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World Bank Protesters Advocate Tyranny Over Liberty By: Joseph J. Sabia
FrontPageMagazine.com | Wednesday, October 02, 2002

This weekend, several thousand students and 1960s-era relics gathered in Washington D.C. under the banner of "Mobilization for Global Justice" to hold a World Bank/IMF Protest Rally. The overall themes of the event resembled those in a standard college lecture — condemnation of free market capitalism, endorsement of global Marxism, and opposition to corporations. These themes were conveyed through musical performances, sketch comedy and incoherent speeches by neo-communists. The content of speeches ranged from how to allocate Ghana's water supply to how to regulate South American health care costs to how stop corporate evil.

Wading through the garbled rhetoric, two clear messages emerged: (1) At best, the protesters are woefully ignorant of the critical role that private voluntary exchanges play in the creation of wealth; at worst, they have no regard for individual liberty and private property rights. (2) These people blame the International Monetary Fund and the World Bank for all of the Third World's economic and social ills.

The rally began with event organizer Robert Weissman denouncing the World Bank for tying financial assistance to Ghana to the privatization of its water supply. He argued that since water is essential to human life, it should not be treated as a commodity sold for profit by firms. (These people view the pursuit of "profit" as slightly more reprehensible than, say, necrophilia.)

As the Ghana National Coalition Against the Privatization of Water has stated in its Accra Declaration:

The public sector is legally and constitutionally mandated and designed to represent the public interest. The essential purpose of the private sector on the other hand is to make profit not to promote the public good. Any public benefits arising from the private sector's activities are incidental not designed. As a result, the private sector cannot be trusted with the public interest.

This, of course, is hogwash. Why would anyone believe that politicians have the "public interest" in mind? The Republic of Ghana is a constitutional democracy. Representatives of the government act so as to win elections. In Ghana, elected officials vote to take away the property of some citizens and transfer it to others so that their probability of getting re-elected is maximized. That is their objective, first and foremost.

Private firms, on the other hand, compete with one another so as to provide consumers with goods and services that they are willing to buy. Hence, firms acting in their private interest (via profit maximization) have an incentive to act in the social interest (giving consumers what they want).

So what is going on with the water supply in Ghana? Currently, there is no private ownership and therefore no defined property rights. The state is solely responsible for the allocation of water to its citizens. Not surprisingly, (i) the water supply is severely polluted, (ii) there are mass shortages of water supplied to the nation's poorest citizens, and (iii) there is no technological improvement underway.

Why do I say "not surprisingly"? Well, one would expect that the water would be excessively polluted if there were no property rights defined. If individuals do not have a financial incentive to keep the water clean people will take less care in preventing water pollution. A private water firm would have an incentive to prevent the pollution of its water supply because it will be selling the resource for profit.

Similarly, one would expect mass shortages of water to the poorest Ghanaians because the political allocation of water is likely to disproportionately harm those who are least likely to affect the outcome of elections. Why should a Ghanaian representative care about getting clean water to constituents who will not play a key role in his election? A private firm, on the other hand, has an incentive to sell his product to poor individuals as long as he can earn a profit (thereby covering the costs of producing the good).

The logic for the lack of technological innovation by the state follows from the previous argument. If there is no electoral incentive to improve water portability, it will not happen. Currently, there is little incentive for Ghana's private firms to invest in irrigation and portability techniques because they are not permitted to share in the profits from the sale of water. Privatization, however, will unleash the creative capacities of individuals by introducing incentives for innovation.

Later, Mr. Weissman complained about the World Bank's policy of encouraging Third World Nations to charge user fees for health care treatment. Pointing to a "Bush is a Jerk" sign in the crowd, Mr. Weissman began the inspired chant: "They say 'User Fees,' we say 'Treatment for Free.'"

What the hell is "treatment for free?" There is no such thing as free treatment. The health care services provided to patients come at a cost — the labor costs to the doctor and his staff, the cost of medical capital, etc. The World Bank is rightfully concerned that if citizens face a price of zero (rather than a price reflecting the true costs) for medical services, they will overconsume these services. This is the rationale for why we have user fees in the United States — usually in the form of co-payments and deductibles.

These user fees are designed to allocate health care resources more efficiently so that they are not wasted in areas where they are not as highly valued. Without user fees — which is the status quo in many African and South American countries — we observe massive overuse of medical clinics, long lines, and little technological innovation. In other words, the "treatment for free" policy is causing worsening illness and death.

The rally's keynote speaker was former Green Party Presidential Candidate Ralph Nader, who gave his standard fire-and-brimstone diatribe against American corporations:

How can we have equal justice under the law in the United States of America between you and General Motors? Between you and Exxon? Impossible. We have to subordinate the power of the corporations to the sovereign power of the people, institutionally.

What Mr. Nader fails to understand is that any "power" that corporations have results from free and voluntary exchanges between consumers and producers. Capitalism is a bottom-up economic system in which consumes' demands for goods and services drive what firms produce. Thus, by definition in a free market, the individual consumer has supreme sovereignty. There is no need to create laws or regulations to establish some vague notion of "equal justice."

The only power of any consequence that individuals ought to fear is government. If an individual does not like a corporation's practices, he is free to refrain from purchasing its products or from selling his labor to the firm. See what happens to an individual on April 15 if he refuses to buy the state's products or to sell his labor to the state. That is the difference between corporate and government power.

Mr. Nader closed his speech on a note of optimism, and perhaps a note on which libertarians, conservatives, and communists can all agree:

We have to recognize that the genius of the Third World is going to save the Third World. It's not going to be the World Bank and it's not going to be the IMF.

While there is little evidence of genius in the Third World (hence, why they are called Third World nations), perhaps this is the result of socialist, tyrannical governments. Regardless, Mr. Nader is correct — neither the World Bank nor the IMF is going to lead these backward nations to prosperity.

Currently, Americans wages are stolen — albeit legally by a majority vote in Congress — to pay for World Bank/IMF loans. This practice is a disgrace and should end immediately. Not only is it unconstitutional, but it is immoral. The World Bank and the International Monetary Fund have their hearts — and more importantly their ideas — in the right place, but that does not justify the rape of American taxpayers. If Third World Nations are ever going to improve, they have to voluntarily choose to adopt free market reforms.

As for the hippie Washington protesters, they may have good intentions, but as the old saying goes: "The road to hell is paved with good intentions." These people ought to hit the road.

Joseph J. Sabia is a Ph.D. candidate in economics at Cornell University.

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