Today I was introduced to someone and shaking her hand couldn’t help but notice how dry and calloused it was. This is not unusual for women in Peru, most of who spend their lives hand-washing clothes. But it did get me thinking.
Over three hundred years ago Adam Smith wrote (H/T Daniel J Mitchell):
“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice.”
Here in Peru for the last 10 years we have been a testament to that truth. When Fujimori’s Government imploded in 2000 as the public revolted against the systematic corruption of his regime, the level of poverty was 54%. That’s to say more than 15 million people living in absolute and grinding penury. For the next 10 years successive governments maintained his free market reforms, which had turned Peru around from the total disaster it was in at the beginning of the 90’s, but at the same time pushed through transparency of government, freedom of the press and rule of law. The economy thrived and investment surged, causing the poverty level to decline to 49% in 2004, accelerating through to 34% in 2009. That’s 20%, or more than 5.5 million people lifted out of poverty in less than 10 years.
And that’s why it is so depressing that all this progress could be thrown away in June when the second round of the Presidential elections takes place. For we have a very good chance that a National Socialist will be elected who wants to throw out the free market model with its vibrancy and rule of law, in favour of central planning, nationalization and arbitrary rule by fiat. (I shall write a detailed post about this on Thursday).
Which is what got me thinking. Not about the cronyism and corruption that always accompanies Big Government but the stultifying effect that central planning has on society. Professor Nutter writing about the Soviet Union in 1957 said (H/T Adam Smith Blog):
All this in an economy that apparently has not yet discovered the wheelbarrow – sledges and two-man litters are used instead – where the scythe is far more in evidence than the mower, where brooms are mostly bundles of twigs without handles, where the mop is a handless rag, etc. In the drive for modernism, the Soviet system has apparently ignored the multitude of simple yet dramatic inventions so important in the economic development of other countries.
Innovation, that vital part of increasing productivity, does not depend upon large and grand inventions. It depends upon the myriad of small changes which are made to this and that which in general make all of the peoples’ time more productive. Inventing Sputnik is all very well, but just think of the time in aggregate that could be saved by the deployment of the simple Fuller Brush to babushkas across the country!
Free markets and rule of law create the means whereby society can innovate and evolve and are vastly more successful at alleviating poverty than anything a central-planning bureaucrat sitting in his airless office in downtown Lima can hope to achieve. Which takes me back to that woman with the calloused hands. Hans Rosling did a brilliant presentation on the washing machine (H/T Cafe Hayek) and how that has revolutionized women’s lives around the world. The free market is transforming the lives of millions of people in Peru. Like a 1970’s movie re-run, National Socialism will take us back to the days of bad haircuts and officials setting soap production targets for the nation’s women scrubbing away at the sinks and river banks around Peru. Let’s hope the voters choose a different future.