Putting a stop to the Argenzuela Project

[Editor’s note: The following piece is written by Dr Nicolás Cachanosky, an economist at Metropolitan State University, Denver and a native Argentinian. Dr Cachanosky hails from the same PhD program (at Suffolk University) as Rick, who introduced us. His homepage is here, and he is also a member of the group blog Punto de Vista Económico (which you can find on the blogroll here at NOL). Check out his popular work for the Mises Institute, too. – BC]

For the last 12 years Argentina was under the influence of the Kirchner administration. First by President Néstor Kirchner (NK), and then two terms by her wife (and widow since 2010) Cristina Fernandez de Kirchner (CFK). Their plan, as perceived by many, was to alternate presidential terms between NK and CFK and remain in power endlessly. While this plan came to an end with NK’s death in 2010, CFK started to entertain the idea of reforming the Constitution to be able to run a gain for office. Because this was not possible, she chose Daniel Scioli, the Governor of Buenos Aires Province to be her successor. Last Sunday, November 22nd, Mauricio Macri, Mayor of Buenos Aires City beat Scioli in a ballotage and became president elect starting his term this coming December 10th.

Argentina was in path to become what is referred as Argenzuela. Namely, the Kirchner administration was taking the country, step-by-step, to become the next Venezuela of Latin America in a close way to what has been described as the four stages of populism. Under the Kirchner administration, the government increased their political ties with Venezuela, Iran, and China, at the expense of political relations with countries like the United States, Germany, and the United Kingdom. But the resemblance was not only in terms of political friendship, but on institutional and economic reforms. Argentina became a country where “Republic” is just a word on paper without a real presence in the country’s institutional reality. According to the Fraser Institute’s Economic Freedom of the World, in 2003 Argentina ranked 99 out of 153 countries. By 2012 it ranked 149 out of 152 countries. The loss of economic freedom was fast and significant. Economic troubles and imbalances did not take long to appear.

Macri’s victory in the presidential elections put a stop to the Argenzuela project. We know what a presidency by Macri won’t look like. But it is still hard to say what it will actually look like. Macri is known for his emphasis not in free or unfree markets, but on an efficient administration. While not difficult to be more free market than the Kirchners, it might prove difficult to describe Macri’s political movement, Pro, as a free market party. The Kirchner administration has refused, at least so far, to share information with Macri and his appointed ministers, so the real situation of the economy and the Treasury remains unknown. Macri and his team are working on reform plans half-blinded because they don’t have reliable economic information, if they have it at all.

Specific reforms by Macri are still unknown (at the time of writing these lines), but his team of Ministers has already been announced. The people he’s bringing to the government with him show significant successful careers in government, the private sector, and international organizations (her chosen Chancellor is the Chief of Staff of Ban Ki Moon, General Secretary of the United Nations.) This is a clear contrast with the Kirchner administration, where all the Ministers showed a strong ideological motivation before professional accomplishments.

The economic crisis in Argentina hands Macri a unique opportunity to carry long needed significant reforms. He has, also, a unique political position. His political party has not only won the presidential election, with Pro Macri has also retained the Mayor’s office of Buenos Aires City and also won the Governor elections for the Buenos Aires Province. Macri’s Pro is in charge of the three most economically and political important districts. Let us hope that Macri does not become yet another lost opportunity in Argentina’s history.

What I’m reading (but not yet writing about)

I have been reading a lot lately. I apologize for the lack of blogging on my part. I am reading through Mestizo Logics by the French anthropologist Jean-Loup Amselle, Degrees of Freedom by our own Edwin van de Haar (a Dutch political theorist), and A Cat, A Man, and Two Women by the Japanese novelist Junichiro Tanazaki. I’ll be blogging about Amselle’s book in the near future, so stick around!

I am also reading through some excellent papers on colonialism.

Michelangelo: I gave apples to the ladies and cigars to the gentlemen (and to a couple of ladies in the English Dept). That was as an undergraduate though…

Turkey just shot down a Russian fighter jet

Yes, folks, things just got way more real in the Levant.

Here is NOL‘s first-ever post on Syria (by yours truly). It’s from 2012 (which means NOL is nearly four years old!) and it holds up pretty well if you ask me.

Jacques Delacroix, an ardent hawk who recently quit NOL (again) and who ironically criticizes libertarians for being “dogmatic” and “predictable,” had this to say about Syria in 2012:

Russia would not risk to go to war with us on behalf of Syria because that country is just not important enough to the Russians’ game.

And also this:

The current murderous situation [in 2012 Syria] is not acceptable. Therefore, the risk of some sort of Islamist take-over is worth running.

Jacques and other military interventionists have been getting the Middle East wrong for decades, and yet people still take them seriously. Just to be clear: Jacques and other hawks were perfectly aware that attacking Assad would mean opening up a space for ISIS and other nasty Sunni organizations to grow. Jacques just thought Islamists would be better than Assad because they’d at least have some form of democratic legitimacy. Then, after the recent massacres in Paris, Delacroix and other hawks began arguing that Islamists have to go, too (along with Assad). The Russians, who Jacques (and other hawks) confidently told the public would not dare intervene in Syria, think that Islamists have to go (too many Russian commercial airliners are blowing up in the sky) but not Assad. Not a pretty picture, and Western hawks are largely responsible for the mess.

Here is an old post detailing just how wrong Jacques was on Libya, and instead of acknowledging just how wrong he was (he was really wrong), Jacques changed the subject and repeated oft-debunked litanies.

Anyone can be wrong, of course. I thought Mitt Romney would beat Obama back in 2012 (the economy was in terrible shape…), but I learned from my mistake and people can generally learn something from me (even if it’s only to see things from a slightly different angle) when I write on American politics.

When Jacques and other hawks are wrong they become dishonest about their past mistakes, though. They don’t acknowledge them. They don’t try to learn from them. They instead repeat their sacred litanies over and over again, hoping that they will eventually be proved correct (a broken clock is right twice a day, after all). This moral failing on the hawks’ part is what’s responsible for the violence and carnage in Syria. It might be responsible for World War 3 (Turkey is a NATO member). Their dogmatism and the dishonesty it entails is far more of a threat to individual liberty than Islamist terrorists or even the violent policy prescriptions (and cultural chauvinism) Jacques and his ilk call for (and rely upon in the public sphere) on a daily basis.

Jacques and the interventionists (cool band name, by the way) are responsible for hundreds of thousands of dead people and millions of displaced ones. They initiated this carnage using made-up “facts,” poor logic, and appeals to violence. Where is the outrage? How can we change the climate of opinion so that those who lie constantly and unabashedly lose influence and prestige? Is incompetence that prevalent in our open society, or is dishonesty to blame?

Theory versus Common Sense? The case of the Dutch

Since the fifteenth century, [the Netherlands] has had several features which later liberal thinkers, such as David Hume and Adam Smith, enviously referred to. Compared to other countries, economic freedom was an important issue, just as the larger degree of religious freedom. Trade, tolerance, and cultural developments turned the Dutch into an early manifestation of liberalism. However, with the possible exception of Erasmus, Spinoza, and perhaps the Rotterdam-born but London-based Bernard Mandeville, the Dutch lacked great thinkers who could provide this liberal practice with a theoretical base.

This is from the introduction (page 2) to Dr van de Haar‘s excellent new book, Degrees of Freedom: Liberal Political Philosophy and Ideology, and I think it makes a good argument in favor of the “common sense” approach to the political. This common sense approach, for those of you wondering, is often contrasted in American libertarian circles with the theoretical approach espoused by academics. Common sense libertarians tend to be more socially conservative and more parochial than theoretical libertarians who, in turn, are less socially conservative and more cosmopolitan in outlook. This difference in outlook between the two factions leads to the former camp appealing to “the people” in arguments, whereas the latter often appeal to the authority of a scholar or school of thought. Dudes like Ron Paul and Lew Rockwell are in the former camp; dudes like Steve Horwitz and Eugene Volokh are in the latter. This is not a tension limited to American libertarians, of course. You can find it just about anywhere, but libertarians have made it interesting, mostly because – once they have acquired facts like the one Edwin reports on above – they ask questions like this:

How is it possible for a society like the Netherlands to exist when it had no great thinkers to claim as its own?

The common sense faction will reply with something like this: “That’s easy: because the Dutch people were left alone they were able to prosper. With no busybody do-gooder class of intellectuals around to make rules for the peons, folks were able to thrive thanks largely to personal freedoms and self-interest.” This line of reasoning has a lot of merit to it. In fact I buy it, even though it’s not complete.

I think the Dutch had plenty of good theorists whose work contributed to the peculiar nature of the 15th century Dutch republic, but it is also true that the high theory of guys like Smith and Hume is largely absent from Dutch political thought (I don’t remember reading any Dutch philosophers in my introductory philosophy courses in college, for example). I can clarify this in my own mind by drawing parallels with American political theorists up until the end of World War 2, when the US suddenly became a superpower and has received a great influx of the Really Smart People from around the world. Like the good Dutch political thinkers, nobody outside of the US knows who James Madison or Alexander Hamilton are (specialists excepted, of course). A few quirky weirdos out there might know who Ben Franklin is, but they won’t know him for his political theory.

Maybe this also had to do with the fact that the Dutch (and American) theorists were more concerned with keeping Spain (or other scheming Great Powers) at bay, and this could only be accomplished with a heavy does of pragmatism to supplement ideals; pragmatism is, of course, something that high theory avoids.

The great thinkers, who we all know (even if we have not all read), in contrast, don’t seem to have a lot of experience in policy and diplomacy. Furthermore, these guys all seemed to be in well-integrated outposts of cosmopolitan empires that were largely populated by minorities. Scotland, for example, was part of the British Empire, or Kant’s Prussia, which was technically independent of the Austro-Hungarian Empire but still very much a cultural and economic junior partner to Vienna at the time.

Here is my big question, though: If the Dutch had no Great Thinkers, how were they able to create the richest, most extensive overseas empire the world had ever seen?

Common sense libertarians, 1

Theoretical libertarians, 0

By the way, my answer to that last question goes something like this: the Dutch, as former subjects of the Spanish Empire, had intimate access to Madrid’s trading networks (cultural access as well as economic and political) and this, coupled with the federal republic that Dutch statesmen were able to cobble together, gave lowlanders just enough breathing room to raise the bar of humanity. Again, you can find Dr van de Haar’s new book here.

BC’s weekend reads

  1. France has less and less influence in the EU, and fears to use what it still has (peep B-Stock here at NOL from awhile back, too)
  2. U of Missouri Student VP: “I think that it’s important for us to create that distinction and create a space where we can all learn from one another and start to create a place of healing rather than a place where we are experiencing a lot of hate like we have in the past.” Mmhm. And what better way to learn from one another than by restricting what can and cannot be said?
  3. Along the Divide: Israel’s Allies (long book review)
  4. Standing Up for Migrant Workers in the Arab Gulf (don’t forget Amit’s piece on migrant workers from Bangladesh here at NOL)
  5. Economic rationality versus full rationality
  6. Rand Paul strikes back
  7. The Case for Brexit (contra B-Stock here at NOL)

From the Comments: Money, Currency, and Bitcoins

Dr Gibson chimes in on Chhay Lin‘s most recent post about bitcoins (I hope there will be more):

“Unspent dollars means reduced sales, and as sales decline, profits drop, layoffs increase, and the total social income decreases, making less money available for consumption. Hoarding induces more hoarding as the economy sinks into a downward spiral.” (Smith, 2009)

That’s a lot of nonsense in just two sentences. (Note this is Smith’s paraphrase of the anti-hoarding argument, which he ably disputes.)

First, there is no distinction between “spent” and “unspent” dollars. Money jumps instantly from one pocket to another whenever it is used in a transaction. All money is “idle” between jumps. This could refer to the demand to hold money which is the inverse of the velocity of money. We hold money for convenience, safety, and occasionally as a hedge against deflation.

Second, decreased velocity means price deflation, other things being equal, and if a fall in velocity happens suddenly and unexpectedly, it can be a temporary boon to buyers and a detriment to sellers. But the idea of a deflationary spiral feeding on itself is silly, if only because we all have to eat. Low prices are the cure for low prices, as bargain-hunters move in and prices stabilize.

Then there’s this “social income” phrase. Real social income is not enhanced by faster spending. It is enhanced by greater productivity which depends on private saving, which in turn depends largely on property-friendly institutions. We cannot spend our way to prosperity.

I’ll also comment on Kaminska’s claim that bitcoins “do not benefit the economy” because they do not bear interest. Along with currency and (in their time) gold and silver coins, bitcoins are what economists call “outside money” meaning they are an asset that is no one’s liability. Checking account balances are a form of “inside money” because they are at once an asset of the account holder and a liability of the bank. When outside money is deposited in a fractional-reserve bank where it becomes inside money, some is kept in reserve and some is loaned out. This apparently what is meant by “benefit to the economy” but in fact it’s a benefit to the bank which can earn profits on the new loans and to the borrower, if all goes well. It’s a detriment to the rest of us because there is an increase in the money supply which causes price inflation.

There is nothing anti-social about holding outside money. Some of us see marginal benefits in holding outside money (security, convenience) that exceed the cost in foregone interest. So what?

My own two cents on this (get it?) is merely that Dr Gibson needs to spend more time at NOL fixing the mistakes of financial journalists and keeping his fellow economists honest. (Notereaders and Notewriters, holla at me and Warren in the ‘comments’ threads if you agree!)

BC’s weekend reads

  1. The Two Asian Americas
  2. Is Hawai’i an occupied nation?
  3. A federal system for Britain
  4. Capitalists from Outer Space
  5. The Physics of Extraterrestrial Civilizations
  6. Humane Canada