#mugabe

Sometimes i wake up sad, then i realise Mugabe is in hell.

What do you think about libertarian thinking in developing countries? Under the influence of [the] IMF and World Bank, do you think they may find their way to a more free market economy? Are you optimistic about the future for these countries, including Turkey, with respect to classical liberal values?

Hoppe: Mankind has been endowed with reason. Hence, we may always be hopeful that the truth will ultimately win. Whether or not one can be optimistic regarding any particular country, such as Turkey, depends on the answer to this question: How many, what proportion, of the members of one's country's intellectual elite have a firm grasp of economic fundamentals? And it is one of the central tasks of a liberal think-tank to produce and multiply such people and thus create reasons for optimism.

What must be understood in the 'developing' world is this. There exist reasons why some countries are rich and others poor—and these reasons have little to do with 'exploitation' of the poor by the rich (although such a thing undoubtedly exists, too). There exists only one way to general prosperity: through saving and investment. Rich countries are rich, because they have accumulated a large supply of capital goods per capita. Poor countries are poor, because they have accumulated little capital. Why is there a lot of saving-investment and capital accumulation in some places and little in others? Because in some places a relatively high degree of security of private property exists or has existed in the past, and in others private property is or has been under constant attack from confiscation, taxation, and regulation. Where private property is not secure, there will be little saving and investment.

Why is it that there is low or little private foreign investment in the so-called developing world, despite the fact that labor costs are much lower than in the U.S. or Western Europe? In the U.S., you hear constant complaints about 'jobs being exported' to low wage third-world countries. However, the amazing thing is how small this sort of export actually is. Again: a central reason why foreigners do not invest more in the developing world is the high insecurity of private property rights.

Moreover, it must be understood in the 'developing' world that a sound currency and monetary system is a highly important aspect of property security. Above all, a fundamental law must be understood: that an increase in the supply of government paper money cannot—never, ever—increase social wealth. After all, it is just an increase in the number of colorful pieces of paper. It does not create one single additional consumer or producer good. Otherwise, if more paper money could produce greater wealth, why is it that there are still poor people around? The only thing that inflation can and does achieve is a systematic re-distribution of existing social wealth in favor of government as the producer of the additional money and its immediate clients (and at the expense of those who must consequently pay higher prices while their own money income has remained unchanged). Paper money inflation is stealing and confiscating, and the governments of 'developing' countries have been the worst offenders against monetary security.

My advice to the undeveloped world: Acquire the reputation of a place where private property, including money, is safe (think of Switzerland, for instance). Then you will prosper. Otherwise you won't.

As for help from the IMF or the World Bank, don't count on it. Instead, these institutions are a major source of economic mischief and misinformation. They have been established by Western governments, foremost the U.S., in order to promote their interests. They are manned by thousands of 'expert' bureaucrats on well-paid jobs requiring little work and offering exotic perks. If they are economists, the 'experts' are most likely Keynesians; that is, for them, there exists no problem that paper money cannot cure. This bureaucracy is endowed with paper money which the US and its allied governments have 'created out of thin air' (printed up). It negotiates loans to governments of countries in financial trouble, presumably in order to get them out of trouble.

From this constellation the following prediction can be derived: Because it is not their own money or that of private investors that the international bureaucrats loan out, they have little or no interest that their policy proposals actually work and the loans be repaid. Worse, because it is 'governments in trouble' that are bailed out with loans, economic troubles and policies leading to such troubles are actually encouraged (think of Zimbabwe and Mugabe!). Perversely, then, the failure of their own policy-prescriptions provides a reason for the institutions' own continued existence and growth. What would the IMF do, if governments would not cause economic troubles?