Robert Lawson, director of the O’Neil Center for Global Markets and Freedom at the Southern Methodist University (SMU) Cox School of Business join us to discuss his new book, Socialism Sucks: Two Economists Drink Their Way Through the Unfree World.
- Robert LawsonProfessor and Director of O’Neil Center for Global Markets and Freedom at the Southern Methodist University
Welcome to the Policy of McCombs podcast, a data driven conversation on the economic
issues up today in this series. We invite guests into our studio to provide a highlight
of their work presented during a visit to the University of Texas at Austin Policy.
Emma Combs is produced by the Center for Enterprise and Policy Analytics at the McCombs School of Business.
I am your co-host, Carlos Carvalho, with my colleague Mario Villarreal.
Our guest today is Bob Lawson, professor of economics at SMU and director of Do a New Center for Global
Markets and Freedom. He’s the coauthor of the Frazier Institute Economic Freedom of the World Annual Report
and joined us today to talk about his recent book, Socialism Sucks to Economist Drink their Way Through the Umphrey
World. Bob, welcome to Polytheistic Combs. Thanks, Carlos. Good to be here. So before we start,
let’s let’s talk about the reason you decided to to write this book and how did you and Ben Powell
decided on the framing and style of it? Well, there’s a formal reason for writing the book, and that is the
you’ve probably seen these polls that are coming out of young people’s saying like 40 percent of young people saying they have a favorable
favorable view of socialism. So that’s a little confusing to me. I don’t think socialism is a very good system
and I think it’s worked where it’s been tried, but a lot of young people say they are. Now, that’s
the formal reason. The informal or informal reason is that Ben and I wanted to go to Cuba and drink. And so we figured
if we wrote a book about it or wrote a book chapter, we could write it off. So we get a 30 percent off that way, you know. So
it’s there’s a there was a little bit of self-serving and especially the beginning. We don’t really know what
we were doing. We’re just let’s go some place, write a chapter. And then we went another place wrote a chapter. It wasn’t
honestly it wasn’t that well-planned out in the beginning. But the the the format
and narrative was definitely targeted to a younger audience, too. To a nonacademic audience. Yeah,
sure. They write a title, gives it away. And you know, Ben, I’ve written 100
journal articles and book chapters. Ben’s written 100. I mean, we have hundreds of articles that we’ve written
books. And let’s face it, you know, an academic journal article is I mean, 10 people
read the thing. I mean, and you slave over for three years. And, you know, of the 10 people, six of them where you’re
your buddies. I mean, so. Including the author. Yeah, right. You know, your family. So.
Exactly. So we decided we wanted to write a book that regular people would read. This is this is a popular trade press book.
It’s on an academic press book. There are some footnotes at the back because we’re still professors. We can’t help ourselves.
But at the end of the day, if you’re going to write a book that regular people are going to read, you can’t write another boring
journal article. I mean, you’ve got to write a book like this. I read I love Anthony Bourdain
and P.J. O’Rourke. And and that writing style is what we went for.
I don’t know that we can claim to be anywhere in the same league as those two great writers, but
that was the style we want. So I you know, I think one of the lines is the publisher came up with the book is
the bastard stepchild of Anthony Bourdain and Milton Friedman. That’s and that’s what we write.
Yes. Let readers decide if we hit it or not. OK, so before we go into specifics of the
book, let’s take a minute to talk about Economic Freedom Index. Tell us about that endeavor and
you know, your involvement with it. Sure. So I might my day job is to run the center. And
a large part of that day job includes me working on the Economic Freedom of the World Index
that fragrance to publishes and has published every year since 1996. I’ve been involved in the projects since the early
what the index does, it tries to quantify how economically free a country is.
So we want to try to put a number on how capitalist the country is. So in the current index, Hong Kong is
number one. It’s the most free market place that we rate the last place we rate as Venezuela.
I should mention we don’t rate North Korea or Cuba because of lack of data. So they were probably still able
to do Venezuela. Venezuela is the lowest rated country that we currently score is 160 second
out of 162. So it basically trying to put on a sort of a a number line from
economic freedom, capitalism on the one hand, and sort of government control, socialism on the other end.
And that’s what it is. And it’s a continuum. I mean, there’s no bright line between socialism. Capitalism is really the reality
is every country has elements of both capitalism and elements of socialism and some have more or less.
And that’s why we’re trying to measure it. It’s a big data project. And you guys are in the data around here.
It’s literally hundreds of thousands of numbers, tax rates, tariff rates, how
days takes to start a business, monetary supply numbers just for 160
countries. We have data back to the 70s. So it’s a very large like a continually updating.
This is the effort. And so I see here I’m looking at the website right now. And the last published
one is you have a report for 2013, but the data is up to 2017. Takes a while to. Yeah. It takes
about a year for the data collecting agencies that we use to collect it and then another year for us to get
our act together and publish it ourselves. So we’re always about two years behind. It’s really more like a year and
a half. But I like to be I’m an academic. I want to be honest. If I’m putting out a report
that uses 2017 numbers, I’m not going to call it a two, not does a 19
report. I well, call a report. It’s two of the nine teams that we do it. But I want to be honest with my
readers about the year. So we’re always like two light years behind, two data years behind.
The score is I’m looking at it. There’s like five categories, right. You talked about the size of government, legal system,
property rights sound. Money films are traded and traded nationally in regulation. And one
thing that I. That right. Yeah. OK. And one thing that I noticed in the writings that you’ve been also thinking
about personal freedoms also inside of it, like you have a gender adjusted things
about. About how men and women are treated in society. It isn’t Economic
Freedom Index. It’s really only looking at that narrow aspect of our lives, dealing with buying and selling,
producing, consuming, you know, stuff like that, hiring and firing. The economic side of life
we did at a an adjustment for gender inequality in the legal system when it comes to economic
matters. So it’s not so much about sexism in a sort of cultural
or outcomes in terms of gender pay gap or something like that. For example, the World Bank
has its data set and what what it does, they basically count all these different laws and
if they apply evenly to men or women or not. So, for example, can you work at night? In
many countries, there are restrictions on women working at night that don’t apply to men. And we basically
collect all of the data we get. And we we and we score the countries for that
and that. And it’s but it’s all economic stuff. It’s like, can you work at night? Can you inherit property in the same way as a man?
Can you? All these things. So it’s it’s not about gender outcomes
or cultural aspects to, you know, gender inequality, which are important,
but that’s not what we’re going to do. All right. So let me let me just start now taking the index as
a as a hook here and Tombo, Venezuela. So you mentioned Venezuela as as is the first chapter
of the book is your first visit? I mean, maybe not this or the first visit chronologically, but the first one presented
in the book. And Venezuela was ranked top 10 in your index in 1970.
Yeah. There were fewer countries, so they were like tenth out of 50, but still very highly still. It
was a country that no one would look and perceive as perhaps not completely prosperous as as as
Europe or the U.S., the playing time, but on its way country, a lot of resources, a country
with a really well established system. And now they ranked dead last. So what
was the experience of it as well? Well, it was pretty dystopian, frankly. We we went to the border
of Venezuela and Colombia. We went to the city on the Colombian side called Cucuta. And
you may have seen on the news these bridges and these these these two to bridge crossings between the countries
where every day, at least when we were there, every day, thousands and thousands without exaggeration, tens of thousands over
the course of a day are crossing from Venezuela into Colombia to buy food.
These sort of makeshift stalls and established on the Colombian side were Colombian entrepeneurs
are showing up and people are coming. We talked to one couple, Pablo and honourary. They’d come three days one
way. So six day round trip. And they were middle class people. He works in a hotel and they had a little bit of
English. They were not peasants by any means. And they were doing a six day trip to buy rice and beans.
And that’s I mean, that’s dystopic. I mean, they left their child behind with family. I mean, can you
imagine how bad life would have to be in your personal circumstances to think it’s a good idea to
get in your car in Austin and drive to Vancouver for food and leave your
most precious know child behind in a risky drive? And, you know, it’s just
it’s terror. It was actually emotionally wrecking to see the people there
and talk. We were talking them as they were going through. It was it was it was a tale of two cities. I mean, the Colombian
side’s a bustling entrepeneurs, a crazy people, you know, trying to to, you know, get the
Venezuelans are coming over. Funny story is that Venezuela has massive hyperinflation is,
you know, something like eighty thousand percent. Most recent years, people were literally
bringing in suitcases full of cash and then they would trade
it for a very small amount of Colombian pesos. And they don’t even count the bolívar. They just
weigh them. You know, it’s easier to wait. The way the way the bills is to count them. So
and then so they and then they buy their rice and beans. And I’m surprised that trade is to exist. And who
actually is willing to hold the belief. Yeah. So, you know, on the Colombian side and obviously they’re getting a huge black
market exchange rate there, pretty bad. And I think that what what they can do is they can quickly.
Sell them back. It’s obviously a terrible rate, but somehow I know that
that works for them, so. Yeah. Yeah. Yeah. Trying to like me. Thanks for joining
us. But to try to make that link a little bit more explicit for those that don’t understand
very well. Says in the categories that Carlos mentioned about
sound government and the various things that come with it in the index of economic
freedom, what it means in practical terms to
have economic freedom versus not having it in the context of your experience writing this
book, how I think about it is an enabler, but I would like to for listeners to
do to get your take. Well, the basic idea of economic freedom or capitalism, if
you want to use that term, is a decentralized decision making system about economics.
That is, say that the decisions about what we produce, how we produce those things,
what food we grow, how we grow, the food, the decisions you and I make at the store
about what we buy, the consumer decisions. All of these things are being made by the individuals themselves.
And there’s no set, there’s no plan, there’s no bureaucracy above them telling farmers, okay, you’re
going to grow broccoli, you’re gonna grow alfalfa sprouts or whatever. I don’t know what. There’s a lot of plans, but there
are decentralized. Right. Yeah. I mean, the individual farmer has ever planned for his farm, but there’s no plan
for farming. There’s no plan for car manufacturing or car manufacturers
who make cars. And they need to plan the manufacture of these cars. But there’s no government agency or overarching agency
that’s in charge of these things and everything. Decisions all the way down.
I mean, what kind of occupation you choose as as a person? Do you want to become a doctor or lawyer? Do you want to become a plumber?
All those decisions are decentralized. That’s the essence of an economically free systems, decentralized decision making,
socialists systems of various types want to have a central plan.
They want to have a usual that means a government entity. It doesn’t always mean that, but it usually means government entity is going
to be centrally planning. There’s gonna be an agency that’s OK. We are in charge of broccoli
and we need to decide which farms make the broccoli, which farmers are assigned to make to
work on those broccoli farms. We decide where the broccoli gets shipped to the stores, what the price of the Rackley
will be when we sell it to the consumer. All of that stuff has to be decided by a central agency.
Capitals and market systems don’t have any central edges. You just sort of happens spontaneously from the bottom.
That’s the difference. And we’re trying to measure that with data, you know, with the index, but that’s
basically it. Well, how do you tell them a country like Venezuela that started out being free? Biomet by by the
measure, you have to get to be completely unfree with a process like to get there. It was
that was that unlike a lot of other places where it was quite discrete, Venezuela
gradually moved that way. And in this it pre-dates Chavez, frankly. But they began,
for example, before Chavez too aggressively. The government began to aggressively
favor Venezuelan industry over external industry exercises. And so Texas
import substitution is called. And that was the that didn’t go well. So Chavez in many
ways was a response to that. And he promised a new socialist revolution. We’re going to fix
all these problems. And they began to do this. They began to centralize. They Nash, of course,
the oil industry was nationalized, but it’s gotten to the point where a large section, sections
of the agricultural sector or national nationalized, they’re owned by the government. They’re government farms.
I mean, it’s factories, shoe factories, clothing mills, hotels.
Literally, the government of Venezuela has nationalized hotels. So it’s not complete socialism.
There’s still no little individual stores are still privately owned. And things are some private companies. But
the government is now essentially in a position of running major aspects of the
Venezuelan economy. And at some point we use the word socialism for that. What do you
thing is in the minds like following these narrative? I I
I saw one of later we’re gonna have a conversation today on
the book with larger audience. And I one of your slides, I saw you have a tweet by Michael
Moore and he says, quote, Most polls now show young adults
quote. And I’d remove something from the quote, because he puts something in parenthesis when he says Americans
prefer socialism. Prentice’s fairness to capitalism. Perens, his selfishness.
Well, he does a choice. I think that all of us prefer fairness to selfishness.
He’s got what is in the minds of people who looking for socialism or or he’s the narrative about centralise
systems versus decentralized systems. Why is this so popular among many people? What
what do you think in the book you did a little bit of your account of
trip. That is interesting. And. Tell us a little bit about that so. Yeah. So I think a lot of people do think
capitalism means selfishness and socialism means fairness. I think they think
that. I don’t think the evidence suggests that if you look at socialist countries, they haven’t been terribly fair in real life.
If you look at capitalist countries, they’ve actually been pretty fair for lots of lots of
people for various reasons. So but it is not wrong, though, that people believe
these things be true. One of things we did for the book is we went to Chicago. One of our trips was to go to socialism. The socialism
conference in Chicago, it’s it bills itself as the largest gathering of socialists in the United States. Something like
It’s a little bit of a strange experience for me at least. And we weren’t there to try to
play gotcha with it. And they were mostly young people, just generally curious as
to why they’re there. They call themselves Conrads. Why are they calling it? Would they think socialism is a good idea?
There’s a very there’s a bunch of different types of people we ran into. There’s people that really just don’t understand
what socialism. And they just think it means fairness. They just think it means where I want a fairer world. Well, I do, too.
I’m sure you do. You do, too. I mean, I want a fairer world. The question is, how do we achieve that? And they somehow
have latched on this idea that giving government control over the economy is going to make things fair. Well, it hasn’t actually
made things fair anywhere. It’s been tried. That’s why we went to Venezuela and Cuba and other places for the book.
But we did run into a few people who were more sophisticated and they were advocating a
democratic socialism as if putting democratic in front of the word changes it.
And we explicitly talked about this in our in our book, Democratic socialism turns out to be
pretty much a myth at the largest scales where it’s been tried, it’s failed. Venezuela’s
one case that started out democratically, Chavez was democratically elected. Maduro at least
once was probably Democratic elected in the last election. Anyone thinks was fair. But.
And the the problem with democratic socialism is it concentrates
power in the hands of a tiny few people. And socialism doesn’t work as a kind of economic
system. That’s empirically true. And so what happens if you have a democratic system, an economy that’s failing,
its people usually will vote the rascals out. But of course, the rascals don’t want to get voted out. So what happens
is democratic soap’s socialist country, countries, economies fail and then the politicians
running those economies get to get rid of the democracy because they know what they keep. Democracy they’re going to get
they’re going to get voted out. And that’s played out in most places. That was him Democratic in the first place. And there was
no point in time where the Bolsheviks or Mao was democratic. So the other big cases of socialism
around the world were never democratic at all. But but democratic system, I think we just get socialism
in the end. The other thing is socialism from below. It’s sort of these people
at the conference were advocating a type of socialism, very micro socialism, like small
worker run enterprises, kind of communes, kibbutzim. I don’t know exactly
what what they have in mind or in a beer, a little bit bag. But the idea is we’re gonna have a group of workers
collectively own the enterprise. They’re going to vote on the business decisions of the
of the firm. I have no problem with that. I don’t think it can be very efficient. I don’t think you’re going to get the economies of scale.
I think there’s a lot of economic problems with those types of enterprises. But if you want to start
a worker run co-op restaurant or should we have some good beer, beer co-ops
and tell them working our way. But but that’s about as far at this scale. And that’s going to be pretty limited, right.
You’re not gonna get an iPhone from that kind of enterprise. It’s just never going to happen. To make an iPhone requires
literally the cooperative efforts of millions and millions of people, massive supply chains, tens of thousands of coders,
completely decentralized. And that’s just never going to happen. An old worker run enterprise.
So I’m OK with it. I mean, there isn’t a law against running a worker on enterprise. You know,
it’s just not gonna be very efficient. We will all be poor if you want to if you want to move the entire economy that way, you’re gonna
have to force us to because it isn’t other choice. We’re not gonna voluntarily give up our standard
of living so we can have worker run co-ops to make all our food or our groceries and
clothes and things. So go back to the book, go to Cuba. Next. Next chapter was Cuba Hand.
And that’s the trip that I wanted. And you know, and I don’t know if you recommend or not, but that
experience. No, it’s a terrible thing. But it’s an interesting. I mean, to understand and see it, it’s it’s it’s a
must have been an interesting. Yeah, it was interesting. I mean, places falling apart, literally.
That’s the sad part, of course, dangerous. It’s I really do worry that
tourists will go there someday and before and like get hurt. And it’s really
a tough place like the. Not in the violence. Violence. No, no, no, no violence. I mean, literally like crumbling
building. I say I see capital where the capital is actually falling, literally like Vesco capital.
You know, you have to worry about buildings falling off on your head as you’re walking down the street. It is that bad.
And but it’s not it’s not terribly unpleasant. And in general. In general sense. It’s extremely
strange. The thing about Cuba is that it’s so strange, it’s weird. There are no advertising.
That’s not a function of being poor. I mean, I’ve been to Jamaica. Jamaica has got advertising everywhere
to make us poor party about as poor as Cuba. And there’s advertisments everywhere
you can. There’s no shortage of it. And that’s with that. There’s no boats, no airplanes, there’s no
sailboats. It’s no cars. Hardly in the Caribbean. No boats. Yeah. It’s very it’s a very
eerie place. The contrast between the private and public
in Cuba, there is a little bit of private I wanted to touch on that, that the restaurants and hotels examples are shocking.
I they really are shocking. I’ve never. I mean, the one hotel government hotel we went to hotel culture even
in Havana, in central Havana was I mean, they left the soap from the previous guests
in there. I mean, it was it was the most disgusting place I’ve ever been. And I I’m old enough to remember really
bad roadside hotels in the United States. This was something else entirely. But
but they do have these private casa particularize that are basically Airbnb’s top operations. And
I think you can actually, oddly enough, get the money or BMB, because the Cubans in Miami will set
up an account for their relatives on the island and you can’t use your credit card on the island. American embargo
prevents that. So, so, so but you got a very lovely little little places with
good air conditioning and a coffeemaker and water. Water was wholly excellent food. Yeah, well,
you know, the food and the rest of the private restaurants have been legalized are you can’t find them. You
literally can’t find the private restaurants because there’s no signs anywhere. There’s a door in the middle
of a bank. Well, looks like a bombed out building. And that’s a restaurant used to be directed there by a, you know, taxi driver.
Somebody will get you there. But you go into the restaurant like, wow, this is a nice restaurant. The government run
restaurants. We walked out of a couple. They were just I mean, they were I mean, again,
public school cafeterias or improvement over what we saw there. So
there was really that Bill, very, very limited amount of private enterprise. Those are the two little carve-outs is that some you can run
out home like rooms in homes and you can have very small private restaurants. This
to kind of carve out exceptions. And they’re really recent. They’ve only been legal about 10, 15 years
in the Cuban economy, but everything else is government run and it’s the government that prevents the car. The reason our new
cars isn’t the U.S. embargo. It’s because the Cuban government won’t let cars come in. There’s no
reason to. But, you know, our embargo doesn’t stop the Brazilians from sending cars to Cuba. Mexicans,
you know, whatever. So the reason they’re so, so few cars is has nothing to do with U.S.
policy, which is a dumb policy. That’s a different story right now. So we we you know, the economist
statisticians, we have a hard time assigning causality to things. And, you know, one might say, wow,
is it socialism really that drove displaces into into ruin and so on. And one of the countries you visit,
of course, is North Korea, where is perhaps the one of the cleanest natural experiments we’ve ever seen in terms of
a place that actually got reminded in the book that the North was richer, the north was more developed than
the South before, the Korean. A lot richer. A lot richer. Exactly. And then, you know,
there’s a there’s a separation of the country. One goes get the list at a one dozen. And I mean,
tame Koreans, same religion, same path, same language, same everything. Now, we’ve we’ve had a
number of these natural experiments with North South Korea, at least in western Germany. They’ll be
in Cuba. Cubans in Miami. Very different experiences. So in every case, of
course, the the socialist side suffered dramatically.
To be clear, we didn’t actually go into North Korea. We went to the border of China and North Korea. The northern North
Korea border city of Dandong on the China side. And our wives were quite adamant
about this particular ideas. No, North Korea was was that it was the rule.
But we did, you know, sort of survey the Lancey. We were as close as we could see. The North Koreans on the other side,
the river, its small river. So it’s not like the DMZ in South Korea. North
Korea border, which you can’t see anything. So we associate it. It’s quite dilapidated and dark
at night. Many people may have seen the satellite photo of the Korean Peninsula, where the entire northern
side, except for the capital, is is all dark. You know, at night, there’s no lights
on the southern side, of course. And the China side all lit up like a Christmas tree. And that’s not a Photoshop. I mean,
when you when you look across the river from the Chinese side and to the North Korean side,
just three, four hundred thousand people living over there. But it’s completely dark at night. They have no power.
And the China side is Dandong is not Shanghai. But it’s a very impressive modern
Chinese capitalist city. It’s a huge trading center. And you didn’t see the similar
the similar sort of like across the river commerce that you saw in Columbia between Columbia and Venezuela.
That was not it. No, they’re not really allowed to travel. There’s a train that you can take from one to the other. It’s heavily controlled.
There was obviously there were smuggling going on. There were these little entrepreneurs in speedboats
offering to take us into North Korea. What they would do is they go up the river and then they’d find a little tributary rivers stream
or. And they go up into the stream into North Korea proper. And I think the deal is they would go up
maybe a few kilometers and then they would pull in and then North Koreans would come and sell
items because there were Chinese tourists gawking at North Korea, just like we were. We were not
where a lot of tourists going the city kind of, oh, there’s North Korea, it’s gone. So we
didn’t take that trip. American passport had a terrible idea to go into North Korea illegally. It’s bad
idea to go in legally. He it not end well. So we did not. But so there’s.
And so there’s a little bit of small smuggling type trade going on. Clearly, I’m sure they’re bribing the guards
to make this happen. We bought on the Chinese side, we bought North Korean beer, which
is toxic. I’ve never, ever drunk. It is.
We couldn’t finish the beer. I’ve never not finished a beer in my life. This beer was undrinkable.
So and, you know, you could see these North Korean handy handy make works and things like, you
know, clothing and things that people have made in their homes.
So there was a smuggling operation, but otherwise not much of the river in most places
is mind. So. And then there’s guards on guard. You could see the guard towers every few
hundred meters. Weirdly, they paint their cup. They can’t paint it like smurf
blue. It’s like baby blue. It’s a strange color to paint your guard tower. I mean, you can see them now. They’re very visible. So
I guess that’s why they do the same image in the capitalist cities of China. So I think in the book you call the fake
socialism with China. Is this there is anything that speaks to the whole notion of the control
of means of production? China these days that’s no longer the case. Yeah, it wasn’t always fake. Of course, Mao
was real socialism. And, you know, tens of millions people died for that. We talk about
the Cultural Revolution and the Great Leap Forward before it. In the book. But now they’ve given
it up. There’s no central plan. Chinese bureaucrats are deciding how many acres of broccoli get planted.
They just they they privatize the farms. Individual farmers decide what products they are going to
make, how they market them. They get. It’s a non-democratic capitalistic. Yeah, that’s the strange
that that’s the schizophrenia of China is that they’re trying to maintain a totalitarian controlled
top-down control political system, but letting the economy be more of a decentralized bottom up
system that’s not in. There’s obviously a tension there. We saw the
ourselves and we talked, but in the book we went to a conference and talked about Ayn Rand and
Friedrich Hayek at a Chinese conference about a mile from Tiananmen Square in Beijing. It was really cool
and scary, but it was no. It was 30 professors, Chinese professors talking about
Ayn Rand. And like, this is the most surreal thing I’ve ever experienced. But the next day, the government shut
that conference down violently. They showed up with thugs. They literally padlocked the chained the doors
of the building. People were still inside the building, actually, and they locked them in and locked us
out. I actually Ben Knight already left, but they elected the reigning participants. So. And
the reason is you’re free in China now to buy and sell and get rich. And I mean, what’s the statistic
that producing a billionaire an hour or something? I mean, it’s absurd. No, you’re free. You’re now free
to get rich and prosper and start a business hire and fire important. You can do all the economic
freedoms more or less. Not all of them. There’s still some issues for us. But you can’t
criticize the government. You can’t talk about the ideas of Friedrich Hayek and Rand, apparently. And
that’s that’s that’s a schizophrenic schizophrenia. I mean, you’re, on the one hand, kind of sane and the other hand,
you’re you’re insane. You know, I don’t think it’ll end this. This can survive for
a very long run. Friedman thinks the same. Right. Does this do things are not compatible in the long run? Well, yeah.
This particular combination is probably easier than the other combinations. It’s his it’s almost impossible to be
democratic and socialist. It’s possible to be
autocratic and capitalist. But even there, there are tensions. Right.
So that the you mentioned East and West Germany. So I’m very surprised it from
a viewer perspective, who did not choose did write a chapter on that split the
check. Well, you know, just East West Germany, I don’t know if the beer’s actually better
in West, but I would guess the beers are better in the West. Today, the beers are pretty good in the east. They’re still there must be some
still lingering effect. And there are I mean, we know in the data there’s still a lot of lingering effects. The east is still struggling in some
ways and spent 30 years. But it was a very dramatic. We thought
about doing one on National Socialism as a brand, a type of socialism. All of our examples
are really Marxian socialism, the very different types of socialism. But honestly,
we wanted to be funny in this book and there’s nothing funny. There’s no politically safe way
to do that. And I would want to get involved in that anyway. So. So we we we
didn’t do that. But we you know, we’ve talked about maybe a right wing version of a book like this, maybe a nationalism
sucks or something and is a sequel or something. You know, it’s because, you know,
they’re right. This is the left wing version of top-down Control that we’re
there’s a right wing version of top-down control that I think is equally pernicious.
And we don’t we don’t really talk. It also fail. It is also true, which I think it’s frightening. Exactly.
So a very bright spot in the book is, is Georgia something that actually knew very little about former Soviet
Republic of Georgia, that apparently it was able to rise up in your ranks
very, very quickly in the past 20 years since it tells about that story? Well, I don’t have a score for Georgia.
In Soviet times, but it would have been a two out of 10. I mean, whatever. But today they’re about an eight out
of 10. And they’re in the top. I think they’re 13th now in the most recent report. They’ve been in the top 10.
So Georgia has gone from being a Soviet republic as socialist as socialism gets more or less
to being a country that is kind of economically free, that’s on par with places like the United States.
Still pretty poor because it’s still growing now. So it’s level of prosperity. You said
Georgia is they’ve got evidence since the since the reforms began, which the reforms really began in the early in
the mid 2000s. 2004/5 GDP is probably gone from about
$3000 a person to seven or eight thousand dollars per person, which is a very they’re growing. They were mad
that last year’s growth rate was only 5 percent. Right. So we would all be deliriously happy at
a head, it’s it’s going to take a generation or more to reach middle
or higher income status. But I have no doubt that they’ll do that. The reforms are amazing, though. I mean, we listed formed.
I’ve got to go to Georgia a lot, but alcohol became kind of a running theme. One of the really
cool stories about Georgia is it’s probably the birthplace of wine as far as we know that we think
it’s the first place on earth that wine was ever made. And they have to this day varietals
of grapes that don’t exist anywhere else in the world, something like four dozen different
varieties that don’t exist. And in Soviet times, they made wine because Soviet central planners weren’t morons.
They knew Georgia’s make wine, but they made really bad Marleau and Cabernet, like, you know,
French style stuff and billions of gallons of really bad wine. But since the
reforms, since the economic reforms in Georgia, the wine business is coming back and it’s becoming
a big tourist operation, big export operation. And they’re bringing back the old classic
Georgian wines, not just not just the grapes, but also the winemaking style, which is very different. And all that entrepreneurial
activity in Georgia today all around the wine business. It was not possible
in Soviet times because the central planners in Moscow didn’t care about saving,
you know, obscure local grapes. They wanted to make massive amounts of Marleau
for, you know, tens of millions of Russians and Ukrainians to drink.
The central planners didn’t face any priority on on the quality of the wine or the types of wines or the history
of the wine and all that’s coming in now that the Georgians are free to make these choices for themselves.
All that’s coming back. It’s really great seeing your wines. Now you’ve got to go to Georgia. So what’s that? What’s what?
How did they were able to actually live in these reforms? How, you know, what was the process? They had a they had a little mini
second rebel. So they broke apartments of Union 91, but they didn’t really do much for about a decade or
more. They had a little revolution called the Rose Revolution in 2004. Misha, meet Mikhail Saakashvili
became president. He’s a very Western oriented guy, whereas Italian wool suits, he’s very
sophisticated, went to Columbia Law School and he but he hired a guy named Cobb
and two kids and cars, a 400 pound chemical engineer
who cusses like I’ve never heard anyone costs and takes no prisoners. He’s
just and he’s a naturally the muscle. He’s fanatic libertarian, too. Oh, and
Misha says the economy is terrible. We don’t know. We’re doing kahar. You’re
in charge and democratically elected. The day he started just just doing
crazy reforms, he would walk into getting good. Here’s a great story. Walk into a government office, random office
and the Georgian bureaucracy. He would ask the clerk. OK, how many people work here? What’s your payroll?
How many people on the payroll? And you’ll be 84. OK. Eighty four people. How many are here right now?
Thursday at 3:00 in the afternoon. How many are here right now? Ten. OK, you ten. Keep
your job. Seventy four. You aren’t here right now. Are all fired if they literally
fired 80 percent. The Georgian Burack bureaucracy. They fired 35000 police
officers in a single day. The entire national road police
was fired because they were corrupt. They were just shaking down people for bribes on streets
and they fired them all. So they did this radical shock reforms.
They lowered there’s only four types of taxes in Georgia, the top income tax. They only have a payroll tax.
A top tax rate is 20 percent. That includes the payroll tax. No tariffs, zero tariffs,
zero point zero. They run in a radical privatization radical. And the cool thing about their privatizations
is they did it on the up and up. They had open, transparent auctions, highest bidder, single bidder
auctions, regular auctions. And if you are Russian and you were the highest bidder, you got it, which
wasn’t always popular in Georgia. But the Georgian government says we’re going to privatise in a free and
fair way and we’re not going to just give it to our cousin, you know, give all these assets, these Georgian
assets. We’re not gonna give it to our brother in law and her, you know, her niece and nephew and get a kickback from them. And that’s how it was
done in most of the Soviet Union is terribly corrupt privatization process. Georgia didn’t do it that
way. Yeah. And in the end, you see other places that that had
had tried to do, like the radical market, you’re into reforms. It was hard
sometimes through the political through a free political system, because, you know, the reforms don’t pay off
immediately. And the political system are very short term centric. And
for example, you know, I’m from Brazil. That’s reforms that we tried to do in the 90s quickly
led to a very strong left wing government. And then, you know, 16 years later, bankrupt the country.
And and it’s it’s a slow but surely process to to to go downwards. Right. And now, again, we get
a president that’s trying to put some marker into reforms in place, but it’s costly.
Takes a while. And, you know, there are some positive indication going on Brazil right now. But still, it’s to be seen whether
whether they’ll be successful or not. Example, of course, is Chile, where he was done from an autocratic system.
And the S&P index, again, I was looking at Chile. Chile, I’m
I think Chile embodies a lot what one of my worries these days is that the what happened in Chile is phenomenal.
In 1990, Chile was born in Brazil. Chile is almost twice as rich in Brazil right now
on a per capita basis. If you look at your index, it goes as skyrocket to freedom. Right.
And then now it’s pretty high and one of the top quartile of the quintile and
the world. And now people are throwing bombs at buildings. I mean,
what gives? How do we manage this? Yeah. You know, I don’t know. I mean,
the success of free, free market economies and producing the stuff, the
goods and services, the housing, the clothing, the food, the entertainment, the the evidence of how
good that system is, it’s just overwhelming. And yet, having delivered
it, people are still unsatisfied with all their because we still live in a world. Scarcity
is still things in this world that we would like to see fixed or done, done differently. And no system
is ever going to fix all that everything. And yet the systems that that is so good. You’re right. Chile was
really poor. And I don’t understand exactly. I
think some of it is just ignorance of the way the world works. People don’t realize
how bad these top-down systems actually function. And then someone comes along and politician
comes along and says, hey, I’m going to fix the problems. And there are problems, America
and problems in Chile. Their problem is. But turning over the keys
to the economy to a few bureaucrats in Washington is going to fix those problems.
Mario, how does one can we wrap up in a positive note? How do you do that? Well, I don’t
have this a positive note or not. I mean, there is tensions there for sure.
And he seems that people are hard wire to feel attracted to some notion of fairness.
And perhaps Inarritu has to do with the fact that we evolved in a in a world where, sure,
if somebody else got water and more water, more food means that I got less water and less food.
So that narrative is still somehow attractive and hardwired into our minds. Of course, we know now that there is a system,
free markets that can actually lift everybody up in marvelous and amazing
ways. So but but I would liked maybe this is a fun
note to end and wrap up. Some reactions I imagine
to your book may be on the direction of like a Y. Your trip trivializing
days, we’d like to these obviously after this conversation, all of us could agree that this is not a trivial issue.
I did. The prosperity and peaceful prospects of living
together are a stake above. And what system do we choose to organize? Societies
not trivial. So why beer? I like it was it wasn’t anything more interesting
here, Bob. And like that. Oh, my. Very, very interesting. I mean, we didn’t set
out to write a book about beer and socialism at all. Although we drink a lot of beer and
beer was in the book and the publisher actually was the one that really pushed us to put beer on the cover. And we even changed the title
to drink their way through the unfree world instead of travel through the entry route.
But we don’t want to trivialize it. And if you read the book, I mean, we talk about the greatly for we talk about the body
counts. We talk about the assassinations. You know, we have some sobering
statistics in there. But when you want to talk about it on a podcast like this or in a public talk,
you know, you want to just recite it much assistance. Already written those articles. No one read them. Right. So
we want to write something that’s that’s interesting. And beer became a very quick metaphor. And
it’s just a metaphor. It’s not a beer book, but it’s a metaphor. You know, in Cuba, there’s only two types of beer. And you think that all
well, who needs more than two types of beer? Well, if you’ve been to if you if you only had two types every day for the
rest of your life, you would eventually realize that’s kind of it’s flattery. It
sucks. And he’s not only been advised, only two types of shirts, two types of. That’s right. So but beer was a car,
you know, a useful thing. And so Venezuelans have actually had trouble making beer because, you know, they’ve
had shortages and the Korean beer was was toxic. And so the
beer became a very useful. And then the wine in Georgia, all the alcohol became a useful way to sort
of quickly encapsulate the functioning of the economy. But it’s not just about beer. You’re right. It’s about
whatever you care about, it’s going to be better provided in a bottom up, decentralized market
economy than in these top-down controlled economies. But beer became
a very good way. And also, we’ll we’d better naah, high functioning alcoholic. So we emphasis
on the high functioning part of that. But, you know, so when we travel, we we drink.
That’s what we do. And that made it into the book because it’s it was a basically a travelog
of our trips. It’s it’s lunchtime and you’re traveling. So why don’t you go
get a beer? Thanks for joining us and follow him on. Thank you, Bob. Thank
Before we wrap up, you can get more information in our medium page. Thanks for listening to Policy
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