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Overcoming Demagogues: Latin America’s Fight for Free Enterprise

By: Gina Kawas - @GinaKawas - Jan 22, 2014, 12:00 pm

EspañolIn many Latin-American countries, there is a predominant tendency on the part of people in government: ambitious promises to save their countries from the prevalent problems that confront them — poverty, low economic growth, corruption, drug trafficking — as well as problems yet to arise.

This tendency already exists in Venezuela, Bolivia, Brazil, Cuba, Ecuador, and Nicaragua — and now, to a greater extent, it is in Argentina and even Chile, with the triumph of socialist Michelle Bachelet in the last election. These promises and the willingness of people to believe them give license to the state for a much larger influence over those economies.

As a result, a block of countries exists where interventionist populism rules, disguised as democracy. In addition to the countless broken promises from these overly powerful states, the regions they rule over suffer under inefficient bureaucracies that use taxes as nothing more than a tool to stay in power, rather than to maintain hospitals, roadways, or schools.

To deflect from these failures, at least from the constituent perspective, the demagogues of the day pursue a range of direct attacks against capitalism. They then promote socialism — in other words, more power in their hands — without any realization that socialism is destroying their economies and dissuading investment, and in a manner open for all to see.

Given these experiences, we must ask ourselves: how can we still believe these socialist promises, especially after seeing product shortages and hunger in Venezuela, one of the richest countries in Latin America? Socialism has made one of the most oil-affluent nations in the world see a reduction in its petroleum production, leading to the necessity for imported gasoline.

Those in power turn around and propagandize us at our own expense. They blame capitalism for their countries’ misfortunes — not that they have it as it exists in more prosperous parts of the world — and they distort its meaning to imperialism and crony-capitalism. Unfortunately, the corrupt cronyism and industry protectionism, the real causes for the underdevelopment, remain in place or grow stronger.

This failed and reinforcing feedback loop is just one more reason why the powers of government should be limited — so those at the helm cannot use political grandstanding to perpetuate the privileged positions of a few, while promising the opposite.

As is abundantly clear from economic freedom rankings, the existence of free enterprise is paramount to generating wealth and employment. However, we suffer as a result of Latin-American leaders’ thirst for power, and they maintain a dependent, subservient population with various forms of welfare and entitlements. They also avoid the undeniable truth that the best social program is generating employment.

meme-jose-azelBy free enterprise, I mean an economic system in which, through peaceful and voluntary exchange, individuals can use their own property to generate profit — limited only by the respect they have for the rights of others.

Innovation and diversified production meet correspondingly diverse human needs, and consumers have the ultimate say regarding who wins and loses in the market. As consumers follow their preferences, and reward or punish those engaged in healthy competition — free from barriers to entry — market diversity blossoms.

Once these conditions are met, employment opportunities open up as well, as does the freedom to enjoy the fruits of one’s labor.

Politicians oppose this, of course, since it requires limited control and less room for parasitism. Therefore, they will continue utilizing populism and making political promises they can never fulfill.

It is important to stress too that, in addition to capitalism, development must stand on an unwavering respect for the law — a rule of law that guarantees free enterprise and contracts on an ongoing basis. It is this rule of law, along with superior human and physical capital, that differentiates developed from undeveloped nations.

Poverty, unemployment, and the stunted growth of many countries, especially in Central America, are real and must be fought. It is more than proven that socialism — whether of the 21st Century flavor or otherwise — isn’t the solution but the problem.

We must defend free enterprise without fear!

Translated by Melisa Slep.

Gina Kawas Gina Kawas

Gina Kawas is a Young Voices Advocate from Honduras and a graduate student of Latin American and Caribbean Studies at New York University. She has coauthored the book Freedom for the Entrepreneur, published by ANDI and the Friedrich Naumann Foundation. Follow @GinaKawas.