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A Spotty Record in the Third World
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14145 |
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CURRENT ISSUES
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1 / 1988 |
2,961 Words |
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J. William Middendorf II
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Adam Smith, the great pioneer of modern economics who demystified the workings of the free market, wrote that national prosperity derives ultimately from the unplanned actions of myriad individuals pursuing their self-interest spontaneously. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner," he wrote, "but from their regard to their own interest.... Led by an invisible hand to promote an end which was no part of his intention," the self-interested individual often helps his fellows in society "more effectually than when he really intends to promote it."
Today the economies of much of the Third World lie in shambles following 40 years of bureaucratic interference with the workings of free markets. Central planning by bureaucrats, supported by sentimental ideology from Western intellectuals, lies at the root of this economic malaise. Social planners attack Adam Smith's ideas for their emphasis on self-interest and not on the state as a whole. But nowhere is there more evidence than in the Third World of the failure of politically motivated interference with the economic principles that Smith promoted.
Is it preordained that a family of workers in Mexico, our immediate neighbor to the south, derives a fraction of the income of their cousins doing the same work a few miles away in the United States? Is it preordained that Third World countries should be synonymous with poverty, malnutrition, overwhelming debt, massive capital flight, and endless emigration?
There are a number of causes for this lack of progress, but a root cause has to be the misguided political interference by governments that adopted "central planning" models that have crowded out the private sector.
Central planning and bureaucratic bungling did not begin with the Russian Revolution of 1917, but ideas espoused by Lenin have had an impact on academics and intellectuals ever since, including many of those who have been in a position to influence the newly developing nations of Africa and Latin America. Perhaps these same intellectuals will reverse their position when they study closely the following quotation:
Over the centuries, humankind has found no more effective measure of work than profit. Only profit can measure the quantity and quality of economic activity and permit us to relate production costs to results effectively and unambiguously. Our suspicious attitude towards profit is an historical misunderstanding, the result of the economic illiteracy of people who thought that socialism would eliminate profit and loss. . . . [T]he basic vice of our current economic system is the total irresponsibility of the upper levels of the pyramid and the absence of any feedback from below.
This excerpt is by Nikolai Shmelyov in the June issue of Novy Mir, the leading Soviet political and literary journal.
The crisis in centrally planned economies has been a long time in the making. Paul Craig Roberts points out that the crisis in Latin America, for example, is the result of the implementation of economic policies propounded a few decades back by leading Western development experts and the Department of State that substituted public debt for private equity and the marketplace. Development planning was to be the only
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