed corruption which exploded in the late '70's, Ball said, and once entrenched, continued thereafter. CEDICE is the main Venezuelan free-market think tank.
Other major speakers included Nobel Laureate Gary Becker; Manuel Ayau of Guatemala's Universidad Franciso Marroquin; Jerry Jordan, President of the Cleveland Federal Reserve Bank; Carlos Caceres, chairman of the organizing committee and professor at Chile's Universidad Aldofo Ibanez; Alberto Venegas Lynch of Argentina's ESADE; Richard Wong, Director of the University of Hong Kong's School of Economics and Finance; and many others
Next year's meeting will be in Slovakia, hosted by its F.A. Hayek Foundation, which has worked closely with the Mises Institute. Russia's Yevgeny Volk, who represents the Heritage Foundation in Moscow, said he expected than many Russians and CIS economists would attend. Foreign Think Tanks are listed on the ATLAS Foundation's web site.
The consensus of nearly all participants was that all the world could become prosperous and at peace, if nations just had the political structure and will to adopt the ideas of Mises and Hayek, the great economists of the post-socialist era.
Mr. Utley (email@example.com) is the Robert A. Taft Fellow in Constitutional and International Studies at the Ludwig von Mises Institute.