By SUZANNE DALEY
Published: May 1, 2010

The New York Times – link to original

OP-ED CONTRIBUTOR

By FRANK R. GUNTER

Published: November 15, 2009

Bethlehem, Pa.

The New York Times – link to original article

AFTER returning from the second of two tours in Iraq, I can attest to notable progress. Iraqi civilian casualties have dropped sharply, the result of both the United States surge and negotiations with Sunni groups. There has been political progress as well. Provincial elections were held this year and national elections are scheduled for early 2010.

The future of the Iraqi economy, however, remains bleak. Without fundamental change, unemployment and the accompanying instability will rise while the widespread corruption will worsen. The political and security gains made at such great cost in Iraqi and American blood and treasure will be imperiled.

Iraq not only has a severe shortage of jobs, it also has a growing number of job-seekers. As much as 51 percent of the Iraqi labor force is either unemployed or underemployed; the number is even higher for young workers. For three decades, the Iraqi government has been the primary source of employment. Almost half of the country’s labor force is paid by the government from its revenues from petroleum exports. With the exception of agriculture, legitimate private-sector employment is small — by my calculations, about 6 percent of the labor force. Most of the remainder of the Iraqi labor force is either unemployed or working in the underground economy.

In 2008, the sharp rise in oil revenues and improved security led to an economic boom. The government created more than enough new public sector jobs to absorb the approximately 250,000 young people who enter the work force every year.

However, this economic surge was short-lived. After oil prices dropped by almost $100 a barrel earlier this year, the government imposed a hiring freeze and unemployment began to rise.

Unfortunately, there is nowhere for these job-seekers to go. Iraq’s private sector is unable to employ many of the jobless because the country has one of the most hostile business regulatory environments in the world. (Of the 183 countries ranked by the World Bank for the “ease of doing business,” Iraq is 153rd.) In Iraq, it is hard to legally start a business, get credit or trade internationally. As a result, most private businesses either hide in the underground economy — with all of the associated inefficiencies — or accept the necessity of bribing an unending stream of government officials.

This is not sustainable. In 2010, the Iraqi government will hit the wall. A combination of low oil prices, exhausted cash reserves and the expense of paying for a bloated government sector will prevent the creation of public sector jobs. And the private sector, as it continues to struggle with excessive regulation and corruption, is unlikely to create more than a fraction of the needed employment. Rapid growth in the number of unemployed young men will likely follow — and these young men will be attractive recruits for political insurgents, fundamentalist terrorist groups and criminal gangs. Increased instability is almost certain.

There is another path. The potential for private sector job growth in Iraq is great. The country is blessed with a strong entrepreneurial tradition, a relatively well-educated labor force and a natural resource more valued in the Middle East than oil: water. Only Iraq and Turkey have sufficient water for large-scale agribusiness, and Iraq is surrounded by wealthy countries that need to import food. But to exploit these advantages, Iraq needs to make important changes. And it should start by rationalizing its commercial code.

The chief problems in Iraq’s commercial code are its incredible complexity, long delays in processing requests for licenses and high cost. For example, registering a new business in Iraq costs almost $2,800 compared to $139 in Delaware. (However, a group of Iraqi businessmen assured me that if $600 in cash was given to the right person, a license would be available immediately and no further fees would be required.)

The country could simply throw out its current commercial code and adopt a less restrictive, regionally acceptable one — like Saudi Arabia’s. Or, more realistically, it could make its code more user-friendly by, say, allowing business owners to work with one ministry — as opposed to a dozen.

The government could take other steps, too. With the exception of tax collection and international trade regulations, responsibility for regulating private businesses could be taken from the Baghdad ministries and delegated to the country’s 18 provinces. Encouraging the provinces to compete for private-sector jobs would lead to friendlier regulatory environments around the country — just as it has in the United States.

But whatever is decided, the government of Iraq is running out of time. It must either end its hostility toward private businesses — or accept that a sharply growing mass of unemployed will nullify the progress of the last three years.

Frank R. Gunter, an associate professor of economics at Lehigh University, was the senior civilian economics adviser to the Multinational Corps in Iraq from 2008 to 2009.

Hernando de Soto RAUL RUBIERA / RAUL RUBIERA

BY GLENN GARVIN

GGARVIN@MIAMIHERALD.COM

• The Power of the Poor with Hernando de Soto, 10-11 p.m. Thursday, WPBT-PBS 2

Posted on Thursday, 10.08.09

Third World governments come and go, trading monarchy for populism for military autocracy and even for the trappings, at least, of democracy. Yet the poor remain poor: from one to four billion of them, depending on whose estimate you accept. And, as everybody from ACORN to Hugo Chavez will tell you, the movement toward economic globalization doesn’t seem to be cutting their numbers.

In this provocative new PBS documentary, Peruvian economist Hernando de Soto argues that globalization has been irrelevant to the world’s poor because they’ve been systematically locked out by legal systems that force them into a shadow economy where their rights aren’t recognized and their resources don’t benefit them.

In fact, he says in The Power of the Poor with Hernando de Soto, the world’s poor are potentially anything but — they control as much as $1 trillion in unregistered property and unlicensed businesses. But the law prevents them from building their assets into anything beyond a subsistence existence.

“Because they are not legally recognized, because they have no legal identity, because they can’t make contact with the outside world, they are not part of globalization,” de Soto says.

The Power of the Poor is essentially a video version of his 1986 book, The Other Path, well known among economists if not ordinary readers. In the book, de Soto documented the vast so-called informal economy of his native Peru, where millions of poor people live as squatters on unowned land to which they cannot get title and operate businesses without legal licenses or permits.

Without a property title, poor Peruvians can’t use their land as collateral for loans to buy equipment for small businesses or seed for their farms. And no lender will put up money for a business operating without legal permits. Without property rights, the taxi drivers and fruit-stall vendors and the rest of the mini-entrepreneurs of Peru’s informal sector can’t execute contracts, employ other workers or use virtually any tools of a modern economy.

Their twilight existence is not a consequence of capitalism, as Peru’s Marxists argued (the title of de Soto’s book was a jibe at Shining Path, the country’s cold-blooded communist insurgency), but of stifling government rules and bureaucracy. De Soto’s researchers (four law students working under the direction of a veteran attorney) discovered it took them nine months to legitimately open a simple sewing business. And though Peruvian law supposedly allowed squatters to claim unowned land on which they lived, it took de Soto’s team six years and 207 separate legal procedures to obtain a deed.

The bureaucratic tangle that chokes property rights is not unique to Peru, de Soto argues in The Power of the Poor, but a common problem across the developing world. And by preventing as much as two-thirds of the world’s population from either creating wealth or spending it, they victimize the rest of us as well.

“They’re also the world largest market,” de Soto says of the poor. “We need them as much as they need us.”

Coming to PBS – Oct 8

The Power of the Poor – link to original posting at Free to Choose

with Hernando de Soto

To those who watch television in the developed world, there doesn’t seem to be a better system on earth than the capitalist system. We are experiencing the longest economic expansion in modern history.  Soviet Communism has been defeated.

But make no mistake, as we will demonstrate in this program, capitalism is surprisingly vulnerable. The moment of capitalism’s greatest triumph is the moment of its greatest crisis, its “Moment of Truth.” In fact, capitalism is not working for the vast majority of humanity that lives on the planet. Two thirds of the world’s population has been locked out of the global economy, forced to operate outside the rule of law, they have no legal identity, no credit, no capital, and thus no way to prosper. To unlock The Power of the Poor is to change the world.  If we fail, these people will turn against capitalism as they have turned against other failed economic systems, and that could make for a very difficult, violent time.

Filmed on location from Latin America to Africa, The Power of the Poor will demonstrate how free markets, individual freedom and especially the right to property can transform the poor into the most powerful resource in the world.  At its heart is the potential triumph of capitalism as a system.

 new United Nations report called “State of the Future” concludes: “People around the world are becoming healthier, wealthier, better educated, more peaceful, more connected, and they are living longer.”

Wall Street Journal – link to original article

Oct 5, 2007 

By STEPHEN MOORE

I’m old enough to recall the days in the late 1960s when people wore those trendy buttons that read: “Stop the Planet I Want to Get Off.” And I will never forget that era’s “educational” films of what life would be like in the year 2000. Played on clanky 16-millimeter projectors, they showed images of people walking down the streets of Manhattan with masks on, so they could avoid breathing the poison gases our industrial society was spewing.

The future seemed mighty bleak back then, and you merely had to open the newspapers for the latest story confirming how the human species was speeding down a congested highway to extinction. A group of scientists calling themselves the Club of Rome issued a report called “Limits to Growth.” It explained that lifeboat Earth had become so weighed down with humans that we were running out of food, minerals, forests, water, energy and just about everything else that we need for survival. Paul Ehrlich’s best-selling book “The Population Bomb” (1968) gave England a 50-50 chance of surviving into the 21st century. In 1980, Jimmy Carter released the “Global 2000 Report,” which declared that life on Earth was getting worse in every measurable way.

So imagine how shocked I was to learn, officially, that we’re not doomed after all. A new United Nations report called “State of the Future” concludes: “People around the world are becoming healthier, wealthier, better educated, more peaceful, more connected, and they are living longer.”

Yes, of course, there was the obligatory bad news: Global warming is said to be getting worse and income disparities are widening. But the joyous trends in health and wealth documented in the report indicate a gigantic leap forward for humanity. This is probably the first time you’ve heard any of this because — while the grim “Global 2000″ and “Limits to Growth” reports were deemed worthy of headlines across the country — the media mostly ignored the good news and the upbeat predictions of “State of the Future.”

But here they are: World-wide illiteracy rates have fallen by half since 1970 and now stand at an all-time low of 18%. More people live in free countries than ever before. The average human being today will live 50% longer in 2025 than one born in 1955.

To what do we owe this improvement? Capitalism, according to the U.N. Free trade is rightly recognized as the engine of global prosperity in recent years. In 1981, 40% of the world’s population lived on less than $1 a day. Now that percentage is only 25%, adjusted for inflation. And at current rates of growth, “world poverty will be cut in half between 2000 and 2015″ — which is arguably one of the greatest triumphs in human history. Trade and technology are closing the global “digital divide,” and the report notes hopefully that soon laptop computers will cost $100 and almost every schoolchild will be a mouse click away from the Internet (and, regrettably, those interminable computer games).

It also turns out that the Malthusians (who worried that we would overpopulate the planet) got the story wrong. Human beings aren’t reproducing like Norwegian field mice. Demographers now say that in the second half of this century, the human population will stabilize and then fall. If we use the same absurd extrapolation techniques demographers used in the 1970s, Japan, with its current low birth rate, will have only a few thousand citizens left in 300 years.

I take special pleasure in reciting all of this global betterment because my first professional job was working with the “doom-slaying” economist Julian Simon. Starting 30 years ago, Simon (who died in 1998) told anyone who would listen — which wasn’t many people — that the faddish declinism of that era was bunk. He called the “Global 2000″ report “globaloney.” Armed with an arsenal of factual missiles, he showed that life on Earth was getting better, and that the combination of free markets and human ingenuity was the recipe for solving environmental and economic problems. Mr. Ehrlich, in response, said Simon proved that the one thing the world isn’t running out of “is lunatics.”

Mr. Ehrlich, whose every prediction turned out wrong, won a MacArthur Foundation “genius award”; Simon, who got the story right, never won so much as a McDonald’s hamburger. But now who looks like the lunatic? This latest survey of the planet is certainly sweet vindication of Simon and others, like Herman Kahn, who in the 1970s dared challenge the “settled science.” (Are you listening, global-warming alarmists?)

The media’s collective yawn over “State of the Future” is typical of the reaction to just about any good news. When 2006 was declared the hottest year on record, there were thousands of news stories. But last month’s revised data, indicating that 1934 was actually warmer, barely warranted a paragraph-long correction in most papers.

So I’m happy to report that the world’s six billion people are living longer, healthier and more comfortably than ever before. If only it were easy to fit that on a button.

Mr. Moore is a member of The Wall Street Journal Editorial Board

By David Adams, Times Latin America Correspondent - link to original article

In Print: Monday, August 17, 2009

AGUAS CLARAS, Cuba

Cuba’s leaders are counting on Alberto Romero’s eight cows to help turn around the island’s struggling socialist economy. Private farmers like Romero, who belongs to a 219-member cooperative near the eastern city of Holguin, were overshadowed for years by Cuba’s emphasis on large state farms. But the government recently began handing out idle state land to private farmers across the island in an effort to boost food production. “The government has put its faith in us, and we will show what we are capable of,” said Romero, whose 20-acre plot has been in his family for 103 years.

Cuba is hoping that private farmers can literally plow the island out of a huge $11 billion trade deficit this year caused by rising food import costs and falling exports. The policy marks a major shift away from inefficient state farms that once occupied the lion’s share of the island’s agricultural land.

“The land is there! Here are the Cubans. Let’s see if we work or not, if we produce or not!” exclaimed President Rául Castro last month at a rally in Holguin.

Castro has made raising food production a national security priority, noting that the area of cultivated land fell 33 percent from 1997 to 2008. He told the crowd in Holguin that Cuba’s poor agricultural output could not be blamed on the U.S. economic embargo alone.

“It’s not a question of shouting, ‘Homeland or death, down with imperialism, the embargo hurts us.’ The land is there, waiting for our sweat.”

Despite being an agricultural nation with plentiful sun, soil and rain, Cuba produces barely 30 percent of the food it needs, due to an acute lack of resources and the inefficiency of its state farm sector. About 250,000 small family farms and 1,100 cooperatives till only about one-quarter of the land, yet still manage to outperform the state farms, producing almost 60 percent of crops and livestock, according to official figures.

“The last 50 years have shown that private farmers are more socialist than the state. State farms are antisocialist. The only thing they socialized is loss-making,” said Oscar Espinosa Chepe, a former state economic adviser who is now a vocal critic of the government.

Since the redistribution of farmland began last year, Cuba says 110,000 people have submitted applications and about 80 percent have been granted, totaling 1.7 million acres. But the new program has been slow to get going. Three devastating hurricanes last year wiped out vast swaths of productive farmland.

Though milk production has risen significantly, overall agricultural production fell by 7.3 percent in the first quarter of 2009, and meat production fell by 14.7 percent.

While it may be too early to judge the results of the program, analysts say it is running into familiar problems.

“There is too much control and bureaucracy that hinders everything,” Espinosa Chepe said. “It’s impregnated with a 50-year-old operating method that is built on taking orders and is not used to decentralization.

“There need to be more incentives,” he said.

Private farmers and cooperatives manage their own land but must sell part of their produce to the state at government prices, which are generally half the market value. Private farmers also lack direct access to equipment and tools, as well as fertilizer and pesticides, all controlled by the state.

Opening the farm sector to more foreign capital would help Cuba acquire new technology and markets, analysts say. But Cuba complains that the U.S. embargo limits its access to foreign capital, as well as cheap pesticides and heavy farm equipment.

Javier Pérez, 40, a plantain grower near Guanabacoa, welcomes the state’s rekindled interest in private farmers.

“We were a bit forgotten about in the past,” he said.

He earns good money selling to farmers’ markets in Havana after he meets his government quota. In return, the state provides him with subsidized fertilizer and irrigation equipment. The adjacent land he recently obtained from the state will help him raise his production by 25 percent more. Less regulation would be better, he agrees.

“The more independent you are, the more you push yourself,” he said. “Why work harder if you don’t get any benefit?”

Cuba’s state-run newspaper Granma recently added its weighty voice to the farm debate, highlighting the success of a 100-acre cooperative farm in Bejucal, about 25 miles south of Havana.

“If the worker is not content in his job and you don’t pay him for his results, you don’t achieve anything,” cooperative president Lázaro Hernández told the paper, saying he paid his 20 employees 780 pesos a month ($32.50), more than twice the average national wage. Their wages, and share of produce, increase if they exceed production targets.

“If the salary is fixed, the worker will just show up and do his day’s work, but he won’t be interested in getting the most out of it. If he has a percentage, it all changes,” he said.

Such quasi-free-market language wasn’t heard much in Cuba until recently. But Rául Castro has shown a pragmatic streak on economic matters, trying to improve state efficiency. In July 2008 he surprised many by advocating a shift away from the orthodox socialist concept of equal pay, arguing that those who were more productive should be paid more.

Romero is optimistic. In eight years, his cooperative hopes to increase its milk output almost tenfold. But to do that, he cautioned, they need state help to buy expensive cereal feed, as well as seeds for better pasture. Artificial insemination would also improve their herds.

“If we don’t achieve it, we will be really close,” Romero said, raising a glass of aliñao, a homemade liquor of sugarcane and fruit. “We have to keep the revolution moving forward. There is no turning back.”

David Adams can be reached at dadams@sptimes.com.

From Charles Murray’s Bradley Lecture last week at the American Enterprise Institute:

Wall Street Journal – link to original post

March 17, 2009

Drive through rural Sweden, as I did a few years ago. In every town was a beautiful Lutheran church, freshly painted, on meticulously tended grounds, all subsidized by the Swedish government. And the churches are empty. Including on Sundays. Scandinavia and Western Europe pride themselves on their “child-friendly” policies, providing generous child allowances, free day-care centers, and long maternity leaves. Those same countries have fertility rates far below replacement and plunging marriage rates. Those same countries are ones in which jobs are most carefully protected by government regulation and mandated benefits are most lavish. And they, with only a few exceptions, are countries where work is most often seen as a necessary evil, least often seen as a vocation, and where the proportions of people who say they love their jobs are the lowest.

What’s happening? Call it the Europe syndrome.

West Bank Success Story – link to original article

The Palestinians are flourishing economically. Unless they live in Gaza.

By MICHAEL B. OREN

Wall Street Journal

8/14/09

Imagine an annual economic growth rate of 7%, declining unemployment, a thriving tourism industry, and a 24% hike in the average daily wage. Where in today’s gloomy global market could one find such gleaming forecasts? Singapore? Brazil? Guess again. The West Bank.

According to the International Monetary Fund (IMF), the West Bank economy is flourishing. Devastated by the violence and corruption fomented by its former leadership, the West Bank has rebounded and today represents a most promising success story. Among the improvements of the last year cited by the IMF and other financial observers are an 18% increase in the local stock exchange, a 94% growth of tourism to Bethlehem—generating 6,000 new jobs—and an 82% rise in trade with Israel.

Since 2008, more than 2,000 new companies have been registered with the Palestinian Authority in the West Bank. Where heavy fighting once raged, there are now state-of-the-art shopping malls.

Much of this revival is due to Palestinian initiative and to the responsible fiscal policies of West Bank leaders—such as Prime Minister Salaam Fayyad—many of whom are American-educated. But few of these improvements could have happened without a vastly improved security environment.

More than 2,100 members of the Palestinian security forces, graduates of an innovative program led by U.S. Gen. Keith Dayton, are patrolling seven major West Bank cities. Another 500-man battalion will soon be deployed. Encouraged by the restoration of law and order, the local population is streaming to the new malls and movie theaters. Shipments of designer furniture are arriving from China and Indonesia, and car imports are up more than 40% since 2008.

Israel, too, has contributed to the West Bank’s financial boom. Tony Blair recently stated that Israel had not been given sufficient credit for efforts such as removing dozens of checkpoints and road blocks, withdrawing Israeli troops from population centers, and facilitating transportation into both Israel and Jordan. Long prohibited by terrorist threats from entering the West Bank, Israeli Arabs are now allowed to shop in most Palestinian cities.

Further, several Israeli-Palestinian committees have achieved fruitful cooperation in the areas of construction and agriculture. Such measures have stimulated the Palestinian economy since 2008 resulting, for example, in a 200% increase in agricultural exports and a nearly 1,000% increase in the number of trucks importing produce into the West Bank from Israel.

The West Bank’s economic improvements contrast with the lack of diplomatic progress on the creation of a Palestinian state. Negotiators focus on the “top down” issues, grappling with legal and territorial problems. But the West Bank’s population is building sovereignty from the bottom-up, forging the law-enforcement, civil, and financial institutions that form the underpinnings of any modern polity. The seeds of what Israeli Prime Minister Benjamin Netanyahu has called “economic peace” are, in fact, already blossoming in the commercial skyline of Ramallah.

The vitality of the West Bank also accentuates the backwardness and despair prevailing in Gaza. In place of economic initiatives that might relieve the nearly 40% unemployment in the Gaza Strip, the radical Hamas government has imposed draconian controls subject to Shariah law. Instead of investing in new shopping centers and restaurants, Hamas has spent millions of dollars restocking its supply of rockets and mortar shells. Rather than forge a framework for peace, Hamas has wrought war and brought economic hardship to civilians on both sides of the borders.

The people of Gaza will have to take notice of their West Bank counterparts and wonder why they, too, cannot enjoy the same economic benefits and opportunities. At the same time, Arab states that have pledged to assist the Palestinian economy in the past, but which have yet to fulfill those promises, may be persuaded of the prudence of investing in the West Bank. Israel, for its part, will continue to remove obstacles to Palestinian development. If the West Bank can serve as a model of prosperity, it may also become a prototype of peace.

Mr. Oren is Israel’s ambassador to the United States.