Do Economies Need Blueprints?

“We even owned a nightclub in Mexico City. It was probably the only nightclub in the world losing money.” Jesus Silva Herzog, on all the money-losing state-owned companies he had to privatize as Mexico’s finance minister in the 1980’s.

I’ve just been reading an excellent 1998 book about the results of government meddling in the economies of various nations. In The Commanding Heights, authors Daniel Yergin and Joseph Stanislaw profile the results of government economic policies in over a dozen different countries, and what they found casts a very negative pall on President Obama’s stated intention to sit in the nation’s capital and draw up a “blueprint for the economy.”

In nation after nation, government management of businesses caused such disastrous economic damage that it had to be abandoned in favor of free enterprise.

The book’s most striking example of the contrast between a centrally planned economy and a more free market oriented economy is probably China. Starvation was actually the leading cause of death for the Chinese people during Mao’s “Great Leap Forward,” in which the government nationalized virtually all private property and established a centrally controlled economy. Hunger-related illnesses and deaths continued to be a major problem until Mao died and successor Deng  Xiaoping started moving the nation toward privatization and deregulation.

Today China’s economy is growing even faster than it was in 1998, when Yergin and Stanislaw wrote their book.

India never had a starvation death toll of millions of people per year, as China did under Communism, but it was a desperately poor country under a system of Democratic socialism all through the 1950’s, 60’s, 70’s, and 80’s. In 1991, an economic collapse forced India to try privatization and deregulation, under which it has prospered for the last twenty years.

Bolivia in the early 1980’s “what the state did not own, it heavily regulated.” The result was widespread unemployment, skyrocketing government debt, and twenty-four thousand percent inflation. Free market reforms beginning in 1985 reversed all the downward trends and set the nation on a path to prosperity.  

When Poland’s Solidarity party jetisoned socialism and privatized, real wages for Polish workers increased sevenfold in two years.

In case after case, nations where the government was empowered to blueprint the economy suffered worse and worse privations until they liberated their businesses from government control. Anyone who studies these stories should find cause for alarm in President Obama’s agenda of dictating business decisions from a political office.

My favorite Ronald Reagan quote just can’t be repeated enough: “The most terrifying words in the English language are ‘we’re from the government, and we’re here to help’.”

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