Socialism kills

Carlos Alberto Montaner

Swaminathan Aiyar is a renowned Indian economist who has tallied some very uncomfortable figures. It was his idea to measure the enormous price paid by the people of India for not proceeding earlier with the economic reform that today keeps their country at a 7 percent annual rate of growth, rapidly reduces the percentage of the poor, and substantially improves the quality of life of the neediest.

The numbers are impressive. Not conducting the reform any earlier caused the death of 14.5 million children, kept 261 million Indians illiterate and 109 million below the poverty level. The study has just been published by the Washington-based Cato Institute under the title “Socialism kills.”

Latin Americans should learn from this experience. Not to, in addition to being a crime, would be an almost perfect stupidity. The example is very clear: two great models of development have been tried in India. Between 1947 and 1981, the country tested the formula of a state-run economy directed by an enormous government bureaucracy that was intensely protectionist, hostile to private enterprise and foreign investment, and convinced of the advantages of domestically directed development. The result of that socialist stage was an average growth rate of 3.5 percent that, after taking into account the population increase, was reduced to 1.49 percent.

While the Indians followed that socialist path, so similar to the Latin American experiments from Peronism to Chavism, other Asian nations – first Taiwan, South Korea, Hong Kong, Singapore, later Thailand, Malasia and Indonesia – took the opposite road. They opened their economies, took the government out of the productive apparatus and fostered private initiative.

In other words, they decidedly liberalized their economies. After barely one generation, the results they exhibited were stunning: a drastic reduction of misery and ignorance, an improvement in all the indices of human development, and the emergence of robust middle-class sectors.

Pressured by that unassailable reality, the Indians went on with their reform and abandoned the failed superstitions of socialism, tepidly at first but with greater impetus in the early 1990s. Today, India is an internationally leading actor, competing in price and quality with China, with whom it is competing for the ranking of the world's foremost factory. (I have never forgotten the surprise of some friends who needed to hire a telephone-marketing service in Latin America and ended up signing up with the branch of an Indian company in Cochabamba, Bolivia.)

It is important for Latin American economists to tally the cost to us of those socialist experiments, in terms of blood, sweat and tears. How much Argentines have paid for their stubborn experiments in Peronism. What was the huge invoice paid by Peru during the crazed administration of Velasco Alvarado, by Nicaragua during Sandinism, or by Cuba during its half-century of Stalinism.

The measurement could be made using the Chilean experience as a benchmark. What would have happened throughout Latin America if the peoples of our culture had conducted an economic reform like the one conducted by the Chileans, initiated during Pinochet's dictatorship but wisely maintained by the democratic governments?

In 1959, for example, Cuba's per-capita income was one third higher than Chile's, though both countries had approximately the same population. Today, Chileans' income is three times that of Cubans, Chile's population is 30 percent larger, and the South American country has become the secret destination of thousands of Cubans who have managed to settle there, including several children of the Cuban ruling class, convinced that the Castro brothers' boat will sink sooner or later.

Are we Latin Americans capable of learning from others' example? Yes, with some difficulty, it appears. For example, Peru is the country that grows the most in the continent, and that's because the past three governments had the common sense to get their inspiration from neighboring Chile and gradually abandon the old practices of state-run socialism. That means less poverty and better standards of living for the great majority of society.

Lamentably, however, rationality continues to be a scarce commodity in our world. While the Peruvians, like the Chileans, move in the direction dictated by experience, Hugo Chávez and his accomplices from 21st Century Socialism keep making the same mistakes. They insist on harming their compatriots, believing all the while that they're guiding them in the direction of glory. They haven't learned that socialism kills.

December 22, 2009

Print this page