Monday, April 16, 2012

Bolivia Shows The Way

Bolivia has taken an aggressive turn away from neoliberalism and economic orthodoxy over the last several years. The results are discussed in this article.

These changes didn't happen over night. Bolivia had been under the thumb of free market madness for years prior. The World Bank had managed to compel them to pursue a large privatization scheme, including water services which were auctioned off to Bechtel. The results were catastrophic, but the poor didn't take it lying down. They protested and resisted. What happened is partly covered in this brief video.


HispanicPundit said...

Curious Jon, why did you pick Bolivia as a leftwing example instead of the more publicized and leftwing darling Venezuela?

Oh, I think I know why.

Jon said...

Why pick Bolivia? Because it's my blog and I get to talk about what I want to talk about. Why don't you talk about Russia, which endured death on the scale of Stalin's purges after the Chicago Boys rammed through privatization and removal of price controls? Also to sustain the neoliberal drive the parliament had to be shelled and democratic government suspended.

But I did read your article. A couple of things to notice.

Rising oil prices don't necessary help a native country if the oil is run by multinationals. It helps in Venezuela because it's a state owned company and the revenue goes to the government. But it doesn't help in Nigeria or Ecuador because the oil is controlled by the multinationals. Workers get wages, stock holders get additional profits. So if prices go up on capitalism, who gets the additional revenue? Wages are already set based on local conditions (high unemployment generally means wages can be set lower.) Does your wage go up if the price of oil goes up? No, it only means more money in the pockets of investors, who don't live in Nigeria.

I won't say much about Venezuela because I don't know much about it, but here's some data that suggests things have improved more than Megan is suggesting.

Chad said...

I say congrats to Bolivia. A country with a population of more than 10 million almost has reached the GDP of Vermont who has a population of less than 700,000.

As pointed out by several sources the increase in GDP is directly tied to higher commodity prices globally.

Like all Socialist ideas, this will fail and fail miserably just give it a little time to unravel. The Foundational Free Market Principals Is what started Bolivia down the right track anyhow - now that their legs are under them a little bit the Lefties rush in to try and take credit where credit is not due. They knew better than to take 100% control of businesses and to leave airports and previously private companies alone to start, but give Socialists time they will take control of it all and that is when it will implode.

Jon said...

Bolivia is extremely poor. No doubt about it. But the question is why. What happened to them to put them in such a desperate condition? What happened was a massive move rightward. An aggressive privatization and market liberalization plan in the 80's. A plan that sent all their oil wealth to private companies rather than to the people. Milton Friedman type economics was aggressively imposed on them, and the resultant impoverishment is something that has been duplicated time and time again. Investors become very rich. Poor people starve.

Here's a question for you. Why is it that rising oil prices don't seem to make Nigeria better off? And why should we expect rising oil prices to help? Rising oil prices help a country that has a state run oil service, like Norway, Iran and Venezuela. What the oil is controlled mostly by private industry, why would rising oil prices help? The revenue goes (mostly) to the owners. Companies usually pay mineral rights based on the price of oil, but in Bolivia it was a pittance compared to the amount going to the private companies.