A truly Orwellian op-ed piece in The New York Times of May 6, says of Bolivia’s nationalization of the natural gas industry in its territory:
Nor is this a classic nationalization in the sense of the confiscations that took place in the region in the 50′s and 70′s. In those days, Latin American governments expropriated everything and kicked out the companies the next day. This time Bolivia will exert greater control over the companies, including significantly higher taxes and 50 percent-plus-one state ownership, but Mr. Morales has pledged to create an environment conducive to private profit-making, and the government has repeatedly stated that it is a “nationalization without confiscation,” with no expulsion of foreign companies nor expropriation of their assets.
So, raising taxes and grabbing 51 percent ownership, in return for nothing, is not confiscation. No. It’s a policy “to create an environment conducive to private profit-making.”
To the Times’ writer, these mind-boggling contradictions are so self-evident and reassuring that he feels a need to explain why the Bolivian army was used to impose this “nationalization without confiscation” that is profitable to its victims. Not being a real confiscation, but a source of profit to its victims, the use of the army and the presence of its deadly weapons was necessary merely as a show “to placate masses of radicalized Bolivians who demand `confiscation without compensation’ to the companies.” This last, of course, is a policy very different from that of Mr. Morales, who merely takes property in exchange for nothing.
This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site www.capitalism.net is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.
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My mistake: I meant NATURAL resources…
Yancey Ward: BillG wrote:
nothing would change except those that are living off the sweat of others’ labor via usury (economic rent, interest, profits) would be forced to fend for themselves…
Then you replied:
I fail to see how geo-libertarianism makes profits impossible, or how it makes interest impossible. Is there something you have not been telling us?
I would like to reply. This is a tricky issue. There are many geoists who are genuinely libertarian-leaning and have no problems with profit, interest, and even private renting out of land, as long as owners pay appropriate site rentals (e.g., Harold Kyriazi). On the other hand, there are geoists who are strongly anti-business and see geoism as more of a means to steal profits, usually by attributing most profits to land rent, and the capability of “charging high interest” to “land monopoly”. (Nevermind that risk-free interest rates are now, and were a hundred years ago, already pitifully low. I would know — I’m a saving type.)
Henry George himself, in Progress and Poverty, denied the existence of profit as possible independent of returns to land, labor, and capital. So most geoists today have problems with profit. I’ve also noticed that under geoism it is possible to extort profits from businesses. All you have to do is tell the government you’re making a high bid on their land (enough to just about capture profit), forcing them to revise up the site rental. Even if that business “calls your bluff” and saddle you with your bid, you can just turn around and rent it right back to that business, or for slightly less, to the next highest bidder really intending to use the land. Of course, the business you’re extorting probably wouldn’t do that, becasue that would mean forfeiting their full investment in any fixed improvement to the site. BillG (based on statemetns, here and on the anti-state and freestateproject.org boards), seems to be of the latter type and thus would few this as a feature rather than a flaw.
Note that many of the same (flawed) arguments against land ownership apply to interest:
“Renting out land isn’t real work.” -> “Renting out money isn’t real work.”
“Nobody produced land.” -> “Nobody produced money.”
“Land rent inhibits investment.” -> “Interest charges inhibit investment.
Person,
I have also encountered both types of geo-libertarians, and far more of the latter variety you described.
I have asked BillG on more than one occasion if he agreed that the only rational way to actually, and fairly, assess land rent is by open auction of leases (he frequently writes that “markets” will determine the rent). I have never gotten a really straightforward answer from him on the mechanism of assessment, however.
As for the issue of extortion, I am unconvinced that open auctions could be successfully abused in this way, since taking ownership of the lease would still require payment of the bid. One could simply require up-front payment of the entire rent. My main concern with such a system is that it does not really measure the rent of the unimproved land, since the present lessee will have to account for the removal of his improvements, which violates his labor-value rights, which geo-libertarians claim to want to protect.
TokyoTom,
That’s what I was trying to say. But if the caucasians hadn’t don’t it, an elite from with the native tribes would have done the same thing. That’s the pattern world-wide. But it will require more than education and more police officers. The culture has to change. You must have judges, policemen, civil servants and legislators who for the most part can’t be bribed. Then you have to tax property and collect the taxes, so you need honest tax collectors who can’t be bribed. Once you have all that in place, the taxes on land will persuade the wealthy to sell unused land, which in Latin America is a lot. Then you need banks that will lend to the poor so they can buy the land and market rates and not have to resort to loan sharks. It’s a very difficult problem. Far more difficult than the socialists want to admit.
TokyoTom,
That’s what I was trying to say. But if the caucasians hadn’t done it, an elite from with the native tribes would have done the same thing. That’s the pattern world-wide. But it will require more than education and policemen. The culture has to change. You must have judges, policemen, civil servants and legislators who, for the most part, can’t be bribed. Then you have to tax property and collect the taxes, so you need honest tax collectors who can’t be bribed. Once you have all that in place, the taxes on land will persuade the wealthy to sell unused land, which in Latin America is huge. Then you need banks that will lend to the poor so they can buy the land at market interest rates and not have to resort to loan sharks. It’s a very difficult problem. Far more difficult than the socialists want to admit.
Albatroz, uh, do you really want to imply there are UNnatural resources? All resources are natural, meaning they exist in a natural universe. If what you mean is raw materials, then so be it, but if so then I do not know why would it be ethical to consider these communal and not anything derived from them, which is what you imply with your argument. If minerals are communal, then the very same minerals found in cars and bicycles would have to remain communal.
If you answer that labour or effort was applied to them, then it begs the question since it would mean any labour applied would privatize previously untouched materials. For example, my landscaper would thereby OWN my lawn.
TokyoTom wrote:
I’m not sure I understand you. Bolivia is a poor nation because the caucasians who have been at the top for centuries (by brutal conquest) chose to run the country for themselves and to keep natives oppressed and poor.
Well, Chile has a large native population and it is run by mostly “caucasians”, yet that country is much more wealthy than Bolivia, even without owning gas or oil. The reason Bolivia is poor is not because the caucasians choose to govern, but because of statist, protectionist policies – it would have mattered little whether Bolivia is run by caucasians, or anatolians or datians.
For it to become a wealthy nation will require a greater sense of shared identity and greater opportunity for the poor.
Whenever someone says the poor need more opportunities, my guess is that he or she means they need more access to free money or free something. Opportunities are always there – what people suffer is the many ways the government extorts from entrepreneurs via regulation.
This may require some redistibution of wealth, in the form of taxation that is invested in education and law enforcement, especially protection of property rights.
Interesting how you have to conflicting ethical issues in the same sentence – you argue that an attack on property be used to protect property, that is, wealth distribution (stealing) to finance the protection of property. Investment in education does not require wealth distribution, just requires that governments do not restrict the efforts of entrepreneuring teachers and investors. It is not like I am describing a dream: it is happening right now in Africa and India, where totally private schools (managed by one or more teachers) are creating better educated individuals than what the public schools (financed with wealth “distribution) can even hope to accomplish.
Sorry, I meant TWO conflicting ethical issues… not “to”
Francisco:
You say that “Well, Chile has a large native population and it is run by mostly “caucasians”, yet that country is much more wealthy than Bolivia, even without owning gas or oil. The reason Bolivia is poor is not because the caucasians choose to govern, but because of statist, protectionist policies – it would have mattered little whether Bolivia is run by caucasians, or anatolians or datians.” Your observation is important, but doesn`t it also lead to the conclusion that Bolivia is poorer because the caucasians chose to manage it that way – by theft and then measures to keep the natives boxed in by policies that don`t allow them to accumulate wealth?
You are right that I think there are ethical conflicts involved – I don`t think there are easy answers. The simplest solutions are to reduce the role of government, avoid confiscatory policies, allow more freedom of commerce, while clarifying and protecting property. But that conveniently ignores that the status quo may not have been fairly gained, and the disruptive resentment that remains – resentment that builds if the government has frustrated individual liberty and economic freedom to date. Isn`t that one of the main reasons why native demagogues who cry for redistribution have appeal? Sometimes old scores have to be settled, at least partially, in order to move ahead, especially if ethnic differences have been heightened – at least the pressure to do so cannot be ignored, which is why Chua advocates paying off the extorionist in some way. But that does pose ethical conflicts, as you suggest.
So what is Bolivian history like?
Just two links as a starter open to dispute:
http://bolivia.area51.ipupdater.com/
http://www.country-data.com/frd/cs/botoc.html#bo0015
http://www.country-data.com/cgi-bin/query/r-1538.html
Gotta get myself en edjucashen
TokyoTom,
I agree, there are no easy solutions to the poverty and the dysfunction of Latin American countries. The problem with such confiscations of property, even if the property was expropriated by past generations, is that such actions do not fix the dysfunctions, but only reinforce them. For example, the Bolivian government has now reinforced the concept that all industries in Bolivia are now in danger of such action. Were I an investor in Bolivia, I would now be looking to liquidate and leave, and would not make any further investments in the country. Almost every government in Latin America, Africa, and the bleeding hearts in the West are trying to eradicate the poverty with self-destructive, but seemingly “easy” solutions.
The only path out of poverty is to institute strong property protection, with low government taxes, and little government power outside that concerned with criminal control. However, even with this, the progress to the present western levels of affluence would take generations.
As I wrote in a previous comment, if you are going to resort to confiscation from affluent elites, then the government must turn these properties over the the citizenry in equal shares, and it must also institute strong property protections. Keeping the properties in the state’s hands will not solve the problem, and will ultimately make the problem worse. It is easy to predict what the outcomes will be for Bolivia and Venezuela. Both will be poorer countries 40 years from now than they even are today.
Yancey, thanks for your response. I agree with much of what you have said – they solutions are in protecting private property, market transactions and allowing stable long-term investment expectations.
There are many obstacles to that, including a history of enthically-based class distinctions and management for the benefit of elites, and a cycle of nationalizations and other paybacks to try to settles scores is counterproductive. But we can still understand what drives them. I think Chua has a point in that long-term growth also requires a development of a confident middle class.
I agree with you that a huge problem is government ownership of resources. The government should try to devolve these resources to its citizens – and should not leave out tribal/community ownership and management by Indians of tracts of land traditionally managed and utilzed by them.
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