Aquecimento global, agropecuária e reserva legal
Por Eduardo Pires Castanho F° (*)
São Paulo, 10 de abril de 2010
Na reunião sobre mudanças climáticas em Köpenhagen em 2009, o papel conferido à agricultura foi fundamental, seja como problema ou como solução para o aquecimento global. E, ela pode ser fundamental para muitos países, mas por outras razões.
Mas essa questão, que vem desde a ECO-92, é de fato um aquecimento, um resfriamento global como alguns postulam, ou são mudanças climáticas constantes na História da Terra?
O que causaria essas duas hipóteses? Qual o papel da agricultura nesse processo? Que dúvidas científicas permeiam essas discussões? Os dados, os modelos e as medições que serviram de base para afirmar que haveria um aquecimento causado pela ação humana foram objeto de "ajustes" revelados poucos dias antes da conferência e colocaram sob suspeição as conclusões do Painel Internacional sobre Mudanças Climáticas- IPCC (sigla em inglês), que têm desdobramentos até hoje, com auditorias independentes e tudo mais.
Além disso, as relações entre temperatura, concentração de CO2 e outros gases do efeito estufa, acrescidos de vapor d’água na atmosfera, têm efeitos controversos sobre o aumento ou a redução da umidade, da pluviometria e dos níveis de absorção de radiação solar pelas diferentes coberturas da superfície da Terra (agricultura, cidades, florestas e oceanos). Mesmo os efeitos do desmatamento na evapotranspiração e na reflexibilidade da terra (albedo) apresentam resultados muito diferentes, dependendo dos estudos que são feitos. O que dizer então do metano, que de 21 vezes mais “nocivo” do que o CO2, passou para 6 e caminha para 4, que aliado à redução de suas emissões acaba tendo um possível efeito muito menor do que se propalava.
O que é provado, recorrendo a Lavoisier, é que a quantidade de carbono no planeta não aumenta nem diminui: está contida no ciclo desse elemento. O que pode aumentar o seu teor na atmosfera é, por exemplo, a extração e queima de combustível fóssil - carvão, petróleo, gás, xisto. Neste ponto é importante rememorar alguns conceitos: o efeito estufa, fenômeno natural e produzido pela História da Terra, tem o CO2 como um agente fundamental, formador de tecidos vegetal e animal- formador da vida, através das pirâmides energéticas e seus níveis tróficos. A agricultura como agente desse processo, porém, não pode expelir mais carbono do que consome, pois integra o ciclo.
Além do mais, a maior concentração de CO2 contribui para aumentar a produtividade primária nas cadeias tróficas, evidentemente que dentro de certos limites, e, portanto, aumenta a capacidade da Terra em absorver esses gases transformando-os em tecidos vivos. Em síntese Carbono é sinônimo de vida. Novos dados indicam que os ecossistemas e oceanos da Terra têm uma capacidade muito maior de absorver gás carbônico do que demonstravam os estudos científicos feitos até então. Pesquisas mostram que o equilíbrio entre a quantidade do gás em suspensão na atmosfera e a que é absorvida se manteve praticamente constante desde 1850, apesar das emissões causadas pelo homem.
O carbono vira vilão
Há aproximadamente 30 anos a tese do aquecimento começou a se fortalecer e foi baseada em medições que indicavam um aumento da concentração de determinados gases na atmosfera. No entanto, essa tese gerou dúvidas desde o princípio. Toda dúvida aliada à curiosidade é o berço da pesquisa e da ciência e, portanto, de todo o conhecimento sistemático. É óbvio e salutar que a teoria científica seja sempre conjectural e provisória. Tal processo de confronto da teoria com as observações poderá, eventualmente, provar a falsidade da teoria em pauta. Nesse caso, há que eliminar essa teoria, que se provou falsa, e procurar uma outra para explicar o fenômeno em análise. Acrescente-se a isso princípios de ordem ética, como a questão da honestidade intelectual, quando é imperativo reconhecer os erros.
A "luta" ambientalista de vários anos foi pela sustentabilidade, apesar de utilizar-se de outros nomes. Ela visava controle e/ou eliminação da poluição, formas limpas e renováveis de energia, padrões diferentes de comportamento e consumo, uso de tecnologias mais adequadas ao ambiente natural, preservação das variadas formas de vida, restrição ao uso de recursos naturais finitos, reciclagem, reaproveitamento, etc.
Subitamente o CO2 surgiu como responsável pelo aquecimento e a questão do clima se transformou num poderoso catalisador da luta ambiental, arrebatando corações e mentes. Porém, transformou-se o CO2, gás responsável pela vida na Terra, em "poluição", apesar de ainda persistirem dúvidas se ele é causa ou efeito de mudanças na temperatura global, visto que os modelos teóricos não conseguem explicar o que se observa nos registros geológicos. Alguns estudos mostram que de fato o CO2 aumenta com a elevação da temperatura média da terra, só que posteriormente ao aquecimento ter se verificado.
Isso pode indicar estar havendo algum engano com o modo como carbono e temperatura estão articulados nos modelos sobre o clima. Dentro do próprio IPCC começaram a surgir dúvidas a respeito do real papel do CO2, tanto por essa precariedade dos modelos climáticos, como pelas próprias medições de carbono, que, se são válidas para continentes, não o são para países.
Sob essa ótica, o vapor d’água, que também é responsável pelo efeito estufa, vai acabar sendo considerado poluidor
O irracionalismo
A falta de lógica e de rigor científico levou setores da mídia, por incrível que pareça, a atribuírem o rigoroso inverno por que passou este ano o hemisfério norte, com o “desderretimento” da Calota Polar Ártica, ao “aquecimento global”. Na mesma linha, existem empresas que trabalham com a exploração de recursos naturais não renováveis (minérios e petróleo), que estão se aproveitando dessa "onda" atual e se colocam como empresas “sustentáveis”, afirmando que estão combatendo o aquecimento global, o que é uma retórica de ludibrio. As mesmas dúvidas existem sobre a temperatura média da Terra, que na grande maioria derivam de pontos de coleta continentais e urbanizados onde se formam as "ilhas de calor". As próprias medições sobre a participação das queimadas na Amazônia variam em mais de 75%, como se constatou em trabalhos feitos na região, conforme os enfoques empregados e os objetivos a serem alcançados pelas pesquisas.
Tais ponderações são chamadas de reacionárias, produtos de atitudes passionais e não científicas, quando não de mercenarismo puro e simples. É o modo mais fácil, simples e eficiente de minar o debate, qualificando o opositor de “cético do clima”. No entanto, se estiver ocorrendo de fato um resfriamento global, tal fato apenas reforça os aspectos da luta permanente pela sustentabilidade: é um avanço, não um retrocesso.
A redução das emissões é importante pela redução da poluição, bem como o emprego das energias renováveis. A queima do petróleo e do carvão não é nociva apenas por um questionável aquecimento, mas por poluir, por exemplo, através do enxofre e provocar chuva ácida e esgotar um recurso finito, que poderia amanhã estar sendo usado para a produção de alimentos, através de sínteses. A utilização desenfreada de recursos naturais não renováveis insere-se no mesmo padrão. A eliminação dos desmatamentos e das queimadas, a adoção de técnicas sustentáveis pela agricultura, o aumento de produtividade das pastagens, o incremento das áreas florestais, a proteção da biodiversidade e assim por diante, são compromissos que devem ser assumidos porque apontam para um mundo melhor, mais equilibrado e mais sustentável, transitando de ecossistemas simples para os de maior complexidade. Por mais que se queira, não existe recuperação de biodiversidade; espécie extinta está extinta, pelo menos no atual estágio da ciência.
Atribuir à agricultura e à pecuária grande parcela de responsabilidade pela emissão de gases efeito-estufa é desconhecer completamente como se processam essas atividades. E se desconhece mesmo, é só ver o caso do metano: há quem atribua ao gado estabulado, que come comida de humano, melhor performance “carbônica” do que o gado que como comida de gado e vive nos pastos. Colocar os efeitos de queimadas, no mais das vezes criminosas, como emissão de gases pela pecuária é, no mínimo, leviano. O crescimento das pastagens e a estocagem de carbono, que é feita por elas, não são levadas em consideração. O desmatamento em si não causa aumento de CO2 na atmosfera. O que o causa é a queima do material desmatado.
Precisaria portanto haver mais seriedade nos estudos que são feitos e também nas suas conclusões. As atividades agrícolas são as únicas ações humanas que captam carbono da atmosfera e o transformam em fibras, alimentos, energia, etc. Fazem o papel que os antigos fisiocratas conferiam ao setor: é o único que produz, enquanto os outros apenas transformam. No cômputo geral, mesmo que um provável aquecimento global se devesse também às atividades humanas, o papel da agropecuária nesse processo seria desprezível.
Adequação legislativa
Esclarecidas essas questões, a atual crise econômica exige que se tomem medidas que aproveitem oportunidades que se apresentem. O Brasil tem todas as condições de se aproveitar disso e se firmar como o maior produtor mundial de alimentos, fibras e energia renovável, além de “produtos ecossistêmicos” não-tradicionais, utilizando modelos pioneiros de desenvolvimento, com tecnologias baseadas em baixo carbono e recicláveis. O País ainda carece de uma política geral que equacione a questão da renda regional, o que deveria levar o Governo, no caso da Amazônia, a assumir de fato a gestão das terras públicas, negociando multilateralmente o pagamento de serviços prestados pela região à comunidade internacional e que à luz dos novos conhecimentos e das relações internacionais se considerem os novos novos mercados de produtos e serviços que a região é capaz de proporcionar em nível global.
Para isso, no entanto, precisa modernizar sua legislação, incorporando os avanços científicos ocorridos nos últimos quarenta anos. Eliminar, por exemplo, a aberração técnica e sócio-econômica que é a chamada Reserva Florestal Legal, área de no mínimo 20% das propriedades rurais. Essa reserva é inócua para os Estados do Sul e Sudeste do Brasil, visto que em 1965 já haviam ocupado suas fronteiras agrícolas. Assim, todas as atividades agrossilvopastoris, que estavam sedimentadas, perderiam no mínimo, 20% da sua capacidade produtiva, porque passaram a ser consideradas nocivas ao meio ambiente, independentemente de elas ainda não serem proibidas legalmente.
Restringir e reduzir a produção do território rural produtivo em uma época de conquista de mercados, com produção ambientalmente adequada e certificada é um contra-senso absoluto. O que se precisa é ter produção ambientalmente adequada em 100% da área, e tecnologia para isso já existe. Para os efeitos que se pretendem que as reservas tenham: preservar e manter os ecossistemas e os seus processos, enquanto unidade funcional, de nada adiantam milhares de pseudo-reservas florestais, com algumas dezenas de hectares cada uma, respeitando no mínimo 20% da área de cada propriedade rural. Isso porque determinadas espécies e suas respectivas cadeias alimentares e energéticas, para serem preservadas e reproduzidas, necessitam áreas contínuas de milhares de hectares que não tem tamanho definido aprioristicamente. Assim, essa exigência percentual pode até levar a acelerar a extinção de espécies que necessitam de grandes territórios e proporcionar o desenvolvimento descontrolado de outras, contribuindo, por exemplo, para o reaparecimento de doenças praticamente extintas. Tais eventos podem ocorrer devido à fragmentação, que leva a um empobrecimento da diversidade biológica e a um ecossistema desequilibrado.
Propostas
Do ponto de vista estritamente técnico-científico, o que se reivindica é que a legislação garanta uma produção agrossilvopastoril sustentável, conservando a diversidade biológica no território estadual como um todo. Ou seja, nada que fosse baseado em percentuais de cada propriedade, mas, sim, em qualidade e quantidade absoluta de área, mediante estudos por bacias hidrográficas, definidos caso a caso, como é o método das multas atualmente feito. Tirar a possibilidade de elaborar esses estudos equivaleria a atribuir um mesmo projeto para todas as construções do País. Estudos já realizados para o Estado de São Paulo indicam que a proporção de terras aptas para usos florestais pode ser superior a 1/3 do território, ou seja, 50% maior do que a percentagem que a legislação florestal federal determina como mínimo. Assim, numa política pública estadual pró-ativa, a proporção de vegetação nativa conservada deve ser definida para o Estado como um todo e não para propriedades individualizadas, podendo ter como base regiões com características ambientais semelhantes. Fundamental considerar que essas áreas estarão também produzindo serviços ecossistêmicos de grande relevância, que precisam ser remunerados adequadamente. O ônus de uma política pública tem que ser repartido com toda a sociedade, como reza a Constituição.
Uma forma de dar início a uma política pública de pagamentos por serviços ecossistêmicos seria utilizar valores baseados no custo de oportunidade médio das terras. Para o Estado de São Paulo por exemplo,fazendo-se uma hipotética evolução para 30 anos, que seria o prazo legal previsto para a adequação ambiental, esse dispêndio anual estaria ao redor de R$ 37 milhões, no primeiro ano, acumulando quantias semelhantes por ano até que se chegasse ao ponto desejado. No último ano e a partir daí haveria uma estabilização em torno de R$ 1 bilhão anuais, ou seja, de 2,5 a 3% do valor atual da produção agropecuária estadual, volume perfeitamente absorvível pelo atual sistema de impostos vigente no Estado, representando não mais do que 30% do ICMS arrecadado no setor rural.
Há que expandir a agricultura para onde ela for viável e restringi-la onde outras atividades forem potencialmente mais interessantes. Nesse sentido, por exemplo, não há porque usar a Amazônia para a agricultura se ela é o maior produtor de equilíbrio climático do planeta. Assim como se comercializam produtos agrícolas, tem-se que fazê-lo com os serviços ecossistêmicos não-tradicionais.
Essa discussão é interessante pelo momento que o planeta atravessa. É preciso saber o que se quer quanto ao futuro e aproveitar as oportunidades. Não se trata, portanto, de maior rigor nas punições, nem de estabelecer mais proibições, mas de aproveitar os avanços dos conhecimentos feitos nos campos ambiental e dos agronegócios, para reverter o quadro de degradação porventura existente e manter o potencial sócio econômico dos agronegócios.
(*) Eduardo Pires Castanho Filho é pesquisador científico do Instituto de Economia Agrícola, IEA, órgão vinculado à Agência Paulista de Tecnologia do Agronegócio, APTA, ligada à Secretaria de Agricultura e Abastecimento do Estado de São Paulo, SAA.
e-mail: castanho@iea.sp.gov.br
segunda-feira, abril 12, 2010
581) Markets Never Fail - Fred Foldvary
Markets Never Fail
Fred E. Foldvary
Dept. of Economics, Santa Clara University
ffoldvary@scu.edu
Available here
Session 6.4: The State Versus the Market, I
APEE Conference, Las Vegas, April 4, 2006
"Private Solutions to Market Failures: Is Government Always the Answer?"
Abstract:
Mainstream allegations of market failure are based on misunderstandings of markets, governance, and ethics. This paper dissects the categories of alleged market failure: externalities, public goods, market structures, asymmetries, irrational behavior, injustice, and lack of sustainability. The analysis reveals that none of these phenomena contain any inherent market failures.
....
Almost all economists believe in the doctrine of market failure. Every widely-used textbook of economics presents the doctrine that markets fail. The mainstream view in economics is that an economy with "perfect competition" would be efficient, but the real world has no perfect competition, and market outcomes are inequitable, so market failure is ubiquitous. Markets always fail, and the only issue to be discussed is the degree of failure. That degree, it is said, is especially severe in the case of public goods, externalities, informational asymmetries, and economic justice.
The meaning of "market failure"
Market failure is distinct from entrepreneurial failure and human failure (such as due to bounded cognition). Market failure is a systemic inability of voluntary economic dynamics to provide the ends desired by the public, systemic meaning a failure which is economy-wide and persists over time due to the inherent structure of free markets. The three ends desired by the public can be categorized as efficiency, equity, and sustainability. Efficiency in this context means that the market provides the goods which people demand at prices that cover all the long-run marginal costs, with the costs borne by those using the good. Sustainability means that the global economy can be expected to provide at least the current standard of living indefinitely.
The full meaning of market failure requires a clear understanding of the meaning of the "market." The textbooks and academic literature seldom venture into what "market" means. A "market" is usually defined vaguely as a context in which there is buying and selling, or hiring and renting. The term "free market" is usually left undefined, and implicitly treated as a synonym for "market."
The concept of a market economy has meaning in contrast with a non-market economy. The logical contrast is with coercive harm. A pure free market is an economy in which all human action is voluntary. Any involuntary action, inflicting coercive harm, is therefore outside the market. The two sets of agents which apply coercive harm are private thieves and governmental officials.
Market failure is therefore the failure of a free market, rather than a market afflicted by governmental or private coercion. When slaves are bought and sold, or rented, there is a market, but not a free market, and the distress is not a "market" failure.
But it is not sufficient to say that a free market consists of voluntary production, exchange, and consumption. This brings the analysis to a deeper level, as we need to understand what it means for human action to be voluntary.
As Jack High has pointed out, "voluntary" action implies an ethical rule by which some acts are morally permitted and other acts, the involuntary ones, are morally evil and thus prohibited (High, 1985). To have a universal meaning of voluntary action, and thus of the market, this moral standard must itself be universally applicable to humanity. This universal ethic would be a natural moral law, based on human nature rather than any cultural practice or personal viewpoint.
John Locke (1690) described natural moral law as being derived from two premises, biological independence and human equality. Independence is the biological fact that human beings think and feel as individuals. Equality is the proposition that there is nothing in human biology that entitles one set of human beings to be masters over another set which has slaves.
A unique universal ethic can be derived from these premises (Foldvary, 1980). The universal ethic has three basic rules:
1. Acts which have welcomed benefits are good.
2. Acts which coercively harm others by initiating an invasion, are evil.
3. All other acts are neutral.
In this context, the term "harm" is distinguished from a mere offence. In an offence, the distress is due solely to the beliefs and values of the person affected. In contrast, coercive harm involves an invasion, an unwelcome penetration into the legitimate domain of the victim. So if a person is offended by what someone says, this is due to his beliefs and values; this act is not coercively harmful, and is designated as morally neutral by the universal ethic.
The universal ethic also provides a meaning for moral rights and liberty. A moral right to X means that the negation of X is morally evil. For example, a person has a moral right to possess a car because the negation of that possession, i.e. theft, is morally evil. Since the universal ethic is the expression of natural moral law, the moral rights based on the u.e. can be called "natural rights." Society then has complete liberty when its laws are based solely on the universal ethic, with legal rights congruent with natural rights.
The natural rights to property begin with one's own body and life. The right to one's person then endows the person with a right to his labor, which implies a right to the wages of his labor and the products of labor.
The universal ethic can now be applied to give meaning to the concepts "voluntary" and "intervention." An act is voluntary if it is either morally good or neutral. An "intervention" is defined here as an act which changes what voluntary action would otherwise do. Governance is morally proper when it acts as an agent of the universal ethic, prohibiting and penalizing evil acts, but not intervening into peaceful and honest action. The pure free market is defined as an economy in which there is no governmental intervention, and in which private coercive harm is effectively prohibited and penalized.
Negative externalities
Every economics textbook I have examined depicts negative externalities as a market failure. Markets allegedly fail because a social cost such as pollution or congestion is imposed on persons and not on those who buy or rent the product. But by the universal ethic, pollution which invades the property of others is an act which is morally wrong and outside the market. The pollution of other people's property is a trespass which, in a free market, requires compensation. This compensation internalizes the cost, eliminating the externality.
The optimal amount of pollution is not zero, but that amount for which the marginal cost of eliminating pollution equals the marginal benefit of less pollution. Normally, the cost of reducing more pollution rises as more pollution is reduced, and the social benefit of eliminating more pollution declines with greater reduction. When polluters compensate others for the damage, then the optimal amount of pollution will tend to take place, as a polluter will weigh the cost of compensation with the cost of pollution reduction. If the transaction costs are low, the affected parties can negotiate an efficient outcome. If there are too many persons affected for negotiations to be effective, then government, acting as an agent for the people, can levy a pollution charge equal, so far as can be measured, to the social cost. Such a charge does not correct a market failure, but rather enhances the market by preventing trespass. Excessive pollution is therefore not a market failure, but a government failure, the failure by government to enforce the property rights of the victims of pollution.
The same analysis applies to congestion externalities. If a large store opens in a neighborhood and there is increased traffic and more congestion, the market has not failed. If the streets were privately owned, the owners would see a profit opportunity and charge higher tolls. If the streets are owned by the government, then congestion implies a failure to charge a toll sufficient to eliminate the congestion. In a congested highway or street, each car imposes a negative externality on the other drivers by increasing the crowding. A toll just high enough to eliminate the congestion is therefore like a pollution charge, and prevents rather than corrects an externality. If a private owner of a highway fails to apply a congestion charge, this is an entrepreneurial failure, since there is no systemic reason to not apply the charge.
Positive externalities
Market failure is also alleged when the externalities are positive, people receiving benefits which they do not pay for. The allegation is that there are fewer beautiful front-yard gardens because the owner is not compensated for benefitting his neighborhood, when folks would pay to have more of this beauty, but don't because they can be free riders.
The retort that government correction would be worse does not eliminate the proposition of market failure. Clearly, this is a systemic situation, and can be non-trivial. Also, the fact that some benefits are provided even when they receive no compensation does not eliminate the proposition that if people could be made to pay for additional benefits, they would pay, but they cannot be made to pay in a market context, and so the market fails to provide goods for which there is a demand.
Suppose the government could determine what each neighbor would pay to have more beauty, and charges them for that. The charge would not be an intervention, since that is what the person is willing to pay. But in fact there is no way to find out the subjective values people have for more beauty, and to also charge them that amount. It is possible to reveal the amounts people would pay if the actual payment is determined independently of their stated values, a process called "demand revelation" by which a person whose stated value changes the outcome pays the social costs of doing so (Tideman and Tullock, 1976). But people can lie if the amount they pay depends on their stated values. Since the externality cannot possibly be eliminated, then the market cannot fail, since failure needs to be defined in a real-world context. The inability to do what is impossible cannot be designated a "failure." One can only fail if it is hypothetically possible to succeed.
Moreover, one cannot ascribe market failure to today's significant positive externalities, because no economy today is a pure free market. Governance in a pure free market would be contractual rather than imposed on people who are not harming others (Foldvary, 1994). Contractual governance would be both greater and lesser than government is today. It would be lesser, because it would not impose taxes and restrictions on peaceful and honest human action. It would be greater, because a contractual agreement would provide rules that would be considered discriminatory by democratic government today. For example, today there are retirement communities that require minimum age limits for residency, something no government today could require. A marriage is a type of contractual governance in which the parties agree to provide each other with positive effects, which governmental law would not require.
The covenants, bylaws, and deeds of private communities can and do deal with positive and negative externalities. They can require people to have well-kept front lawns. Likewise, a night club can have a dress-code, enhancing the positive externality of nicely-attired attendees and avoiding the negative externality of having to look at slobs. Thus, when a potential externality (such as the color of the exterior of a house) is regarded by the community as significant, it can be mandated in its covenants. People can then move into communities with the covenants they prefer. Contractual governance can thus provide for positive externalities, and if people consider them important enough, there will be communities that require these.
The voluntariness of such communities exits at the level of choosing to join it. Once one is a member, then there may be rules which they may not like, but they accept them as part of a package that provides for greater benefits than if they were not members.
There is therefore no systemic failure by markets to provide positive externalities. Some external benefits are provided even without compensation. Others are compensated or provided by contract. The fact that would be more positive externalities if we could determine all subjective values is not a market failure if this determination is biologically impossible.
Excludable public goods
The next allegation of market failure concerns collective goods. Almost all textbooks and economists claim that markets fail to provide sufficient public goods because of free riders who cannot be made to pay.
Public or collective goods are nonrival, in contrast to "private" goods for which the greater use by one person implies less for others. With collective goods, each person uses the entire good, and is not affected by others who use it, such as watching a movie in an uncongested and quiet theater. Some economists define "public goods" as also being nonexcludable. However, Paul Samuelson's (1954) landmark paper on public goods defined only two classes of goods, public and private, the latter occurring when the total amount equals the sum of the individually consumed quantities, as with rival goods. Good which are both excludable and nonrival are called "club goods."
Markets do not fail to provide club goods, because exclusion implies the ability to charge for entry and for continuing use. Almost all goods and services provided by government are excludable. A highway is excludable, as reckless drivers are stopped and expelled. Many governmental services are excludable by proximity; a neighborhood park is used mostly by the residents of the neighborhood, others being excluded by the transportation cost. Even national defense is excludable, as those outside the country are excluded from the protection, and those who enter illegally can be deported.
Most public goods provided by government are territorial, and to the extent these are wanted services, they become capitalized into higher land values and land rentals. This extra rent provides the means to finance the goods, the optimal quantity being the amounts for which the marginal rent generated equals the marginal cost of the public good. The rent is a private good, the total rent being the sum of the individual rents. Thus when a private agent can collect the rent, the rent provides the means for private-sector provision (Foldvary, 1994).
Nonexcludable collective goods
Market-failure advocates seem to have a stronger case for non-excludable public goods. For example, basic research can benefit society as a whole, and once the knowledge becomes public, it becomes non-excludable. One can well argue that education and the alleviation of poverty benefits society overall, not just those immediately affected, and these benefits are non-excludable. These benefits also fall into the class of positive externalities. Being non-excludable, the public benefits are greater than those obtained by the contracting parties.
The market-failure argument for non-excludable public goods and positive externalities presumes that people are narrowly self-interested, so they will choose to be free riders. But in fact, human beings have two basic motivations: self-interest, and sympathy.
In The Theory of Moral Sentiments (1790), Adam Smith wrote: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure in seeing it" (p. 9). These principles are manifested in "sympathy," a feeling of affinity, solidarity, accord, generosity, and empathy with a person, group, culture, organization, or other entity. "Nature, therefore, exhorts mankind to acts of beneficence, by the pleasing consciousness of deserved reward" (p. 86). Sympathy can apply to an idea or project, like a religion, wildlife conservation, or helping the needy.
Henry George (1879, 462) stated similarly, "If you would move men to action, to what shall you appeal? Not to their pockets, but to their patriotism; not to selfishness, but to sympathy. Self-interest is, as it were, a mechanical force - potent, it is true; capable of large and wide results. But there is in human nature what may be likened to a chemical force; which melts and fuses and overwhelms; to which nothing seems impossible. 'All that a man hath will he give for his life' [Job 2:4] - that is self-interest. But in loyalty to higher impulses men will give even life."
There are also of course self-interested motivations for donating benefits. A donor may seek the prestige that comes from being recognized as a philanthropist. Another motivation is a sense of moral duty. The dutiful and prestige-seeking motivations are complementary to the sympathetic motives, so the self-interested motivations are also worth cultivating. Benevolent sympathy overcomes the problem of free riders unable to cooperate in the provision of a non-excludable public good. If a person has benevolent sympathy for a community and its goods, he will not wish to free ride; the act of contributing itself provides satisfaction, or even joy.
Sympathy is generated by social entrepreneurship. A philanthropist might not only provide charity but also stimulate others to give. He creates institutions - traditions, festivals, symbols, organizations, - that elicit greater sympathy from a commmunity. Benevolent giving is also promoted by mutual-aid fraternal societies, many of which flourished during the 1800s and early 1900s, before they became preempted by governmental programs (Beito, 2002).
If such sympathy is lacking, this implies that the public does not value the activity that highly. The lack of provision is not a market failure if people do not value the provision. Moreover, a lack of private-sector provision today may be due to interventions that prevent firms from acting jointly. For example, joint basic research may be inhibited if not explicitly prevented by anti-trust laws, and there are in fact trade associations which promote mutually beneficial activities, to the extent permissible without violating anti-monopoly laws. The benefits of belonging to trade associations can induce the members to avoid being free riders.
The argument for market failure for non-excludable public goods and positive externalities therefore has to explain why mutual aid and sympathy would fail to provide the public goods wanted by the public. It is not sufficient to merely assume that the only motivation is narrow self-interest, because there is in fact abundant charitable and philanthropic giving. Would anyone argue that there the amount of churches is insufficient? There are numerous churches of many denominations in all American cities, where the financing is private.
The case for market failure in the provision of non-excludable public goods itself fails by assuming deficient amounts of sympathetic provision, when it is that very sympathy that implies public demand.
Market failure for imperfect competition and monopoly
The neoclassical-economics benchmark for market efficiency is perfect competition, with many tiny firms producing an identical product. The efficiency comes from each firm being a price taker, selling all its output at the market price, and therefore the profit-maximizing quantity is that for which price equal the marginal cost. Ease of entry and exit induce zero economic profits, so the price is also the minimum average cost. Government can do nothing to improve this outcome.
The market-failure doctrine alleges that when competition is imperfect or non-existent, the price is above marginal cost, and the market fails to be maximally efficient. But economics analysts seldom explain the meaning of "perfect" and "competition." The term "competition" in this context does not mean "rivalry," but rather "the absence of pricing power." "Perfect" does not mean ideal or desirable, but rather "complete." "Perfect competition" thus means nothing more than the complete absence of pricing power. In "imperfect competition," there is some pricing power; there is no inherent implication that such a market structure is bad.
In monopolistic competition, there are many small firms, but they produce differentiated products, so each firm confronts a declining demand curve. Even though making no economic profit in the long run, the firm produces at a price greater than its marginal cost, a situation with excess capacity, as each firm could produce more at a lower average cost, but at a quantity greater than that which maximizes profit. Moreover, product variety induces competition by advertising, adding to the costs of production, cost which often merely induce customers to switch brands.
However, the greater cost of goods relative to if the industry had one identical product is offset by the value people place on product variety. Since product variety has a benefit, its absence has a social cost. Including the marginal social cost of eliminating differentiated products, the price of a good in monopolistic competition is not necessarily above its social marginal cost. Moreover, the advertising finances public-goods media such as television.
An oligopoly being an industry with a few firms, not only is the price above marginal cost, but there can be lasting economic profits not to due entrepreneurial innovation but to the cost of entry. Economic profit as such is not a social cost and thus not an indication of market failure. The social cost is the reduction in quantity relative to a greater number of firms.
But an industry with a few firms implies economies of scale that lower average cost with increasing size. The public would not benefit from splitting up the firms, as this would increase average cost. But market-failure advocates could argue in favor of government intervention to set the price at marginal cost, increasing quantity relative to the profit-maximizing quantity.
But such a policy would need to consider the market as global rather than national. For example, the U.S. automobile industry has only a few firms, but the planet has many car makers. Moreover, with technological products, competitive advantage requires continuous innovation, which requires investment. Price fixing and lower profits can lead to the social cost of less technological and marketing progress. Only when the oligopoly involves the value of natural resources such as oil is there a case for the price and the profit not being a result of entrepreneurship. (Natural resources are examined below). Thus the mere existence of oligopoly is therefore not necessarily a market failure, when all social costs are taken into account.
In the case of monopoly, the case for market failure depends on the cause of the monopoly. Clearly, monopolies due to governmental restrictions on competition are not market failures. Copyrights and patents confer monopoly privileges which may be justified by inducing creation and discovery; a consideration of such intellectual property is beyond the scope of this paper. Franchises such as local cable services are monopolies whose failures are due to the governmental protection from competition.
Another source of monopoly is collusion among oligopolists. Such collusion is illegal in the United States. Would such collusion be a market failure? Economic theory as well as historical evidence tells us that such collusion often breaks down as there is an incentive to cheat by providing more at a lower price, until the others also lower their prices.
But suppose the cartel does not break down or there is a dominant firm. If the product is not a natural resource, then an economic profit is an inducement for competitors to enter, if the fixed cost is not prohibitive. It may take some time, but eventually, for example, alternative products will appear if users are not satisfied with the dominant product such as a computer operating system.
Moreover, as technology advances, the new versions compete with the prior versions, and high prices prevent users from buying the new versions. Thus overall, the mere existence of dominant firms does not necessarily indicate that the public is worse off.
If there is a large fixed cost and a small marginal cost, then the firm is a natural monopoly, and there may not be any actual or potential competition. Advancing technology is making industries such as electricity and even water provision less naturally monopolistic (Foldvary and Klein, 2003). At any rate, if a resource such as water is a natural monopoly, the market does not necessarily involve a monopoly exploiting the users by charging more than average cost. Another possibility is that homeowner associations and other private communities would jointly own the water company.
As analyzed by Oliver Williamson (1985), asset specificity, the specialized use of assets not easily transferable to other uses, determines the contracting process. If there is little asset specificity, competitive market contracting is effective. With high asset specificity, governance within an organization is efficacious as agents economize on bounded cognition while protecting themselves against opportunism. If a community is dependent on a particular natural monopoly, its incentive will be to own it. Vertical and horizontal integration prevent the problem of natural monopoly, which is why residential associations own their own streets and transit services. House owners also own their back yards rather than rent them, to prevent paying monopoly prices. Therefore, the mere potential of monopoly does not inherently imply market failure.
Finally, some have pointed to network externalities as a possible market failure, as an inferior product can become established and then becomes difficult to replace. This is the strongest argument in favor of market failure, but it is much stronger in social and cultural spheres than in the commercial realm. As Israel Kirzner has argued, in the commercial context, there is a profit opportunity for entrepreneurs to innovate and market better products, overcoming or adapting to the older networks. For example, Apple computer has made its computer compatible with the PC format.
But, as Kirzner also argues, in the social and cultural sphere, less efficient patterns can persist, such as the irregularity of English-language spelling, when considered narrowly. The English language would be even more efficient if everybody spoke Esperanto, a constructed language with no irregularities. But giving up traditional language and spelling would amount to losing part of our cultural heritage, so even there, it is not clear that there is a market failure to replace the network. Measurement would be more efficient in the metric system, yet the USA persists in using traditional inches and pounds; but these traditional measures could be more fitted to usual human usages. Swimming would be less costly if people swam nude, but it would cause distress to most people. Thus there are social costs in cultural change.
There is, however, one area where the market does fail. When there is a dictator, the market will usually fail to overthrow him. Those who are brave enough to oppose him will be killed, or suffer terribly. So the proposition is not that markets always succeed in everything, but that markets do not fail to provide wanted services in the context of a pure free market. When there are interventions, then markets may not succeed in eliminating them.
Informational asymmetry
Another allegation of market failure invokes asymmetries of information, where one party is much better informed than the other, such as when someone has his car repaired. The first line of defense against market failure from this source is the prohibition of fraud, since fraud is a type of theft, and is outside the market. In a proper contract, all parties are competent and informed about the terms. Caveat emptor should apply when the buyer has more knowledge of his usage, but caveat venditor should apply when the seller has better information.
Moreover, reputation is an effective antidote to lack of knowledge. One may not know much about cars, but one can have confidence the company providing the services. The market also provides sources of information, from publications such as Consumers Reports to organizations such as the Better Business Bureau, to the Internet.
Thus the ability to sue for fraud or damages, the incentive of firms to have a good reputation, and the availability of information from many sources, undermine the allegation that the mere existence of informational asymmetry is necessarily a market failure.
Irrationality as market failure
A more radical challenge to market success is the literature on economic psychology, which posits that cognition is bounded and that people fail to maximize possible gains. (The allegation of "bounded rationality" is better termed "bounded cognition," since it is the processing of information that is bounded rather than rationality itself.)
The existence of human character flaws such as excessive confidence, bias towards recent and readily available data, and anchoring on some past event, does not make human action irrational. Human action is rational when human beings economize in the pursuit of the ends, and when preferences are consistent (thus transitive, as when A is preferred to B and B to C, then A should be preferred to C).
When a person is overconfident and trades stocks in the mistaken belief that he can do better than average, this is a human failure rather than failure of the overall market. When the owner of a stock is anchored on the price he paid, and refuses to sell as the price declines, this is also a human failure, or entrepreneurial failure. There are winners and losers in financial markets, and the winners are those with better knowledge about economics, finances, and personal and mass psychology. So human foibles do not constitute market failure.
Distributional injustice as a market failure
Finally, the market-failure doctrine claims that even if markets are efficient in providing goods, they fail to provide equity. Critics of markets often point to today's inequalities of income and wealth as outcomes that should be corrected by government.
Neoclassical economics, as expressed in textbooks and the academic literature, claims that there is a necessary trade-off between equity (justice or fairness) and efficiency. If the rich are taxed and the wealth is redistributed to the poor, the rich will have less incentive to produce and invest, resulting in a lower amount of wealth, which may make the poor less well off. Nevertheless, some limited redistribution is advocated in the name of social justice.
But the ethic that tells us the meaning of the market is the same ethic that tells us the morally proper laws and policies. Therefore, a pure free market cannot possibly be unjust.
By the universal ethic, doing good does not absolve evil. The universal ethic makes it morally wrong to tax wages no matter what the funds are used for. Theft does not become proper if the thief transfers the money to the poor. Thus, social justice cannot be enhanced by immoral means.
Moreover, the outcomes of today are not free-market outcomes. One cannot point to any actual distribution as a flaw of the market, since intervention has affected the outcome. Governments throughout the world are engaged in massive redistribution, including subsidies and grants to the wealthy.
Economic justice therefore cannot predetermine any particular outcome, but must examine the initial distribution of resources and the process of exchange, and then accept whatever outcomes result. A voluntary process of exchange is morally neutral, so what remains is to examine the initial distribution of resources.
The ultimate and original factors or inputs into production are land and labor. We have already concluded that self-ownership endows a person with a complete right to his wages and the products of labor. But land, defined as all natural resources, exclusive of any improvements, is not a product of human action, and so self-ownership cannot apply to the ownership of land.
Natural resources and rent
We have to begin, as did John Locke (1690), with the premise of human equality, which entitles every person to an equal access to unclaimed natural resources. As labor must necessarily be applied to natural resources, private possession is justified and may be claimed. But Locke included the proviso that one could fully own features of nature only if there were also quantities of similar quality freely available to others.
If that situation does not hold, as indeed it does not in much of the world, then the implication is that the title holder does not properly own the total rights to the land. He should be entitled to the rights of possession, to have an effective market, but that does not entitle him to the yield, or rent, of that land.
To examine this issue more deeply, we need to recognize two sources of land rental. One source of rental from land is the presence of civic infrastructure. The presence of streets, parks, public transit, and other territorial amenities increases the demand to be located then and pumps up the rentals and site values. If the provider is a private firm, then it has the moral right to the generated rental, subject to contracts with the local residents. This provider could be a proprietary community, owned by a corporation, or a civic association.
If the provider of the public works is government, then government may properly collect the rental, as it has generated that rental. If the funds instead come from taxes on wages (including sales taxes paid from wages), then a worker-tenant is double billed, as he pays a higher rent and also higher taxes. Also, if the funds come from non-land sources, the landowner is effectively subsidized, obtaining rental and site value paid for by others.
The tapping of site rentals or site value to finance civic works such as mass transit relates to the issue of natural monopolies, goods for which there is a declining average cost, and where the marginal cost is below the average cost. In a free market, the provide can charge the user the marginal cost (which can be zero if the marginal cost is trivial, as with elevators), and pay for the fixed costs from the site rentals generated by the service, such as hotels financing elevator costs from the room rentals.
Thus one source of income inequality is land rent which is generated by civic infrastructure paid for by taxes on wages and business profits. Landowners become wealthier at the expense of workers. Attempts at redistribution are largely futile, since much of the taxation is on those having higher wages, rather than landowners, and the transfers received by lower-income folk then enable them to afford higher rents, and some significant portion of the welfare ends up with the landlord.
This inequality is caused by intervention, not the market. When the infrastructure is provided privately, then this redistribution does not take place, as the residents are not taxed, but instead pay for the civic goods from their rentals or assessments on their units of property.
The other source of land rental is the natural features of the area: the climate, proximity and access to waterways, soil quality, forests, etc. New York City and San Francisco, for example, are located places suitable to harbors. Las Vegas could not function without the availability of natural sources of water. The natural rent of such land can be tapped for public revenue without hampering the market or intruding into self-ownership. Such taps would also eliminate a source of inequality to the extent that land value is held unequally. If, on the other hand, all communities are contractual, then the natural rent would be collected by contract along with the rentals generated by civic goods.
The option of using land rent for public revenue creates an opportunity to increase the efficiency of the economy by shifting taxation from wages and capital to land rent or site values. This shift would also reduce the inequality of income distribution. Thus, the tradeoff between equity and efficiency is an unnecessary one; it is possible to have more of both, relative to current outcomes.
Therefore, the allegation that markets fail achieve justice is doubly false. It is false because the criterion for justice uses the same ethic that determines the market in the first place, making true free markets inherently just. It is also false because government today creates more inequality than necessary, and so inequality today is logically a government failure, not the failure of a non-existent free market.
Sustainability
The use of fixed natural resources such as oil and copper necessarily uses up the available sources, so it cannot be a "market" failure to use them up. A market can efficiently allocate use, since as the good gets used up and reserves diminish, the price rises, and users economize by substituting other goods or using the resource more efficiently.
For renewable natural resources, if the universal ethic requires that wildlife and the habitat of the earth be preserved, then that is what a free market does. Market failure implies that markets within their ethical constraints are failing to be sustainable, but that is not the case if the ethic that gives the market its meaning also prohibits the destruction of the commons, the atmosphere, oceans, rivers, underground waters, the soil, and the wildlife of the planet.
Conclusion
The claim of mainstream economic thought that markets fail is not justified. The failures ascribed to externalities, public goods, market structures, asymmetries, injustice, and lack of sustainability, are due to misunderstanding or ignorance of the ethics, governance, and economics of markets. There is plenty of entrepreneurial and human failure, but no inherent systemic market failure.
Free markets never fail.
References
Beito, David T. 2002. "'This Enormous Army': The Mutual-Aid Tradition of AmericanFraternal Societies before the Twentieth Century." In The Voluntary City. Eds. David Beito,Peter Gordon, and Alexander Tabarrok. Ann Arbor: University of Michigan Press, and Oakland,CA: The Independent Institute. Pp. 182-203.
Foldvary, Fred E. 1980. The Soul of Liberty. San Francisco: The Gutenberg Press.
Foldvary, Fred. 1994. Public Goods and Private Communities. Aldershot, UK: Edward Elgar Publishing.
Fred Foldvary and Daniel Klein, eds. 2003. The Half-Life of Policy Rationales: How Technology Affects Old Policy Issues. Cato Institute in partnership with New York University Press, 2003.
George, Henry. 1879 [1975]. Progress and Poverty. Rpt. NY: Robert Schalkenbach Foundation.
High, Jack. 1985. "Is Economics Independent of Ethics?" Reason Papers 10 (Spring): 3-16.
Kirzner, Israel. 1992. The Meaning of Market Process. London and New York: Routledge.
Locke, John. 1690 [1947]. Two Treatises of Government. Ed. Thomas I. Cook. New York: Hafner Press.
Samuelson, Paul A. 1954. "The Pure Theory of Public Expenditure." Review of Economics and Statistics 36, no. 4 (November): 387-9.
Smith, Adam. 1790 [1982]. The Theory of Moral Sentiments. Indianapolis: Liberty Classics.
Tideman, T. Nicolaus, and Tullock, Gordon. 1976. "A New and Superior Process for Making Social Choices." Journal of Political Economy 84, 6 (December): 1145-59.
Williamson, Oliver E. 1985. The Economic Institutions of Capitalism. NY: The Free Press.
Fred E. Foldvary
Dept. of Economics, Santa Clara University
ffoldvary@scu.edu
Available here
Session 6.4: The State Versus the Market, I
APEE Conference, Las Vegas, April 4, 2006
"Private Solutions to Market Failures: Is Government Always the Answer?"
Abstract:
Mainstream allegations of market failure are based on misunderstandings of markets, governance, and ethics. This paper dissects the categories of alleged market failure: externalities, public goods, market structures, asymmetries, irrational behavior, injustice, and lack of sustainability. The analysis reveals that none of these phenomena contain any inherent market failures.
....
Almost all economists believe in the doctrine of market failure. Every widely-used textbook of economics presents the doctrine that markets fail. The mainstream view in economics is that an economy with "perfect competition" would be efficient, but the real world has no perfect competition, and market outcomes are inequitable, so market failure is ubiquitous. Markets always fail, and the only issue to be discussed is the degree of failure. That degree, it is said, is especially severe in the case of public goods, externalities, informational asymmetries, and economic justice.
The meaning of "market failure"
Market failure is distinct from entrepreneurial failure and human failure (such as due to bounded cognition). Market failure is a systemic inability of voluntary economic dynamics to provide the ends desired by the public, systemic meaning a failure which is economy-wide and persists over time due to the inherent structure of free markets. The three ends desired by the public can be categorized as efficiency, equity, and sustainability. Efficiency in this context means that the market provides the goods which people demand at prices that cover all the long-run marginal costs, with the costs borne by those using the good. Sustainability means that the global economy can be expected to provide at least the current standard of living indefinitely.
The full meaning of market failure requires a clear understanding of the meaning of the "market." The textbooks and academic literature seldom venture into what "market" means. A "market" is usually defined vaguely as a context in which there is buying and selling, or hiring and renting. The term "free market" is usually left undefined, and implicitly treated as a synonym for "market."
The concept of a market economy has meaning in contrast with a non-market economy. The logical contrast is with coercive harm. A pure free market is an economy in which all human action is voluntary. Any involuntary action, inflicting coercive harm, is therefore outside the market. The two sets of agents which apply coercive harm are private thieves and governmental officials.
Market failure is therefore the failure of a free market, rather than a market afflicted by governmental or private coercion. When slaves are bought and sold, or rented, there is a market, but not a free market, and the distress is not a "market" failure.
But it is not sufficient to say that a free market consists of voluntary production, exchange, and consumption. This brings the analysis to a deeper level, as we need to understand what it means for human action to be voluntary.
As Jack High has pointed out, "voluntary" action implies an ethical rule by which some acts are morally permitted and other acts, the involuntary ones, are morally evil and thus prohibited (High, 1985). To have a universal meaning of voluntary action, and thus of the market, this moral standard must itself be universally applicable to humanity. This universal ethic would be a natural moral law, based on human nature rather than any cultural practice or personal viewpoint.
John Locke (1690) described natural moral law as being derived from two premises, biological independence and human equality. Independence is the biological fact that human beings think and feel as individuals. Equality is the proposition that there is nothing in human biology that entitles one set of human beings to be masters over another set which has slaves.
A unique universal ethic can be derived from these premises (Foldvary, 1980). The universal ethic has three basic rules:
1. Acts which have welcomed benefits are good.
2. Acts which coercively harm others by initiating an invasion, are evil.
3. All other acts are neutral.
In this context, the term "harm" is distinguished from a mere offence. In an offence, the distress is due solely to the beliefs and values of the person affected. In contrast, coercive harm involves an invasion, an unwelcome penetration into the legitimate domain of the victim. So if a person is offended by what someone says, this is due to his beliefs and values; this act is not coercively harmful, and is designated as morally neutral by the universal ethic.
The universal ethic also provides a meaning for moral rights and liberty. A moral right to X means that the negation of X is morally evil. For example, a person has a moral right to possess a car because the negation of that possession, i.e. theft, is morally evil. Since the universal ethic is the expression of natural moral law, the moral rights based on the u.e. can be called "natural rights." Society then has complete liberty when its laws are based solely on the universal ethic, with legal rights congruent with natural rights.
The natural rights to property begin with one's own body and life. The right to one's person then endows the person with a right to his labor, which implies a right to the wages of his labor and the products of labor.
The universal ethic can now be applied to give meaning to the concepts "voluntary" and "intervention." An act is voluntary if it is either morally good or neutral. An "intervention" is defined here as an act which changes what voluntary action would otherwise do. Governance is morally proper when it acts as an agent of the universal ethic, prohibiting and penalizing evil acts, but not intervening into peaceful and honest action. The pure free market is defined as an economy in which there is no governmental intervention, and in which private coercive harm is effectively prohibited and penalized.
Negative externalities
Every economics textbook I have examined depicts negative externalities as a market failure. Markets allegedly fail because a social cost such as pollution or congestion is imposed on persons and not on those who buy or rent the product. But by the universal ethic, pollution which invades the property of others is an act which is morally wrong and outside the market. The pollution of other people's property is a trespass which, in a free market, requires compensation. This compensation internalizes the cost, eliminating the externality.
The optimal amount of pollution is not zero, but that amount for which the marginal cost of eliminating pollution equals the marginal benefit of less pollution. Normally, the cost of reducing more pollution rises as more pollution is reduced, and the social benefit of eliminating more pollution declines with greater reduction. When polluters compensate others for the damage, then the optimal amount of pollution will tend to take place, as a polluter will weigh the cost of compensation with the cost of pollution reduction. If the transaction costs are low, the affected parties can negotiate an efficient outcome. If there are too many persons affected for negotiations to be effective, then government, acting as an agent for the people, can levy a pollution charge equal, so far as can be measured, to the social cost. Such a charge does not correct a market failure, but rather enhances the market by preventing trespass. Excessive pollution is therefore not a market failure, but a government failure, the failure by government to enforce the property rights of the victims of pollution.
The same analysis applies to congestion externalities. If a large store opens in a neighborhood and there is increased traffic and more congestion, the market has not failed. If the streets were privately owned, the owners would see a profit opportunity and charge higher tolls. If the streets are owned by the government, then congestion implies a failure to charge a toll sufficient to eliminate the congestion. In a congested highway or street, each car imposes a negative externality on the other drivers by increasing the crowding. A toll just high enough to eliminate the congestion is therefore like a pollution charge, and prevents rather than corrects an externality. If a private owner of a highway fails to apply a congestion charge, this is an entrepreneurial failure, since there is no systemic reason to not apply the charge.
Positive externalities
Market failure is also alleged when the externalities are positive, people receiving benefits which they do not pay for. The allegation is that there are fewer beautiful front-yard gardens because the owner is not compensated for benefitting his neighborhood, when folks would pay to have more of this beauty, but don't because they can be free riders.
The retort that government correction would be worse does not eliminate the proposition of market failure. Clearly, this is a systemic situation, and can be non-trivial. Also, the fact that some benefits are provided even when they receive no compensation does not eliminate the proposition that if people could be made to pay for additional benefits, they would pay, but they cannot be made to pay in a market context, and so the market fails to provide goods for which there is a demand.
Suppose the government could determine what each neighbor would pay to have more beauty, and charges them for that. The charge would not be an intervention, since that is what the person is willing to pay. But in fact there is no way to find out the subjective values people have for more beauty, and to also charge them that amount. It is possible to reveal the amounts people would pay if the actual payment is determined independently of their stated values, a process called "demand revelation" by which a person whose stated value changes the outcome pays the social costs of doing so (Tideman and Tullock, 1976). But people can lie if the amount they pay depends on their stated values. Since the externality cannot possibly be eliminated, then the market cannot fail, since failure needs to be defined in a real-world context. The inability to do what is impossible cannot be designated a "failure." One can only fail if it is hypothetically possible to succeed.
Moreover, one cannot ascribe market failure to today's significant positive externalities, because no economy today is a pure free market. Governance in a pure free market would be contractual rather than imposed on people who are not harming others (Foldvary, 1994). Contractual governance would be both greater and lesser than government is today. It would be lesser, because it would not impose taxes and restrictions on peaceful and honest human action. It would be greater, because a contractual agreement would provide rules that would be considered discriminatory by democratic government today. For example, today there are retirement communities that require minimum age limits for residency, something no government today could require. A marriage is a type of contractual governance in which the parties agree to provide each other with positive effects, which governmental law would not require.
The covenants, bylaws, and deeds of private communities can and do deal with positive and negative externalities. They can require people to have well-kept front lawns. Likewise, a night club can have a dress-code, enhancing the positive externality of nicely-attired attendees and avoiding the negative externality of having to look at slobs. Thus, when a potential externality (such as the color of the exterior of a house) is regarded by the community as significant, it can be mandated in its covenants. People can then move into communities with the covenants they prefer. Contractual governance can thus provide for positive externalities, and if people consider them important enough, there will be communities that require these.
The voluntariness of such communities exits at the level of choosing to join it. Once one is a member, then there may be rules which they may not like, but they accept them as part of a package that provides for greater benefits than if they were not members.
There is therefore no systemic failure by markets to provide positive externalities. Some external benefits are provided even without compensation. Others are compensated or provided by contract. The fact that would be more positive externalities if we could determine all subjective values is not a market failure if this determination is biologically impossible.
Excludable public goods
The next allegation of market failure concerns collective goods. Almost all textbooks and economists claim that markets fail to provide sufficient public goods because of free riders who cannot be made to pay.
Public or collective goods are nonrival, in contrast to "private" goods for which the greater use by one person implies less for others. With collective goods, each person uses the entire good, and is not affected by others who use it, such as watching a movie in an uncongested and quiet theater. Some economists define "public goods" as also being nonexcludable. However, Paul Samuelson's (1954) landmark paper on public goods defined only two classes of goods, public and private, the latter occurring when the total amount equals the sum of the individually consumed quantities, as with rival goods. Good which are both excludable and nonrival are called "club goods."
Markets do not fail to provide club goods, because exclusion implies the ability to charge for entry and for continuing use. Almost all goods and services provided by government are excludable. A highway is excludable, as reckless drivers are stopped and expelled. Many governmental services are excludable by proximity; a neighborhood park is used mostly by the residents of the neighborhood, others being excluded by the transportation cost. Even national defense is excludable, as those outside the country are excluded from the protection, and those who enter illegally can be deported.
Most public goods provided by government are territorial, and to the extent these are wanted services, they become capitalized into higher land values and land rentals. This extra rent provides the means to finance the goods, the optimal quantity being the amounts for which the marginal rent generated equals the marginal cost of the public good. The rent is a private good, the total rent being the sum of the individual rents. Thus when a private agent can collect the rent, the rent provides the means for private-sector provision (Foldvary, 1994).
Nonexcludable collective goods
Market-failure advocates seem to have a stronger case for non-excludable public goods. For example, basic research can benefit society as a whole, and once the knowledge becomes public, it becomes non-excludable. One can well argue that education and the alleviation of poverty benefits society overall, not just those immediately affected, and these benefits are non-excludable. These benefits also fall into the class of positive externalities. Being non-excludable, the public benefits are greater than those obtained by the contracting parties.
The market-failure argument for non-excludable public goods and positive externalities presumes that people are narrowly self-interested, so they will choose to be free riders. But in fact, human beings have two basic motivations: self-interest, and sympathy.
In The Theory of Moral Sentiments (1790), Adam Smith wrote: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure in seeing it" (p. 9). These principles are manifested in "sympathy," a feeling of affinity, solidarity, accord, generosity, and empathy with a person, group, culture, organization, or other entity. "Nature, therefore, exhorts mankind to acts of beneficence, by the pleasing consciousness of deserved reward" (p. 86). Sympathy can apply to an idea or project, like a religion, wildlife conservation, or helping the needy.
Henry George (1879, 462) stated similarly, "If you would move men to action, to what shall you appeal? Not to their pockets, but to their patriotism; not to selfishness, but to sympathy. Self-interest is, as it were, a mechanical force - potent, it is true; capable of large and wide results. But there is in human nature what may be likened to a chemical force; which melts and fuses and overwhelms; to which nothing seems impossible. 'All that a man hath will he give for his life' [Job 2:4] - that is self-interest. But in loyalty to higher impulses men will give even life."
There are also of course self-interested motivations for donating benefits. A donor may seek the prestige that comes from being recognized as a philanthropist. Another motivation is a sense of moral duty. The dutiful and prestige-seeking motivations are complementary to the sympathetic motives, so the self-interested motivations are also worth cultivating. Benevolent sympathy overcomes the problem of free riders unable to cooperate in the provision of a non-excludable public good. If a person has benevolent sympathy for a community and its goods, he will not wish to free ride; the act of contributing itself provides satisfaction, or even joy.
Sympathy is generated by social entrepreneurship. A philanthropist might not only provide charity but also stimulate others to give. He creates institutions - traditions, festivals, symbols, organizations, - that elicit greater sympathy from a commmunity. Benevolent giving is also promoted by mutual-aid fraternal societies, many of which flourished during the 1800s and early 1900s, before they became preempted by governmental programs (Beito, 2002).
If such sympathy is lacking, this implies that the public does not value the activity that highly. The lack of provision is not a market failure if people do not value the provision. Moreover, a lack of private-sector provision today may be due to interventions that prevent firms from acting jointly. For example, joint basic research may be inhibited if not explicitly prevented by anti-trust laws, and there are in fact trade associations which promote mutually beneficial activities, to the extent permissible without violating anti-monopoly laws. The benefits of belonging to trade associations can induce the members to avoid being free riders.
The argument for market failure for non-excludable public goods and positive externalities therefore has to explain why mutual aid and sympathy would fail to provide the public goods wanted by the public. It is not sufficient to merely assume that the only motivation is narrow self-interest, because there is in fact abundant charitable and philanthropic giving. Would anyone argue that there the amount of churches is insufficient? There are numerous churches of many denominations in all American cities, where the financing is private.
The case for market failure in the provision of non-excludable public goods itself fails by assuming deficient amounts of sympathetic provision, when it is that very sympathy that implies public demand.
Market failure for imperfect competition and monopoly
The neoclassical-economics benchmark for market efficiency is perfect competition, with many tiny firms producing an identical product. The efficiency comes from each firm being a price taker, selling all its output at the market price, and therefore the profit-maximizing quantity is that for which price equal the marginal cost. Ease of entry and exit induce zero economic profits, so the price is also the minimum average cost. Government can do nothing to improve this outcome.
The market-failure doctrine alleges that when competition is imperfect or non-existent, the price is above marginal cost, and the market fails to be maximally efficient. But economics analysts seldom explain the meaning of "perfect" and "competition." The term "competition" in this context does not mean "rivalry," but rather "the absence of pricing power." "Perfect" does not mean ideal or desirable, but rather "complete." "Perfect competition" thus means nothing more than the complete absence of pricing power. In "imperfect competition," there is some pricing power; there is no inherent implication that such a market structure is bad.
In monopolistic competition, there are many small firms, but they produce differentiated products, so each firm confronts a declining demand curve. Even though making no economic profit in the long run, the firm produces at a price greater than its marginal cost, a situation with excess capacity, as each firm could produce more at a lower average cost, but at a quantity greater than that which maximizes profit. Moreover, product variety induces competition by advertising, adding to the costs of production, cost which often merely induce customers to switch brands.
However, the greater cost of goods relative to if the industry had one identical product is offset by the value people place on product variety. Since product variety has a benefit, its absence has a social cost. Including the marginal social cost of eliminating differentiated products, the price of a good in monopolistic competition is not necessarily above its social marginal cost. Moreover, the advertising finances public-goods media such as television.
An oligopoly being an industry with a few firms, not only is the price above marginal cost, but there can be lasting economic profits not to due entrepreneurial innovation but to the cost of entry. Economic profit as such is not a social cost and thus not an indication of market failure. The social cost is the reduction in quantity relative to a greater number of firms.
But an industry with a few firms implies economies of scale that lower average cost with increasing size. The public would not benefit from splitting up the firms, as this would increase average cost. But market-failure advocates could argue in favor of government intervention to set the price at marginal cost, increasing quantity relative to the profit-maximizing quantity.
But such a policy would need to consider the market as global rather than national. For example, the U.S. automobile industry has only a few firms, but the planet has many car makers. Moreover, with technological products, competitive advantage requires continuous innovation, which requires investment. Price fixing and lower profits can lead to the social cost of less technological and marketing progress. Only when the oligopoly involves the value of natural resources such as oil is there a case for the price and the profit not being a result of entrepreneurship. (Natural resources are examined below). Thus the mere existence of oligopoly is therefore not necessarily a market failure, when all social costs are taken into account.
In the case of monopoly, the case for market failure depends on the cause of the monopoly. Clearly, monopolies due to governmental restrictions on competition are not market failures. Copyrights and patents confer monopoly privileges which may be justified by inducing creation and discovery; a consideration of such intellectual property is beyond the scope of this paper. Franchises such as local cable services are monopolies whose failures are due to the governmental protection from competition.
Another source of monopoly is collusion among oligopolists. Such collusion is illegal in the United States. Would such collusion be a market failure? Economic theory as well as historical evidence tells us that such collusion often breaks down as there is an incentive to cheat by providing more at a lower price, until the others also lower their prices.
But suppose the cartel does not break down or there is a dominant firm. If the product is not a natural resource, then an economic profit is an inducement for competitors to enter, if the fixed cost is not prohibitive. It may take some time, but eventually, for example, alternative products will appear if users are not satisfied with the dominant product such as a computer operating system.
Moreover, as technology advances, the new versions compete with the prior versions, and high prices prevent users from buying the new versions. Thus overall, the mere existence of dominant firms does not necessarily indicate that the public is worse off.
If there is a large fixed cost and a small marginal cost, then the firm is a natural monopoly, and there may not be any actual or potential competition. Advancing technology is making industries such as electricity and even water provision less naturally monopolistic (Foldvary and Klein, 2003). At any rate, if a resource such as water is a natural monopoly, the market does not necessarily involve a monopoly exploiting the users by charging more than average cost. Another possibility is that homeowner associations and other private communities would jointly own the water company.
As analyzed by Oliver Williamson (1985), asset specificity, the specialized use of assets not easily transferable to other uses, determines the contracting process. If there is little asset specificity, competitive market contracting is effective. With high asset specificity, governance within an organization is efficacious as agents economize on bounded cognition while protecting themselves against opportunism. If a community is dependent on a particular natural monopoly, its incentive will be to own it. Vertical and horizontal integration prevent the problem of natural monopoly, which is why residential associations own their own streets and transit services. House owners also own their back yards rather than rent them, to prevent paying monopoly prices. Therefore, the mere potential of monopoly does not inherently imply market failure.
Finally, some have pointed to network externalities as a possible market failure, as an inferior product can become established and then becomes difficult to replace. This is the strongest argument in favor of market failure, but it is much stronger in social and cultural spheres than in the commercial realm. As Israel Kirzner has argued, in the commercial context, there is a profit opportunity for entrepreneurs to innovate and market better products, overcoming or adapting to the older networks. For example, Apple computer has made its computer compatible with the PC format.
But, as Kirzner also argues, in the social and cultural sphere, less efficient patterns can persist, such as the irregularity of English-language spelling, when considered narrowly. The English language would be even more efficient if everybody spoke Esperanto, a constructed language with no irregularities. But giving up traditional language and spelling would amount to losing part of our cultural heritage, so even there, it is not clear that there is a market failure to replace the network. Measurement would be more efficient in the metric system, yet the USA persists in using traditional inches and pounds; but these traditional measures could be more fitted to usual human usages. Swimming would be less costly if people swam nude, but it would cause distress to most people. Thus there are social costs in cultural change.
There is, however, one area where the market does fail. When there is a dictator, the market will usually fail to overthrow him. Those who are brave enough to oppose him will be killed, or suffer terribly. So the proposition is not that markets always succeed in everything, but that markets do not fail to provide wanted services in the context of a pure free market. When there are interventions, then markets may not succeed in eliminating them.
Informational asymmetry
Another allegation of market failure invokes asymmetries of information, where one party is much better informed than the other, such as when someone has his car repaired. The first line of defense against market failure from this source is the prohibition of fraud, since fraud is a type of theft, and is outside the market. In a proper contract, all parties are competent and informed about the terms. Caveat emptor should apply when the buyer has more knowledge of his usage, but caveat venditor should apply when the seller has better information.
Moreover, reputation is an effective antidote to lack of knowledge. One may not know much about cars, but one can have confidence the company providing the services. The market also provides sources of information, from publications such as Consumers Reports to organizations such as the Better Business Bureau, to the Internet.
Thus the ability to sue for fraud or damages, the incentive of firms to have a good reputation, and the availability of information from many sources, undermine the allegation that the mere existence of informational asymmetry is necessarily a market failure.
Irrationality as market failure
A more radical challenge to market success is the literature on economic psychology, which posits that cognition is bounded and that people fail to maximize possible gains. (The allegation of "bounded rationality" is better termed "bounded cognition," since it is the processing of information that is bounded rather than rationality itself.)
The existence of human character flaws such as excessive confidence, bias towards recent and readily available data, and anchoring on some past event, does not make human action irrational. Human action is rational when human beings economize in the pursuit of the ends, and when preferences are consistent (thus transitive, as when A is preferred to B and B to C, then A should be preferred to C).
When a person is overconfident and trades stocks in the mistaken belief that he can do better than average, this is a human failure rather than failure of the overall market. When the owner of a stock is anchored on the price he paid, and refuses to sell as the price declines, this is also a human failure, or entrepreneurial failure. There are winners and losers in financial markets, and the winners are those with better knowledge about economics, finances, and personal and mass psychology. So human foibles do not constitute market failure.
Distributional injustice as a market failure
Finally, the market-failure doctrine claims that even if markets are efficient in providing goods, they fail to provide equity. Critics of markets often point to today's inequalities of income and wealth as outcomes that should be corrected by government.
Neoclassical economics, as expressed in textbooks and the academic literature, claims that there is a necessary trade-off between equity (justice or fairness) and efficiency. If the rich are taxed and the wealth is redistributed to the poor, the rich will have less incentive to produce and invest, resulting in a lower amount of wealth, which may make the poor less well off. Nevertheless, some limited redistribution is advocated in the name of social justice.
But the ethic that tells us the meaning of the market is the same ethic that tells us the morally proper laws and policies. Therefore, a pure free market cannot possibly be unjust.
By the universal ethic, doing good does not absolve evil. The universal ethic makes it morally wrong to tax wages no matter what the funds are used for. Theft does not become proper if the thief transfers the money to the poor. Thus, social justice cannot be enhanced by immoral means.
Moreover, the outcomes of today are not free-market outcomes. One cannot point to any actual distribution as a flaw of the market, since intervention has affected the outcome. Governments throughout the world are engaged in massive redistribution, including subsidies and grants to the wealthy.
Economic justice therefore cannot predetermine any particular outcome, but must examine the initial distribution of resources and the process of exchange, and then accept whatever outcomes result. A voluntary process of exchange is morally neutral, so what remains is to examine the initial distribution of resources.
The ultimate and original factors or inputs into production are land and labor. We have already concluded that self-ownership endows a person with a complete right to his wages and the products of labor. But land, defined as all natural resources, exclusive of any improvements, is not a product of human action, and so self-ownership cannot apply to the ownership of land.
Natural resources and rent
We have to begin, as did John Locke (1690), with the premise of human equality, which entitles every person to an equal access to unclaimed natural resources. As labor must necessarily be applied to natural resources, private possession is justified and may be claimed. But Locke included the proviso that one could fully own features of nature only if there were also quantities of similar quality freely available to others.
If that situation does not hold, as indeed it does not in much of the world, then the implication is that the title holder does not properly own the total rights to the land. He should be entitled to the rights of possession, to have an effective market, but that does not entitle him to the yield, or rent, of that land.
To examine this issue more deeply, we need to recognize two sources of land rental. One source of rental from land is the presence of civic infrastructure. The presence of streets, parks, public transit, and other territorial amenities increases the demand to be located then and pumps up the rentals and site values. If the provider is a private firm, then it has the moral right to the generated rental, subject to contracts with the local residents. This provider could be a proprietary community, owned by a corporation, or a civic association.
If the provider of the public works is government, then government may properly collect the rental, as it has generated that rental. If the funds instead come from taxes on wages (including sales taxes paid from wages), then a worker-tenant is double billed, as he pays a higher rent and also higher taxes. Also, if the funds come from non-land sources, the landowner is effectively subsidized, obtaining rental and site value paid for by others.
The tapping of site rentals or site value to finance civic works such as mass transit relates to the issue of natural monopolies, goods for which there is a declining average cost, and where the marginal cost is below the average cost. In a free market, the provide can charge the user the marginal cost (which can be zero if the marginal cost is trivial, as with elevators), and pay for the fixed costs from the site rentals generated by the service, such as hotels financing elevator costs from the room rentals.
Thus one source of income inequality is land rent which is generated by civic infrastructure paid for by taxes on wages and business profits. Landowners become wealthier at the expense of workers. Attempts at redistribution are largely futile, since much of the taxation is on those having higher wages, rather than landowners, and the transfers received by lower-income folk then enable them to afford higher rents, and some significant portion of the welfare ends up with the landlord.
This inequality is caused by intervention, not the market. When the infrastructure is provided privately, then this redistribution does not take place, as the residents are not taxed, but instead pay for the civic goods from their rentals or assessments on their units of property.
The other source of land rental is the natural features of the area: the climate, proximity and access to waterways, soil quality, forests, etc. New York City and San Francisco, for example, are located places suitable to harbors. Las Vegas could not function without the availability of natural sources of water. The natural rent of such land can be tapped for public revenue without hampering the market or intruding into self-ownership. Such taps would also eliminate a source of inequality to the extent that land value is held unequally. If, on the other hand, all communities are contractual, then the natural rent would be collected by contract along with the rentals generated by civic goods.
The option of using land rent for public revenue creates an opportunity to increase the efficiency of the economy by shifting taxation from wages and capital to land rent or site values. This shift would also reduce the inequality of income distribution. Thus, the tradeoff between equity and efficiency is an unnecessary one; it is possible to have more of both, relative to current outcomes.
Therefore, the allegation that markets fail achieve justice is doubly false. It is false because the criterion for justice uses the same ethic that determines the market in the first place, making true free markets inherently just. It is also false because government today creates more inequality than necessary, and so inequality today is logically a government failure, not the failure of a non-existent free market.
Sustainability
The use of fixed natural resources such as oil and copper necessarily uses up the available sources, so it cannot be a "market" failure to use them up. A market can efficiently allocate use, since as the good gets used up and reserves diminish, the price rises, and users economize by substituting other goods or using the resource more efficiently.
For renewable natural resources, if the universal ethic requires that wildlife and the habitat of the earth be preserved, then that is what a free market does. Market failure implies that markets within their ethical constraints are failing to be sustainable, but that is not the case if the ethic that gives the market its meaning also prohibits the destruction of the commons, the atmosphere, oceans, rivers, underground waters, the soil, and the wildlife of the planet.
Conclusion
The claim of mainstream economic thought that markets fail is not justified. The failures ascribed to externalities, public goods, market structures, asymmetries, injustice, and lack of sustainability, are due to misunderstanding or ignorance of the ethics, governance, and economics of markets. There is plenty of entrepreneurial and human failure, but no inherent systemic market failure.
Free markets never fail.
References
Beito, David T. 2002. "'This Enormous Army': The Mutual-Aid Tradition of AmericanFraternal Societies before the Twentieth Century." In The Voluntary City. Eds. David Beito,Peter Gordon, and Alexander Tabarrok. Ann Arbor: University of Michigan Press, and Oakland,CA: The Independent Institute. Pp. 182-203.
Foldvary, Fred E. 1980. The Soul of Liberty. San Francisco: The Gutenberg Press.
Foldvary, Fred. 1994. Public Goods and Private Communities. Aldershot, UK: Edward Elgar Publishing.
Fred Foldvary and Daniel Klein, eds. 2003. The Half-Life of Policy Rationales: How Technology Affects Old Policy Issues. Cato Institute in partnership with New York University Press, 2003.
George, Henry. 1879 [1975]. Progress and Poverty. Rpt. NY: Robert Schalkenbach Foundation.
High, Jack. 1985. "Is Economics Independent of Ethics?" Reason Papers 10 (Spring): 3-16.
Kirzner, Israel. 1992. The Meaning of Market Process. London and New York: Routledge.
Locke, John. 1690 [1947]. Two Treatises of Government. Ed. Thomas I. Cook. New York: Hafner Press.
Samuelson, Paul A. 1954. "The Pure Theory of Public Expenditure." Review of Economics and Statistics 36, no. 4 (November): 387-9.
Smith, Adam. 1790 [1982]. The Theory of Moral Sentiments. Indianapolis: Liberty Classics.
Tideman, T. Nicolaus, and Tullock, Gordon. 1976. "A New and Superior Process for Making Social Choices." Journal of Political Economy 84, 6 (December): 1145-59.
Williamson, Oliver E. 1985. The Economic Institutions of Capitalism. NY: The Free Press.
quinta-feira, abril 08, 2010
580) Brasil: sociedade de privilegio - Gustavo Franco
Sociedade do Privilégio
Professor Gustavo Henrique de Barroso Franco
gfranco@riobravo.com.br
www.riobravo.com.br
Passando em revista nossas origens, um tema comum a muitos historiadores é a formação de uma Sociedade fundada sobre o Privilégio. No começo, quando se forma o que Jorge Caldeira chamou de a Nação Mercantilista, não havia capital, nem trabalho, tampouco Sociedade, mas apenas o Estado, criador de todos os Privilégios, dentre os quais, inclusive, o direito de propriedade sobre outros seres humanos.
No Brasil nunca tivemos luta de classes de verdade; a tensão social sempre foi entre o Estado, ou seus donos, e a Sociedade, especialmente os brasileiros desprovidos de Privilégio. Direita e esquerda pareciam atores de um enredo menor num país onde o Estado sempre soube definir-se como um fim em si mesmo, como uma encarnação falsificada da Nação. O Estado sempre foi propriedade privada de poucos, e por isso Brasil nasceu e cresceu desigual. A Maioria, ou o Povo, esta entidade sem rosto, multidão silenciosa e amorfa, sempre foi coadjuvante da Sociedade do Privilégio e, basicamente, é gente demais para dividir a pouca riqueza existente.
A Democracia de Massa no Brasil é fenômeno muito recente, e seu aparecimento em meados dos anos 1980 tem a mais inesperada conseqüência: a hiperinflação. O leitor já parou para pensar por que a inflação vai de 100% anuais para 84% mensais de 1984 a 1989 durante os primeiros anos de Democracia depois de três décadas de Ditadura?
A resposta para este enigma é simples: o Povo quis participar da Sociedade do Privilégio, anseio absolutamente legítimo, pois se as políticas públicas eram dirigidas a setores “especiais” ou “estratégicos”, por que exatamente alguém, qualquer pessoa, deve ser excluído desta categoria? Por que apenas alguns e não todos não são merecedores das benesses do Estado?
Os primeiros anos da nossa Democracia de Massa produziram a hiperinflação por que a dinâmica política foi a de “incorporar” todo mundo que aparecesse, todos que quisessem podiam ter a sua Emenda no Orçamento, a sua “Conquista” consagrada na Constituição, seu programinha de apoio no contexto da “Política Industrial”, todo o país passou a ser “estratégico”, e por força do Princípio da Isonomia, todos passaram a merecer o direito a algum pequeno Cartório pelo menos igual ao do vizinho. Todos se tornaram Credores do Estado, e portanto cobradores implacáveis da Dívida Social.
O novo Estado Democrático, diante destes anseios, adotou um modelo de “Clientelismo de Massa”, cujo espírito ainda permanece muito vivo, e que consiste em estender a todos os brasileiros algum Privilégio, via orçamento, ou via regulação, por que todos têm direito. É o Espírito (da Constituição) de 1988.
Todavia, como o Estado não é criador de riqueza, apenas um veículo de transferência, o modelo rapidamente se revelou impraticável. O nobre propósito de “incluir os excluídos” a qualquer custo, acabou corrompido pelo fato de que o dinheiro advinha da tributação do próprio “excluído” através da inflação. Ou das futuras gerações através de dívidas crescentes.
Todos têm direito, mas simplesmente não é possível conceder tantos Privilégios a tanta gente; não vamos acabar com a Sociedade do Privilégio multiplicando Direitos e Privilégios de forma irreal.
Com efeito, quem vai terminar com a Sociedade do Privilégio é a Economia de Mercado, e não é outro o motivo pelo qual a Estabilização, a Abertura, a Desregulamentação, e a Privatização geraram tantas tensões.
A Economia de Mercado é subversiva numa Sociedade do Privilégio pois propugna a competição, a impessoalidade e a Meritocracia, e dispensa, tanto quanto possível a interveniência de um Estado cheio de vícios.
Só uma verdadeira e bem urdida Sociedade do Privilégio consegue o prodígio de alijar a Economia de Mercado do sistema político-partidário, e consegue nos impor quatro candidatos a desancar o que chamam de “o modelo neoliberal”, cada qual propondo, em diferentes vestimentas, a extensão de novos Privilégios e o crescimento do Estado.
==========
Gustavo Franco é fundador da Rio Bravo Investimentos, empresa de serviços financeiros, fusões, aquisições, investimentos e securitizações. Foi presidente do Banco Central do Brasil de 1997 a 1999. É Formado e pós-graduado pela Pontifícia Universidade Católica do Rio de Janeiro, onde atuou como professor, pesquisador e consultor em assuntos de economia, de 1986 a 1993, especializando-se em inflação, estabilização, história econômica e economia internacional. Sua tese foi primeiro lugar no Prêmio BNDES de Economia para Teses de Mestrado em 1983 e deu origem ao seu primeiro livro: "Reforma monetária e instabilidade durante a transição republicana".
Franco foi um dos responsáveis pela instituição da URV e responsável direto pela lei 8880/94 do Plano Real, da moeda, conversões contratuais e desindexações. Teve também expressiva participação nas políticas cambiais e mudanças do cenário econômico à época, incluindo administração de reservas e fases finais das negociações de dívida externa. Foi também membro da equipe responsável pela concepção e implementação do programa de privatização e extinção de bancos estaduais (PROES).
As experiências derivadas do plano real, renderam os seguintes livros: "O Plano Real e Outros Ensaios" (1995) e "O Desafio Brasileiro: ensaios sobre desenvolvimento, globalização e moeda" (1999). Em 2006 contribuiu também para o autor Guilherme Fiúza em "3000 dias no bunker, um plano na cabeça e um país na mão" e para Maria Clara R. M. do Prado em "Plano Real: A real história do Real".
Desde 1999 publicou outros três livros: O papel e a baixa do câmbio - um discurso histórico de Ruy Barbosa. Rio de Janeiro: Editora Reler, 2005. (editor e organizador); Crônicas da convergência: ensaios sobre temas já não tão polêmicos. Rio de Janeiro: Editora Topbooks, 2006; e A economia em Pessoa (textos econômicos de Fernando Pessoa). Rio de Janeiro: Reler Editora, Novembro, 2006 (editor e organizador).
Além de dirigir a Bravo Investimentos, atualmente, Franco dá andamento à carreira de professor, pesquisador e escritor.
Professor Gustavo Henrique de Barroso Franco
gfranco@riobravo.com.br
www.riobravo.com.br
Passando em revista nossas origens, um tema comum a muitos historiadores é a formação de uma Sociedade fundada sobre o Privilégio. No começo, quando se forma o que Jorge Caldeira chamou de a Nação Mercantilista, não havia capital, nem trabalho, tampouco Sociedade, mas apenas o Estado, criador de todos os Privilégios, dentre os quais, inclusive, o direito de propriedade sobre outros seres humanos.
No Brasil nunca tivemos luta de classes de verdade; a tensão social sempre foi entre o Estado, ou seus donos, e a Sociedade, especialmente os brasileiros desprovidos de Privilégio. Direita e esquerda pareciam atores de um enredo menor num país onde o Estado sempre soube definir-se como um fim em si mesmo, como uma encarnação falsificada da Nação. O Estado sempre foi propriedade privada de poucos, e por isso Brasil nasceu e cresceu desigual. A Maioria, ou o Povo, esta entidade sem rosto, multidão silenciosa e amorfa, sempre foi coadjuvante da Sociedade do Privilégio e, basicamente, é gente demais para dividir a pouca riqueza existente.
A Democracia de Massa no Brasil é fenômeno muito recente, e seu aparecimento em meados dos anos 1980 tem a mais inesperada conseqüência: a hiperinflação. O leitor já parou para pensar por que a inflação vai de 100% anuais para 84% mensais de 1984 a 1989 durante os primeiros anos de Democracia depois de três décadas de Ditadura?
A resposta para este enigma é simples: o Povo quis participar da Sociedade do Privilégio, anseio absolutamente legítimo, pois se as políticas públicas eram dirigidas a setores “especiais” ou “estratégicos”, por que exatamente alguém, qualquer pessoa, deve ser excluído desta categoria? Por que apenas alguns e não todos não são merecedores das benesses do Estado?
Os primeiros anos da nossa Democracia de Massa produziram a hiperinflação por que a dinâmica política foi a de “incorporar” todo mundo que aparecesse, todos que quisessem podiam ter a sua Emenda no Orçamento, a sua “Conquista” consagrada na Constituição, seu programinha de apoio no contexto da “Política Industrial”, todo o país passou a ser “estratégico”, e por força do Princípio da Isonomia, todos passaram a merecer o direito a algum pequeno Cartório pelo menos igual ao do vizinho. Todos se tornaram Credores do Estado, e portanto cobradores implacáveis da Dívida Social.
O novo Estado Democrático, diante destes anseios, adotou um modelo de “Clientelismo de Massa”, cujo espírito ainda permanece muito vivo, e que consiste em estender a todos os brasileiros algum Privilégio, via orçamento, ou via regulação, por que todos têm direito. É o Espírito (da Constituição) de 1988.
Todavia, como o Estado não é criador de riqueza, apenas um veículo de transferência, o modelo rapidamente se revelou impraticável. O nobre propósito de “incluir os excluídos” a qualquer custo, acabou corrompido pelo fato de que o dinheiro advinha da tributação do próprio “excluído” através da inflação. Ou das futuras gerações através de dívidas crescentes.
Todos têm direito, mas simplesmente não é possível conceder tantos Privilégios a tanta gente; não vamos acabar com a Sociedade do Privilégio multiplicando Direitos e Privilégios de forma irreal.
Com efeito, quem vai terminar com a Sociedade do Privilégio é a Economia de Mercado, e não é outro o motivo pelo qual a Estabilização, a Abertura, a Desregulamentação, e a Privatização geraram tantas tensões.
A Economia de Mercado é subversiva numa Sociedade do Privilégio pois propugna a competição, a impessoalidade e a Meritocracia, e dispensa, tanto quanto possível a interveniência de um Estado cheio de vícios.
Só uma verdadeira e bem urdida Sociedade do Privilégio consegue o prodígio de alijar a Economia de Mercado do sistema político-partidário, e consegue nos impor quatro candidatos a desancar o que chamam de “o modelo neoliberal”, cada qual propondo, em diferentes vestimentas, a extensão de novos Privilégios e o crescimento do Estado.
==========
Gustavo Franco é fundador da Rio Bravo Investimentos, empresa de serviços financeiros, fusões, aquisições, investimentos e securitizações. Foi presidente do Banco Central do Brasil de 1997 a 1999. É Formado e pós-graduado pela Pontifícia Universidade Católica do Rio de Janeiro, onde atuou como professor, pesquisador e consultor em assuntos de economia, de 1986 a 1993, especializando-se em inflação, estabilização, história econômica e economia internacional. Sua tese foi primeiro lugar no Prêmio BNDES de Economia para Teses de Mestrado em 1983 e deu origem ao seu primeiro livro: "Reforma monetária e instabilidade durante a transição republicana".
Franco foi um dos responsáveis pela instituição da URV e responsável direto pela lei 8880/94 do Plano Real, da moeda, conversões contratuais e desindexações. Teve também expressiva participação nas políticas cambiais e mudanças do cenário econômico à época, incluindo administração de reservas e fases finais das negociações de dívida externa. Foi também membro da equipe responsável pela concepção e implementação do programa de privatização e extinção de bancos estaduais (PROES).
As experiências derivadas do plano real, renderam os seguintes livros: "O Plano Real e Outros Ensaios" (1995) e "O Desafio Brasileiro: ensaios sobre desenvolvimento, globalização e moeda" (1999). Em 2006 contribuiu também para o autor Guilherme Fiúza em "3000 dias no bunker, um plano na cabeça e um país na mão" e para Maria Clara R. M. do Prado em "Plano Real: A real história do Real".
Desde 1999 publicou outros três livros: O papel e a baixa do câmbio - um discurso histórico de Ruy Barbosa. Rio de Janeiro: Editora Reler, 2005. (editor e organizador); Crônicas da convergência: ensaios sobre temas já não tão polêmicos. Rio de Janeiro: Editora Topbooks, 2006; e A economia em Pessoa (textos econômicos de Fernando Pessoa). Rio de Janeiro: Reler Editora, Novembro, 2006 (editor e organizador).
Além de dirigir a Bravo Investimentos, atualmente, Franco dá andamento à carreira de professor, pesquisador e escritor.
domingo, abril 04, 2010
579) Shakira on Early Education of Children - Wall Street Journal
OPINION: THE WEEKEND INTERVIEW
Shakira’s Colombian War
By SILVANA PATERNOSTRO
The Wall Street Journal, April 3, 2010
The Latin pop star on why she’s spending millions on schools in her home country and beyond.
Los Angeles - Everyone knows Shakira as the hip-shaking siren of pop music. If you don’t know what I mean, go to YouTube and check out the music video for “Hips Don’t Lie.” The song, recorded with Wyclef Jean in 2006, topped the charts in 55 countries, including the U.S. Her latest song, “Gypsy,” is a similar tribute to her famous curves, only this time she gyrates for shirtless tennis god Rafael Nadal.
But Shakira—born Shakira Isabel Mebarak Ripoll—is intent on making her advocacy work as well-known as her hips. Her cause? Educating impoverished children by building schools and community centers in some of the poorest neighborhoods in her native Colombia, and convincing other Latin American leaders to invest in early childhood education.
When I catch up with Shakira, she’s taking an afternoon break from her tight recording schedule in order to visit a charter school in East L.A. “I always had the intuition, even as a little child, that I was called for a big project,” says the singer, now 33-years-old, as we ride in the car. “I am sure that many children feel that way but they don’t have the environment that is conducive for them to exploit their potential to its fullest. I was lucky I had those things: caring, loving, educated parents and a good school.”
View Full Image
winterpaternC
Zina Saunders
winterpaternC
winterpaternC
That luck—combined with hard work—has allowed her to promote her causes at the highest levels. President Obama met with her last month in the Oval Office to get her advice on education for Latino children. In the past six months, she has addressed the Oxford Union, appeared in the opinion pages of the Economist, and was asked by the Brookings Institution to be the celebrity behind its proposal to create A Global Fund for Education, modeled after the Global Fund to Fight Malaria, Tuberculosis and AIDS.
She knows about deprivation from her own upbringing in the extremely stratified city of Barranquilla, where I also grew up. Located on the Caribbean side of Colombia, nearly 50% of people in this port live under the poverty line. More than 43% of children do not have access to early education, and less than 20% have access to the Internet. What will happen to those who live in extreme poverty and receive no schooling is predictable in a country with a protracted civil conflict and an economy fueled by drug trafficking: “Being a militant or a drug trafficker are the only options.”
In 1996, Shakira started investing her own financial resources to reverse this trend. Her Barefoot Foundation began “very small, writing checks for orphanages.” At the time she was 18 and had her first hit in Latin America. That album was “Pies Descalzos,” after which her foundation was named. In those days, she was more of a rock-and-roll chick, a singer-songwriter with black hair, tight jeans and a guitar. Two years later, she had a bigger hit. “Where Are The Thieves?” sold a million copies. Armed with more caché and a heftier checkbook, she called Maria Emma Mejia, a former minister of education, to help her run Barefoot. “I was lucky that she said yes. I was only 20 years old. And she was so well-known.”
Shakira then moved to Miami, dyed her hair blond, and learned English—determined to conquer the U.S. market. In 2001 she came out with “Laundry Service,” her first English album, which sold 18 million copies. By 2006, she dominated the charts with her song about hips.
According to last year’s figures, Shakira has sold some 50 million records. She has won two Grammy awards and seven Latin Grammies. Two years ago, Forbes named her the fourth richest woman in music (after Madonna, Barbra Streisand and Celine Dion). And she’s just been commissioned to write the official song for the upcoming World Cup in South Africa. Billions of people will watch her perform live on TV.
As for her foundation, what started as an effort to feed a few thousand refugees on the Pacific Coast has now matured into a full-fledged organization that provides high-quality education, nutrition and psychological support to poor and displaced children and their families in three different Colombian cities. These centers, known as mega-schools, serve more than 6,000 children and their families.
“Our projects have proven that if we get the parents interested it makes a huge difference,” she says. “We get them interested because the kids are receiving a meal, because they are happy, because they are playing. And that way they are being protected from joining the guerrillas or the paramilitary.”
Shakira’s latest contribution went to our hometown. In February 2009, the Barefoot Foundation inaugurated a $6 million K-12 mega-school. El colegio de Shakira, as it is known locally, gets only praise. A friend described it to me as an American institution, by which she meant state-of-the-art. The complex includes an auditorium, chemistry labs and even air conditioning. “Parents receive English classes and computer skills,” Shakira says, “and the entire neighborhood can play soccer there.” Families look for every possible way to move close to the school.
Is she doing the work of the government, I ask? “No,” she says emphatically, “We are proving a case. If we can do it then the government can do it.” Shakira’s foundation builds the schools but then donates them to the district to run. “Over time, the government increasingly assumes responsibility. That is essential.” The jury is still out on this model. Will local government agencies with a dismal record of management allow the schools to thrive? For now, Shakira can boast that this year’s graduating class at El colegio de Shakira received very high test scores on their college placement exams.
Two years ago, Shakira showed up in El Salvador at the annual meeting of Latin American presidents. Word was that all the leaders cared about was getting their picture taken with the star. At the next one in 2009, Shakira fared better in promoting her cause. Colombia, Paraguay, Chile, Panama, Argentina and Mexico signed up to work with ALAS—a foundation started by Shakira and her fiancée to combat poverty—to bolster early childhood education in their countries. Neither Venezuela’s Hugo Chávez nor any of the governments that support him were interested.
Today, Shakira’s focus is on how to help Latino children in the U.S. So after a long night at Serenity Studios—“wrote a song yesterday”—and five hours of sleep, she is ready to learn about the charter school on Skid Row where most of the children are both Latino and homeless or semi-homeless. They live in cars, garages, shelters, or squat many families to a room.
As the Escalade speeds down Sixth Street, Shakira changes the conversation from her work in Latin America. “If the fastest growing population in this country is Latino, that means we are the future of this country,” she says in pretty fluent English. “And, we have proven we have talent,” she pauses and winks. “Now we need the tools to succeed.” She reminds me that Latinos account for the highest number of high-school dropouts.
Shakira stops talking for a moment and looks out at the street. “I lived here for a few months when I was eight,” she says. “It was a turning point in my life. My mom and I came. My father went bankrupt, so he sent us to a friend’s house in Orange County. For me it was sort of a vacation, eating American candy, while my dad was going through hell.”
When she returned to Colombia, everything she knew of her comfortable home was gone: the two cars, the furniture, even the air-conditioning units. “I remember the holes in the wall,” she says making a square with her fingers. “The color TV became black and white. I was so upset, frustrated, pissed at my parents. I couldn’t believe their incompetence,” she ends with a laugh intended to explain how immature her attitude was.
To show her some perspective, her parents took her to a park. “I saw homeless kids, with bare feet, smelling glue. It left such a mark in my mind. I realized that I could still attend school. I still had a loving family,” she says leaning forward.
“I made a promise to myself. I knew then that I wanted to be part of the solution, for those kids, for myself and for my parents. I made a commitment to succeed,” she says. “I did not want to spend the rest of my life not being able to ride in a nice car.” Her tiny manicured hand pats the beige leather seat.
The nuns at her school—the ones who encouraged her to belly dance at school performances—also taught her “social awareness.” Every Friday her class was taken to one of the most marginalized neighborhoods in Barranquilla. “The conditions to teach these kids were not viable for learning. They were barefoot, half naked, hungry, hot. There was no way these kids were going to learn—not even a vowel,” she says, still frustrated. “What really struck me was the state of the schools. How can you get them to focus if they are not even in a classroom?” El colegio de Shakira stands right on the spot where the nuns took her.
“I don’t know if the children will recognize me,” she says as the car pulls into the school’s parking lot. She removes the heavy rhinestone earrings in the form of lightning rods that have been weighing down her ears. “But if they do and I hug them, I can hurt them with these.”
With the only visible sign of rock glamour off, Shakira steps out of the car in a dark plaid shirt and jeans (no makeup) and becomes almost shy as she says hello to the three women standing outside the school’s door. For the next hour, she is all ears as the women explain how they run their school. A few children ask for autographs. Beth, a round-faced eight-year-old, approaches. Shakira happily gives her a hug, with no earrings to get in the way.
Why children and education? Why displaced communities? She responds, “Because I see myself in those children. It’s the same thing that happened to me—at a worse scale.”
As the car enters Beverly Hills, I pose my last questions: How do you get Latin American presidents to listen about bringing up babies and day care? The short answer is by being Shakira. The longer one: “ALAS created a Secretariat for Early Childhood Development and together we mobilize to get them to upscale and expand their programs. The World Bank just announced a $300 million credit line to finance some of these programs. We’ve gathered the most important experts working in this area to put together a manual to bring to the next summit.” She will do that at the next Ibero-American Summit to take place in Argentina in November. President Cristina Kirchner has given her an “extraordinary commitment” to make early childhood development a central topic of discussion.
And what will you tell them in Argentina?
“We just want to make it easy on the governments so that they don’t have an excuse not to do it. Here, sirs, we got the credit. We got the money. We have the best experts. We got technical support. We got recommendations. Now, get the freaking job done.”
Ms. Paternostro is the author of “My Colombian War: A Journey Through the Country I Left Behind” (Holt, 2007).
Shakira’s Colombian War
By SILVANA PATERNOSTRO
The Wall Street Journal, April 3, 2010
The Latin pop star on why she’s spending millions on schools in her home country and beyond.
Los Angeles - Everyone knows Shakira as the hip-shaking siren of pop music. If you don’t know what I mean, go to YouTube and check out the music video for “Hips Don’t Lie.” The song, recorded with Wyclef Jean in 2006, topped the charts in 55 countries, including the U.S. Her latest song, “Gypsy,” is a similar tribute to her famous curves, only this time she gyrates for shirtless tennis god Rafael Nadal.
But Shakira—born Shakira Isabel Mebarak Ripoll—is intent on making her advocacy work as well-known as her hips. Her cause? Educating impoverished children by building schools and community centers in some of the poorest neighborhoods in her native Colombia, and convincing other Latin American leaders to invest in early childhood education.
When I catch up with Shakira, she’s taking an afternoon break from her tight recording schedule in order to visit a charter school in East L.A. “I always had the intuition, even as a little child, that I was called for a big project,” says the singer, now 33-years-old, as we ride in the car. “I am sure that many children feel that way but they don’t have the environment that is conducive for them to exploit their potential to its fullest. I was lucky I had those things: caring, loving, educated parents and a good school.”
View Full Image
winterpaternC
Zina Saunders
winterpaternC
winterpaternC
That luck—combined with hard work—has allowed her to promote her causes at the highest levels. President Obama met with her last month in the Oval Office to get her advice on education for Latino children. In the past six months, she has addressed the Oxford Union, appeared in the opinion pages of the Economist, and was asked by the Brookings Institution to be the celebrity behind its proposal to create A Global Fund for Education, modeled after the Global Fund to Fight Malaria, Tuberculosis and AIDS.
She knows about deprivation from her own upbringing in the extremely stratified city of Barranquilla, where I also grew up. Located on the Caribbean side of Colombia, nearly 50% of people in this port live under the poverty line. More than 43% of children do not have access to early education, and less than 20% have access to the Internet. What will happen to those who live in extreme poverty and receive no schooling is predictable in a country with a protracted civil conflict and an economy fueled by drug trafficking: “Being a militant or a drug trafficker are the only options.”
In 1996, Shakira started investing her own financial resources to reverse this trend. Her Barefoot Foundation began “very small, writing checks for orphanages.” At the time she was 18 and had her first hit in Latin America. That album was “Pies Descalzos,” after which her foundation was named. In those days, she was more of a rock-and-roll chick, a singer-songwriter with black hair, tight jeans and a guitar. Two years later, she had a bigger hit. “Where Are The Thieves?” sold a million copies. Armed with more caché and a heftier checkbook, she called Maria Emma Mejia, a former minister of education, to help her run Barefoot. “I was lucky that she said yes. I was only 20 years old. And she was so well-known.”
Shakira then moved to Miami, dyed her hair blond, and learned English—determined to conquer the U.S. market. In 2001 she came out with “Laundry Service,” her first English album, which sold 18 million copies. By 2006, she dominated the charts with her song about hips.
According to last year’s figures, Shakira has sold some 50 million records. She has won two Grammy awards and seven Latin Grammies. Two years ago, Forbes named her the fourth richest woman in music (after Madonna, Barbra Streisand and Celine Dion). And she’s just been commissioned to write the official song for the upcoming World Cup in South Africa. Billions of people will watch her perform live on TV.
As for her foundation, what started as an effort to feed a few thousand refugees on the Pacific Coast has now matured into a full-fledged organization that provides high-quality education, nutrition and psychological support to poor and displaced children and their families in three different Colombian cities. These centers, known as mega-schools, serve more than 6,000 children and their families.
“Our projects have proven that if we get the parents interested it makes a huge difference,” she says. “We get them interested because the kids are receiving a meal, because they are happy, because they are playing. And that way they are being protected from joining the guerrillas or the paramilitary.”
Shakira’s latest contribution went to our hometown. In February 2009, the Barefoot Foundation inaugurated a $6 million K-12 mega-school. El colegio de Shakira, as it is known locally, gets only praise. A friend described it to me as an American institution, by which she meant state-of-the-art. The complex includes an auditorium, chemistry labs and even air conditioning. “Parents receive English classes and computer skills,” Shakira says, “and the entire neighborhood can play soccer there.” Families look for every possible way to move close to the school.
Is she doing the work of the government, I ask? “No,” she says emphatically, “We are proving a case. If we can do it then the government can do it.” Shakira’s foundation builds the schools but then donates them to the district to run. “Over time, the government increasingly assumes responsibility. That is essential.” The jury is still out on this model. Will local government agencies with a dismal record of management allow the schools to thrive? For now, Shakira can boast that this year’s graduating class at El colegio de Shakira received very high test scores on their college placement exams.
Two years ago, Shakira showed up in El Salvador at the annual meeting of Latin American presidents. Word was that all the leaders cared about was getting their picture taken with the star. At the next one in 2009, Shakira fared better in promoting her cause. Colombia, Paraguay, Chile, Panama, Argentina and Mexico signed up to work with ALAS—a foundation started by Shakira and her fiancée to combat poverty—to bolster early childhood education in their countries. Neither Venezuela’s Hugo Chávez nor any of the governments that support him were interested.
Today, Shakira’s focus is on how to help Latino children in the U.S. So after a long night at Serenity Studios—“wrote a song yesterday”—and five hours of sleep, she is ready to learn about the charter school on Skid Row where most of the children are both Latino and homeless or semi-homeless. They live in cars, garages, shelters, or squat many families to a room.
As the Escalade speeds down Sixth Street, Shakira changes the conversation from her work in Latin America. “If the fastest growing population in this country is Latino, that means we are the future of this country,” she says in pretty fluent English. “And, we have proven we have talent,” she pauses and winks. “Now we need the tools to succeed.” She reminds me that Latinos account for the highest number of high-school dropouts.
Shakira stops talking for a moment and looks out at the street. “I lived here for a few months when I was eight,” she says. “It was a turning point in my life. My mom and I came. My father went bankrupt, so he sent us to a friend’s house in Orange County. For me it was sort of a vacation, eating American candy, while my dad was going through hell.”
When she returned to Colombia, everything she knew of her comfortable home was gone: the two cars, the furniture, even the air-conditioning units. “I remember the holes in the wall,” she says making a square with her fingers. “The color TV became black and white. I was so upset, frustrated, pissed at my parents. I couldn’t believe their incompetence,” she ends with a laugh intended to explain how immature her attitude was.
To show her some perspective, her parents took her to a park. “I saw homeless kids, with bare feet, smelling glue. It left such a mark in my mind. I realized that I could still attend school. I still had a loving family,” she says leaning forward.
“I made a promise to myself. I knew then that I wanted to be part of the solution, for those kids, for myself and for my parents. I made a commitment to succeed,” she says. “I did not want to spend the rest of my life not being able to ride in a nice car.” Her tiny manicured hand pats the beige leather seat.
The nuns at her school—the ones who encouraged her to belly dance at school performances—also taught her “social awareness.” Every Friday her class was taken to one of the most marginalized neighborhoods in Barranquilla. “The conditions to teach these kids were not viable for learning. They were barefoot, half naked, hungry, hot. There was no way these kids were going to learn—not even a vowel,” she says, still frustrated. “What really struck me was the state of the schools. How can you get them to focus if they are not even in a classroom?” El colegio de Shakira stands right on the spot where the nuns took her.
“I don’t know if the children will recognize me,” she says as the car pulls into the school’s parking lot. She removes the heavy rhinestone earrings in the form of lightning rods that have been weighing down her ears. “But if they do and I hug them, I can hurt them with these.”
With the only visible sign of rock glamour off, Shakira steps out of the car in a dark plaid shirt and jeans (no makeup) and becomes almost shy as she says hello to the three women standing outside the school’s door. For the next hour, she is all ears as the women explain how they run their school. A few children ask for autographs. Beth, a round-faced eight-year-old, approaches. Shakira happily gives her a hug, with no earrings to get in the way.
Why children and education? Why displaced communities? She responds, “Because I see myself in those children. It’s the same thing that happened to me—at a worse scale.”
As the car enters Beverly Hills, I pose my last questions: How do you get Latin American presidents to listen about bringing up babies and day care? The short answer is by being Shakira. The longer one: “ALAS created a Secretariat for Early Childhood Development and together we mobilize to get them to upscale and expand their programs. The World Bank just announced a $300 million credit line to finance some of these programs. We’ve gathered the most important experts working in this area to put together a manual to bring to the next summit.” She will do that at the next Ibero-American Summit to take place in Argentina in November. President Cristina Kirchner has given her an “extraordinary commitment” to make early childhood development a central topic of discussion.
And what will you tell them in Argentina?
“We just want to make it easy on the governments so that they don’t have an excuse not to do it. Here, sirs, we got the credit. We got the money. We have the best experts. We got technical support. We got recommendations. Now, get the freaking job done.”
Ms. Paternostro is the author of “My Colombian War: A Journey Through the Country I Left Behind” (Holt, 2007).
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