Month: November 2014

The Pope and the Left

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Pope Francis has made it very clear since he took over the reigns of the Catholic Church that his ideological agenda is rooted on the left. While advocating for the poor and the less privileged in society has always been part of the Catholic doctrine, the means and routes proposed by the current pope to lift these segments of the population are as lefty and as populist as we have seen in the history of the Church.

Recently, at the intriguing World Meeting of Popular Movements, Pope Francis sounded exactly like a “piquetero” or street protester in his native Argentina. He called the popular movements to “keep up the fight” and to “say together with our heart: no family without a roof, no peasant farmer without land, no worker without rights and no person without dignified labor.” He then went on to call that these demands “sacred rights.”

The problem is not that Pope Francis has an ideological agenda. After all, all religious leaders have one. The problem is that this particular ideological agenda is wrong. When people demand things such as “no family without a roof,” “no peasant farmer without land” or “no person without a job,” they typically mean it in a literal sense. That is, they mean that having a roof, a piece of land or a job are, indeed, rights, and families, farmers and workers are entitled to them. This ideology is dangerous because it goes agains the natural condition of human existence: scarcity. Because resources are scarce, not everybody can have a roof, a piece of land or a job. Pretending otherwise is plain populism and forcing this outcome (through expropriations or heavy taxation, for example) is highly inefficient.

People defending the pope will argue that if the massive amounts of wealth that the world’s economy has accumulated over time were more evenly split, everybody could have a roof, a piece of land and/or a job. True. But the major problem with this argument is that once the re-distribution of wealth is done, the world’s economy will not be likely to generate the same amount of wealth in the future. The incentives for accumulation will no longer be there. Think about it, if we assign the average grade to all students in a class, students earning higher grades will have no incentives to keep their high performance and students earning lower grades will have no incentives to improve it (they will receive the average grade anyway). As a result, the class average will drop in the future and everybody will fail the class.

Pope Francis, like many other religious leaders, is well-intentioned. Unfortunately, the ideological route that he has taken is not sound and will not advance the cause of the poor and unprivileged in a sustained manner.

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The bittersweet results of the midterm elections

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The Republicans swept with the Democrats in yesterday’s midterm elections. Not a surprising result. The polls had been predicting more or less that outcome in the weeks before the election and it was all but unexpected. In fact, in my opinion, the interesting result of the elections had nothing to do with party candidates but with two highly debated political issues: minimum wage hikes and marijuana legalization.

Yesterday’s midterm election in the U.S. gave marijuana legalization important victories in key areas of the country: Oregon, Alaska and Washington D.C. This is, in my view, a very positive outcome and a move in the right direction. I am a long supporter of the legalization of all drugs and is fascinating to see how the case for legalization has been gaining ground very quickly in the U.S. and other parts of the world (e.g. Uruguay). We are seeing today what ten or fifteen years ago was simply unthinkable. At this pace, marijuana legalization could become a mainstream policy at national level in the next decade. The next big battle will have to be cocaine and the rest of the “hard” drugs.

On the other hand, yesterday’s midterm election gave minimum wage hikes a sweeping victory in Alaska, Arkansas, South Dakota and Nebraska. While this result is not very surprising either (minimum wage hikes have always been favored at the polls), it is interesting to see this result and the one about marijuana happening at the same time (an in the case of Alaska, in the same state). We voted for liberalizing one market but for imposing controls on another. Why? One reason is that while millions of workers could directly benefit from increasing minimum wage hikes (although many others will lose their jobs precisely because of this policy), most of us do not believe that legalizing marijuana would have a direct impact on our lives. Is the marijuana vote a “might as well” type of vote then? Or is it a conscious recognition that prohibition and controls are highly inefficient? If so, how deep is that conscious recognition buried under hopeful personal incentives in the case of minimum wages?

The cable car in Bolivia

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A Bolivian public company has recently finished building a series of cable car lines in La Paz. It is, of course, too soon to run a cost-benefit analysis of the investment but it seems that the public has welcomed the cable car system enthusiastically. Travel times have been greatly reduced and the cable car seems the perfect method of mass transportation given the difficult topography of the city. As with any other public investment, however, I will remain skeptical about the sustainability of the service in the long run. Governments are, by definition, bad business managers and public companies typically become political trophies and sources of rampant corruption. I wouldn’t be surprised, therefore, if the cable car company in Bolivia adds in the end to the long list of inefficient public enterprises in Latin America. Only time will tell…

The building of a cable car system has transformed the mass transportation market in La Paz. As it is always the case with the introduction of new technologies or innovations, old markets are destroyed and new ones are developed. The examples abound. The creation of MP3 files destroyed the market for CDs and the creation of computers destroyed the market for typewriters. That is the way technology works. It is inevitable and actually desirable. Schumpeter called it “creative destruction.” That is the way countries develop and grow. Did you ever hear the manufacturers of CDs or typewriters complain and demand compensation for the market/customers they lost when MP3s and computers were introduced? No. Did we give a compensation to VHS manufacturers after DVDs were introduced? No. Those are the rules of the game and everybody understands them. Should we then give a compensation to taxi and bus drivers in La Paz who lost their market when the cable car system was introduced? Definitely not! Of course, however, that is exactly what they are demanding. Interestingly, the populist Bolivian regime is not giving up and rejects to give these drivers any compensation. For once, I agree with them.