Honduras needs free market capitalism

On the Honduras Weekly web site, there was an interesting discussion about the possible merits of socialism, in the context of the declared aim of the so-called “Partido Libre” in Honduras:

….socialism. For more than two-thirds of the people in the country who struggle to survive on $3 or less per day, this is probably a good idea because the primary outgrowth of such a move (if implemented competently and without generating excessive civil turmoil — both very big “ifs”) would be the redistribution of power, wealth, and control over national resources. For them, neoliberal capitalism has produced nothing but misery, so to them a new economic model emphasizing more balance in society through more government control and regulation sounds pretty nice.

It is impossible to implement any economic planning without deep understanding of economics. The problem with the study of economics in government planning is the fact that almost nobody in government planning offices have a good understanding of economics in the real world.

Government control and regulation has only made things worse where it is enforced. This is what has finally brought USA prosperity growth to a halt. That along with the boom and bust whiplash of central bank machinations, fiat money devaluation (“inflation”) that robs the poor and the elderly living on fixed-amount incomes based on questionable government-created COLA indexes, and so on.

For them, concepts like free trade, open markets, and private enterprise are of no consequence because they’re not able to compete in such a world, and so they keep getting left farther behind until all hope of ever having a good life for themselves and their children is gone

Most people don’t understand how free trade and open markets really work because private enterprise has not been truly free in the real world for a long time, except in a few isolated areas.

“Free trade agreements” might not seem to work, but that’s because we’ve not seen any. The ones they tell us about are really “managed trade” agreements where each side negotiates the best deal they can, not for the consumer or the poor, but for crony and special interests. The interests of a king or parliament or the corporate-government complex is not the interest of the housewife shopping in the grocery, or the corner store on the corner.

I don’t know offhand of any truly open markets either. Honduras does not qualify, although some of the street vendors might, when they are left alone.

The poor benefit from a free market left alone, where investors with capital area able to establish an enterprise that endures and continues to provide productive employment for those who want to work. If someone is willing to work for $3.00 a day, it is because the alternative is worse! Demanding higher pay without corresponding productivity increases for the labor will do one of the following: (1) increase the relative value of automating the activity and decreasing the labor pool (This has happened in the US, that’s why so much fast food production is automated); or (2) all other things being equal, decrease the profit margin and in some cases make the difference between bankruptcy and solvency.

In any cases, it decreases the marginal utility of a laborer for the employer. This is why the estimated 150,000 poorest earners lost jobs with Zelaya’s sudden doubling of the minimum wage.

The economic differences between North and South Korea is the difference between socialism and capitalism. Chile introduced some measures that rid themselves of much of the socialism under Allende. Under the runaway socialist regime, the nationalized copper mines had been losing money, had increased rates of accidents, and political appointees instead of technical managers.

When they sold the mines back to Anaconda, they became tax contributors again and accidents went down. They introduced a choice in the retirement plans and did not force workers to contribute to a state controlled plan. One of the most frequent wish list items Ron Paul got from young people was that they wanted to opt OUT of the socialist social security system because they do not have faith.

I spoke this very day I write this with an employee of the Social Security Administration. She says she hopes there is still something left when she gets to retirement age!

This next point the writer made is absolutely true, more than he realizes I think:

Capitalism is all about competition and profit, and there is nothing inherently wrong with that… so long as there is a level playing field.

I say probably more because once you understand how economics works and how government works, you understand that there is a guarantee under government that there is never a “level playing field”. This is because government, especially with socialism, is based on force. If Mr. Tax Collector Smith takes your money under threat of force, it is theft. It does not matter in the real world who does it.

Remember Mohamed Bouazizi? He was the man in Tunisia who set himself on fire in protest. One of the last things he said that day to his brother was “Poor people have a right to do business too!”.

Earlier that day, he had gone to the plaza with his “capital good”, a balance to weigh the produce he was going to sell there. He was a poor street vendor. Since he was not paying the fees and taxes to authorities, since he was violating government regulations, a policeman confiscated his balance and sent him away.


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