All Commentary
Saturday, August 1, 1987

Perspective: Non-Developing Nations

Since World War II, more than a hundred new nations have gained independence. Most are primitive, agricultural, and were originally called “backward” or “undeveloped.” But now they have a nicer label, “developing.” Unfortunately, the label alone does not ensure development. That depends on whether the government welcomes or repels “developers” (entrepreneurs, savers, investors).

Many of these new nations have suffered civil strife, revolutions, and frequent government changes. But the new government that takes over after a coup is usually just as leftist, Marxist, Maoist, Leninist, communist, or interventionist as the previous one. Its officials are interested primarily in maintaining power and controlling the economy. Few of them have any understanding of the prerequisites for development. Property in these poor nations is seldom secure; enterprises are usually harshly controlled and regulated; threats of collectivization and confiscation abound; foreign investors are discouraged; and trade is restricted.

A few examples. One new African nation, Burkina Faso, levied high tariffs on animal- drawn plows and on irrigation pump engines that its farmers needed to produce. Mozambique’s Marxist government has destroyed that nation’s economy; its capital city, Maputo, lacks virtually everything; soldiering is one of the few steady jobs available as only the nation’s army prospers; yet imports of rice, corn, and consumer goods in exchange for oil were banned during a recent economic emergency. Egypt maintains control over her economy, discourages private entrepreneurs, and the country remains desperately poor. Collectivization and a socialist police state have crippled production in Tanzania. Price controls in Ghana have made that relatively rich country poor. In some African countries, according to one report, farmers who sell on the black (free) market, in defiance of the price controls, are routinely shot.

Policies that deter development are not limited to Africa. Massive government intervention in Malaysia discourages foreign investment and production. In El Salvador, the production of coffee, sugar, and cotton plummeted after the larger landowners were expropriated. The proposal for a joint Chrysler-Mexican truck factory was rejected by the Mexican government lest it lose control of the economy. Stringent labor laws hamper production in Venezuela. The examples could go on and on.

To deserve the label “developing,” these poor nations should attract entrepreneurs and investors by protecting private property.


Developing Nations

What is the “secret” of developing nations? Let us look at the historical record.

Consider, for example, the German economic “miracle” following World War II. Her cities were in rubble and teeming with millions of displaced persons. The people were hungry, their clothes were in tatters, and many were living in makeshift hovels. There was no food in the stores, so both money and ration cards were worthless.

Then, in June 1948, a fundamental change took place. The U.S. and British military gov ernments replaced the inflated wartime marks with a sound currency. At the same time German economic minister Ludwig Erhard, against the advice of his advisers, abolished price and wage controls. According to one report:

“The black market suddenly disappeared. Shop windows were full of goods; factory chimneys were smoking; and the streets swarmed with lorries. Everywhere the noise of new buildings going up replaced the deathly silence of the ruins. If the state of recovery was a surprise, its swiftness was even more so. . . . Shops filled up with goods from one day to the next; the factories began to work. . . . One day apathy was mirrored on their faces while on the next a whole nation looked hopefully into the future.”

For the first time in years, German farmers and other producers began to bring goods to market. For the first time in years they could sell their produce for money that had some value. The post-World War II “German economic miracle” had begun. With fewer eco-nomic controls to hold them back, the people worked harder and the economy boomed.

Similar “industrial revolutions” have developed also in Japan, Korea, Taiwan, Hong Kong, and Singapore as each has allowed entrepreneurs more freedom. Even India has reduced some controls over agriculture and is now producing enough to feed her huge population.

History shows time and again that people prosper when governments protect private property, when money is sound, and when individuals are permitted to buy and sell at mutually agreeable prices. The free market is the only path to economic development.


Socialized Medicine

British correspondent Anthony Lejeune reports in the February 1987 issue of Private Practice on the deteriorating condition of Britain’s National Health Service:

“[A] 65-year-old mechanic from Battersea in central London had a hernia diagnosed 10 years ago; he was operated on within four weeks. But now he needs another operation, and he has been on the waiting list for a year. At the last annual meeting of the British Medical Association, Dr. John Marks said that at his local hospital, Barnet General in outer London, patients had to wait 10 weeks for an appointment with a dermatologist, 15 weeks to see an ear, nose and throat specialist and 14 weeks to see an orthopedist. ‘You’re lucky!’ cried doctors in the audience.

“A survey of 130 hospitals showed that 70 percent had beds temporarily closed or staff doctors who complained of having to discharge patients early to make room for others. A report from the Office of Health Economics estimated that 1,230 people younger than 65 were dying each year from kidney disease because dialysis or transplant facilities were not available, and that three times more people needed coronary bypass operations than were receiving them.”

The British experience with socialized medicine may be a forerunner of developments in the United States. For some disturbing trends in the U.S. Medicare system, see Dr. Jane Orient’s article on page 284

  • The Foundation for Economic Education, founded 1946, works for a free and prosperous world.