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News From Mont Pelerin

November 29, 2000

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 (jbutley@earthlink.net) is the Robert A. Taft Fellow in Constitutional and International
Studies at the Ludwig von Mises Institute.


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