I cannot assess the truth or falsehood of Mary Anastasia O’Grady’s latest Wall Street Journal column. In it she assesses Biden Administration policies with regards to Central America in a strongly accusatory manner:
The Biden administration says it wants to tackle the “root causes†of migration. But progressives don’t want capitalism to take hold in poor countries. The upshot is that somebody’s going to get rich off President Biden’s $4 billion aid package for the region. But it won’t be la gente.
In assessing the migrant flow from Central America’s Northern Triangle—Honduras, Guatemala and El Salvador—Team Biden places heavy blame on successful entrepreneurs. In a March interview with NPR, Juan González, the White House’s National Security Council senior director for the Western Hemisphere, called the “private sector†a “predatory elite that benefits from the status quo, which is to not pay any taxes or invest in social programs.â€
Mr. González’s pejorative is shorthand for the view that a small number of wealthy business owners are responsible for persistent, widespread poverty. This narrative, popular during the Central American wars of the 1980s, is outdated at best. Yet it remains the left’s central talking point.
The facts on the ground are different. Far from causing the lack of demand for labor or a shortage of tax revenue, local businesses that operate in the formal economy create good jobs and generate a major portion of the tax revenue. They also contribute to the government’s health and pension systems. But there aren’t enough of them. Even educated youths often don’t find work.
The trouble is that most of the economy is underground. The development challenge is to make it attractive for those businesses, which aren’t registered and don’t pay taxes, to become legal and grow. That’s not done by scapegoating the compliant.
To be sure, crony capitalism undermines growth. But Mr. González is wrong to finger the traditional entrepreneurial class as the culprit. The biggest crooks in the Northern Triangle tend to be politicians and narcos snagging shady state contracts.
I would hasten to mention that these policies did not begin with the Biden Administration but they do seem to be doubling down on them. I think there are some things that we should agree on about our aid policy and some on which people should be open to being persuaded.
We should agree that our present foreign aid policy is not working by any key performance indicators, at least not by any KPIs that we would actually want. It has been said with some justice that foreign aid consists of poor people in rich countries paying rich people in poor countries.
What I think we should be willing to agree is that the biggest impediment to economic growth and development in poor countries is bad government. It is very difficult to find a counter-example. China, for example, was desperately poor until it abandoned its state policy of autarky. In other words a great part of the solution to China’s problems was better government. The same is very much the case in practically every poor country you can name.
What should we be trying to accomplish with our foreign aid and how can those objectives be accomplished?
Who are these progressives who dont want capitalism? I think progressives would gladly support truly local small businesses who provide jobs. What I think they oppose are the large companies/cartels that exist and proper largely by their political connections and run monopsonies that set wages well below what would be market rates if they had markets. Not sure who this person is but she might want to read on the history of the area. Maybe start with he big sugar companies.
Steve
And yet they’re happy to subsidize big businesses and tax small ones out of existence.
Most of the abuses of the United Fruit Company in Central America took place a century ago and the most recent of which I’m aware was 50 years ago. It makes a good whipping boy but it’s not responsible for Central America’s problems.
Well, Dave got there first.
Try some new bullshit, steve.
To us, foreign aid is humanitarian, to the leaders, whoever they are at the receiving end it’s an opportunity.
It can be seized and sold, seized and distributed to political allies, withheld from opponents.
When the actor Shawn Penn went down to help clear debris after the earthquake in Haiti, he noticed groups of men glaring at him. Turns out, they didn’t believe that the volunteers were not being paid, and they needed work. So it would have been better to pony up pay for the local men to do the jobs and leave the corrupt Haitian government out of it.
Fundamentally, we just don’t have much ability to influence other societies. We barely have the ability to influence our own. We try with foreign aid by doing what we do best – throwing money at the problem with good intentions. Like so much else in our government where good intentions and money conspire, the results are rarely what proponents predict.
I don’t think this problem is really solvable. I think US aid money can somewhat influence governments, not societies, but the effects are short-term.