The Failure of Neoclassical Economics in Latin America

Chuck the Libertarian continues:

For all your railing against capitalism and in favor of socialism/Communism, the best controlled experiment we’ve had for that is East versus West Germany. Remember, it was the East German government who had to build a wall to keep their people from spilling out of the country. The only difference was the communist totalitarian regime and the lack of economic and personal freedom that entails.

That Berlin Wall was put up due to brain drain. The East Germans were fleeing a Communist East Germany for a socialist West Germany. It was mostly the smartest who were leaving, mostly to make more money. People like money. And many West German Leftists moved to East Germany in the early days.
I’m not so big on Communism. It’s got a ton of problems, but it was able to do some things well. For instance, in Latin America, Cuba has provided electricity, plumbing, decent housing, access to transportation, good clothing, plenty of food, work for everyone.
Cuban medical care is better than the medical care in capitalist Latin America. Cubans live longer and have lower infant mortality rates than other Latin Americans. The health care is so great that the rich of Latin America, usually very rightwing people, fly to Cuba from all over the continent to have specialty work done that’s not available in their country.
Cuban education beats education in the rest of Latin America. With 2% of the population, Cuba has 10% of the scientists. The have more agronomists per capita than anywhere else in Latin America.
Capitalism in Latin America in general has utterly failed to do any of these things.
They have not been able to:

  1. Provide electricity for all of their people. Even Argentina has not wired up the whole country. The Indian areas of the northeast lack electricity.
  2. Provide plumbing and sewage treatment for all their people. Even Mexico does not provide it for 27% of the population.
  3. Provide decent housing for all their people. Horrible shantytowns are everywhere.
  4. Provide access to transportation for everyone. For many, the only transportation is on foot.
  5. Provide good clothing for their people. Many people are barefoot or practically dressed in rags. In videos of Cuba, one thing you notice is that everyone is dressed in nice, modern clothing.
  6. Provide food for all their people. Cuba has a malnutrition rate of 2%, the lowest in Latin America. Even in Argentina, recently 50 children a day were dying of malnutrition. Even Costa Rica has 7% malnutrition. Capitalism in Latin America has failed in the worst possible way – it can’t even feed it’s own people.
  7. Provide jobs for everyone. Cuba has full employment. Mass unemployment is typical in Latin America.

If neoclassical economics works so great, why can’t it provide food, jobs, electricity, plumbing, decent clothing and housing and transportation for the people of this land? Why has neoclassical economics failed so badly compared to Cuba in terms of health care and education?
If you go to the rural areas of Cuba, you will see an interesting thing. Everywhere you go, you will see happy, healthy, well-fed, well-clothed children. In general, you will not see this in the rural areas of most other Latin American countries. Why can’t neoclassical economics provide for children the way the Cubans do?
In Latin America, it looks like neoliberalism is nothing but a massive fail.

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9 thoughts on “The Failure of Neoclassical Economics in Latin America”

  1. neoliberalism works in Taiwan, Hong Kong, and Singapore. They are rated as the freest economies by the Heritage Foundation. No starvation or shantytowns there.

    1. To AJ:
      Neoliberalism works in Taiwan, Hong Kong, and Singapore.
      Neoliberalism and Neoclassical economics are not really the same thing although they have overlaps…
      None of the above were Neoliberal at the time of their founding but they are certainly more Neoliberal now since they have move towards freer trade and very free flow of capital investment.

  2. The health care is so great that the rich of Latin America, usually very rightwing people, fly to Cuba from all over the continent to have specialty work done that’s not available in their country.

    That’s a facade. Cuba saves their best medical resources for foreigners who pay good money to receive health care. They reserve the shit health care for their own citizens.
    For instance, here is a story of 26 Cubans freezing to death in a Cuban mental hospital. The government vowed to prosecute those responsible even though the responsibility lies with the nationalized health care system and the totalitarian regime. But Castro can’t flog himself I guess.

      1. umm, yes chic, it is. 26 dead cubans versus 1 live american soldier with nesting rats?
        who knows how many vermin are living among cuban hospital patients. it takes a miracle for a story of mass death to make its way off that island; we certainly wouldn’t hear stories of only poor living conditions.

  3. Oh, the most pertinent fact about Cuba is that people have very limited personal freedom. What is that curtailed freedom worth in terms of health care, education, and sewage lines? Neither you nor I could blog on these subjects if we lived in Cuba. Not only because we probably wouldn’t have computers or the internet, but also because our content would land us in prison. Even homeless freaks in America have internet access at the public library.

  4. Robert,
    I assume you won’t take much stock in this post from Volokh Conspiracy, but it makes quite a few good points.
    To compare apples to apples we should look at Cuba pre-Revolucion compared to other LA countries. Cuba outpaced them on most metrics and rivaled some Western European countries. Since that time they have deminished – not to even mention the fudge factor by which the Cuban government has lied about the statistics you’ve cited.

  5. Dear Robert
    Contrary to widespread belief, post-war Latin America has not been a haven of laissez-faire. During the fifties, sixties and seventies, many Latin American countries pursued a strategy of import substitution, which essentially consisted of imposing tarifs on manufactured products and encouraging foreign manufacturers to invest in the country.
    In many cases, it was a huge success. For instance, the entire auto industry in Brazil is due to this strategy. Needless to say, all of Brazil’s auto industry is foreign-owned. This strategy was probably a mistake for small countries such as Uruguay. Small countries can’t pursue such a strategy on their own but should join a larger group. One such group is Mercosur, of which Brazil, Argentina, Uruguay and Paraguay are members. It has free trade within and some protectionism without.
    The East Asian tigers had a strategy of export promotion. This consisted of encourageing industry that could produce for foreign markets. Part of this may have been dictated by necessity. Industry requires energy and raw materials. When a country doesn’t have them, it must export manufactured products to finance their import. That was the case with the East Asian tigers.
    If a country has a large domestic market, is rich in farm land, energy and raw materials, and is technologically advanced, then it can industrialize without exports. That was the case of the US in 1865.
    On the other hand, if a country has a small domestic market, is poor in farm land, energy and raw materials, and is technologically backward, then it can’t industrialize without exports and without doing some borrowing from abroad. The most extreme example of such a country is Hong Kong in 1950.
    There is no economic policy that works for everybody. Probably the only constant is investment in education. You won’t develop if your entire population consists of illiterates.
    Regards. James

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