# Liberty for Latin America ## Metadata * Author: [Alvaro Vargas Llosa](https://www.amazon.com/Alvaro-Vargas-Llosa/e/B001IU0X6C/ref=dp_byline_cont_ebooks_1) * ASIN: B00VE68IQW * Reference: https://www.amazon.com/dp/B00VE68IQW * [Kindle link](kindle://book?action=open&asin=B00VE68IQW) ## Highlights What good does it do to change institutions that make the government an instrument of privilege and predation if those changes are reversed by a culture unwilling to trade the security of a given situation, however dire, for the uncertainties and adjustments of free choice? That is exactly what happened to Argentina in the 1930s: after half a century of substantial free-market capitalism, it chose the opposite path. Growth cannot be sustained if, once the productive capacity of a nation is liberated from institutional constraints, citizens, lacking notions of saving and investing with a view to the future, squander their surpluses. — location: [103](kindle://book?action=open&asin=B00VE68IQW&location=103) ^ref-45800 --- a free institutional environment will foster a system of opportunity and reward that encourages those basic human instincts of survival and personal gain through social cooperation — location: [116](kindle://book?action=open&asin=B00VE68IQW&location=116) ^ref-30223 --- The encomiendas, large grants of serf labor handed out by the state as a reward for military victories or other reasons, were perhaps the greatest symbol of privilege. The symbol reflected the dominant idea that wealth was not to be produced but appropriated, and its appropriation entailed a form of status. — location: [269](kindle://book?action=open&asin=B00VE68IQW&location=269) ^ref-3316 --- The absolutist monarchy of unified Spain consolidated the latter type and, through the fusion of law and religion, strengthened the “idealism” and “unreality” of the legal system. The spheres of political authority and of the church were so intertwined that they became almost indistinguishable (kings even appointed bishops). — location: [283](kindle://book?action=open&asin=B00VE68IQW&location=283) ^ref-9839 This relates to Jared Rubin's book & thesis on the role religious authorities play in legitimizing and perpetuating rulers. --- Until the late nineteenth century, only 1 or 2 percent of the Latin American population were allowed to vote, whereas in the United States there was already by the middle of the century eight times that rate of popular electoral participation. — location: [413](kindle://book?action=open&asin=B00VE68IQW&location=413) ^ref-11720 --- The Latin American legal system that has been in place since the advent of the republics has been described as suffering from idealism, paternalism, legalism, formalism, and lack of penetration. Idealism entails a disconnection between the law and real life. Paternalism stresses authority over freedom. Legalism binds all social relations under comprehensive legislation. Formalism breeds a proliferation of requirements for legal permissions. — location: [468](kindle://book?action=open&asin=B00VE68IQW&location=468) ^ref-42259 --- But the inflation of laws translated into their debasement, just as the inflation of money debases a currency. — location: [479](kindle://book?action=open&asin=B00VE68IQW&location=479) ^ref-45533 --- The republic, which had come about as the result of the struggle against the institutions of colonial rule, in fact consolidated the five principles of oppression that constituted the legacy of both the pre-Columbian and the colonial worlds. Just as had been the case in the remote origins of the state, political power was now, if in more sophisticated ways, the instrument by which a powerful ruling class satisfied its desires and ambitions at the expense of the rest. — location: [488](kindle://book?action=open&asin=B00VE68IQW&location=488) ^ref-9192 Do most states result from increasing personal freedoms and less power with fewer restrictions, gradually over time? --- The rise of the people at the beginning of the twentieth century was not so much the physical rise of the masses as the subsuming of all individual identities into a body politic that now acquired the legitimacy of universal representation. — location: [524](kindle://book?action=open&asin=B00VE68IQW&location=524) ^ref-2668 --- Interventionism in the Caribbean and Central America propped up governments that were as corrupt as the enemies they struggled against. — location: [1022](kindle://book?action=open&asin=B00VE68IQW&location=1022) ^ref-60183 --- The effect of interventionism has been twofold. On the one hand, authoritarian, corrupt, and mercantilist institutions were reinforced. On the other, American actions in the region caused many Latin Americans to direct their resentment toward the other values that America purported to stand for. — location: [1032](kindle://book?action=open&asin=B00VE68IQW&location=1032) ^ref-34711 --- Rich countries did not develop because of industrialization. On the contrary: industrialization followed development, which in many Western nations was already under way in the old agrarian economy. Manufacturing, as Peter Bauer has said, is not a “cause” but a “symptom” of development. — location: [1067](kindle://book?action=open&asin=B00VE68IQW&location=1067) ^ref-60065 --- There was a period in western Europe between the sixteenth and seventeenth centuries when fierce negotiations, power struggles fought with bare knuckles, took place as different groups of people exercising what might be called entrepreneurial leadership lobbied to extract various sets of property rights and freedoms from the political authorities. What turned out to be decisive for the rise of capitalism was that those struggles gradually and painfully enfranchised more and more people, securing rights and freedoms for all. — location: [1256](kindle://book?action=open&asin=B00VE68IQW&location=1256) ^ref-59685 --- In England and the Netherlands, the movement was toward full, universal rights; in France, toward a much less healthy mixture of mercantilism and property rights; and in Spain and Portugal, the countries that conquered Latin America, toward a system bearing against the individual. — location: [1308](kindle://book?action=open&asin=B00VE68IQW&location=1308) ^ref-27980 --- The social institutions that we associate with free-market capitalism, from property to merchant courts, from common law to the use of money, were born out of the free intercourse of people making private decisions and contracting with each other, not out of government policies. — location: [1368](kindle://book?action=open&asin=B00VE68IQW&location=1368) ^ref-27176 --- Even the capitalist corporation, which is essentially a web of contracts among people vested with property rights and dreams of creative endeavor and progress, was not a cold, politically engineered design but a spontaneous, deeply humane institutional development born out of the convenience of reducing transaction costs by integrating activities. — location: [1370](kindle://book?action=open&asin=B00VE68IQW&location=1370) ^ref-15553 --- What might have seemed from a late-seventeenth-century perspective an inferiority on the part of early American settlements vis-à-vis Latin America’s massive colonial structure, namely small-scale systems of self-government with people who had fled religious persecution, was in fact the seed of capitalism in North America. — location: [1447](kindle://book?action=open&asin=B00VE68IQW&location=1447) ^ref-57655 --- research has rediscovered the history of civic associations, fraternal orders, friendly societies, and religious groups in nineteenth-century America and Britain that provided the safety nets we tend to associate with governments today: medical care, unemployment insurance, education, and even law and order. Other “public goods,” such as turnpikes, also resulted from people cooperating with one another on a private basis. — location: [1491](kindle://book?action=open&asin=B00VE68IQW&location=1491) ^ref-32823 --- after centuries of high capital formation under a climate of incentives for private enterprise in general, this very unhealthy increase in interventionism has not been able to unseat the United States from world supremacy or to destroy the capitalist engine driving the country forward. — location: [1527](kindle://book?action=open&asin=B00VE68IQW&location=1527) ^ref-40158 High taxes alone can not stop growth from happening. It depends on how taxes are used relative to the counterfactual. If taxes are used for highly product've poproses then there is no problem. The thing is that the people with the capital can individually (as part of a society) determine that much better than a few people in a room. Another consideration is that the government could have used it for value-added uses but ones that are far inferior to what the private market would do. --- Anyone who visits a market fair of the Indian communities of the Andes, the south of Mexico, or Guatemala will detect a powerful commercial spirit among peoples in many ways remote from the mainstream Western culture. — location: [1625](kindle://book?action=open&asin=B00VE68IQW&location=1625) ^ref-35267 --- Argentina managed to narrow the scope of its government’s powers and remove obstacles to capitalist endeavor and voluntary association in such a way that it soon attained impressive levels of development. Commercial banks, for instance, were allowed to issue their own notes in the 1880s, something unthinkable today. — location: [1740](kindle://book?action=open&asin=B00VE68IQW&location=1740) ^ref-1722 I need to learn more about Argentina's history. It touches on a few of my interests. --- This legacy continues to stare one in the eye wherever one goes in Latin America. It is the daily struggle of ordinary men and women who survive through clandestine property and enterprise. — location: [1871](kindle://book?action=open&asin=B00VE68IQW&location=1871) ^ref-54389 This chapter highlights the roots of liberalism, going as far back as pre-colonial times (with small villagers protecting capital), to the free trade that was supported by early colonizers, to the later argentinian free market experiment . --- the economy is human action under a set of rules, and those rules, good or bad, are the stuff of politics. — location: [1886](kindle://book?action=open&asin=B00VE68IQW&location=1886) ^ref-19679 --- reformers often mistook symptoms for causes. The church was not the real enemy; the culprits were concentration of power, stratified or exclusive property rights, the state as the enforcer of a particular creed, and the law as an extension and not as a limit of government. Reformers tried to remove particular institutions and individuals from positions of authority but failed to change the nature of authority itself. — location: [1940](kindle://book?action=open&asin=B00VE68IQW&location=1940) ^ref-54304 --- For positivists, the centralization of political power and the subordination of political institutions to particular interests was not an obstacle to but rather a condition for the creation of wealth. — location: [2030](kindle://book?action=open&asin=B00VE68IQW&location=2030) ^ref-34262 --- Positivism’s crucial flaws, which would haunt Latin America again once economic nationalism collapsed and the pendulum swung back to private enterprise and open borders, are no mystery. Its first mistake was conceiving of development as a deliberate national achievement, not as the natural consequence of individual human action pursuing independent objectives. — location: [2040](kindle://book?action=open&asin=B00VE68IQW&location=2040) ^ref-31999 --- Those dictatorships—in Brazil, Argentina, and Uruguay—that sought to combine political authoritarianism with “free markets” were children of a long tradition of delusion, a new attempt at doing what Latin America had tried in the nineteenth and early twentieth centuries before economic nationalism set in. — location: [2106](kindle://book?action=open&asin=B00VE68IQW&location=2106) ^ref-22907 --- The United States quickly backed the reformist reaction against statism without regard to the ethical nature of the new regimes, or to their origin and methods. — location: [2188](kindle://book?action=open&asin=B00VE68IQW&location=2188) ^ref-1981 --- What was not socialist had to be capitalist. Indeed, it looked capitalist, and if it was capitalist, it was “one of us.” Latin America became one of the main laboratories for what was termed the “Washington Consensus,” a set of policies backed by multilateral bodies and think tanks, and centered on fiscal discipline, economic liberalization, and privatization. The world community at large, not only the United States, became enamored with Latin America. It was now the place to invest in, to trade with, to engage in political partnership, to exhibit as the epitome of “emerging markets.” — location: [2190](kindle://book?action=open&asin=B00VE68IQW&location=2190) ^ref-8142 --- Aside from any other consideration, restoring proportionality between the monetary mass and national production and reducing government bills in order to lower the pressure on the central bank were acts of economic honesty and an admission of deceit. Ever since the 1930s, when the gold standard was dropped, monetary policy had been at the mercy of political fiction producing abundant fiat money as if it constituted real wealth. — location: [2223](kindle://book?action=open&asin=B00VE68IQW&location=2223) ^ref-22249 --- In Latin America, few people pay direct taxes, and the causality that relates the government’s expenditure to society’s wealth had for a long time been lost in the minds of most ordinary citizens. — location: [2235](kindle://book?action=open&asin=B00VE68IQW&location=2235) ^ref-54730 --- The Chilean model gained global recognition and was imitated in many Latin American and Central European countries. The substantial hostility surrounding efforts to dismantle the welfare state, in the case of western Europe, and the Social Security system, in the case of the United States, has prevented its adoption in the developed world. Seven Latin American nations privatized pensions. — location: [2540](kindle://book?action=open&asin=B00VE68IQW&location=2540) ^ref-4120 Interesting to consider the liabilities of developed world an's icy from pensions compared to Latin America and central Europe. --- the pressure from interest groups, whether local or foreign, seeking to avoid the abolition of their privileges, or to obtain new ones, tends to exceed the pressure from society as a whole, the overall beneficiary of reform. — location: [2578](kindle://book?action=open&asin=B00VE68IQW&location=2578) ^ref-950 --- If reform does not consist of a systematic, all-encompassing assault on the myriad mechanisms through which power allocates opportunity and vests particular individuals and groups with rights the rest of society is barred from, the transition can end up replacing one form of corporatism, state mercantilism, privilege, wealth transfer, and political law with another. — location: [2594](kindle://book?action=open&asin=B00VE68IQW&location=2594) ^ref-64572 --- There took place what many decades ago Andreski had called “a parasitic involution of capitalism,” defined as a “tendency to seek profits and alter market conditions by political means in the widest sense of the word.” — location: [2646](kindle://book?action=open&asin=B00VE68IQW&location=2646) ^ref-4837 --- Privatization exalted the notion that property is a political concession, not a higher or universal law that empowers individuals, beyond the government’s power, so it can be the object of contract and exchange. — location: [2653](kindle://book?action=open&asin=B00VE68IQW&location=2653) ^ref-16478 --- In general, the most attractive sectors of the privatized economy, such as banking, energy, and telecommunications, have been dominated by foreign interests allied with smaller local interests, helped along by government favors in the form of monopoly concessions (or vertical integration in the energy and electricity business), tax exemptions, discriminatory regulation, and expanded credit. — location: [2708](kindle://book?action=open&asin=B00VE68IQW&location=2708) ^ref-35397 --- At the turn of the new millennium, Mexico grappled with loss of investment and jobs as some three hundred manufacturing plants moved to China between 2001 and 2003, further illustrating the problems introduced by monopolies. Under the state monopoly, the cost of energy is 20 percent higher than in competing countries; under Telmex’s protected position, increased communication costs and the restricted transport market mean that proximity to the United States is no longer a decisive advantage over Asia. — location: [2768](kindle://book?action=open&asin=B00VE68IQW&location=2768) ^ref-41505 That's a great anecdote highlighting the downfall of monopolies even in just a section of the economy. --- pension reform itself was not saved from state mercantilism and crony capitalism: in many countries, private pension funds were forced to invest heavily in government bonds. This was a very old tradition of state concessions (limited property rights) in exchange for funding. — location: [2795](kindle://book?action=open&asin=B00VE68IQW&location=2795) ^ref-57884 --- In Argentina, pension funds were mainly invested in government bonds when the government defaulted on most of its $141 billion foreign debt at the end of 2001 and, after suspending payment of its domestic debt also, ended up devaluing its currency—thus expropriating the savings of the pensioners. — location: [2799](kindle://book?action=open&asin=B00VE68IQW&location=2799) ^ref-3236 --- The variety of trade deals and negotiations in the western hemisphere indicates that no government sees trade as a spontaneous activity by people who want to benefit themselves and each other. They see it as a military exercise that aims to take as much territory as possible and concede as little as possible. — location: [2861](kindle://book?action=open&asin=B00VE68IQW&location=2861) ^ref-57596 --- In trying to steer a middle course between the inflationary 1980s and the privatizing 1990s, they fail to see that both experiences were variants of the same evil. In the 1980s, the state, a producer of goods and services, used a suffocating tangle of compulsion mechanisms, including currency manipulation, to coerce citizens into sustaining what Octavio Paz once called the Philanthropic Ogre; in the 1990s, the state, having transferred production to private enterprise, used a suffocating tangle of compulsion mechanisms, excluding inflation, to coerce citizens into sustaining a coterie of monopolies that, in exchange for exclusive rights, supported the Philanthropic Ogre through credit and some taxes. — location: [2993](kindle://book?action=open&asin=B00VE68IQW&location=2993) ^ref-64044 --- Corruption is not just a means to obtain profits in countries where profit is a function of power and not of initiative and enterprise; it is a consequence of the loss of legitimacy of the law and of the state, and of those moral values that make possible civilized coexistence in any society. — location: [3104](kindle://book?action=open&asin=B00VE68IQW&location=3104) ^ref-57339 --- It is hard to overstate the corrosive ethical effect of this distortion arising from the displacement of opportunities from the private to the public sphere. — location: [3113](kindle://book?action=open&asin=B00VE68IQW&location=3113) ^ref-57136 --- No law or decree designed to encourage production or distribute wealth is able to turn a poor country into a prosperous one. — location: [3280](kindle://book?action=open&asin=B00VE68IQW&location=3280) ^ref-14657 ---