Freeman

ARTICLE

Perspective: Toward Argentine Freedom

MAY 01, 1990 by MEIR ZYLBERBERG

The complete re-establishment of the right to property and respect for contracts requires the elimination of the official organs of control of prices, exchanges, schedules, and rates of interest, the liquidation of the state banks, the annulment of taxes on profits and assets, the privatization of the subsoil, and removal of the regulations on the use of land. The market in all useful activities should be opened to competition without discrimination. Trade with monies from taxes should be prohibited. Government would then be limited to protecting the life and property of the country’s inhabitants.

If legislative action were to take this form, the black markets would soon disappear, fugitive capital would return without fear of reprisals, institutionalized begging would cease to exist, fiscal privileges would automatically be extinguished, and national reconciliation would become a fact.

—Meir Zylberberg,

writing in La Prensa (Buenos Aires, Argentina),

September 11, 1989

The Banking Crisis

“The American financial system was fashioned by legislators and is regulated by regulators who together created a cartel that is crumbling under the weight of its own contradictions. The system rests on government force, rather than voluntary cooperation. Enmeshed in countless laws and regulations, it was unable to cope with the rampant inflation of the 1970s, and the globalization of capital markets during the 1980s . . . .

“Most policymakers are resisting the only rational conclusion that can be drawn: the time has come to dismantle the financial cartel of which the S&Ls are an integral part. It is an aberration and abomination. If a cartel structure, which restricts competition and divides the market, does not function satisfactorily, and inflicts painful losses on the underwriter, it is reasonable and just that it Should be abolished. When all expedients of the cartel system have failed, we may try freedom.”

—Hans F. Sennholz,

“The Savings and Loan Bailout:

Valiant Rescue or Hysterical Reaction?”

American Science

I have seen science in operation in many countries. One strength of American science is the high level of independence given to young people, who have the freedom to join the system, cooperate, and compete with their fellow scientists, and be judged by their peers. On the other hand, in societies that have strong central planning of science, the positions of power are fewer and more important, and the incentives to act politically to advance one’s career are very strong. As a consequence, people are corrupted by politicking and distracted from producing good science. Another enormous advantage in Western science, particularly in comparison to the socialist countries, is the flourishing of small companies that can rapidly provide the chemicals and the tools that are needed for the constantly changing interests of scientists.

—Bruce N. Ames,

Chairman Department of Biochemistry

University of California at Berkeley

How to Sustain Agriculture

The only really sustainable agriculture is one based on private control of the means of production and prices set in the marketplace. Prices set in the political arena teach us farmers to think as indecisive dependents; prices set in the marketplace teach us to think and act as responsible and independent businessmen.

Farmer addiction to Federal handouts is dangerously high and even now may not be terminated without political disruption. The direction taken by U.S. agriculture must undergo dramatic change if we are not to completely lose private control of land use in this country.

—Gerard Bourgeois

a dairy farmer in Morris, New York

Decontrol in India

When Rajiv Gandhi began accelerating the liberalization of the economy in 1985, there was an outcry from the Indian “left” that he was selling the common man down the river to rapacious businessmen who needed to be held in check by a multitude of controls. Even moderate voices opined that liberalization would help economic growth, but skew the distribution of income in favor of the business class . . . .

Three and a half years down the road, it is possible to sit back and review the evidence. And the bottom line is that liberalization has aided the consumer greatly at the expense of inefficient businessmen. Indeed, many businessmen are now protesting about “excessive” liberalization and competition that has led the less efficient among them to the brink of bankruptcy.

The most spectacular change has come about in two-wheelers—scooters, mopeds, and motor cycles. For decades earlier, the consumer was obliged to buy substandard vehicles from companies like Scooters India for want of an alternative, and the waiting list for Bajaj scooters ran to over 10 years. The two-wheeler industry was liberalized in the early 1980s, and capacity has almost tripled since then. New units have come up in collaboration with all the best known names in the world—Hon-da, Vespa, Suzuki, Kawasaki, Peugeot, Yamaha, Zundapp, Garelli. The result has been an unprecedented choice of models for the consumer, the disappearance of waiting lists, and the offer of cheap installment finance by producers. Kenetic Honda and Lohia Machines, whose Scooters once fetched a hefty open market premium, have slashed their prices in order to stay in the market. The waiting period for even a Bajaj scooter has shrunk dramatically.

While the consumer has gained, many producers are in dire straits. Scooters India, Chamundi Mopeds, Andhra Pradesh Scooters, and Kelvinator’s Avanti model have already fallen by the wayside. Only those really meeting consumer needs—notably Bajaj and Maharashtra Scoot-ers—have been able to maintain their profit margins.

Less dramatic but similar stories can be told of cars, TV sets, synthetic fibers, computers, and many other liberalized industries.

—Swaminathan S. Anklesaria Aiyar,

“Who Gains by Liberalization?”

sponsored by The Project

for Economic Education, Bombay, India

ASSOCIATED ISSUE

May 1990

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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