International Liberty

Last July, I wrote about how excessive spending was causing economic instability in Bolivia.

One month later, I looked at overall public policy and explained that a bloated budget was just one of many problems.

Simply stated, Bolivia suffers from too much statism.

Not just wasteful spending, but other bad policies such as excessive taxation, burdensome red tape, and onerous protectionism.

That’s the bad news.

The good news is that voters may be finally waking up and realizing – as Reagan wisely told us – that government is the problem.

Here are some excerpts from a Washington Post report by Samantha Schmidt and Gabriel Díez Lacunza, beginning with an assessment of Bolivia’s faltering economy.

…politics in Bolivia has been dominated by one man. Evo Morales, acolyte of Fidel Castro and Hugo Chávez… But the movement he built now verges on collapse. The economy, now in the hands of a former protégé, is struggling through its worst crisis in decades: Inflation has reached double digits; the central bank nearly ran out of dollars. An energy shortage has left Bolivians spending hours waiting in line at gas stations… When Morales took office in 2006, Bolivia was the poorest country in South America. Over the next 14 years, his socialist policies helped push an estimated 3 million people into the middle class. …But Morales, like socialist comrades Chávez in Venezuela and Rafael Correa in Ecuador, depended on a global commodities boom to fund government spending. Thanks to the high price of natural gas, nationalized by Morales, foreign exchange earnings reached near $70 billion, according to economist Gary Antonio Rodríguez Álvarez. “It was a fantasy of money for such a small economy,” said Raul Peñaranda, a political analyst. “Now, none of that is left.” …Nationalization chased foreign investors away, reducing production. Less than a decade after supplying 50 percent of its own diesel fuel, Arce said, by 2023 Bolivia produced only 12 percent. Soon, the central bank was running out of dollars. Inflation, which until 2023 was controlled at 2 percent, was more than 16 percent in July.

I can’t resist commenting on one of the above sentences.

The article notes that Bolivia was the poorest country in South America about 20 years ago and then praises Morales for making things better.

The average reader might therefore assume the country’s status has improved, but IMF data clearly shows that it not true.

I also doubt that the claims that 3 million people were lifted out of poverty. Or, if they were, they’ve probably fallen back into destitution because of the current crisis.

The moral of the story is that socialism inevitably fails. Margaret Thatcher was right about how they always run out of other people’s money.

Any improvement, as we saw in Venezuela, is illusory and short lived.

Now we finally get to the good part of the report. It seems like the days of socialism may be coming to a halt.

The presidential election on Sunday could mean the end of a socialist era. Two right-leaning candidates are leading in the polls. …The end of Bolivia’s socialist experiment would be another win in a recent streak for Latin America’s resurgent right. After victories by Javier Milei in Argentina and Daniel Noboa in Ecuador, right-leaning challengers are trying to capitalize on frustration with leftist leaders in Chile and Colombia.

I’ll close with the should-be-obvious observation that candidates from Latin America’s “resurgent right” are not created equal.

Bolivia needs a Javier Milei, as does almost every country.

P.S. I got to meet Milei last night. My selfie was blurry, but thanks to AI here’s a clean version.

I got to meet Ronald Reagan a few times when I was in college and he running for president, but I was too stupid to get any pictures. But I did get a picture with Margaret Thatcher in the 1990s. Now that I have one with Milei, my track record with great leaders is captured by this song.

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When I wrote about South America, it’s almost always to cite developments in Chile, Argentina, and Venezuela.

That’s because those countries clearly show, respectively, the consequences of good, bad, and terrible economic policies.*

Today, though, I’m going to write about Bolivia, a South American country that has received only two meaningful mentions in 15 years of writing this column.

• In 2011, I mocked the then-Bolivian president after he declared a right to keep stolen property.
• Earlier this year, I wrote about how over-spending has created economic and political unrest.

Since bad policy has been the norm in Bolivia, you won’t be surprised to learn that it has dismal economic outcomes compared to other nations in the region.

Here’s a chart showing per-capita GDP in selected nations over the past 15 years. Simply stated, Bolivia is a bottom dweller when looking at economic performance.

Why does Bolivia lag other nations?

In a column published by the Foundation for Economic Education, Fabricio Antezana Duran gives five reasons why Bolivia’s economy is a failure.

Operating for almost two decades under a socialist regime has taken a toll on the Bolivian economy… 1) Nationalization of Natural Resources… Bolivia was poised to experience one of the biggest “economic booms” and investment opportunities with the hydrocarbon industry… However, the 2009 constitution under Movimiento al Socialismo, specifically Article 311, nationalized this industry and almost every other natural resource, ranging from water and minerals to electricity. …2) Conditional Private Property… Bolivia’s 2009 constitution rewrote the rules regarding private property, declaring in Article 56: “Everyone has the right to individual or collective private property, provided that it fulfills a social function.” …The lack of property rights scares investors away and greatly hinders Bolivian businesses. 3) From 3 Ministries to 17 Ministries and 22 Vice Ministries… the party has gradually created more ministries and public offices, each more unnecessary than the last. The creation of new public offices serves as an excuse to create more “state parasites,”…diverting able-bodied individuals from creating value in society. …4) Over 60 State-Owned Businesses… The government’s economic model is called Modelo Económico Social Comunitario Productivo (“Social Economic Productive Community Model”—again with the creative names). This “model” is ambiguous, has a social character, and essentially puts the state at the center of economic progress and development, declaring it their duty. For this reason, the government has created over 60 businesses, all of which are deficit-prone and arbitrary to the economy. …5) High Taxes and a Bureaucratic Tax System… Bolivia has one of the worst taxation systems in the world, ranked 186 out of 190 countries according to the World Bank’s Doing Business report. …Bolivians spend 1,025 hours every year to pay their taxes properly (over 42 days!) and risk paying a rate of 83.7 percent of their profits if they don’t file them correctly. A study by economic analyst Diego Sánchez de la Cruz labeled Bolivia as the “tax hell” of Latin America, ranking it the worst in tax pressure and tax effort.

What’s the bottom line?

Here’s an excerpt from the column’s conclusion.

Movimiento al Socialismo reaped the benefits of the pro-market economic reforms of the 1980s and 1990s, but now Bolivia is beginning to harvest the fruits of nearly two decades of socialism: crisis, misery, and decay.

I’ll close by noting that economic freedom in Bolivia dramatically increased during the era of the “Washington Consensus.”

But this century, Bolivia has become more statist. It now ranks only #117 for economic liberty, which is even worse than Russia or China.

There’s a recipe for Bolivian prosperity, but don’t hold your breath waiting for that nation’s politicians to follow it.

*If we’re looking only at 2024, Argentina is an example of a nation following the right recipe.

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