Thursday, August 18, 2011

Debt Is When Math and Violence Pervert a Promise

Book Review of Debt: The First 5,000 Years by David Graeber

Debt: The First 5,000 Years is precisely what its title suggests: a wide-ranging exploration of the recorded history of debt. Which may sound a bit abstract, until one remembers that it was debt that nearly destroyed the entire global economy we all inhabit a few years ago. And it may sound a bit impersonal, until one remembers that personal debt is at historic levels. Actually, what it may seem is morose, depressing. What would be the value of such an exploration? What insights might it lead to?

Well, it might lead to "that great embarrassing fact that haunts all attempts to represent the market at the highest form of human freedom: that historically, impersonal, commercial markets originate in theft. [...] Who was the first man to look at a house full of objects and to immediately assess them only in terms of what he could trade them in for in the market likely to have been? Surely, he can only have been a thief. Burglars, marauding soldiers, then perhaps debt collectors, were the first to see the world this way. It was only in the hands of soldiers, fresh from looting towns and cities, that chunks of gold or silver - melted down, in most cases, from some heirloom treasure, that like the Kashmiri gods, or Aztec breastplates, or Babylonian women's ankle bracelets, was both a work of art and a little compendium of history - could become simple, uniform bits of currency, with no history, valuable precisely for their lack of history, because they could be accepted anywhere, no questions asked. And it continues to be true. Any system that reduces the world to numbers can only be held in place by weapons, whether these are swords and clubs, or nowadays, 'smart bombs' from unmanned drones."

In this book, Graeber reveals the way in which the ancient concept of "obligation" was piggybacked upon by the modern capitalist idea of "debt". That is, it reveals how a very ancient concept with deep cultural and psychological roots, which is intertwined with our sense of morality, has mutated into a very different, fundamentally different modern concept. The ancient concept is "obligation", the sense that we owe everything to our community, without which our lives would be completely impossible; and specifically, the sense that we are obligated to be generous to those who have been (or would in the future be) generous to us. The modern concept is "debt", which exists in forms of varying similarity to the ancient concept: from the very obligation-esque loan from a friend or family member, to the multi-billion dollar junk bond or derivative instrument. Personal, one-to-one, community feelings of obligation and mutual support were transmuted in and appropriated by our modern capitalist system, a system which is a total mismatch to the environment in which such feelings first arose and evolved.

In my estimation, there is a significant degree of similarity between Graeber's anthropological project and the mission of evolutionary psychology. In evolutionary psychology, attempts (of wildly varying success) are made to show how the several-hundred-thousand years during which homo sapiens evolved as hunter-gatherers in the savannas of Africa shaped our psychology. Evolutionary psychology explains phenomena like our taste for salty, sweet and fatty foods: in the environment our species evolved in, salt, sugar and fat were hard to come by, and their presence in a food source in the African savannas would indicate that it was nutrient-rich and healthy; hence, part of the reason for today's widespread consumption of junk foods that are nutrient-poor and unhealthy.

With that being said, this book makes no claim that the concept of debt is genetically hard-wired into our species. What it does explain, however, is that the concept of debt is at least as old as recorded history. This is important for two reasons. First, it strongly suggests that the modern incarnation of debt can only be fully understood by looking at its roots; which, being roots, must still comprise a significant portion of the whole. Second, it exposes as a myth the "history" of money that is a cornerstone of economics today. (By "economics", I mean only the dominant paradigm within economics today, the neoclassical school, which I refer to as "theoclassical economics" for its similarities to fundamentalist religion.)

Before I get into the mythology of economics, a bit of history: before Adam Smith, the reigning paradigm in economics was the theory that each nation should strive to export more than it imported, enriching itself from inflows of precious metals as it progressively improved its technology and productivity. Adam Smith and other laissez faire economists led an overthrow of that paradigm, at least within England, leading to a new paradigm of free trade (now called "classical") economics: the belief that by minimizing governmental interference in the realm of economic activity, the most economically advanced nation, England, would maximize its power and wealth. This belief was proselytized, with varying degrees of success (more in Portugal, less in Germany and the United States), by a key modification: that free trade would benefit all nations, not just the most economically advanced. Karl Marx then came along and postulated that the next logical step from classical economics would be socialism, because the way capitalism under classical economics worked would inexorably lead to the overthrow of capitalists and the birth of a worker-led global economy. For obvious reasons, this idea was anathema to those who profited from the contemporary economic system, and it did not take long for economics to retreat from the intellectual lineage that Marx had corrupted with his contribution. The neoclassical school was born in this retreat, which attempted to resituate the classical economics of Adam Smith within a realm of simplified mathematical models of the economy on a microscopic scale. Rather than examining national and global economics, neoclassical economists zoomed in to the individual level, assuming that self-interested rationality governed all choices, and then made national and global policy prescriptions based on their unscientific models of how individuals made economic choices. Their models suggested that the aggregate of individual economic choices would result in the best outcomes for all, if only governments would allow individuals to choose freely. The policy prescriptions of neoclassical economics gave immediate benefit to already rich individuals and the already technologically advanced countries, while promising deferred benefits to the poor and developing nations. (Their policy prescriptions were rejected by the governments of successful developers like the United States and Germany during their periods of development.)

The Great Depression was nothing less than a mindfuck to the then-dominant neoclassical paradigm. According to the neoclassical economists, it should not have happened, or at least it should not have lasted for as long as it did. What should have occurred, according to the orthodox view, was a corrective period during which wages would drop to the level at which capitalists would be willing to begin investing and hiring en masse, and then the whole economy would begin growing again. That did not happen. Instead, what finally ended the worldwide depression was massive government spending, creating credit upon sovereign debt, for the war. These real-world events powerfully shook the economics academy into breaking from neoclassical orthodoxy, at least a bit, towards a view of the economy as needing government intervention to fix serious, inherent flaws.

Fast forward a few decades, and the neoclassical paradigm has arisen again like a zombie. And along with it, Adam Smith's mythology of the origins of human economy.

As Graeber explains, Adam Smith claimed that human economies were first based on barter; then, someone decided to introduce coins to make things simpler; then governments decided to take over the currency business, issuing their own currencies and regularly screwing things up by spending too much and causing inflation. Since this core myth still survives, it is easy to see how the contemporary debate over deficit spending assumes that governments which issue their own currencies are nonetheless subject to the same kinds of budgetary constraints that keep individuals from spending beyond their means.

Yet, a myth is a myth. Governments which issue their own currencies are not strictly subject to the same constraints. To begin to understand why, we must begin by replacing myth with history.

"[O]ur standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage or paper money: historically, it has mainly been what people who are used to cash transactions do when for one reason or another they have no access to currency."

Credit (and the flip side of the coin, debt) did not arise only after coinage; it has existed in countless forms since (and doubtlessly before) the beginning of recorded history. Most likely the first form in which it existed was in what Marx called primitive communism: the interdependence of hunter-gatherer tribes, each member of which would both expect to help and be expected to help everyone else in the group. This is undoubtedly the first form of credit and debt to emerge. It is just another way of conceptualizing the sort of altruism that characterizes our species, and which gave early evolutionary theorists such a headache ("how could it be that there is so much altruism in our species, when our evolution is supposed to be governed by survival of the fittest? Shouldn't those who betray the altruists for their own benefit out-compete, and eventually completely replace, them?"). This sort of in-group altruism is pithily summarized by an anecdote from the Greenland Inuit, one of whom was thanked profusely by a hungry Danish writer who had been given a gift of walrus meat by one hunter:
"Up in our country we are human!" said the hunter. "And since we are human we help each other. We don't like to hear anybody say thanks for that. What I get today you may get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes dogs."
Or, by whips one trains dogs, and by gifts one trains slaves. In other words, in this hunter-gatherer society, each member was expected to behave altruistically to everyone, without expectation of recompense in any form. A gift for which one expects thanks or repayment is a form of debt; and debt creates slaves.

So first, a form of reciprocal assistance emerged. Then, as human groups grew larger and more divorced from their kin-group beginnings, the ties that bound kin groups together evolved to support a much larger superstructure. A sense of altruism emerged within homo sapiens which formed a key role in supporting kin group bonds. These bonds were the basis that allowed early humans to organize into tribes, in which each member would work for the benefit of the other members, even though fairly extensive interbreeding with other tribes would have minimized the actual genetic relationship between members. But how could this happen? Altruism itself, even when practiced solely within families, was extremely difficult for early evolutionary theorists to explain. After all, would not the most ruthless, back-stabbing individuals out-compete and out-breed their more altruistic kin, leading to a race of selfish individualists who would never sacrifice an eyelash for anyone?

But as evolutionary biologist Robert Trivers showed, it is perfectly reasonable that altruism within kin groups would have evolved. After all, self-sacrifice for those who share a healthy percentage of one's own genes can very well increase the longevity of those very genes. That much is clear. That much fits within the umbrella of natural selection. But what could account for much larger groups of humans, who share far less genetic similarity, cooperating among each other as if they shared a substantial percentage of genes? That, it would seem, cannot be explained by genetic evolution on its own. It would seem, rather, that ideas whose existence was predicated upon kin-group solidarity themselves evolved, and provided the basis upon which much larger, non-kin-group organizations could develop. The evolution of ideas is something we are all very familiar with, even if we rarely systematically examine the process - we are familiar with the evolution of baseball from the basis of cricket, the evolution of rock 'n' roll from the blues, the evolution of World of Warcraft from Pong, and so on. In much the same way, altruism within artificial groups (like 'my people', 'my nation') could not evolve without the ideas that grew inside the minds of those who had evolved to behave altruistically to members of natural, genetic kin groups.

And central among the ideas that grew along with the formation of kin groups must have been the idea of debt. Only, back when it first emerged, "debt" probably looked nothing like our modern conception of the idea. When it first emerged, "debt" would have been more like our modern conception of "obligation", in the same way that we feel like we "owe", "are obliged to", or "should" provide care to our parents and relatives, who cared for us in our youth. This ancient form of "debt" can very easily be understood as the cornerstone of a bond that allowed large-scale cooperation to evolve in the first place: it is as if to say, "everyone in my group will help me, therefore I will help everyone else in my group because I owe them one."

The evolution from ancient to modern conceptions of debt did not occur seamlessly. Or painlessly. As modern ideas of debt emerged from their ancient counterparts, traditional social relations were torn apart. For instance, as horribly patriarchal as many early societies were, and as much control husbands were given over their wives:
"[a] Mesopotamian husband couldn't sell his wife [...]. Or, normally he couldn't. Still, everything changed the moment he took out a loan. Since if he did, it was perfectly legal - as we've seen - to use his wife and children as surety, and if he was unable to pay, they could then be taken away as debt pawns in exactly the same way that he could lose his slaves, sheep, and goats. What this also meant was that honor and credit became, effectively, the same thing: at least for a poor man, one's creditworthiness was precisely one's command over one's household, and (the flip side, as it were) relations of domestic authority, relations that in principle meant ones of care and protection, became property rights that could indeed be bought and sold."
The first human societies would disallow the selling of one's wife or children as if they were handicrafts in a marketplace. One may be obligated to provide for the larger community as a condition for membership, but one would never have to pledge one's family members as slaves in exchange for any benefit the community might give. But the more newly-evolved concept of debt did allow a man to offer his wife or children as collateral for a loan - not quite the same as a simple sale, but potentially having the exact same effect. In the first human social environments, to someone who helped you in a material way you would only feel the obligation to continue to be willing to help that person out - but as time went by, and social organizations grew much larger and evolved conceptions of "debt", you would feel a sense of obligation much more specific and temporal, tied to a particular item and lasting for a specific period of time. This new concept of social obligation as "debt" also, as slavery shows, could be profoundly inhuman.

As markets developed and societies grew larger, and it became impossible to know each and every member of one's in-group, obligation-as-debt came to completely destroy social bonds for the unluckiest. A farmer forced to take out a loan and unable to pay it back due to drought or an unfavorable market might be forced into slavery, or to sell his family members into slavery. (In fact, in ancient Greece it was an aristocratic rebellion against these terrible outcomes of the marketplace that led women to be veiled and shut up in the house, to keep them from the market-infected values of the public sphere.) Hence, when it first emerged as an impersonal market mechanism, "debt" was feared due to its sinister ability to exile people from their communities and rob them of their freedom:
"As everywhere in the ancient world, to be 'free' meant, first and foremost, not to be a slave. Since slavery means above all the annihilation of social ties and the ability to form them, freedom meant the capacity to make and maintain moral commitments to others. The English word 'free,' for instance, is derived from a German root meaning 'friend,' since to be free meant to be able to make friends, to keep promises, to live within a community of equals. This is why freed slaves in Rome became citizens: to be free, by definition, meant to be anchored in a civic community, with all the rights and responsibilities that this entailed."
Interestingly, around 600 AD, human nature began to rebel against this most drastic consequence of the concept of "debt", and all around the world, "over the course of centuries, amidst much unrest and confusion, chattel slavery largely ceased to exist." Although the intellectual justification for slavery as the natural consequence of unpaid debts remained in place, it inspired such revulsion in people that it was extinguished in most parts of the world. Or, elaborate new theories were invented to justify its re-adoption: "[i]t is one of the great ironies of history that modern racism - probably the single greatest evil of our last two centuries - had to be invented largely because Europeans continued to refuse to listen to the arguments of the intellectuals and jurists and did not accept that anyone they believed to be a full and equal human being could ever be justifiably enslaved."

So just what is this concept of debt, this mutation of an original sense of mutual obligation within the small societies in which we as a species spent most of our time evolving?
"A debt ... is just an exchange that has not yet been brought to completion. [...] It follows that debt is strictly a creature of reciprocity and has little to do with other sorts of morality [...] Debt is a very specific thing, and it arises from very specific situations. It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are not currently in a state of equality... This is what makes situations of effectively unpayable debt so difficult and so painful. Since creditor and debtor are ultimately equals, if the debtor cannot do what it takes to restore himself to equality, there is obviously something wrong with her; it must be her fault. [...] This connection becomes clear if we look at the etymology of common words for 'debt' in European languages. Many are synonyms for 'fault,' 'sin,' or 'guilt;' just as a criminal owes a debt to society, a debtor is always a sort of criminal."
Or, to be more accurate, is considered to be a sort of criminal. Someone who shirked one's obligations to a traditional, small human society might do so in the form of murdering a community member, or hoarding community resources, among other things; and this would make one a criminal. But as the modern concept of debt emerged, it piggybacked upon the idea of transgressions against the community and came to be considered nearly criminal in its own right. This is a glaring error. The modern concept of debt only emerged once societies had grown large enough to create faceless, impersonal marketplaces; and the sense of obligation, from which debt arose, is at home only in small societies whose members would each have had a personal relationship with every other member. In a large, impersonal marketplace, having a personal relationship with everyone else is an impossibility; hence, it makes no sense to apply the morality of small societies to it. To do so is to commit a category error. And yet today, we still apply our ancient sense of morality to the new, fundamentally inapplicable concept of debt, 'putting new wine in old wineskins' as Jesus would say.

This misapplication has innumerable and fascinating implications for modern society. As just one example:
"Consider the custom, in American society, of constantly saying 'please' and 'thank you.' To do so is often treated as basic morality: we are constantly chiding children for forgetting to do it, just as the moral guardians of our society - teachers and ministers, for instance - do to everybody else. We often assume the habit is universal, but as the Inuit hunter made clear, it is not. Like so many of our everyday courtesies, it is a kind of democratization of what was once a habit of feudal deference: the insistence on treating absolutely everyone the way that one used only to have to treat a lord or similar hierarchical superior. [...] In English, 'thank you' derives from 'think,' it originally meant, 'I will remember what you did for me' [...] but in other languages (the Portuguese obrigado is a good example) the standard term follows the form of the English 'much obliged' - it actually does mean 'I am in your debt.' The French merci is even more graphic: it derives from 'mercy,' as in begging for mercy; by saying it you are symbolically placing yourself in your benefactor's power - since a debtor is, after all, a criminal."

So, now that we know to be wary of our conception of debt because is founded upon and partially composed of radically different ideas that make sense only in an entirely different sort of small-scale, primitive communist society, what else must we reexamine?

As it happens, the answer is: the entire structure of our contemporary world economy. And this reexamination must start from the beginning.

Traditional small-scale human societies, judging from the still-extant ones today that anthropologists have been able to study, had forms of currency. But these currencies were fundamentally different from the currency used today. They may have been rare feathers, or shells, or copper wires; but what differentiates them from a dollar or peso is that they were not redeemable for anything. Rather, they played a very limited and specific social role, such as making up for social transgressions, or paying for a rite of passage. But they were not "money" in the modern sense, something that can be used to trade for just about anything one might need or desire, from food to clothes to shelter. A form of modern money emerged as tokens of debt between individuals. Merchants with a reputation for paying debts might issue unmistakeable tokens of debt, say in the form of a chip or a notched wooden stick. The recipient of this IOU then might, rather than hold on to it and wait for the merchant debtor to redeem it, trade it for something else to someone who similarly trusted that the merchant would honor the debt instrument.

This, for obvious reasons, was only a very limited form of money. Few would accept as payment a wooden stick that was claimed to be redeemable for actual goods by an unknown merchant thousands of miles away. The birth of modern money required a midwife. A very powerful midwife, as it happened: governments, and their desire to wage war.
"Say a king wishes to support a standing army of fifty thousand men. Under ancient or medieval conditions, feeding such a force was an enormous problem - unless they were on the march, one would need to employ almost as many men and animals just to locate, acquire, and transport the necessary provisions. On the other hand, if one simply hands out coins to the soldiers and then demands that every family in the kingdom was obliged to pay one of those coins back to you, one would, in one blow, turn one's entire national economy into a vast machine for the provisioning of soldiers, since now every family, in order to get their hands on the coins, must find some way to contribute to the general effort to provide soldiers with things they want. Markets are brought into existence as a side effect."
So, while 'soldiers win battles, but logistics win wars,' government-issued money makes logistics possible in the first place. Hence, power-hungry kings soon latched on to the idea of issuing their own currencies, to create markets that would make military logistics much easier.

It is useful here to explain, in extremely simplified form, the difference between Modern (formerly known as Chartalist) Monetary Theory, and the outdated, conventional monetary theory. The outdated theory begins with Adam Smith's mythology about currency first being the spontaneous invention of private actors in a free marketplace choosing to use precious metals as a way of simplifying and facilitating trade. From this falsehood flows the idea that since governments forced their way into the realm of currency by issuing their own money, they must be kept in check just as would the most powerful merchant in a market who made himself the sole issuer of currency. After all, the temptation is too great on the part of the sovereign to use his money-creation powers to satisfy his own greed, destroying the value of the currency and the markets which depend on it in the process; so the smaller players need to band together to heap restrictions on governments to keep them from creating too much new money. This irrational and unspoken prejudice informs much of conventional monetary theory, horribly afraid as it is of inflation, and willing to countenance much unemployment and many unmet societal needs in order to keep it at bay. Better that governments spend less even if it leaves people suffering in unemployment, rather than employing them and possibly creating inflation that might rile investors.

Modern Monetary Theory (MMT), on the other hand, correctly locates the origin of money as the creation of the state. This is the conclusion all serious investigation has arrived at, even though it remains at the furthest reaches of mainstream Western economics today. John Maynard Keynes' "conclusion, which he set forth at the very beginning of his Treatise on Money, his most famous work, was more or less the only conclusion one could come to if one started not from first principles, but from a careful examination of the historical record: that the lunatic fringe was, essentially, right. Whatever its earliest origins, for the last four thousand years, money has been effectively a creature of the state." As the creature of the state, states have a great deal of freedom in its use. For instance, on the topic of spending, MMT holds that governments that issue their own currency are under no intrinsic limit; they can, and should, spend sufficiently to provide full employment to the population. The bugaboo of runaway inflation is one that governments need not be as terrified of as they currently are. As one of MMT's leading proponents, Bill Mitchell, puts it: "[a]ny spending that pushes nominal aggregate demand (spending) more quickly than the growth in real capacity will be inflation. That is the risk in all spending. There is nothing special about government spending in this regard. So, yes, under certain circumstances, government deficits could be inflationary but that begs the question as to why a prudent government would want to expand its deficit beyond full employment." In other words, government spending can cause inflation, but only under the same conditions that private spending can cause inflation: when there is too much money chasing too few goods and services. When natural, environmental, technological or human resources are left unused (which they by definition are whenever there is high unemployment), government spending can bring them into use by the economy. When such resources are fully tapped, further credit creation by the government or by private banks to allow more spending on tapped resources will lead to inflation.

This is a view diametrically opposed to the conventional monetary theory, with its basis in a myth about what money and credit are, in essence. But back to history:
"Chinese monetary theory was always chartalist. This was partly just an effect of size: the empire and its internal market were so huge that foreign trade was never especially important; therefore, those running the government were well aware that they could turn pretty much anything into money, simply by insisting that taxes be paid in that form."
This is interesting beyond the mere observation that the Chinese had stumbled upon the reality of modern money long before Western economists. It also points to a deeper challenge to our standard ideas about economics:
"[W]e're used to assuming that capitalism and markets are the same thing, but, as the great French historian Fernand Braudel pointed out, in many ways they could equally well be conceived as opposites. While markets are ways of exchanging goods through the medium of money - historically, ways for those with a surplus of grain to acquire candles and vice versa [...] - capitalism is first and foremost the art of using money to get more money [...]. Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so. From this perspective, China was for most of its history the ultimate anti-capitalist market state. Unlike later European princes, Chinese rulers systematically refused to team up with would-be Chinese capitalists (who always existed). Instead, like their officials, they saw them as destructive parasites - though, unlike the usurers, ones whose fundamentally selfish and antisocial motivations could still be put to use in certain ways."
Not only is capitalism not particularly cozy with free markets, it is not terribly fond of freedom itself. "It is the secret scandal of capitalism that at no point has it been organized primarily around free labor." From the conquest of the Americas, to debt peonage, African slavery, indentured servitude, coolies, forced labor and the like, the history of capitalism betrays a tension with freedom bordering on open conflict. "This is a scandal not just because the system occasionally goes haywire, [...] but because it plays havoc with our most cherished assumptions about what capitalism really is - particularly that, in its basic nature, capitalism has something to do with freedom."

Above all, what Debt: The First 5,000 Years does brilliantly is dispelling illusions and revealing the folly in some of our foundational, yet largely unexamined, ideas. Nowhere is this more apparent than when Graeber shifts his gaze to contemporary political economic discourse about debt:
"[T]here is something profoundly deceptive going on here. All these moral dramas start from the assumption that personal debt is ultimately a matter of self-indulgence, a sin against one's loved ones - and therefore, that redemption must necessarily be a matter of purging and restoration of ascetic self-denial. What's being shunted out of sight here is first of all the fact that everyone is now in debt (U.S. household debt is now estimated at on average 130 percent of income), and that very little of this debt was accrued by those determined to find money to bet on the horses or toss away on fripperies. Insofar as it was borrowed for what economists like to call discretionary spending, it was mainly to be given to children, to share with friends, or otherwise to be able to build and maintain relations with other human beings that are based on something other than sheer material calculation. One must go into debt to achieve a life that goes in any way beyond sheer survival. [...] The chief cause of bankruptcy in America is catastrophic illness; most borrowing is simply a matter of survival (if one does not have a car, one cannot work); and increasingly, simply being able to go to college now almost necessarily means debt peonage for at least half one's subsequent working life. Still, it is useful to point out that for real human beings survival is rarely enough. Nor should it be."


Debt ends with a concrete proposal which is worth quoting at length:
"[W]e are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt. It would be salutary not just because it would relieve so much genuine human suffering, but also because it would be our way of reminding ourselves that money is not ineffable, that paying one's debts is not the essence of morality, that all these things are human arrangements and that if democracy is to mean anything, it is the ability to all agree to arrange things in a different way. It is significant, I think, that since Hammurabi, great imperial states have invariably resisted this kind of politics. Athens and Rome established the paradigm: even when confronted with continual debt crises, they insisted on legislating around the edges, softening the impact, eliminating obvious abuses like debt slavery, using the spoils of empire to throw all sorts of extra benefits at their poorer citizens (who, after all, provided the rank and file of their armies), so as to keep them more or less afloat - but all in such a way as never to allow a challenge to the principle of debt itself. The governing class of the United States seems to have taken a remarkably similar approach: eliminating the worst abuses (e.g., debtors' prisons), using the fruits of empire to provide subsidies, visible and otherwise, to the bulk of the population; in more recent years, manipulating currency rates to flood the country with cheap goods from China, but never allowing anyone to question the sacred principle that we must all pay our debts.
At this point, however, the principle has been exposed as a flagrant lie. As it turns out, we don't 'all' have to pay our debts. Only some of us do. Nothing would be more important than to wipe the slate clean for everyone, mark a break with our accustomed morality, and start again.
What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point we can't even say. It's more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe."

Wednesday, March 02, 2011

Karl Marx is to blame for our economic problems - Book Review of Trade, Development and Foreign Debt by Michael Hudson

Those who regularly read my writings (both of you) will think this a very strange stance for me to take. Yet it is entirely true: the current woeful state of the world economy can be traced back to Karl Marx. This is because the predominance of neoclassical economics in the academy - and, from there, its dominance in public policy circles in the world's rich countries - originated as a reaction to Marx. Marx stained classical economics by powerfully arguing that capitalism would inevitably evolve into socialism. Hence, the entire edifice of classical economics was abandoned, and the neoclassical (also known as "theoclassical" for the nearly religious fervor its adherents have for it, even in the face of mountains of contrary evidence) school was born. As Hudson puts it, "[s]o inextricably had Marx identified the evolution of capitalism with the emergence of socialist institutions that the minds of orthodox economists snapped shut." Marx had taken the dominant contemporary economics of Adam Smith and David Ricardo, and so convincingly argued that the inevitable end result of the capitalist world system they described was socialism, that subsequent economists (or at least those derided by Marx as "sycophants of capital") were forced to retreat to a fantasy realm constructed entirely of mathematical models that only purportedly described the real world.

"The use to which Marx put Ricardo’s labor theory of value rendered it anathema [...]. An alternative body of economics was developed, a theory of marginal psychological utility rather than focusing on production functions and active government policy. […] According to laissez faire ideology a country’s first objective should be to maximize consumer utility at any given moment of time, as evaluated by current (rather than potential) market prices. There was no concept of losses suffered through trade, such as mineral depletion or forgone opportunities to develop. … [Neoclassical economists] down to the present day ignored the widening of international productivity differentials." Marx scared later economists both into the clouds and into a microscope, so to speak. By focusing on individual preferences on the micro scale, and on an aggregate of hypothetical individual preferences on the macro scale, economists abandoned protectionism's pragmatic focus on how to develop a national economy's productive potential. The result was an abandonment of earlier theories that actually dealt with the effect of trade policy on technological development, and explained how differential development between countries would allow those in the lead to grow exponentially faster than those without a productivity edge. Replacing these realistic theories were quasi-religious theories that posited, a priori, natural endowments that determined what were supposedly the most profitable economic endeavors for any given country - as if Britain had been endowed at some point with cutting-edge steel-making technology, while Ireland had been endowed (by God?) with great soil for growing potatoes.

Part of the blame for economics' flight into vested-interest-serving, fanciful irrelevance belongs on the shoulders of Thomas Malthus. Other than the authors of holy books, it would be hard to find find an author whose ideas have been more soundly trounced by a trip through the gauntlet of reality, while at the same time being widely believed to be true. (Freud and Ayn Rand might come in a close second.) Since he published his theories about the essential character of economics being determined to a large extent by the exponential growth of population and the linear growth of agricultural production, the world has seen - in the rich countries at least - a marked reduction in population growth and a nearly exponential growth in agricultural production. In other words, nearly the exact opposite of what Malthus predicted. Malthusian armchair theorizing could be what inspired neoclassical economists to assume diminishing returns in all industrial enterprises, as if the world were inherently as fatalist as one deficient product of the Victorian age believed it to be. Hudson goes beyond affinity to Malthus' delusions to explain how this devolution in economic theory occurred:
"The reason for assuming diminishing returns was not because this characterized economic reality. Rather, it was logically necessary to ‘close’ heuristic economic models so as to mathematically determine a single optimum mix of labor, capital and land for each commodity and an optimum specialization of production for each country. The new academic vogue of scientific economics was to translate arguments into mathematical terms, in ways that suggested neat equilibrium solutions to each hypothetical problem.
The real world was in no such equilibrium. …[Early economists] perceived that as England gained a world monopoly position by virtue of its self-reinforcing head start, economies of scale and financial efficiency, less active government diplomacy was needed - as long as other countries refrained from subsidizing their own industrial development. (A few gunboats often were all that was needed, not formal imperialism.)
The industrial and agricultural revolutions implied government policies to coordinate the training and education of labor and other infrastructure spending. But free traders excluded the analysis and consequences of increasing returns from the realm of international economics, and from that of domestic economics as well. Its dynamics were beyond the ability of simple arithmetic formulas to handle, at a time when mathematical treatment of subject matter had become the very symbol of scientific method. Increasing returns implied a plethora of choices in an explosive world, not a single stable solution in an entropic world. It implied a focus on change, not preservation of the status quo. It suggested inherent tendencies toward monopolization of production, both for nations enjoying a head start and within each country. […]
Despite these realities, free traders claimed an unwarranted generality for their conclusions by limiting the number of factors considered in describing economic development. Stripping economics of its classical political, social and technological concerns, they narrowed economic methodology[...] The assertion that free trade results in an optimum development policy for all countries, irrespective of their level of development and productivity differences, can be defended only by dropping the technological, historical and institutional aspects of trade theory.”
And to paraphrase (as Hudson does, in a slightly different form) R. L. Nettleship, “...the most fatally unpractical thing in the world is to go on using methods which take every factor into account except the one upon which the whole result ultimately depends.”

But economics' break with reality was not a development initiated by Marx. Throughout its history, economics has been particularly susceptible to corruption by political developments. For instance, in pushing for laissez faire against the protectionist/mercantilist orthodoxy of the time, Adam Smith was producing an economic theory that would be opportunistically championed by those segments of the British economy that would benefit from them. And this pressure - whether consciously or unconsciously - led him to avoid addressing the most cogent points of his economist opponents:
“... realism was not the objective of free traders. [Adam] Smith and his followers were not merely being naive in ignoring the mercantilist points. Their abandonment of the most sophisticated mercantilist analysis served politically to avoid discussion of assumptions that would produce protectionist rather than free-trade policy conclusions for poorer countries. For the past two centuries, free traders have shied away from introducing productivity analysis or realistic capital-transfer theorizing into their discussions, or acknowledging international movements of skilled and unskilled labor and capital. … The growing inequality among nations … suggested that if poor countries refrained from protecting and actively steering their economic development, they would suffer a growing dependency and consequent loss of economic options - exactly what has happened in practice. To avoid coming to this conclusion, free-trade theory ever since has narrowed its scope to become a caricature of global reality."
At a certain stage in a country's economic development, protectionism becomes outmoded. Once a country's means of economic production are advanced enough, it benefits that country more to advance a global economic regime of free trade, so its more advanced, more cheaply produced products can compete with other countries' less advanced, more expensive products without any foreign state intervention aimed at leveling the playing field. Latter day advocates of free trade did not arrive at their position from adherence to a sense of cosmopolitanism; rather, they advocated free trade out of a sense of nationalism, out of a belief that global adoption of free trade policies would benefit their own country disproportionately. This may come as a shock to many a self-styled adherent of Adam Smith's ideas today; so too nearly a century ago. Hudson quotes John Shield Nicholson writing in 1918: “...the present-day Free Trader will find in his Adam Smith a series of shocks and surprises. Instead of being cosmopolitan, Adam Smith was intensely nationalist, or rather Imperialist.”

Supporting the idea that the "free trade" orthodoxy that supplanted mercantilism in England was motivated by nationalist concerns was the fact that the "free trade" policies implemented by the British empire did not undermine its profitability. Rather the opposite. By freeing up funds that might otherwise be spent on the military, "free trade" policies allowed for even greater profitability for the private sector, hence greater national economic power. Replacing direct military force, "free market" forces were employed to garner the same benefit from Britain's colonies:
“Under freer market relations, trade was conducted along basically the same lines of specialization that the old colonial systems had brought into being. Market forces induced citizens in the liberated colonies to produce the foodstuffs and materials they had been led to produce under England’s trade and navigation acts. The legacy of colonial regulations, in conjunction with the sparsely populated condition of Europe’s white colonies and the squalid plantation organization of its colored colonies, had nurtured a specialization of world labor and dependency that henceforth was maintained by market incentives alone. The New World, Africa and Asia became thriving agricultural or mining regions rather than industrial rivals to Europe - until the United States adopted protectionist policies after its Civil War.”
The United States' turn toward protectionism is covered in greater detail in Hudson's America's Protectionist Takeoff, 1815-1914. Just like Britian's adoption of "free trade", the United States' adoption of protectionist policies was due to nationalistic concerns. And just as today's Unitedstatesian economists are ignorant of their country's protectionist economists and the protectionist policies they advocated (successfully, to the great benefit of the U.S. in the mid to late 19th century and early 20th), Britain too fell victim to the same sort of directed amnesia. "The nationalistic ideal of British free trade, like that of earlier mercantilism, held that strong economies would grow stronger while poor countries would become more dependent. […] This is the kind of admission - almost a secret knowledge - that subsequent free traders have been eager to forget.” Likewise, today's neoclassical (or theoclassical) economists have either been quite eager to forget the successes of the United States' early protectionism, or have never learned about it in the first place.

But back to Britain's transition from mercantilism and protectionism to laissez faire. Hudson explains how parliamentary debates were won by the free traders through their use of nationalist and imperialist arguments that a global free trade regime would benefit Britain above all. But after the free traders had won in the British Parliament, there was still the rest of the world to convince. And arguments based on English superiority were not likely to win many adherents outside of the British Isles. So the free traders argued instead that each country had been endowed (again, presumably by God) with certain unique advantages, or "factor proportions", that should be exploited to their fullest by focusing exclusively on producing them. In David Ricardo's words, whatever a given country has a "comparative advantage" in producing should be produced to the exclusion of everything else. Then, the products in which a given country has a comparative should then be traded within an international free market for all other needed products. Therefore, if Cuba "just so happened" to be better at producing sugar than England was, Cuba should focus entirely on sugar production, and trade its sugar for everything else it might want or need. After all, its "factor proportions" were better suited to sugar production, because it had good soil, a warm climate, and no steel industry (and a colonial history that turned it into a sugar producer). But factor proportions are not endowed by the Almighty. They are the result of geographical accident in the case of climate and soil, and the result of conscious human planning, and government intervention, in the case of industry. Hudson strikes at the core of factor proportion nonsense with a sliver of biting wit: “[t]he system of European land grants in the North and South American (and later African) colonies established local oligarchies that sponsored a centralized economic and political dirigisme in the context of latifundia/microfundia systems which still persist today. When the Native Americans refused to submit to the plantations system and its personal servitude, armed appropriation of their land drastically reduced their ‘factor proportions.’” Elsewhere, in revealing Ricardo's theory of comparative advantage to be seriously deficient due to its ignorance of history and politics, Hudson quips: “England prohibited India from rivaling the mother country in any commodity that its own producers desired to export. But gunboats do not appear in Ricardian trade theory."

In two sentences each, Hudson strips the arguments of the free traders bare. Factor proportions, or that which countries have a comparative advantage in producing, have been determined not only by geography, but by political, economic, cultural and military history. In other words, "natural endowments" are far from natural. South Korea has a comparative advantage in producing kimchi thanks to a cultural endowment, but it has a comparative advantage in shipbuilding thanks to the "endowments" of heavy state intervention in the economy, a history of economic aid and military protection from the United States, and its location near a number of Communist countries during the Cold War. Which are not "endowments" at all.

Such real-world considerations were not for the early free-traders, however. Once they had won over the British Parliament, their goalposts were shifted from convincing nationals of a country at the vanguard of economic and technological development, to convincing nationals of the rest of the world's countries, which were economic stragglers. Therefore, they made an amnesiac turn away from their country's own history of economic development, towards an abstract realm of reasoning with little basis in actual historical experience, to which they gave the euphemism "economic science." In this fantasy realm, ideas, theories and mathematical models ruled supreme, towering above the hoi polloi of actual history and pragmatism.
“Having established free trade at home over the course of a century, England’s strategic problem became one of how to export laissez faire ideology as a means to deter foreign protectionism and thereby keep foreign markets open to English industrial exports. The last thing called for in this ideological initiative was to repeat the arguments that had won over England’s own Parliament, namely that free trade would uniquely benefit England as the leading industrial power at the expense of poorer economies. Henceforth free trade was supposed to make countries more equal and, in the process, to increase the resources of all trading ‘partners.’ But once hitherto protectionist countries opt for free trade, it usually is to close off advantageous lines of investment for less developed countries.”
For instance, the free traders denigrated the use of tariffs - which Britain had used to its great advantage when its industries were still infants - by creating mathematical constructs in which tariffs were simply excess costs that consumers had to pay. By this logic, the tariffs that Britain had levied against foreign textiles while its textile industry was in its infancy only served to impoverish British consumers while doing absolutely nothing else. Not expanding the domestic market for British textile manufacturers, or financing infrastructure built by the British state. "By treating tariffs as a pure cost borne by the nation’s consumers, the free trade model of comparative costs has nothing to say about social utility as such, dismissing it as an ‘externality,’ that is, of little importance to private-sector balance sheets. Tariff revenues are treated as if the money simply was extinguished, not to finance internal improvements and related economic infrastructure.” As it happened - in the real world, if not in theoclassical economists' fantasies - tariffs proved quite effective in protecting infant industries in countries that are now rich, and in financing infrastructural improvements that facilitated economic development.

To be fair, yesterday's theoclassical economists were not wrong only about tariffs. They were wrong about many other things besides. For instance, they thought that rising labor costs - in other words, higher wages for the masses of a country's workers that would allow them a higher standard of living - would destroy competitiveness. (The more things change, the more they stay the same.) English theoclassical economists of the late 19th century preached that countries needed to keep their wages low, or else they would be destroyed by competition from poorer countries. In opposition to this idea, American protectionists argued that well-paid labor would always beat out what they called "pauper labor". This was because well-paid labor was well-educated, highly-skilled labor, of the sort that could operate the most sophisticated labor-saving machinery of the day. So well-paid labor could actually out-compete pauper labor because the unit cost of the products made by the former would be, despite higher labor costs, lower than the products made by pauper labor, which would be unable to operate high-tech machinery. Hudson quotes the late 19th-century Unitedstatesian economist Francis Amasa Walker: “In the contests of industry the civilized, organized, disciplined and highly-equipped nations may safely entertain much the same contempt for barbarous antagonists as in the contests of war.” And as history would have it, Walker was right: countries with well-paid, highly-trained and educated labor out-competed those countries whose "factor proportions" or "natural endowments" included uneducated, easily-exploited pauper labor.

But there is method to the theoclassical economists' madness. Political expediency favors the economic theory that serves to further enrich wealthy countries, at the expense of all others:
“...the breadth and scope [of mainstream economics] widens as we look further back in time. Early observers perceived with remarkable clarity the political context and positive feedback character of England’s industrial head start, as did subsequent protectionists in America and continental Europe in mapping out their own long-term national strategy. From the outset, English mercantilism and subsequent protectionism, traced the positive feedback and obsolescence processes that shape market relations, and extended the analysis of trade and development into the political and social sphere. Most of these perceptions were voiced by men well placed in the political leadership of their times.
The subsequent narrowing of scope - away from long-term development to short-term market analysis, away from the monetary and financial context of trade to a ‘barter’ theory, and away from a government policy-oriented focus to one of laissez faire - has been politically dictated by the success of England, the United States and subsequent lead nations in achieving dominant intellectual as well as economic status. It seems ironic that the more successful a nation becomes, the narrower and more short-term tends to be the scope of its international economic theorizing - almost as if it would pull up the policy ladder behind it. The aim is to impose a superficial trade theory and financial austerity on the less developed periphery, treating their resources as ‘endowments’ dealt out by nature rather than fostered actively by national policy.”
Economic power has been exerted most clearly in the field of economics itself. It is not only the case that economists departments in most of the world are completely dominated by the theoclassical paradigm; in addition to this, in the few departments to offer a course in economic history, economic history is severely censored:
“Free-trade histories of international economics reflect the degree to which manipulating the history of ideas may become a ploy to maintain the status quo. As George Orwell observed, whoever controls the past controls the present, and hence the future. The history of international trade and financial theory has fallen prey to the censorial spirit of free-trade ideology blocking knowledge of the development of rival theories. Protectionism for its part has relied more on political lobbying than on academic theorizing, leaving the field of international economics as a preserve for laissez faire advocates who brand alternative views as lying outside the subject matter of the discipline they have narrowly re-defined.
… A large part of the problem stems from trying to make economics a ‘natural science,’ treating society in much the same way one might view physical nature. We must beware of writers who use the term ‘nature’ (as in natural endowments) as a code word for the status quo. To follow nature has meant to acquiesce in the existing division of labor between lead nations and poor countries. This commitment to defend the status quo has led free-trade theory to treat international trade in isolation from finance, technology, demography, ecology, politics and the military dimension.”
This isolation allows theoclassical economists to advocate policies that inhibit broad-based economic growth that would benefit the masses, and only serve to further enrich the already rich. It is no accident that the greatest economic success story of the past half-century, China, has achieved its success by ignoring the theoclassical economic orthodoxy, and following a state-directed economic policy. Nor is it an accident that most of the rest of the world, when following policies advocated by theoclassical economists, has seen a widening of the wealth gap and continued pain for the growing ranks of the poor. “Whenever we find so great a degree of unreality to characterize a theory that backs an economic doctrine and its applied models, we should suspect special interests to be at work. It hardly is surprising that the ideology of today’s global orthodoxy reflects the self-interest of the industrial creditor nations.”

This helps to explain how an economic theory that recently led the world to the brink of global economic collapse is still placed on a pedestal. Although its models and predictions are demonstrably - manifestly - wrong, it nonetheless serves the interests of the world's powerful. Hence, its staying power. “If insanity is doing the same thing over and over again in the expectation of a different result, then neoliberal trade theorists are at best useful lunatics for international predators. The usual term is ‘useful idiots,’ but it takes great intelligence to persist in wrong-headed, counter-productive policies in the face of consistent failure. The problem is learned ignorance, which typically goes hand in hand with an almost religious faith in ideological labels. ‘Nothing is so passionate as a vested interest disguised as an intellectual conviction,’ explained the main character in Sean O’Casey’s play The White Plague.”

Hudson concludes his book with a summary which should be tattooed on the foreheads of all graduate students in economics: “All economies are planned, and all markets are structured. The key to understanding their dynamics is to ask who is doing the planning and structuring, and in whose interest countries will place decision-making. Will it be in the hands of elected officials with a clear empirical knowledge of reality to guide their national economic laws, or in those of academics serving special interests as they turn theories of international trade, lending and debt into a disinformation system?”

Thursday, February 24, 2011

Guide to the Perfect Latin American Idiots' "Guide to the Perfect Latin American Idiot"

            To begin, I would like to apologize for what follows.  Below I have strayed from the beliefs of my elders who,  what with the experience differential between us, should know better than me.  I am sorry.  I am not sorry for contradicting them and calling them fools of the very worst sort, at once destructive, well-meaning, oblivious and self-righteous. I am sorry – that they should know better than me, but do not.  
            On the one hand, it is difficult to hate the perfect Latin American idiot authors of Guide to the Perfect Latin American Idiot.  They are so adorably idealistic that one almost wants to pat them on the back and cheer them on with a harmless cliche like "if you apply yourself, you can achieve anything."  Yeah!  Let's build this perfect society of freedom for entrepreneurs, free of monopolies, parasites, and inept government bureaucracy!  Let's roll!

            This becomes very difficult, however, when one contemplates just what their ideology is (not that they would recognize that their beliefs constitute an ideology - to them it is pure science - but that is a trademark hallucination of the ideologist).  Not that it is reprehensible on its face; on the contrary, it is quite attractive when understood superficially (as the authors do).  As they understand it, their ideology is not the same as that of the traditional Latin American right.  They do not support military dictatorships, they support democracy.  They do not support massive, monopolistic corporations whose cozy relationship to the state guarantees them protection from what can be a very unkind market.  They do not support large military budgets, repression of political dissent, or human rights abuses.  Well, depending on how you define “human rights”.
            But they reserve their most potent venom for those on the left who believe that the unfettered capitalist marketplace is not the ideal organizational structure for a society's economy.  Because they are heartless cheerleaders of wealth and power, and secret despisers of the poor and weak?  Because they are greedy taskmasters of the same mind as the Japanese finance magistrate who likened peasants to sesame seeds: the harder you crush them, the more they produce?  Heavens no!  The authors are enlightened liberals, and the human right to a basic standard of living is as dear to their hearts as the right to run a business.  The thing is, they are simply more enlightened than the Latin American "idiots" they write about.  They, unlike their benighted counterparts on the left, understand the science of neoclassical economics.  They know that, however pure and laudable be the intentions of social reformers who seek to use non-market mechanisms to uplift the poor from their heartbreaking plight, their methods are doomed to failure.  Oh sure, for a few years their methods might produce the illusion of poverty reduction, but one need only wait long enough to see the foolish, bleeding heart lefties' - sorry, idiots' - programs fall apart, leaving the poor in an even worse situation than before.
            You see, thanks to their education in neoclassical economics, the authors know that an unfettered capitalist market produces more wealth than any other system.  It may shower immense wealth on a tiny fraction of the population, but the trickle emanating from that fraction upon the lower orders is still greater than they would be able to expect under any alternate system.  And once you start messing with that system, say with progressive taxation to redistribute wealth to the poor, or environmental regulations that increase the cost of doing business by eliminating profitable externalities, you introduce "distortions" into the capitalist marketplace that create "inefficiencies" in the system. The unfettered capitalist system, the authors understand, is perfect.  It is less an economic system than a set of natural laws.  And messing with these laws, even with the most blameless of intentions, would produce the same result as messing with the laws of physics - say, by increasing the strength of gravity to compensate for the oppression it faces from the bullying of the electromagnetic force or the orders-of-magnitude-more-powerful "weak" nuclear force.  It might make us feel good at first to buck nature to improve the lot of gravity.  Now gravity can raise its head high in the presence of electromagnetism, and it makes our workouts that much harder, and more fitness-enhancing.  But in the end, our well-intentioned intervention will throw the whole universe out of equilibrium, and we very well may end up in the singularity of a black hole as a result of our good deed.
            The idealistic authors believe that the world's poor are poor only because they have not been allowed to experience capitalism fully enough.  The traditional rightist's preoccupation with "races" and racial hierarchies are not for them.  They have full faith that the poorest African or Indian tribe can produce savvy small business owners and visionary CEOs, if only given the chance.  That is, if only they lived in a country without government regulation of the economy.  Namibians could very well be the world's next up-and-comers, if only they would take a flamethrower to their law books, and a bulldozer to their bureaucracies.  Sadly, however, it takes above average intelligence to be able to grasp the truth and wisdom of this prescription, and there are always monopolists, government bureaucrats and leftist idiots lying about, plotting to crush the poor by impeding the emancipatory arrival of neoliberalism.
            What makes the authors so adorable is their indomitable idealism, and their refusal to be corrupted by the actually existing world with its messy history and impure economies.  To them, the definition of the ideal economy is that which belongs to rich countries.  These ideal economies - the rich countries' economies - are the same thing as the neoliberal ideal.  It is a trivial detail if the countries that are now rich have not actually followed the authors' neoliberal economic prescriptions - what is important is that countries that are now rich can be associated (arbitrarily, and without reference to reality, by the authors) with neoliberalism.  It does not crush the authors' idealism that today's rich countries did not follow neoliberal prescriptions to become rich; even the fact that today the rich countries do not fastidiously follow neoliberal prescriptions cannot defeat the authors' devotion to their ideal world.  A world which does not exist.
            The authors have much in common with those socialists (that is, "idiots") who believe in a pure, unalloyed socialism that exists only in the ether, because it has never actually been implemented.  One can hear this type explaining what socialism really is; how it is democratic, egalitarian, and does not allow for either totalitarianism, environmental degradation, or a bureaucratic elite.  Likewise, you can hear the authors explain what neoliberal capitalism really is: not a system of economic organization but the absence of such, where individuals are free to do what they will, resulting in the flourishing of entrepreneurship, the withering of stifling bureaucracy, the creation of untold wealth and the elimination of poverty.  But whereas the aforementioned socialists will happily criticize nominally socialist countries like China and Cuba, expounding on the many ways in which they do not practice real socialism, the authors seem incapable of criticizing their beloved nominally-neoliberal capitalist countries for their myriad ways in which they fall short of the neoliberal ideal.
            But what makes the authors truly irresistible is their style.  They write in a fun, irreverent, almost snarky (but not quite - not enough sarcasm) style that reads like a rare issue of The Economist, one in which its writers stray from their own "style" guide and demonstrate creativity.  Granted, they sometimes let loose a stinker.  But for every overdone flop, like "Didn't they teach us that the poor shall inherit the Kingdom of God and tell us, with spectacular metaphors of humpback ruminants and metal rods, of the almost impossible prospect of the rich setting foot in Paradise?", there are two or three "the Peruvians, ancient courtiers of the Incas and the viceroyals, also declared [Simón Bolivar] dictator, adding - just in case - the very finite adjective 'for life' to this designation."  Their cause, the rescuscitation of liberal economics after it was buried at the hands of the Great Depression and Keynes, is a deeply conservative one.  So the overall impression these skilled writers give is of Voltaire defending the Catholic Church against heretical free-thinkers.  But more than being conservative, their cause is fatally discredited and doomed to oblivion.  Neoliberalism has pushed itself sharply off the cliff towards its final destination: to be a historical laughingstock, an anachronism which, like Creationism, will have children of future generations scratching their heads at just how previous generations could possibly have been that stupid.  As Max Planck would recognize, neoliberalism will not be replaced by something less bogus in the minds of its devotees - more likely it will die with them.  What is certain is that the economic orthodoxy the next generation imbibes will be quite different from neoliberalism.  So the overall effect of reading 1996's neoliberal triumphalist Guide to the Perfect Latin American Idiot in 2009 is that of watching a sharp-witted comedian tear through a crowd, humiliating the easy targets in the audience. Oblivious to the fact that some prankster has cut out the backside of his trousers, and the audience's laughter owes less to his jokes, and more to his ass sagging out the back of his pants.

Before we begin

Here is a slightly modified excerpt of Mario Vargas Llosa's introduction to the Guide to the Perfect Latin American Idiot:

The idiocy pervading this guide is not congenital, nor a cerebral or spiritual phenomenon. This type of idiot arouses affection and sympathy or, even worse, commiseration, but not anger or criticism.  At times he even inspires secret envy; there is something that resembles purity and innocence in those simpletons of nature and in their spontaneous idiocy. This idiocy documented in these pages exists not just in Latin America – it runs like quicksilver and spreads its roots everywhere. False, and conveniently so, it has consciously been spread within and then from the academy, those accepting it doing so out of laziness, ethical sluggishness and social opportunism.  It is ideological and political but above all frivolous, because it reveals an abdication of the ability to think for oneself, to compare the words with the facts they claim to describe, to question the lemming-like acceptance of conventional wisdom that replaces thoughts.  This idiocy is devoted to the prevailing trend; always carried away by the popular tide, it worships fantasies and is defined by laughable oversimplifications. (xiv)

            Therefore, I have decided that the authors of  the Guide to the Perfect Latin American Idiot would be better described as dreamers than idiots.  “Idiot” is no longer used as a word to describe someone afflicted with a mental handicap, but rather as a mere insult, like “asshole”, “dickhead” or other epithets that anthropomorphize erogenous zones.

Defining Our Terms

            It is rightly considered wise to learn from one's mistakes. In this instance, however, we can learn from our dreamers' mistakes – namely, a failure to define their terms. Our dreamers have good reason for failing to define their terms: because doing so would fatally undermine their arguments.
            For instance, our dreamers refer to themselves as economic "liberals". But this is incorrect.  Adam Smith was an economic liberal. Yes, like our dreamers this liberal did believe - selectively oblivious to the rabidly[1] protectionist economic polices that were intrinsic to England's economic and technological attainments - that the path to development was that of free trade.  (Ironically,
Adam Smith's government job post-publication of Wealth of Nations was as Commissioner of Customs and the Salt Duties – an ideological mismatch as keen as the Pope becoming the CEO of Hustler Magazine, Inc.)  But Adam Smith's idea of free trade was of an entirely different sort than that of our modern dreamers.  Smith was not a proponent of laissez faire, because he was intelligent, or simply observant, enough to know that free markets leave many essential goods and services unprovided.  Like schools and infrastructure.  He also did not think that the naked pursuit of individual self-interest is the infallible foundation of a good society.  He went to great lengths – providing some fifty examples in the Wealth of Nations – to show how self-interest could undermine societal interest.  He was supremely critical of efforts by powerful interests to use government to advance their self-aggrandizing economic aims. 
            And this, more than anything else, describes the economies of today's successful – in dreamer terminology, “liberal” – states.  What else do the governments of the United States, the European Union, Japan, Korea, China, etc. do, but attempt to advance the economic interests of their most powerful constituencies?  The United States' government will rail on and on about the evils of protectionism, but when it comes to farm subsidies, principles take a back seat to the agribusiness lobby.  Japan's government might be a member in good standing at the World Trade Organization, but its keiretsu like Toyota owe their contemporary competitiveness to state solicitousness and support during their infancy.  European governments talk a good game about free trade, but Airbus would be just a bus company if exposed without nanny state support to the harsh winds of the free market.
            Classical liberalism, epitomized by economists like Smith, argued for a maximal role in societal decision-making for capitalist markets – but properly functioning, competitive capitalist markets.  True liberals are less like Lawrence Summers and more like Ron Paul.  They believe that society is best run when every societal need is either provided by competing small enterprises, or by government stepping into a gap caused by excessive risk or lack of profit-making opportunities.  In sharp contrast to our dreamers, Adam Smith was anti-corporate to an extent that would shock our modern sense of economic propriety.  He saw the primitive corporations of his day as little more than conspiratorial cabals, and famously wrote that “[p]eople of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”[2]  The corporation, which even our dreamers know, when awake, is the dominant entity in the world's economic activity.  So when our dreamers call themselves liberal – while not raising a whimper of protest against the routine and predictably anti-competitive activities of the modern corporation – they are revealing their ignorance of the very words they use.
            A more apt word to describe their position on economics is neoliberal.  Neoliberalism, like its name would suggest, is a variation on liberalism.  While liberalism can trace its origins much farther back, neoliberalism arose in the late 19th century in reaction to the criticisms of capitalism made by economists like Karl Marx.  While Adam Smith criticized the form of capitalism that existed in his day for its failure to live up to his ideal form of capitalism, Marx criticized the capitalism of his day for its inherent, unavoidable inability not only to live up to Smith's ideal, but also to live up to any truly desirable final state of economic organization.  Neoliberals reacted to this vein of criticism by enshrining ever higher an impossible ideal where the state plays a purely supervisory, referee role to ensure that market forces are unhindered and allowed to perform their beneficial work.  They had to  entrench themselves ever further into this ideology, buttressing their position with the pseudoscience of Social Darwinism, as the United States and Europe began to interfere more and more with capitalist markets during the Progressive Era.  Neoliberals were finally relegated to the lunatic fringe after the Great Depression, during which neoliberal ideologues would rant as if on a Hyde Park soapbox about how the depression was caused by government polices that simply did not conform enough to the economic ideology such governments had largely been following.  Meanwhile Keynesianism, which advocated a much greater role for the state in alleviating the deficiencies of free market capitalism, gained predominance in intellectual and policy circles around the world.
            Yet due to a number of factors – primary among them the costs of the war against Vietnam, the “guns and butter” war and social-spending policy with progressively less progressive taxation in the United States, global overproduction and the lack of effective demand in the Third World leading to a pervasive economic stagnation in the 1970s – neoliberalism made a comeback.  Armed with a religious belief in the saving power of free, unregulated markets, and financed by business interests who saw them as brilliant prophets and evangelists at best, and useful idiots at worst, neoliberal economists gained complete predominance in both the academy and governments around the world.  Neoliberalism has been implemented in its extreme, or pure, form in a number of countries: for instance, Chile in the 1970s, Russia in the 1990s, and Iraq in the 2000s.  Neoliberal policies have been implemented to a lesser extent throughout the world since the 1980s; to a great extent in Argentina in the 1990s, to a lesser extent in France today.
            So despite their desire to be considered “liberals”, the intellectual descendants of economists like Adam Smith (who would have considered them impossibly stupid), our dreamers are neoliberals.  Yet despite the international ascendance of neoliberalism and its implementation (from partial to complete) in most of the world's countries, our Latin American dreamers are angry and disappointed.  Like the (very few) members of the Revolutionary Communist Party USA, our dreamers see a world full of only nominally neoliberal capitalist countries – and the rest are corrupted and impure for their failure to sufficiently implement the one, true dogma.  For them, only rich or rapidly growing economies are properly neoliberal (again, remember, the dreamers would prefer their proprietary and inapt use of the word “liberal”). 
           Other crimes against language our neoliberal dreamers innocently commit occur when they discuss socialism and Gross Domestic Product (GDP).  Socialism, as properly understood, is any variety of systems wherein the means of production – factories, intellectual capital, productive technology, business organizations, etc. –  are controlled by the community as a whole.  Such a definition can cause some of the same problems as the definition of neoliberalism (which is a form of capitalism wherein governments play a very limited role as referee and security guard in society's economic organization, and allow unregulated business activity to distribute wealth).  That is, both are ideals, and the real world rarely allows for the instantiation of ideals.  So one will rarely hit the mark squarely when describing one state as “socialist” and another as “neoliberal capitalist”.
            Neoliberalism is based on the school of economics known as neoclassical economics, which is predominant to such an extent that to say that one studied “economics” in university is to say that one studied neoclasisical economics.  Neoclassical economics (the school of economics) is to neoliberalism (the economic policy prescriptions) what the classical economics of Adam Smith is to economic liberalism.  Neoclassical economics, by the way, is in 2009 a bankrupt school of thought.  Based on complex mathematical models that rely on simplifying assumptions which completely undermine any pretense of real-world applicability, neoclassical economics is on its way out.  It was the dominant paradigm that, fatally, utterly failed to predict the worldwide financial collapse and depression of the late 2000s.  In the present and even more so in the future, well-read and intelligent people simply reject the claim neoclassical economics makes to explain real-world economic activity.  Sure, there will still be people who keep the neoclassical faith – tenured professors prominent among them – but there are also intellectuals (of a sort) who believe and will continue to believe in the tenets of other faiths, like Hinduism.  However, those who believe in the tenets of neoclassical economics will inevitably be lead to the fringe of intellectual culture.  Shamans who perform rain dances still exist in the modern world, but they have forever lost the widespread prestige they once enjoyed.
            In their use of such terms, our dreamers seem to have all the skill in aiming as Dick Cheney on a group quail hunt.  For instance they clearly consider countries like Japan and South Korea to be neoliberal capitalist.  And to some extent, today one could almost get away with labeling them such.  But our dreamers consider them to have been good pupils of neoliberalism back when they were developing into rich countries from relatively backward starting points.  For any serious – neigh, any halfway competent – student of the two countries' respective histories of economic development, this belief is on par with the belief in a 10,000-year-old universe.  Japan and South Korea both made extensive use of state planning, state support and state subsidies in order to grow their infant industries from inauspicious beginnings, to their current status as internationally-competitive and even world-leading.  Such “trade distortions” as Japan and South Korea made extensive use of are anathema to neoliberalism.  For the true neoliberal, Japan should have stuck to their areas of competitive advantage back at the end of the 19th century, producing many pretty woodblock prints and samurai swords for foreign home decorators.  Likewise, South Korea in the 1950s[3] should have stuck to producing simple textiles and kimchi for export.  Luckily for them, neither the Japanese nor the South Korean governments were foolish enough to implement neoliberal doctrine during their periods of economic catch-up.  Or else there would hardly have been much catching up to have been done.  Although then surely Western economists would have been able to travel to Tokyo and eat an inexpensive sushi dinner at the dozen or so restaurants catering to the tiny Japanese elite and wealthy foreigners, or to Seoul for budget sex tourism.
            Likewise our dreamers most evidently do not know much about what “GDP” means.  For them, GDP, like its three-letter word counterpart “God”, is the Be All and End All.  If a country has a high GDP, it is good.  If a country has a low GDP, it is bad.  It is good when countries make their GDP bigger year after year, and it is bad when countries fail to grow their GDP at a fast enough clip.  Like a favorable God, a favorable GDP will provide for you.  A favorable GDP will ensure a good society, with a healthy, educated, satisfied and sated population.
            This is the religious view.  In reality, GDP means a nation's total consumer, investment and government spending, plus net exports (the total value of exports minus the total value of imports).  GDP was created by economist Simon Kuznets during the Great Depression in a report to Congress that concluded with the following qualification: “The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.”  Kuznets was not heeded in subsequent years, as dreamers all over the world took GDP to be the measurement of national welfare.  For neoclassical economists who believe in the mythical homo economicus – the rational, self-interested consumer each one of us is believed to be (in stark contradiction to all available evidence from psychology) – GDP is a perfect measurement of national welfare.  Since every economic choice a consumer makes is an expression of that consumer's free will (unimpeded by such trivialities as “not starving” in the decision to take a sweatshop job or not), the composite of such choices is a society's expression of collective  free will.  So a high GDP means that a society's individuals have a high degree of free will, being able to make their wills manifest to a great extent.  A low GDP then means that a society's individuals either have an unusually high preference for leisure (or digging through trash heaps for sustenance), or they are having some difficulty getting what they want.
            Of course, back in the realm of reality GDP means no such thing.  Not only is government expenditure on weapons (in the U.S., roughly half of discretionary government spending) rarely the expression of a society's individuals' free will, but there are myriad instances of economic activity measured in the calculation of GDP that are contrary to a society's interests – or, if you prefer, the interests of the individuals comprising that society.  Having a road system prone to traffic jams contributes to a high GDP if it means that many cars are being produced and bought, accidents are happening that require expenditure on repairs, and government must spend more than otherwise necessary on road repairs.  Having poor overall health contributes to a high GDP, especially in tandem with a bloated, costly and inefficient healthcare system, if it means that people are forced (there is not so much free will when it comes to the choice between life and death) to spend more money on doctors' services and medicines, and government must spend more than otherwise necessary on hospitals, medicines and equipment.  Having widespread drug or gambling addiction contributes to a high GDP if it means that people are purchasing lots of drugs or blowing vast amounts in a nation's casinos, and government must spend more than otherwise necessary on drug treatment, prisons and police.  Having a polluted environment and depleted stock of natural resources is a common concomitant of a high GDP, because it means that industries have enjoyed higher profits from lower costs of pollution control, and mining enterprises have “produced” raw materials that can be consumed domestically and exported to contribute to GDP's net export component.
            A woman buying one $1000 pair of Jimmy Choos contributes 40 times as much to GDP as a woman buying a $25 pair of children's shoes.  A man spending $5000 on a night with a sex worker contributes 50 times as much to GDP as a man spending $100 on a child's weekly music lessons..A family whose members each night separately consume fast food meals, movies, video games and other individual forms of entertainment out of the home, and drive back alone in their own separate cars, is very good for GDP.  A family whose members eat together at home, perhaps entertaining themselves with conversation, walks in the neighborhood or sports in the yard, is not very good for GDP.
            For our dreamers, to look towards GDP as the definitive measure of national health  is not a mistake.  Except when it is.  See, our dreamers love to create tenuous connections between higher GDP and the implementation of some degree of neoliberalism for the sake of justifying and lionizing the latter.  But sometimes GDP figures are to be ignored.  Like, for instance, when they show that the developing world's economies did significantly better as measured by GDP during the non-neoliberal period of the 1950s and '60s as compared to the neoliberal period of the 1980s and '90s.[4]  In inconvenient cases, correlations of economic policies and performance are irrelevant to our dreamers.
            At any rate, when our dreamers point to GDP as the sole indication of a country's economic health, they are being quite foolish.  They have a love of numbers which blinds them to Mark Twain's observation (ranking in ascending order of evil “lies, damned lies, and statistics”) that statistics can often be deceiving, and are often used deceitfully.  But their love of the imagined purity of statistics, as we will see, is not absolute, or consistent, and in the end its hypocrisy saves it from fanaticism.

How to dream – our how dreamers think

            Our dreamers – and here I do not refer only to the authors, but to many intellectuals around the world – have joined hands and united, in a manner of speaking (to the serenading of Bono) under the flag of human freedom: which is neoliberalism (or what the authors mistakenly call “liberalism”) in its pure state.  Not – and here let us borrow a coin from the lexicon of the author's idiots – not “really-existing” neoliberal capitalism.  To the dreamer, the theory of neoliberal capitalism has reached perfection.  And having achieved such an elevated state, it has tragically overshot the feeble efforts of fallen man to actually implement it. 
            Now, there are many countries considered by the average person, or the “idiot”, to form a part of the global economy.  This global economy is considered by the same “idiots” – and the masses they have brainwashed by means of their  low-circulation newspapers and academic publications – to be “capitalist”.  But these buffoons are speaking only of “really-existing” capitalist countries, and “really existing” capitalist countries are messy, dirty hybrids bred by the unfortunate meeting of neoliberalism and the real world.
            A lot of the world's foolish economists, the ones unintelligent enough to join the rest of the dreamer-idealists in theory-paradise, would call many developing countries with basket case economies “capitalist”, even neoliberal.  But our dreamers know that this is a mistake. It would be improper to call a developing country “capitalist”, if it is not rich.  That is because the most efficient way to produce wealth is to implement capitalism, which is to say, to implement neoliberal economic policies.  So, by definition, a capitalist country that has implemented neoliberalism either boasts a rapidly growing GDP, or is already rich. 
            The unintelligent economists, the ones outside the biggest herd, make a mistake in calling many poor countries “capitalist” just because the vast majority of economic activity is carried out by privately owned enterprises and people are paid with salaries for their labor, which forms a part of the production processes of these enterprises, and so on. This is because it is only once your economic policies are neoliberal are you a proper capitalist country.  Which is to say, a successful country.  Unsuccessful countries with all the polices and economic organization affiliated with neoliberal capitalism can not, by definition, really be examples of capitalism.  Properly speaking. 
            By the simple operation of logic, neoliberal economic policies work best because they make countries rich; and some countries are rich because they have implemented neoliberal economic theory.  Or rather, to the extent that they have implemented neoliberal theory.
            You may be thinking, “but can our dreamers really be so pure?  Might not they sully themselves with considerations historical, geographical or geopolitical? Perhaps sometimes they question whether their theory truly is the golden independent variable, the one upon which a society's well-being exclusively relies?  Naysayers, cynics and defamers would be disproved, however, if they only knew.  Far from engaging in lewd acts like “sociology” (a word which terrifyingly sounds like “socialism”), our dreamers stay true to the religious precept that, In the End, It All Evens Out. This is a doctrine that sanitizes the realm of the economic from infectants that might skew results in directions other than purely economic considerations would suggest.  Minor things like “culture” and “human psychology” can therefore be tossed aside by In the End, It All Evens Out. This, in fact, is a prerequisite for the preparation of that which fills tabernacles in economics departments, and private intellectuals' shrines, across the globe: the model.  Like the devotional figurines of the past, the mathematical model is to be revered as the temporal portal through which we interact with the realm of neoliberal theory.  There, our models are to be untainted by contact with culture, human psychology and other contaminants. 
            Strict censorship is duly imposed by our dreamers on a wide swath of considerations under the doctrine of “assumptions”.  “Assumptions” can be found towards the beginning of any neoclassical economic text: assuming that this facet of human behavior a can be reduced to equation v, and assuming that this other facet of human behavior b can be reduced to equation w, then so long as this other facet of human behavior c can be reduced to equation x, it follows that in the presence of complex human behavior d reduced to equation y, doomed-to-be-messily-implemented economic policy e will surely result in economic outcome z.
            “Get thee behind me, Satan,” they say to the dual obscenity of “geography” and “history”, when faced with the temptation of, say, Singapore.  No, when faced with a Singapore, for instance, our dreamers stolidly refuse to have any  illicit intellectual intercourse with tawdry details like Singapore's birth (birth! See, we are talking about sex – dirty!) as a trading settlement within the British colonial economic system.  (Britain was a rich and successful country during the time of its empire, which is to say that it was a shining exemplar of liberal capitalism – which can in turn be proven by demonstrating that it was rich.)  The new creation was a result of a certain indecent interaction between a government monopoly (those socialist heathens!), the British East India Company, and a certain unelected leader the locals called a  “sultan“.  (“Unelected leaders” are bad because they are not part of the neoliberal package – capitalism works best, the dreamers dream, under a democratic system of government.)   Why, it is downright indecent to consider how Singapore was born as the result of a deal made between a government monopoly and a sultan – therefore, neoliberal dreamers do not consider it relevant.  Neither is Singapore's initial development as an a value-added entrepôt stop along established British trade routes.  The fact that Singapore's first economic development occurred under the direction and investment of Britain's state capitalist monopolies does not neatly fit in neoclasisical economic models – therefore the doctrine of assumptions neatly removes it.  So too, Singapore's strategic location during World War II, and the consequent military spending it experienced benefits from – benefits, that is, of a strictly economic nature.  No, for the dreamer Singapore's success derives from the fact that its post-war leader Lee Kuan Yew decided to re-orient Singapore's economy to serve international markets.  (It would be a blasphemy to suggest that what Lee Kuan Yew did was to merely re-orient Singapore's already globalized economy to serve international markets rather than the British empire.)  This reorientation was in reality achieved by allowing government monopolies to dominate certain markets, like real estate, although the dreamer's view of this is occluded by clouds, and he sees only low tax rates, predictable law enforcement, and a dearth of restrictions on economic enterprise.
            Our dreamers are too pure to engage in dirty, corrupt, corporeal intercourse with such tawdry subjects as comparative economic history.  Unless it is undertaken in the style of a hagiography, praising a historically successful economy for its cherry-picked points of similitude with the neoliberal ideal.  Neoliberal dreamers of course do not realize this – why after all reflect on earth, with your head in the clouds? - because, as do the dreamer-authors of the Guide, they have a narrative that suits them well.  Their narrative explains all currently rich countries as having arrived at their wealth through the more-or-less pure application of neoliberal policies; and the belief that the mathematical models of neoclassical economics embody a timeless, universal truth that anyway renders in-depth study of economic history a meaningless distraction.
            Of course, examples from recent history can be very embarrassing, indeed scandalous to the neoliberal dreamer.  For instance, a very pure form of neoliberal policies was recently imposed upon Iraq – and little over a decade before upon Russia – and the results were catastrophic to an extent unequaled by just about any other set of economic policies imaginable.  But that is only at the far end of the spectrum – neoliberal policies implemented by Argentina and East Asian countries in the 1990s resulted in economic results far less spectacular, while still catastrophic.  But this hardly fazes the dreamer, because by definition an economically unsuccessful country simply could not possibly have instantiated neoliberal capitalism.  An economic failure must have failed to correctly implement neoliberalism.  Otherwise, there is a mysterious force at work.  For instance, there were years of communist indoctrination in the case of Russia, inter-ethnic hatreds in the case of Iraq, and, most strangely, a phenomenon known as “crony capitalism” in East Asia – so named, one would guess, because personal and family relationships play no appreciable role in the workings of Western capitalism? 
            Similarly embarrassing, though coming from the opposite direction, are high rates of economic growth in non-capitalist, or non-neoliberal capitalist economies.  Our dreamers react by admitting that it is true that some states have seen stretches of economic success while rejecting the truth of neoliberalism – but this is not sustainable in the long run, and sooner or later some primordial economic forces (restrained in neoliberal economies, perhaps, by the order provided by neoclassical mathematical models) will destroy them.  Our dreamers thereby bypass any potential difficulties the astronomic growth rates in the Soviet Union and China after their revolutions might cause, or the fact that up until the 1980s, North Koreans enjoyed a higher standard of living than South Koreans.[5]  The downfall of the Soviet Union, and North Korea's economic disintegration, have little to do with political realities, and everything to do with their meeting a final reckoning over their failure to implement neoliberalism.
            This exclusive focus on economic ideology to the exclusion of facts, and the reality they comprise, causes all sorts of absurdities to be overlooked by our dreamers.  For instance, one might find it hilarious in its ripe hypocrisy that Vargas Llosa and his dreamer friends excoriate Latin American strongmen (caudillos) while implicitly – though truly and innocently (in the sense of "ignorantly") – lionize men of the exact same stripe in Korea.  Of course, the real reason for this should be obvious: Korean caudillos like Syngman Rhee and Park Chung Hee achieved greater economic success than the Latin American variety our dreamers hate.  Our dreamers fail to recognize a major distinction (with a difference) between the Latin American and Korean caudillos: the latter faced a geopolitical climate most propitious for their version of state-directed capitalism (oops, wrong word; because they were successful in achieving their economic aims, the dreamers would say "liberal capitalism").  The countries ruled by the Latin American caudillos never served as lonely outposts for the capitalist world system on a continent home to the two largest and most powerful communist countries of the day.  The Latin American caudillos did not enjoy massive economic aid and military purchases from the United States, nor were their state-supported industries given preferential access to the U.S. market.  But in all their vulgarity and violence to opposition – the traits our dreamers criticize in Latin American caudillos – the Korean variants were damn near carbon-copies.  Not to unduly praise him or insult our dreamers, but they have succumbed to the same intellectual malaise the economist Jeffrey Sachs has since repented of: obliviousness to geography, history, and politics.
            So to conclude, our dreamers' command of their terms is not so strong.  Do not, therefore, make the mistaken assumption that they know what they are writing about.  Particularly when they recommend the implementation of neoliberal economic policies, which they will assure you inevitably lead to economic growth that ends up benefiting all members of society.  Of course, for that to happen, you might have to wait for the long run – in which, the despised though-I-doubt-extensively-read-among-our-dreamers Keynes would remind us, we are all dead.  So the dreamers' economic ideology is essentially this: you'll have pie in the sky when you die (that's no lie).

The Idiot's Bible's treatment of "The Idiot's Bible"/The Book Dreamers call “The Idiot's Bible”

            The lady I would like to introduce as la deficientissima (literally, “the most deficient one”), Mary Anastasia O'Grady of the Wall Street Journal, recommended The Guide in an editorial in 2009.  Yes, in 2009.  (My need for repetition here to convey the requisite amount of confidence in this date, if not already understood, will become apparent later.)  In her editorial, she wrote about Venezuelan president Hugo Chavez giving a copy of Eduardo Galeano's  Open Veins of Latin America to United States' president Barack Obama.  In her anachronistic, Ayn Rand-worshiping brain, she thought this a particularly bad choice.  Galeano's book is an example of dangerous economic thinking, and in her impoverished opinion, Plinio Apuleyo Mendoza, Carlos Alberto Montaner and Alvaro Vargas Llosa's book, Guide to the Perfect Latin American Idiot, would have been a much better choice.  O'Grady reasoned – or approximated reason – that the Guide corrects the foolishly unorthodox economics of Open Veins with a hearty dose of neoliberalism.  Because O'Grady vomited such vitriol over Open Veins, I decided to read it – and, for comic relief, I also read our long-named dreamers book the Guide.    (My choice was a good one – I attracted many puzzled looks from New York City subway riders over the spontaneous bouts of laughter the Guide inspired.)
            If our dreamers hate Eduardo Galeano's book Open Veins of Latin America for one reason, it is because of what they must view as Galeano's obsession with history.  As good students of neoclassical economics, dreamers have no need for economic history – for them, history ended with the development in the late 1800s of neoclassical economics.  After the truth of their ideology had been revealed, many things simply no longer merited examination.  Economic history is one of these things that, in our dreamers' hazy vision, has been done away with by their theories.  Since neoclassical economics is the distillation of all economic truth, the only value economic history has is to show the success of historical economies to the extent that they followed neoliberal policies, and the failure of historical economies to the extent that they failed to do so.
            But Galeano's view of economic history is not so neat.  His book chronicles the economic development of Latin America as colonies first of Spain and Portugal, and then as neocolonies of Britain and the United States.  To the properly instructed neoliberal dreamer, this is not only anathema, it is impossible.  All that exists for the dreamer is a mass of individuals freely choosing that which, in their unerring judgment, best serves their interests.  In Galeano's account, however, the only individuals freely choosing anything are those endowed with some measure of sovereign power during the colonial period, and those endowed with sovereign and/or economic power in the neocolonial period.  The rest are, like slaves, obliged under pain of death by sword to work for their master, or like the modern poor, obliged under pain of death by starvation to work for their employer.
            What is worse, Galeano does not weave his impossible narrative by reference to mathematical models reinforced by assumptions about human behavior.  No, he weaves his narrative using threads of actual historical examples of economic enterprises, and then asks his readers to fill in the narrative garment with parallel threads supplied by the imagination.  The result of this terrible maneuver creates the impression that what is operating is not, at its base, a mass of free individuals choosing what suits them to the extent that a market-manipulating government does not stymy them.  Instead, it portrays a mass of individuals with little control over their own economic lives, and a small minority who skew the system in their favor.  Galeano's Latin America is controlled by a small minority who profit from an economic system which benefits primarily the powerful countries – whether feudal Spain and Portugal during the colonial period, or Britain and the United States during the neocolonial period.  Latin America's minerals and other natural resources are extracted by extremely exploited labor for export to the rich countries where they are processed by relatively less exploited, more highly skilled labor into the final products that only decently-paid laborers can afford.
            This is not to say that our dreamers do not know what economic history is.  That would be insulting.  They know what economic history is, and they have an adorable view of it – as whatever supports their presuppositions.  As a prime and recurring example, our dreamers make reference to the Asian Tiger economies of Japan, South Korea and Taiwan.  But what they refer to are not the Japan, South Korea or Taiwan of history – they refer only to the imagined histories of these countries.  Here it is necessary to call to mind the dreamers' special, proprietary definition of a successful economy: one which implements neoliberal economic policies.  (And its corollary: neoliberal economies are successful economies.)  Our dreamers write that “[i]f the Latin American idiot would study how some previously destitute nations succeeded in placing themselves at the economic forefront, instead of complaining about something that is as inevitable as it is advantageous, he would see that no one stopped Japan, South Korea, or Taiwan from becoming economic empires.” (p. 29)  This a revealing comment – it reveals the ignorance (shall we say, innocence) of our dreamers, who should enroll themselves in the same remedial economic history class they recommend for the “idiots”.
            Looming large in the dreamers' minds is the example of Japan, which until late “was a medieval kingdom, a close, isolated theocracy, not seen by Western eyes until […] 1853, and a country that had not experienced the first or even the second industrial revolution.” Yet by 1905 “Japan was already an economic power” - why?  With an explanation so cheerily naive as to prompt instant cheek-pinching and forehead-kissing, our dreamers explain that Japan was one of a select group of “countries that seriously want[ed] to advance”, and that there was no “someone or something [that] tr[ied] to impede them from doing so.”  Aha!  The secret of economic development, revealed: serious desire.  “Countries” must “seriously want” to advance, and so long as they are not impeded by a someone or something – an “atrocity”, our dreamers assure us, that “has never been seen in the contemporary world” – they will attain the height of economic development.
            Of course, back in the real world, “serious desire” is insignificant, and Japan developed by copying, with well-suited adaptations, the way in which European powers developed.  Behind the conservative-sounding Meiji Restoration lay a revolution that replaced Japanese feudalism with state-led capitalism.  Japanese capitalists were led, nurtured, protected and taught by the state, Japanese cities were developed at the expense of the rural peasantry through high taxation (remember the Japanese finance minister who likened peasants to sesame seeds, in that they are both more productive when crushed hard?), feudal privileges were eliminated, social relations restructured, raw materials were sought from militarily weaker countries at beneficial terms at the point of a gun, and the military was strengthened both to defend Japan against Western imperialism and to develop an imperialism of its own.
            So our dreamers inadvertently sap the very foundations they are seeking to build.  They sleepwalk over the edge of a cliff – and this is not the only instance.  Their ignorance of the economic history of Japan may be stunning, but hardly so in comparison to their ignorance of the economic policies used during the various periods of early development of their other favorite countries, whether the late-developers like South Korea, Taiwan and Singapore, or the early-developing countries of Europe.
            Our dreamers hate Galeano for his dogged insistence in looking to historical lessons rather than mathematical models designed by politically conservative economists.  But, concerned with the draw his arguments might have among those who believe history to be a source of valuable lessons, they attempt to undermine his arguments using the tried and tested technique of the straw man.  Two of the straw men our dreamers create to beat Galeano in effigy are: that governments create wealth through taxation, and that wealth, once expropriated through unequal power relations, invariably remains with its expropriator.  Galeano, at least in Open Veins, never embraces such absurd positions. So when our dreamers write the following series of rhetorical questions, they are not attacking Galeano's arguments, and they are not blindly swatting at a pinata – they are beating up a straw man:
            Is it seriously possible to say that the exploitation of the colonies by voracious mother countries explains the underdevelopment of some at the expense of others after what was experienced in the last centuries?  What is the current status of Spain or Portugal, two of the modern world's most tenacious imperial patrias?  At the dawn of the twentieth century (which is closer to the colonial period than to today), weren't Buenos Aires and Sao Paulo wealthier than Madrid and Lisbon? Haven't Spain and Portugal fared much better without their colonies than with them?” (p. 28)
None other than a straw man could believe that wealth, once attained, must necessarily remain where it is for perpetuity.  Spain and Portugal obliterated the previously existing economies of Latin America and replaced them with a system designed first to export natural wealth, and second to pay for luxuries from Europe.  There is no law of physics, however, which states that natural wealth, in the form of gold, silver, sugar, guano and the like, must confer a lasting economic benefit upon its recipient.  A powerful minority in Portugal and Spain were indeed showered by wealth drained from Latin America, but they did not use this wealth to build the industrial foundations for future national wealth once they transitioned from feudal monarchy to capitalist democracy.  Instead, an opulent minority in Portugal and Spain frittered away their wealth on conspicuous consumption and war (which is but another form of conspicuous consumption for the sufficiently powerful).  Hence the relative wealth of Buenos Aires and Madrid in 1900 is irrelevant, and the economic performance of Portugal after Brazil's independence is an independent variable.  That colonial Spain and Portugal were profligate wastrels that were soon dispossessed of the wealth they violently expropriated from Latin America, does not mean they never expropriated wealth from Latin America.  “No your honor, I can prove I didn't mug this man, because I have nothing left after gambling away his money!”
                        Galeano, in his colloquial style, writes that “[t]he division of labor among nations is that some specialize in winning and others in losing.”  This is another way of stating that the rich nations specialize in high value-added economic activity, like high-tech manufacturing and software development, while the poor nations' economies are characterized by low value-added activity, like mineral extraction and low-tech manufacturing.  But this rather obvious statement of fact cannot scale our dreamers' ideological firewall.  They ask rhetorically, “if the evil American plan is to keep other countries specializing in 'losing,' then why did it join with Mexico and Canada in the North American Free Trade Agreement (NAFTA), whose stated goal is for all three nations to profit?” [emphasis added] (p. 23).  Why, you fools – the stated goal of NAFTA is for all three nations concerned to profit!  What further inquiry is needed?  For these neoliberal dreamers, apparently, a statement of good intentions is the beginning and end of critical inquiry – so for them, one would imagine, imperial Japan engaged in a selfless quest to save Asia from Western imperialism during World War II, and more recently, the United States under George W. Bush merely attempted to protect its vulnerable cities from the towering threat of Iraqi weapons of mass destruction. 
                        Elsewhere, Galeano's criticism of the peculiar form of Latin American industrialization, “comfortably coexisting with the latifundia”, centered in a select few “privileged poles of development” like Sao Paulo, Buenos Aires and Mexico City, and progressively needing less and less labor as technology advances, runs into opposition from our dreamers.  Actually, it is not Galeano's criticism that runs into opposition, but rather a straw man simulacrum of his criticism.  Our dreamers write, “[s]o, the solution to Latin America's problem cannot be industrialization, given that [Luddite] Galeano […] believes that industrialization is harmful.”  Of course, Galeano believes nothing of the sort.  He believes, rather, that the peculiar form of Latin American industrialization is harmful, the form which exists solely to exploit cheap labor or export raw materials – the form in which only a small minority reaps any appreciable benefit.  And yet again here, our dreamers drink a poisoned glass of rice wine to toast their ideological follies, making reference to the economies of South Korea and Taiwan.  They argue that had their straw man version of Galeano's beliefs – namely, that industrialization is bad – held sway in mid-twentieth century South Korea and Taiwan, that neither would have developed in the successful way they did.  This is a trivial truth, tantamount to me stating that had I stopped drinking liquids a few years ago, I would presently not be as well hydrated as I currently am.  But so too, if South Korea and Taiwan had followed our dreamers' advice and implemented neoliberal policies, foregoing protectionist measures to develop high value-added industries like steel and electronics in the face of superior international competition, then our dreamers' beloved Asian Tigers would look a lot more like Latin American Llamas.[6]
                        Our dreamers' chapter on Open Veins of Latin America ends, appropriately, with a swipe at the suicide rate of Cuba and its decidedly un-neoliberal economy (which, one is left to wonder, is to blame for the suicide rate?).  Strange, this causal connection our dreamers imply, given that Cuba has had Latin America's highest per capita suicide rate since the 19th century.   (Journal of Third World Studies, Spring 2007, Michael R. Hall, review of To Die in Cuba: Suicide and Society by Pérez, Louis A, Jr.)  Stranger still the focus on “the sweaty and overworked buttocks of its poor Tropicana mulatto women.” This is our (wet?) dreamers' way of referring to sex work in Cuba, which to them is inordinately widespread and, naturally, due to Cuba's rejection of neoliberal economic policies.  This suggested causal connection between the rejection of neoliberalism and the proliferation of sex work is odd, considering that the sex industry has long been a draw for wealthy foreigners to the island. (Sun, sex, and gold Edited by Kamala Kempadoo p. 12)  But, I suppose it is impossible to argue against, given that Cuba's capitalist neighbors, like the Domincan Republic, Jamaica and Puerto Rico, simply do not have prostitution, let alone sex tourism. 

Guide to the aptly though unintentionally named, inadvertently confessional Guide to the Perfect Latin American Idiot

                        While our dreamer-authors give no evidence of having read past page 18 of Open Veins of Latin America – the chapter dealing with the book having ended there – I will go through the Guide to its end.  This is not to accuse, or set myself above our dreamer-authors.  For them, reading Open Veins must have been an extremely scandalous experience, dealing as it does with graphic depictions of actual economic history and empirical investigation.  Which, for the neoliberal, is a most distasteful thing to do.  Like modern-day popes, who can write entire encyclicals about sexuality and its meaning but never debase themselves by actually delving into sex, neoliberals stay pure in the realm of theoretical abstraction, and make reference to empirical reality only when and to the extent they must to (always inadequately) buttress their ideology.  Our dreamers attack Open Veins with surgical gloves and a light touch, much like one would imagine Pope John Paul II attacking Madonna's Sex by reading the introduction and extrapolating from it all of the grave errors that were surely committed in subsequent pages.
                        On page 38, following page 36 on which our dreamer-authors disgard their straw man arguments against Open Veins to pick up straw man arguments against unidentified opponents, lumped together under the term “idiots”, our dreamers write:
Simple logic should suffice to invalidate the statement that our poverty is the wealth of the rich, since it's obvious that if wealth is created and not something that already exists, one country's prosperity is not the result of another's wealth being stolen.
            In essence, our dreamers must believe that the natural state of the world sans neoliberal capitalism is pure stagnation.  In this imagined natural state, there must not be creation of anything lasting, nothing that could be called wealth.  Otherwise, it is hard to understand what our dreamers mean by their use of the word “logic”.  (Might it be the logic of fantasy, whatever that might mean?)  Otherwise, our dreamers would seem to be prevented from realizing that the production of wealth is one thing, and its distribution another entirely.  Most likely, our dreamers actually believe their straw man version of Galeano's argument: that economic relationships are “zero sum games”.  Zero sum games are those in which there can be only one winner and the rest losers.  Non-zero sum games are those in which there can be only winners; in other words, mutually-beneficial relationships.  Occluded from our dreamers' binary vision is the possibility that while both parties in an economic relationship may benefit from it, another possibility – and in fact, very common occurrence – is that economic relationships often benefit both parties, but unequally; even vastly so.
                        The real world does not take kindly to this particular dream.  In the real world, Britain's museums would not be filled with half as much wealth were it not for the relative poverty of the museums of their former colonial possessions and imperial subjects.  Anyone who is awake understands that the production of this art occurred in one country, and its distribution resulted in it residing in another country.  This, of course, is just one very simple anecdotal example, but others abound.  The (very nice) clothes I am wearing as I write this are a form of wealth. And while they now form a microscopic fraction of the wealth in the very rich country I live in, they were made in two very poor countries.  Out of the amount of money I paid for them, only a small amount made it to the people who produced them: those who both worked in, managed and directed the factories that made my clothes.  This amount was sufficient only to aid the directors of these factories in being relatively wealthy, and to allow the workers in these factories to eke out a subsistence existence.  The rest of the money I paid for them went to pay marketers, middlemen and retailers in my own very rich country.  So if you look at the natural state of the world sans our present economic system as one of pure stagnation, then the factory workers would be making absolutely nothing – presumably they would be starving to death in a lush jungle or on a beach somewhere.  But if you look at the natural state of the human world as one of wealth-producing activity under varying economic systems, then the system that produced my clothes is arbitrary and could be replaced by any number of alternatives.  Once looked at in this way – the manner of a realist – it is clear that the production process that resulted in me having nice clothes to wear as I write could have distributed the lion's share of this produced wealth in one (very rich) country.

If services (which constitute three-fourths of today's U.S. economy) do not use raw materials from Latin America or anywhere else, how, without using magic, could those services be the result of the plundering of our natural resources?
Magic is unnecessary.  Raw materials are.  Since our dreamers are ensconced in the clouds, they cannot see how the viability of a service-dominated economy might be tied to its ability to purchase raw materials on the cheap.  But let us depart the holy of holies for a moment to glance again at the real world.  On the average day, the Unitedstatesian service worker wakes up, drinks a cup of coffee grown by poor Colombians, changes into clothes made by poor Chinese and Malaysians (though carries a made-in-the-USA purse made by poor Samoans) with underwear made by poor Salvadorans and Jamaicans, and drives to work in car manufactured by poor Mexicans, made of metals mined by poor South Americans, powered by oil drilled by poor Iraqis or Russians, and arrives at an office built by poor Central American undocumented immigrants, to work on a computer manufactured using minerals mined by poor Africans. To produce a service does not require natural resources, plundered or otherwise, as direct inputs.  But to produce a service requires food, clothing, transportation, infrastructure, energy, buildings and technology – and these require natural resources.  And they are all the cheaper if those natural resources are plundered, stolen, attained through crooked dealing or simply as the result of uneven bargaining power.  And when you are getting wealthy by producing services of such dubious human utility as the iFart Mobile software application, it really helps when all of your production costs are as low as possible.  Even when that means preventing too much wealth going to the lowly producer of the raw materials that form the foundation of so much higher-level economic activity.

If the United States' annual $6 trillion economy is eight times greater than the three major Latin American economies combined (the “giants” Brazil, Mexico, and Argentina), in order for the aforementioned premise to be true, it would have to be shown that at some time these three economies jointly, for example, produced eight times more than they do today, and, when added together, the giant three's production reached a number similar to $6 trillion.
            This is a very strange contention.  It is very possible, accurate even, to say that the United States' economy is as wealthy as it is due to a history of exploitative (or extremely favorable, if you like) relationships with Brazil, Mexico, Argentina and any number of Latin American, Asian or African countries.  For instance, towards the end of the 19th century, while Brazil was producing rubber and selling it to the United States and other economically powerful countries, its rubber workers – if they were lucky enough to survive the journey to the Amazon – were eking out a bare subsistence.  Only Brazilian owners within the rubber and transportation industries were accumulating capital, and this capital was not used to develop high value added industry to be protected from competition for a period by the Brazilian government.  The Brazilian government, primarily representing as all governments do its most wealthy constituents, had at that time implemented an economic policy that would benefit the owners of low value added industries.  High value added industries, like heavy manufacturing, did not dominate Brazil's economy at that time, unlike the United States'.  The U.S. economy around the turn of the century was dominated by heavy industry, and had a government that was very solicitous of it.  Unlike Brazil, at the height of this particular economic relationship, the U.S. government had instituted a broad range of tariffs and subsidies to help along the growth of domestic, high value added industry.  While Brazil's economy was dominated by the low value added raw material export sector, the U.S. grew on the back of heavy industrial growth and raw materials whose cost represented a small fraction of the market value of manufactured goods.  Had Brazil and other raw materials producers banded together in the manner of the conspiratorial business groupings Adam Smith had inveighed against, and which actually had very effective influence upon the U.S. government, things may have been different.  (At the time, this was highly improbable, as much of the world's economy was actually under British imperial control, and a union of raw materials producers would be broken before one even tried to come into existence.)  Clearly, in this – and many other, if a dreamer may be persuaded to delve into a little economic history – examples, a more powerful economic partner wrested the lion's share of the benefits from the relationship.  That this relationship could not possibly be predominant within the international economy is an all-engulfing blind spot in our dreamers' sightless vision.  Here, our dreamers' conception of economic reality is so dreamily simplistic that it becomes hard to understand. 
                        Unless imposed by nakedly brutal military conquest, economic relationships between two countries are rarely of the zero sum sort.  That is, there is most often a reciprocal benefit in the economic relationships between countries.  Yet rarely are these benefits equally apportioned.  As a rule, the more powerful country or group of countries tend to extract most of the immediate and long-term benefits of any particular economic relationship with a less powerful country or group of countries.  The “idiots” our dreamers rail against also conceive of a world wherein economic relationships are non-zero sum; unlike our dreamers, however, the “idiots” do not believe that non-zero sum economic relationships always benefit both parties equally.  “Idiots” seem better positioned than dreamers to notice the commonsense fact that real-world power relationships can influence the distribution of wealth created by a particular economic relationship.
                        At the end of their argument, our dreamers crystallize their absurd belief that economic relationships are not zero sum game (which no one disputes) but rather are non-zero sum game where both parties benefit equally:
One could argue that this is not a fair comparison since the United States did not exactly steal everything that it produces but rather it pocketed the necessary resources and then built its own wealth from them.  But this argument would invalidate the entire premise that our poverty is due to the exploitation that made us victims, since the exploitation concept rests completely on the idea that wealth is not made but distributed.  If it does not [already] exist, it is created, and if it is created, no country's wealth is another's poverty.
Ah, but it does not!  The “exploitation concept” rests rather on the idea that wealth is first made, then distributed – and most often unequally.  Coincidentally, this is the view that best accords with economic history.  The economic history of reality, not the economic history of cherry-picking attempts to correlate periods of economic growth with periods of (mostly nominal) adherence to neoliberal ideals.
                        In the same paragraph on page 39, our dreamers introduce an entirely novel, uniquely absurd and largely implicit theory.  They argue that the sum of the economic benefits derived from the relationships between Latin American countries and the United States and Europe were of equal or greater utility to Latin America.  From the horses' mouths (or asses, perhaps):
One could argue that this is not a fair comparison since the United States did not exactly steal everything that it produces but rather it pocketed the necessary resources and then built its own wealth from them.  But this argument would invalidate the entire premise that our poverty is due to the exploitation that made us victims, since the exploitation concept rests completely on the idea that wealth is not made but distributed.  If it does not [already] exist, it is created, and if it is created, no country's wealth is another's poverty.  Even the worst colonial government from the Renaissance era until today has brought the victim country tools of knowledge or technology, providing them some development (at least economically if not politically or intellectually).  What would Latin America's economy be today in comparison to wealthy countries if we had not had contact with “the white man's” economies?  It's hard to believe that the combined production of Mexico, Brazil, and Argentina would be only eight times less than that of the United States.  Peruvians will probably continue patting themselves on the back for the agricultural virtues of the terraced hillsides, a noteworthy invention of the pre-Columbian period but not exactly the forerunner of, for example, the steam or internal-combustion engine (to mention just two rather antiquated capitalist inventions.

                        Here, our dreamers rather amusingly – yet with a straight face – compare an economic invention of the 19th century (the steam engine) with an economic invention of the 15th century (terraced farming).  They do so, to prove that the inventiveness of a Britain flush with wealth ill begotten from their empire in the 19th century is superior to what the Incas would have been at the time had they existed, that is, had they not been destroyed by the Spanish in the 16th century to turn Peru into a European gold mine. In their preposterous vision, economies stagnate unless they are neoliberal capitalist; therefore, by whatever magic Peruvians used to develop terraced farming in the 15th century, from then on they certainly would have been inhibited from developing and implementing new technologies.  Thank God (or Columbus) they were introduced to the white man's economies, eh?
                        Not so fast.  If capable of developing terraced farming in the 15th century, Peru's economy would surely have been capable of incorporating developments from other societies.  That is, if their interactions with other societies allowed them, besides continued existence, some freedom in developing themselves as they wished.  Much like one of our dreamers favorite countries, Japan (granted, they are infatuated only with a fantasy version of Japan), Peru could have had a rude first encounter with Europe.  But Japan was never invaded, its population never reduced by murder, overwork and disease to a mere 7% of what it had been prior to its encounter with Portuguese traders.  Perhaps, if Peru had instead experienced Japan's first encounter with Europeans, they would have been able to keep living, maybe – or maybe not – modifying their society to adapt to European inventions.  (Certainly they would have had to, since all of Europe's inventions of note at the time were military, and the early Peruvians would have needed to adopt them at the very least to defend themselves from European barbarians.)   Perhaps some hundreds of years later they, like Japan, would have been forced to sign unequal trade deals with more developed foreign countries (today, these are referred to as “free trade agreements”). Unfortunately for the Peruvians, however, they first encountered Europe at the tip of Spanish swords – and Spain at the time had not yet advanced even to that stage of idiocy when “free trade” supremacy is preached.  But our dreamers do not sully themselves with such historical iniquities.  If it is a part of reality that one cannot, even by making disfiguring assumptions, fit into a mathematical model, then it is impure and not deserving of attention.


p. 52 – the depths/heights of the dream – criticizing 1935-55 capitalism for not improving the lives of the poor because it was not neoliberal enough
63 – more on why latin american governments have fucked up by being insufficiently capitalist, and believes them to be socialist due to state intervention in the economy. p. 64-5 criticisms sound a lot like Korea when developing...
p. 67 – statement of dreamers' principles: a version of capitalism that does not exist. Distinction between dreamers and “the recalcitrant conservatism of times past”.
p.68 - “idiots'” hatred of capitalism stems from old religious inhibitions against greed.  As if the neoliberal creed isn't religious. Refer to Economics as Religion.
p. 73 – attempted argument that Asian Tigers did not use government intervention and planning to get rich.  But it runs into the stupidity. Like “Naturally, the judicial framework and guarantee of order and security required for productive activity are the state's obligations. [Why only these? Divine revelation?] We liberals [sic] have never questioned its essential functions, such as administering justice, maintaining the basic legal order, and protecting citizens.  Among us Latin Americans, though, the state carries out these functions in such an inept way because it is embroiled in jobs that are better handled by the private sector.” The tigers on the other hand supposedly had governments that played the mere role of referee to the market...
p. 60 – really dumb metaphor: “Politically speaking, anti-imperialism is the most profitable way of making love” - and obliviousness to the fact that anti-Americans were killed en masse, not smothered by largesse.
p. 62 – laughable claim that the U.S. never sent in the Marines just over an expropriation – there were higher motives involved? - and Cuba is an example. Because technically, the Bay of Pigs was CIA not USMC.
p. 78 – stupendously stupid claim that “Except for the British revolution of 1688 and the American revolution at the end of the eighteenth century, there's not a single case of a revolution that has achieved anything good.”  How about the Chinese revolution of 1949?  I would presume that a doubling of life expectancy would be considered by most to be a good thing, to say nothing of removing China from under the thumb of foreign powers, or industrializing the country in a fraction of the time it took European countries.  How about the Italian Risorgimento?  How about the innumerable revolutions that freed populations throughout the planet from direct colonial domination?  As if others were needed, this is one more instance of the disconnect between our dreamers and humanity.  History tells us through innumerable examples that human beings are often willing to die for the opportunity to get up from their knees and stand.
p. 89 – Roberto D'Aubuisson St. in El Salvador was “capable of fiercely confronting leftist rhetoric”.  This is about “Blowtorch Bob” - so-called for his favorite method of torture – killer of Oscar Romero.

p. 97 – Cuba's economy was grand prior to the revolution - “import capacity” is the measurement chosen
98 – good line about “genital nationalism”, marred by inaccuracies about prostitution prior to the revolution, i.e., that it was nonexistent.
p. 99 – increase of Cuban ownership of sugar plantations not a sign of economic growth if the sole importer is the U.S.
p. 100-1 – economic embargo is not harmful to Cuba? 101, yes Cuba can lift the embargo, if it gives up its revolution – so what?
p. 104 – Cuba should be compared to similarly developed Latin American countries at the time of its revolution.  (Puerto Rico was not a “country”)
p. 110 – As if the ability to buy a Mercedes is not as structural in Venezuela as in Cuba.  Just a different structure
p. 168 – bemoaning the poverty of the majority of Cubans relative to European tourists to Cuba.  Still waiting to hear the same salvo leveled against Latin America's capitalist countries.  (The really-existing capitalist countries – we know of course that only Chile, perhaps, is close enough to our dreamer's ideal to be considered capitalist by them.)
p. 169 – berates Cuba for the abuse received by a pro-democracy poet: forced to swallow her papers while State Security officers shouted “I hope your mouth bleeds, damn it, I hope it bleeds!”  If true – and I see no reason to disbelieve Ms. Cruz Varela's testimony without further investigation – this is a disgusting abuse of power.  But one must admit that this is treatment is a paradise compared to the abuses committed under Chile's white night of neoliberalism, Pinochet.  No “henchmen” was inserting spiders and rats into Ms. Cruz Varela's vagina, raping and impregnating her and then torturing and beating her to the point of miscarriage – unlike Lux de las Nieves Ayress Moreno in our dreamers' beloved Chile.  Is this is the worst our dreamers can point to as evidence of Cuba's perfidy and human rights abuses undertaken in crushing internal dissent?  Our dreamers cite migration flows as the most telling evidence of a country's quality of life.  Had Cuban and Chilean dissidents been given the opportunity to migrate to be a dissident in either Chile or Cuba, respectively, this peculiar migration would flow in only one direction: towards the totalitarian monster state, Cuba.  I am pretty sure that I'd rather be forced to eat pieces of paper than be raped and tortured.
p. 172 – our dreamers frenziedly contest an “idiot” writer's claim that Amnesty International officially reported the existence of only 300 political prisoners in Cuba.  Surely, they all but shout from the printed page, the number of political prisoners in Cuba is far from this modest. 
                        This bores me.  As of January 29th, 2007, Amnesty International's web site reports “at least 67 prisoners of conscience” in Cuba.  This is compared to violently anti-communist Colombia's 2.7 million internal refugees, and 3,000 political murders since the dubious demobilization of Columbia's right wing paramilitaries in 2003.until 2007.  One can, and many others have, exhaustively detailed the enormous disparity between Cuba's state crimes and abuses and those of the anti-communist states of Latin America.  This picking the speck out of one's communist neighbor's eye while ignoring the plank in one's own capitalist eye is the fancy of a dreamer that does not merit serious consideration.

p.113 – attacks liberation theology – an easy target insofar as its religious content is concerned.  But the dreamers sloppily equate the violence of guerillas and the oligarchies, and the hardships faced by the campesinos due to the conditions caused by both.
p. 114 – makes out the narrative that the Church hierarchy nurtured and supported the liberation theologists – which conflicts with my narrative of the highest levels of the Church hierarchy (Ratzinger, JPII) fighting liberation theology to the point of withdrawing the Vatican's diplomatic support where that may have saved the lives of religious – not to mention thousands in the laity – in the movement.  But both narratives can coexist; though to most, I would imagine, the latter narrative would have pride of place given that liberation theology and its allied movements were ultimately unsuccessful.  Also there's a stupid bit here about Jesuits' buying weaponry being in contradiction to their vow of poverty; even if true,  they would have been buying guns, not gold; pistols, not prostitutes.
116 – Claims the “fantastic”, “juggernaut” “propaganda machine of the left” was “capable of ending the free Western world from within”; and calls the assassination of Oscar Romero “one of the most counterproductive barbarities committed by the anti-communists”.  See, our dreamers are not allied with the death squads – they denounce their violence's counterproductivity!
118 – amid one good line - “when God and the Devil are invoked to judge politics the likely outcome is a bonfire” - there is some stupidity about capitalism being a radical negation of slave-based economies.  Eric Williams' Capitalism and Slavery explains well how slave-based economies crucially contributed to the development of capitalism – which, he argues, at a certain stage is incompatible with slavery as an inefficient, less profitable system of organizing the labor market – by creating the capital foundation upon which more advanced capitalist economies could build upon.  Also this page contains a condemnation of liberation theology for assigning the category “evil” to the poverty inherent in Latin American capitalist systems...
p. 119 ...which continues with an argument that the proper villain would be socialism over capitalism.  The dreamers of course deny that Latin America has ever tasted capitalism (since Latin America has not become wealthy, or successful, by our dreamers' proprietary definition they cannot be capitalist).  Rather, what Latin America has experienced has been nationalization (an act, not a system), mercantilism, nationalism and other “derivatives” of what our dreamers call socialism,  To be charitable, is this highly nonstandard usage.  And, in an absurdly mistaken semantic hissyfit, claim that their opponents are creating a caricature of capitalism by assigning to it the characteristics of real world economies, which were and are integrated into the international economic system.  The system that only a vanishingly small minority of people would deny would be best characterized as capitalist.  But for our dreamers, capitalism has not been tried and found wanting; it has been found difficult, and left untried.  Latin American capitalism, to them, is unborn – so they can write: “On hearing that capitalism is condemned to Hades, God, who usually doesn't sentence the unborn to Hell [true, he generally waits until the kid is around ten before doing that – Ed.], must be frowning.”  Strange, however, that they consider capitalism to be merely “society's way of spontaneously organizing itself” (p. 118).  Should not they then be the supreme revolutionaries, advocating anarchy to allow Latin American societies the freedom to spontaneously organize themselves into the default state of economic nature: their dreamy, pie-in-the-sky conception of capitalism?
                        Then they go on to make the strange case that Christianity is incompatible with sharp criticism of the wealthy – in their wide reading, they must have somehow skipped The New Testament. Rather our dreamers argue that capitalism is the most virtuous and charitable system yet devised – oops, rather, yet spontaneously self-organized – because it places an inherent premium on trust.  Trust in the functioning of courts and the sanctity of contracts.  Really rarefied stuff, this.  Indeed, our dreamers reveal a belief in a capitalist equivalent of liberation theology (oppression theology?): “Capitalistic egoism promotes such teamwork that it appears to be the fellowship preached about in the Bible.”  Ah, the invisible hand – with the stigmata
p. 121 – criticizing liberation theology because in its desire to see poverty eliminated, our dreamers sense an abandonment of the Gospels' exaltation of the poor.  Our dreamers confusedly explain this desire to see poverty eliminated as hypocrisy in the face of the Church's role – more aspirational than actual – as “an institutional exaltation of poverty, [with] its ethical foundations a defense for material nakedness”.  That is one impression of the Church I, for one, did not come away with after spending time in the material splendor that is Vatican City.
p. 123 – an ecstatic ode to capitalism – again the spontaneous self-organization, that cannot but emerge if only governments would consent to rather than suffocate it.  Misses by a mile the indispensable role governments have played in the development of capitalism.

p. 139 – adopts the completely discredited story that the democratically elected Arbenz government was a puppet of the Soviets which might, in a few years, invade the vulnerable United States a la Red Dawn, the 1984 propaganda film.  Actually, this is the same as the CIA's official interpretation (and if you cannot trust the CIA, who can you trust?). But hey, if they are willing to believe the mathematical fantasies of neoclassical economists, who is to say it is any less sound to believe CIA public relations?

p. 163 – a charge of hypocrisy based on a laughably inapt equation between European leftists' refusal to push for the Communist Party being the only legal party in their countries, and their lack of protest over post-revolutionary poor countries' clampdowns on competing, capitalist political parties.

p. 167 – again denying that Latin American countries could be called capitalist.  Regardless of their pervasive integration into a global economy that would be hard to describe without using the word “capitalist”, our dreamers' pure theory has simply not been implemented.  Of course it has not; the developing position of Latin America within the global capitalist economy, and the internal dynamics of its own countries' economies, have denied it the propitious circumstances that allowed its northern neighbor to develop closer to the dreamers' capitalist ideal. 
                        Here, the dreamers betray the influence the Peruvian intellectual José Carlos Mariátegui has had on them.  In his highly influential Seven Interpretive Essays on Peruvian Reality, Mariátegui gave a thorough exposition of how Peru's – and many other Latin American countries had a similar experience – lack of capitalist development doomed it to playing catch-up with the United States.  He argued that what condemned Peru to stagnation was its history as a feudal, parasitic colonial economy lacking a bourgeoisie to guide and push for its evolution into a fully capitalist country.  Meanwhile, the United States had evolved into a standard-bearer of capitalism, allowing it to develop as successful capitalist countries do by plying their cultivated strengths against other countries' relative weaknesses for gain.  Mariátegui gives the example of land: in Peru, land was granted in the first instance from the monarch's decree, and was further distributed and circulated as a currency for political favors.  On the other hand, in the United States land was freely bought and sold, and, once it had been taken from the Indians, the land went to the tiller, in a sense: those who improved the land (“improved” in the European sense only, of course) would own it, and royal decrees had no say whatsoever.

p. 175 – concise compilation of their dreamy precepts: “the government isn't the one that creates wealth but individuals; that a country's wealth is made or can be made by savings, effort, national and foreign investments, creating, developing, and proliferating companies within the framework of a market economy; that state-run and private monopolies are the source of abuse and that free competition is the best way to regulate them and protect the consumer; that excessive regulations, foreign exchange controls, import and export controls, tariff barriers, and subsidies generate corruption and illegitimate privileges.”

p. 176 – Excellent way perhaps of finishing this all up: “But ideology, like religion, thrives on dogmas of faith.  It's an intellectual dispensation, a way of explaining the world and society with comfortable theoretical suppositions, but not subjecting them to tests.  When one questions this dogma, however, (which serves as the basis for an entire code of interpretation that has until now been irremovable as well as the foundation for everything that this code has planned for an individual's destiny of a group or party) the response is virulent; just like, by the way, what happened when Galileo revealed that the Earth was round and that it circled the Sun. Burn the heretics at the stake!”
                        Oh how difficult the life of a neoliberal intellectual in Latin America!  While economists and policy makers in the region had not only imbibed but implemented neoliberalism at the time our dreamer-authors wrote the Guide, apparently the intellectuals entertaining themselves on the cocktail circuit made our dreamers' nightlives a bit unpleasant perhaps.

p. 177 – superficial description of Peronism in Argentina used to malign government intervention in the economy (what our dreamers would call “socialism” or economic nationalism). Also criticism of Nicaragua's economic catastrophe of the 1980s – pinned, of course, on the implementation of “the social state” which “financially ruin[ed] Nicaragua” – without any reference to the proxy war waged upon Nicaragua by the United States with the help of Honduras and Iran.

p. 178 – lampooning the idea that in many economies, far more luxury goods are produced than basic necessities, relative to the level of need.  To lampoon this idea, our dreamers ask if critics in rich economies – in this case Spain – have any shortage of basic necessities.  Of course they do not.  Our dreamers draw from this trivial truth that since rich countries have both luxury goods and basic necessities in abundance, that the countries of Latin America must not have an overabundance of luxury goods relative to basic necessities.  I am not entirely sure how our dreamers make this leap – but I am quite certain that they do not make it to the other side.  Perhaps they are unfamiliar with the difference between the concepts of demand and effective demand.  Demand refers, as one would presume, to people clamoring for something or other.  Effective demand, on the other hand, refers to people being able to purchase that which they desire. In the absence of an ability to purchase, one would merely be demanding - or ineffectively clamoring for.

p. 182 – spiel about neoliberalism never having been tried in Latin America, so it is unfair for its critics to point to its alleged failures in Latin America.  Also bit about Chile's privatized pension system: back in 1996 things looked good – and looked even better in “the long run”.  But nowadays, Chile's privatized pension system is in a crisis never predicted by neoliberal witch doctors, and Chileans are yearning for a return to the “bad old days” of socialized pensions.  Our dreamers also insist that Chileans had a “choice” between privatized and socialized pensions, and that only 10% chose to stick with the antiquated, “inefficient” public system  However, starting in 1983, the privatized pension system was made mandatory for everyone entering the workforce.[7]  When a properly neoliberal – if fascist – state forces the switch to private pensions, this is considered a choice by those whose eyes are tightly closed.

p. 198 – argues – somehow – that the United States, from “the height of the Great Depression” and “thirty years” hence, was a properly neoliberal state.  That is, it was an economically successful state, so to our dreamers, it must therefore have implemented neoliberal policies – and the reality be damned.  To the informed, or simply the non-deluded, the U.S. was nothing of the sort during this period.  In fact, from 1934 to 1964 (the period our dreamers refer to), the United States underwent the most radical economic transformation of its history.  As the Pulitzer Prize-winning Harvard historian Alfred Chandler wrote:

The mobilization of the war economy brought corporation managers to Washington to carry out one of the most complex pieces of economic planning in history [that dirty word!].  That experience lessened ideological [ideological! Only socialists are ideological!] anxieties about the government's role in stabilizing the economy. Then the fear of postwar recession and consequent return of mass unemployment brought support for legislation to commit the federal government to maintaining full employment and aggregate demand. While a few managers and businessmen favored such legislation, most continued to oppose what they considered government interference in the processes of business.  The Employment Act of 1946 passed only through the concerted efforts of liberal and labor groups.  By the 1950s, however, businessmen in general and professional managers in particular had begun to see the benefits of a government commitment to maintaining aggregate demand.  They supported the efforts of both Democratic and Republican administrations during the recessions of 1949, 1957, and 1960 to provide stability through fiscal policies involving the building of highways and shifting defense contracts.

p. 203 – our dreamers equate Cuba with Taiwan in the year 1959.  Taiwan's success must of course be due to its adherence to neoliberal polices (to which, in reality, it adhered like oil and water), and Cuba's failure to develop an economy similar to Taiwan's is attributed solely to its decision to withdraw from the U.S.-dominated capitalist world system.

p. 208 – Another passage that can more accurately be transformed to condemn our dreamers: “There unquestionably exists something that Galeano hates with even greater intensity than the gringos or the multinationals or liberalism: truth, common sense, and freedom.  He cannot stand them.  He doesn't believe in them.  He has no respect for them.  His only and strongest allegiance is to feed uninformed Latin Americans errors and nonsense until her perfects the legendary ideological stupidity that he has made famous.”

Real-world Neoliberalism?
To borrow a clever phrase from our dreamers, neoliberalism-preaching wealthy governments are not exactly “obsessive cultivators of congruency between words and actions.” (p. 147)
            Ideas do not just get implemented by fiat.  “Human mind, presto change-o” does not work  They must spread like a trees' roots through soil, incorporating every last square inch of dirt into a field of interaction between the organisms comprising what we conceptualize as “tree” and “soil”.
                        In the end, the sum of our dreamers' arguments elaborate on John Stuart Mill's otherwise accurate maxim that “although it is not true that all conservatives are stupid people, it is true that most stupid people are conservative.”  Now we know how it is that smart people can take up conservative positions: because their heads are in the clouds, their eyes are closed, and their economic arguments are the products of feverish, if well-meaning, dreams.

[1]          And when I say "rabidly", I mean, for instance, that England had a law that provided for a jail sentence for those skilled workers who left England to start a competing business in another country.
[2]    Smith went on to write: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.“  In other words, Smith was firmly against modern corporate law, and the structure of modern capitalist economies.  Which, not only facilitates the assembly of “people of the same trade”, but renders such (daily) assembly and coordination necessary to remain economically viable.
[3]    As a typical example of how difficult history is to grasp for a dreamer, see this description of North and South Korea in the 1950s on p. 40: “At the end of the Korean conflict, South Korea was left stripped of all industry, since this was all in North Korea.”  Really?  Someone should have told General Curtis LeMay that he left all of the Korean peninsula's industry standing in the North – he seemed pretty emphatic when he explained, in retirement, that “we burned down every town in North Korea”.  Back in reality, North Korea had been devastated by the war in 1950s, and certainly enjoyed no industrial advantage over the South that was not given them by Soviet aid and their own tenacious rebuilding efforts.
[4]    Ha-Joon Chang
[5]    Korea's Place in the Sun, Bruce Cumings
[6]    It is embarrassing how much our dreamers' argument rests on their make-believe, imagined history of the East Asian Tigers.  They write on p. 40: “it's becoming quite boring always citing the tigers, but what else can we do?”  Exactly nothing.