The Power and the Money

The friendly society

 Governor Carter refused to limit emigration because the remittances sent back to Barbados from the Panama workers had markedly improved the economy, especially for poorer tenant farmers.  In a country that had recently been on the brink of collapse, he was not going to tinker with that.

 
The direct impact of the remittances was not that large.  In 1906, when Carter declared their importance, they came to 73¢ (U.S.) per inhabitant per year; call it three days wages.  That is not nothing, but it is also not an economic revolution.  Over time remittances grew, peaking at $2.39 per person in 1913 — a bit more than a week’s labor for a male worker at 1910 wage rates.  Not nothing, but not the millenium, either.

But the indirect impact was huge.  First, it bolstered the growth of smallholders.  In 1897, an estimated 8,500 small proprietors held a bit less than 10,000 acres.  By 1912, 13,152 smallholders owned plots.   Assuming that the average size of holding remained constant, this represented an increase in smallholder ownership of 5500 acres, or over 22 square kilometers, five percent of the land area of Barbados.  By 1929, the number of smallholding households had further increased to 17,731.  Land ownership on the island remained astoundingly concentrated, but the percentage of Barbadians who owned property rose from 18% in 1897 to 40% by 1929.* 

Second, it supercharged the Barbadian banking system.  Barbadians opened 16,094 new accounts in government savings banks between 1906 and 1913, and deposits increased 88%.  In 1920, deposits per person surpassed $11.  That was a level of financial penetration about half of contemporary Spain and two-thirds of Italy; very high for a country as poor as Barbados.  It prefigured the island’s emergence as a regional banking center a half-century later. 

Third, it prompted the emergence of a Barbadian social insurance state.  The “friendly society” served as a form of insurance pool.  For a weekly fee of 10 to 12 pence, the societies provided their members with sickness insurance, unemployment insurance, death benefits, free scholarships to household members, and an annual “bonus.”  In 1901, there were 101 societies; between 1907 and 1910 a further 110 were founded, peaking at 260 in 1920.  Their membership grew from 13,933 in 1904 to 46,207 in 1920.  The 1921 census found that 156,312 people lived in households belonging to a friendly society.  That was 94 percent of the population.  Alongside the friendlies were the “landships,” which provided similar services along with ceremonial drills and uniforms modeled on the Royal Navy. Infant mortality continued to lag the rest of the Caribbean until the 1950s, but the societies aided a huge increase in literacy, to 93 percent by 1946. 

In the Zone

  The Panama Canal Agency took charge of picking the workers and getting them to from Barbados to the Canal Zone. Recruiting took place in Trafalgar Square, in Bridgetown, conveniently near the main police station.  Today the place is called National Heroes Square (although a lot of people use the old name) right outside the Parliament building. 

 
Agents went out into the crowd to interview and select potential workers. A doctor then checked the potential workers, selecting those who would receive a contract.  In 1907, Arthur Bullard described the scene as follows:

Several policemen kept the crowd in order and sent them up into the recruiting station in batches of 100 at a time.  As the men came up, they were formed in a line around the wall.  First, all those who looked too old, or too young, or too weakly, were picked out and sent away.  Then they were told that no man who had previously worked on the canal would be taken again.  Then the doctor told them all to roll up their left sleeves and began a mysterious examination of their forearms.  He saw that a few men had been vaccinated by him already, and these were sent away.  One protested that a dog had bitten him there.  Then, he went over the whole line gain for trachoma, rolling back their eyelids and looking for inflammation.  Seven or eight fell at this test.  Then he made them strip, and went over them round after round for tuberculosis, heart trouble, and rupture. About 20 of 100 were left at the end.

The selected migrants reported back to the docks a few days later.  After a second medical examination and a check to insure that every emigrant had a number that matched the one on their contract, they boarded the steamers, where they had to find deck space and food for themselves during the 12 day voyage to Colón.  According to a report presented to the Barbados Legislative Council, the atmosphere on the docks was fairly hostile towards the ruling class.  The crowds would “abuse whites and aggressively denounce them” before boarding. 

 
The anger was understandable, given the situation the emigrants were leaving.  Ironically, the departure of so many angry young men gave plenty of leverage to those who stayed behind.  One prospective emigrant was heard telling his co-workers, “Why you don’t hit the manager in the head and come along with we?”  His co-workers refrained from assaulting the manager, but there was a wave of plantation labor disputes, and the following song became fairly common:

We want more wages, we want it now
And if we don’t get it, we’re going to Panama
Yankees say they want we down there
We want more wages, we want it now

And what do you know?  Wages went up.  By 1910, the American consul in Bridgetown reported that agricultural workers received 30¢ per day, a 25% rise in nominal wages over the 1900 level.   More importantly, unpaid labor — remember the located labor laws? — basically disappeared.  Planters reacted to the new environment.  First, they started to employ tenant women in the fields.  Second, they modernized production.  In 1910 there were no modern sugar centrals on the island — intead, windmill-powered presses wasted upwards of 30% of the raw material.   By 1921, in contrast, 19 modern sugar centrals had entered operation.  Third, they mobilized politically to halt emigration.

Barbados had seen the emigration movie in the 1870s, when Guyanese and Trinidadian labor brokers began recruiting on the island.  That time around, it ended with the Emigration Act of 1873, which effectively prevented labor recruiters from operating in Barbados.  (My wife’s grandfather is from Barbados, but he left for Trinidad in the early 20th century.)  Emigration fell from 2,676 in 1873 to only 613 by 1876. 

This time the movie ended differently.  In 1906, the Barbadian parliament passed a bill giving Governor Gilbert Carter the power to halt emigration.  Two angry public demonstrations convinced the Governor to take the then-extraordinary measure of publicly proclaiming that he had no intention of using his new powers.   The parliament then demanded that he appoint a commission of inquiry into emigration; he refused.  Five years later, in 1911, Carter retired and returned to Britain.  The new Governor, Leslie Probyn, appeared to bow to planter pressure by declaring a ban on labor recruiting for Panama ... but he took no action to enforce it.  Barbadians continued to leave for Panama. 

Emigration, then, had palpable economic effects on Barbados.  It raised wages (albeit to still-low levels) and prompted the renewal of the sugar industry.  That is not nothing.  But there was another effect.  In fact, that other effect was why Governor Carter refused to appoint a commission of inquiry ...

Where is the inflation in China?

 I have been resisting it, mostly because I don’t want to have to go back and reclassify all the China-related posts, but I have to add a China tag to this blog.  Ugh.

A few years ago, before I started my second-year course on geopolitics and the energy business, I taught in HBS’s first-year required political economy course.  In it, we had two cases on the collapse of Bretton Woods.  One of the teaching points of the Bretton Woods cases was that small countries effectively give up control of monetary policy when they fix their exchange rate.  During the class, I put up the following 1970 quote from Time magazine, which sums up the economics pretty well:

Foreign central banks have no practical alternative but to support the value of the dollar by absorbing any surplus dollars that are offered in their own market places.  If the Bank of France, for example, failed to do this, the resulting glut of dollars in the hands of French bankers and businessmen would cause the value of the dollar to fall in France and the value of French francs to soar.  This would raise the export price of Citroëns, Camembert and other French products, hurting sales abroad.  To avoid all that, the Bank of France buys up surplus dollars. But in order to make those purchases it must increase the supply of French francs in circulation. Thus, France and other foreign governments correctly complain that they are forced to adopt inflationary policies to cope with the dollar flow.

People forget this now but it was actually France, not Germany, what blew up the system.  (Which is not to say that Germany would not have blown it up, if France hadn’t taken the lead.)  It was De Gaulle who said, “There can be no other criterion, no other standard than gold.  Yes, gold ... which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence.”

A fixed exchange rate is (outside Venezuela) a promise by a central bank to swap one currency for another at a fixed price.  If that promise is credible than nobody has any incentive to make a deal at any other price, for the simple reason that one of the parties could always get a better deal at the central bank.  In France’s case, back in the day, everyone wanted to buy its exports.  So they took their dollars, and swapped ‘em for francs at the Banque de France.  Where did the Banque de France get the francs?  It printed them!  That is what central banks do; they cannot hold their own currency as an asset, any more than a company can buy up its own debt and book it on the asset side of the balance sheet. 

Well, the People’s Bank of China (PBC) today is piling up bajillions of dollars in its vaults.  In theory it would have to print bajillions of yuan for that.  In practice, the Chinese government sterilizes the inflow by forcing the banks to buy government bonds.  In essence, a Chinese exporter turns over his or her dollars to the PBC for yuan accounts at a Chinese commercial bank.  (They have to do this, by law.)  The government, however, forces the commercial banks (which are mostly state-owned) to use the yuan deposited in them to buy central bank-issued bonds.  An utterly stylized way of thinking about it would be:

1. The central bank prints yuan in exchange for dollars.
2. The yuan are deposited in commercial banks.
3. The commercial banks lend the yuan back to the central bank in exchange for bonds.

And voila, inflation is kept under control. 

The point, however, is that the inflationary pressure is caused by the fixed exchange rate.  Only now the Chinese are claiming that their fear of inflation is a reason to keep the fixed exchange rate!  Whaa?  Paul Krugman and Dean Baker point out allowing the yuan to appreciate would reduce import prices, and thus lower inflation.  This post is reinforcing their arguments by pointing out that the pileup of reserves — which an appreciation of yuan would slow or stop — also causes inflationary pressure.  In short, Chinese policy makes no sense in terms of inflation.

I am coming around to the unfortunate conclusion that it may be time to credibly threaten to slap some pretty significant tariffs on Chinese goods.  Right now, that country is acting as an international demand suck, earning foreign income and then sitting on it.  Sure, it is nice that they invest those reserves in Treasury bonds ... but with American savings rates rising and interest rates as flat as they can get, now is the time for them to start buying less. 

I find this sort of thing irritating.  I found it irritating when the Chinese government, which quite successfully engages in massive buy-Chinese policies (google “State Council Document 18”) criticized the buy-American provisions of the stimulus.  That was small beans, however.  The Chinese government right now is playing with fire in refusing to allow its exchange rate to appreciate.  During the Great Depression, countries imposed tariffs in lieu of devaluation.  The U.S. can’t unilaterally devalue the dollar against the yuan without Chinese cooperation.  The implication is left as an exercise for the reader. 

(To be fair, the Eichengreen and Irwin paper makes a very different point.  Unlike the countries hit by the Great Depression, the U.S. is a gigantic economy, and the fixed exchange rate with China does not impose deflationary pressure that the Fed cannot fight.  But it does reduce aggregate demand, and it is a growing problem.  I hope the Chinese see the light before we slap tariffs on ‘em.)

Thoughts?

Trills, warrants and kickers

  This post is not about organized crime.  This post is about a proposal from Robert Shiller and Mark Kamstra featured in today’s New York Times.  (Sanchez got the first down!  At the opposing 46.)  The idea is for the government to issue bonds whose payout is linked to GDP.  (Sanchez sacked!  Commentator yells, “Are they trying to kill Sanchez?”)  In the case of Shillers proposed “trills,” the payout would be directly linked:   each one would yield one-trillionth of quarterly GDP every three months.

It’s a fine idea, although I suspect that the benefits would be, well, limited.  They protect against inflation, but so do inflation-linked bonds, and investors would presumably demand some sort of equity-ish premium.  That said, they’d offer an easy way to diversify ... you get to buy a security linked to the income of every single income-earning entity in the country!  On the other hand, the income stream won’t come directly from those entities, but via the tax revenue that they generate for the federal government. 

(Holy s--t!  Did that just happen?  Challenge.  Why yes, it did.  Two-point conversion, 18-15.)

But that is not what this post is about.  This post is just to point out that Argentina issued something not unlike the trill back in 2004.  The “GDP kicker,” pronounced “keek-air,” aka a warrant, offered creditors payments equal to one-twentieth of the dollar value of all GDP growth above a threshold of 4.2% per year.  Bosnia, Bulgaria, Costa Rica, and Singapore have issued similar securities.  None of them are as simple as the trill, of course, but still.  When have you heard of Argentina being a financial pioneer, in a good way?  (Field goal! 21-15.)

Of course, there are some people who think that Argentina gave away the store with the kicker.  And they may be right!  Which is what worries me about the trill.  It might turn out to be a rather expensive way to finance the borrowing needs of the government ... and that, ultimately, is what I tend to think government debt is for.  Although Alexander Hamilton would not agree.

Teddy Roosevelt and Spanish labor unions save Barbados, hate Barbadians!

  I don’t have a whole lot of emotional attachment to the madre patria, not where it counts.  After all, the parliament has passed a law giving the descendents of Civil War refugees the option to apply for a passport.  Yet I have zero desire to do it.  No, I have a negative reaction to doing it.  In other words, at the level where it counts, my people are the people of the United States of America.

But sometimes I can’t resist borrowing a phrase from my good friend (and great American) Carlos Yu:  “Oh, my peoples.” The story of the labor troubles on the Panama Canal is one of those times.

 
In 1904, the United States began construction of the Panama Canal in earnest.  Problem was, it needed laborers.  Lots of laborers.  Preferably cheap laborers, which ruled out hiring Panamanians.  (The Canal labor force would peak at more than a quarter of Panama’s economically active population.  Wage rates would have skyrocketed, even had that many people been interested in killing themselves to dig a big ditch ... which they were not.)  So the U.S. turned to the same place from which the earlier French canal effort had got its workers:  Jamaica.  Problem was, the Jamaican government remembered the disaster that was the repatriation of Jamaican workers after the French canal effort collapsed in 1889.  The Crown Colony government insisted that the Americans guarantee repatriation costs for any and all workers.  That ended the idea of using Jamaican labor; ultimately, only 47 worked on the Canal.

At this point the Barbadians, and later the Spanish, enter the story ... the rest of which is below the fold.

Why is Barbados such a nice place?

   Barbados is a very nice place.  The water is wonderful, of course:  the limestone makes it a turquoise color that simply doesn’t look real.  But it isn’t just the water that makes it so nice:  Quintana Roo and Yucatán also have very nice limestone-saturated water.  No, what makes Barbados especially nice is the society inhabiting the island.  Crime is low, human development is high, institutions seem to work.  It terms of ex-colonies, it is the anti-Congo.  The question is why the place is so nice.  

 
One answer, which I find unsatisfactory, is good macroeconomic policy.  In that view, Barbadian governments managed the economy particularly well after independence, and thus the island grew (relatively) rich.  The problem with that view is that many of Barbados’ unique qualities emerged well before 1966.  In 1960, for example, real primary school teacher salaries in Barbados were 31% higher than in Jamaica, educational spending as a % of GDP was 52% higher and real per student primary school spending was 2.3 times higher.  In 1950, its GDP per capita was the third-highest in the British Caribbean, after an off-the-charts already-developed Bahamas and oil-rich Trinidad.  It was a full 60% higher than Jamaica’s.   Barbados and Trinidad were the only two countries in which less than 40 percent of the labor force worked in agriculture.  (32% in both countries; the Jamaican number was 57%.)  Lifespans at birth were five years higher than elsewhere in the Caribbean (except Trinidad) if still only 56 years.   Other statistics are hard to come by, but the general impression is that for all the poverty — and it was widespread — Barbados had already diverged from the rest of the West Indies.

Except here’s the thing:  if you jump backwards from 1950 to 1900, Barbados doesn’t look so special.  In fact, the place was a disaster, close to becoming what we’d today call a failed state.  In 1902, facing riots, assassinations and economic collapse, the U.K. would take the unprecedented step of approving the 2008 equivalent of a £164 million relief grant (measured as a percent of Britain’s GDP) ... or in purchasing-power terms the modern equivalent £125 per man, woman, and child in Barbados. 

What had gone wrong?  A brief history of the Barbadian collapse below the fold. 

Failure modes of the United States (part 1c) goes mainstream!

 For all the snarky comments of some my favorite participants on this blog (in truth!) it seems as though some of the heavyweights of the internets are beginning to worry that the recent routinization of the filibuster may, in the future, cause the United States to come to a cropper.  One of these worryworts is, in fact, also a heavyweight of the real world, the Heaviest Heavyweight, in fact.

Then again, he would think that, wouldn’t he?

Merry Christmas, everyone.

The President and a question for Doug Muir

  I’ve been avoiding posting about American politics, but I can’t avoid it anymore. Via Johnny Pez, political analysis from a parallel universe:

In this version of events, Joe Lieberman is not acting on his own to make the bill as unpleasant to liberals as possible. Instead, Lieberman is simply doing what Obama wants him to do: stripping out the parts of the bill that the health-care industry doesn't like, while keeping in the parts that the industry does like. Greenwald notes that Lieberman has received no criticism from the White House for doing this. Rather, the White House has reserved its criticism for Howard Dean, who has pointed out just how corporate-friendly the bill has become and who has publicly called for the defeat of the bill.

This is politics the DLC way: a big wet sloppy kiss for corporate interests and a flip of the bird to the party’s liberal base. These are the principles that Obama's Chief of Staff, Rahm Emanuel, has espoused throughout his political career, and presumably that's why Obama made him Chief of Staff in the first place.

If this is what's really going on, then Obama is a DLC Democrat, and always has been. Those who defend Obama, saying that he was helpless to influence events, and that it was all Rahm’s fault, or all Joe’s fault, are in denial. It's no use crying, “If only the Tsar knew!” because, as always, the Tsar has known, and approved, all along.

The Tsar?  Okay.  Either way, it is an interesting post from a world where the Democrats had 65 seats instead of sixty, or cloture required less than sixty votes, or the Republicans had less internal discipline, or Howard Dean was a Senator, or the Senate did not exist.  Or something.  Of course, we live in a world in which the Senate does exist, cloture requires 60 votes, Republican opposition is unbreakable, and Howard Dean is not a Senator.  In which case none of the above makes any bloody sense at all. 

I really get a little crazy when people assume the President has power that the office does not convey.  The bill we have is the best bill that could pass, regardless of the President’s preferences.  So stop it already with the preference parsing.  Who cares? 

Now, the President might have been able to get a bigger stimulus had he been willing to forget about the possibility of Republican votes.  (Of course, Arlen Specter was not yet a Democrat, which poses some problems.)  He could have gone to mattresses on financial reform.  He could have dumped health care in order to go to the mattresses on financial reform.  Heck, maybe he should still go to the mattresses on financial reform; it is a policy field in which liberals can fail without, you know, allowing people to die of preventable illnesses.  And there is slowness on Guantánamo, the backpedalling on detention, and other stuff. 

Analyses should, you know, make sense.  Which means that they should take political realities into account.  The whole Tsar metaphor, well, it doesn’t make any sense, not in this universe.  Sure, yeah, people are disappointed.  And people are disappointed because they thought the Senate would be more progressive, or the Republicans more divided, or because they didn’t think about legislative politics at all.  But that’s where it ends ... unless you want to fault the President for wanting to, well, pass stuff into law.

On July 2008, Doug Muir read a New Yorker article about the President’s early career in Chicago.  Doug then wrote:  “What the article does is, it gives me a much clearer notion of how President Obama may disappoint.”  I asked him at the time to elaborate; he did not.  But I’d like to ask now:  Doug, has President Obama disappointed his supporters in the way that you expected he might, or is he disappointing them in a different way?

The Rwandan empire in Congo

  A “stylized fact” is a fact accepted as true for the sake of argument.  Good stylized facts are true statements that have been simplified in order to allow the creation of tractable arguments.  Bad stylized facts are oversimplified at best, and false at worst. 

One stylized fact is that Rwanda extracted great economic resources from its control of eastern Congo in 1998-2004.  It is accepted.  But is it true?  The answer is not as clear as you might think.

The Rwandan-backed RCD collected fees from local producers.  In Bukavu, merchants who commercialized peasant production were forced to pay a $1,300 fee, in addition to a $3,000 deposit.  In addition, the RCD used military planes to export palm oil to Kisangani.  The rub, however, is twofold.  First, there is not any evidence that the RCD taxes on commerce flowed to Rwanda ... although they did obviously reduce the subsidies that needed to flow the other way.  Second, according to merchants involved in the trade (HBS is very well plugged in to Rwanda) palm oil exports were barely able to cover their costs during the period; Rwanda in fact subsidized the RCD’s profits by providing the planes.

Following the general pattern of the Mexican Revolution, Ugandan and Rwandan troops did not destroy the Sotexki textile plant during their invasion and occupation.  On the other hand, the plant did basically shut down.  The gave an advantage to Rwandan exporters, but it is hard to believe that the additional profits were significant, even in an economy as poor as Rwanda.   

The Sominki gold mines (which also produced coltan and cassiterite) would have been, well, a gold mine, had they not gone bankrupt in the 1980s.  The mine holding company was renamed Sakima, and wound up in the hands of a Canadian corporation, Banro.  In 1998, the DRC expropriated the mine.  (Banro sued Congo at the all-powerful ICSID ... the panel wisely decided to use the fact that Canada had not signed the Washington Convention to punt and let the DRC get away with the expropriation.  Otherwise ... ugh.)  The RCD took over the mines in 1998 and quickly requisitioned 312 tons of coltan and 190 tons of cassiterite.  The DRC gave the concession back to the Canadians in 2003, but the RCD continued to pick over the bones until 2004.  Still, they really were bones, at least in terms of gold; the mines were dead, even by Central African standards. 

So far, so little.  Rwanda “let them [the RCD] exploit the sub-soil for their survival,” and that certainly made it cheaper to maintain control of the area in an international environment that precluded formal annexation.  (There is some evidence that Rwanda wanted to annex the region, which would have completely altered the game, quite possibly for the better.)   That, however, was not a reason for Kigali to continue its occupation; it merely made it cheaper to continue a policy that it wanted to pursue for other reasons.

But that isn’t quite right either.  The U.N. argued that the Congo Desk of the Rwandan Patriotic Army came up with a number of schemes to extract resources from its Congolese territories.  There is even an unconfirmed report of Kagame calling the war “self-financing.”  Thing is, theU.N. report really seems a bit dodgy.  Its estimate of $320 million a year comes from one unidentified source.  It also comes to 20% of Rwanda’s GDP, an four times its official military budget, an enormous sum.  The report gives percentage breakdowns of coltan exports, without mentioning either prices or quantities.  As social science, it is really really bad, inexplicably so.  I could have done a much better job ... but I don’t have reasons to want to find evidence of massive resource extraction. 

I don’t have reasons not to find such evidence either.  In fact, there is solid data regarding diamond profits.  The RPA and RCD apparently set up a powerful monopsony, using force to insure that exports went through their hands.  In 2001, the RCD even studied how their designated tax farmer was performing.  The quota was about $500,000 per month, and the fellow was meeting it ... but the market value of the quantity exported was over $2 million.  The U.N. concluded that the Congo Desk diverted the difference, but in the absence of data on how much was paid to producers and middlemen (and harder price and quantity data) that conclusion is dodgy.  In addition, the maximum estimate of diverted funds comes to a little less than $17 million per year.  That is a lot of money by Central African standards, but it is not $320 million.

In short, it is undeniable that the RCD financed itself from local resources.  It is also undeniable that the RPA got something from the occupied territories.  What we do not know is whether it was anywhere near enough to provide an incentive to prolong the occupation in the absence of security concerns. It really depends on the coltan numbers, which AFAIK we do not have.  Inexplicably.  Here is a pretty bad journalist’s report.  It has numbers, though, and it might be possible to use it to ballpark Rwandan coltan profits, if any. This report seems better, and it might be possible to tease out some real numbers.  I am sure that there is other data available, for anyone with the time and the interest.  (I have only the second at the moment.)

The really interesting counterfactual is whether the Second Congo War and its aftermath would have been as prolonged or as destructive in the absence of an effective taboo against de jure border changes.  And that counterfactual, of course, depends on the amount of resources that could be extracted and the security concerns faced by the relevant parties.  But it is food for thought:  do our post-1945 institutions really contribute to peace and well-being?  I honestly think that they do — but like all stylized facts, it bears the occasional reconsideration.

So ... I ask you all for two things.  (1)  Hard evidence on Rwandan extraction; and (2) thoughts on the impact of the effective end (with a few exceptions, here and there) of de jure annexation?

The Democratic Republic of Congo

  These are honestly the best series of posts from Doug yet, and that is setting a rather high bar.  All they lack are representative photographs.

Here Doug visits Katanga.  The post details the province's problems, covers some colonial history, and shows why visits to Africa often produce wistfulness and confusion regarding the European empires even among people who hold no emotional attachment to them.  In Doug's case, quite the reverse.

This post explores a practical question:  how do central banks manage to get currency into the hands of people who need it?  Money as a unit of exchange is worthless if people with wealth can't convert their stores of wealth into units of exchange.  But that turns out to be much more complicated than it might seem.  Latin American countries have at times encountered problems of small change --- Argentina recently went through one such episode, and I lived through another in Mexico in the early and mid 1990s --- but I know of nothing on the scale of the problems Doug describes.  He also describes a minor miracle in which millions of dollars in cash sits undisturbed and barely protected in a place where one would not expect it to last.

Doug also investigates past and present plans to dam or make navigable (these are different) the lower reaches of the Congo River.  Mobutu, it turns out, built a massive long-distance power line to move electricity from one of the dams on the Congo (the last of which was built in 1958) to Katanga, in order to make the province dependent on the central government.  It didn't work out too well.  The whole mess makes me wonder.  Did decolonization in Congo have to be such a mess?  Was a better outcome at all possible?  I know not.  But Mozambique suggests that it might have been better.

And in the latest, he asks the question:  how bad is Congo's government?  You won't like the answer, nor the paradoxically Pollyannish (but almost certainly correct) explanation.

Also, in recognition of my co-blogger, we now have a Finland tag!  Enjoy. 

Dubai bailout, nothing to see

  No, really.  Here’s the opinion of a Saudi Arabian banker on the Dubai default, dated November 27th:  “We believe that Abu Dhabi will come to the rescue… but like all rescues it would have a price. In that case it may well be first of all a political price.” Why did they believe that Abu Dhabi would rescue it’s neighbor?  Simple:  ADIA, Abu Dhabi’s sovereign wealth fund, has enough assets that if it seemed like bailing out Dubai world might preserve market values, then ADIA had enough of a stake in those markets to make the bailout a paying proposition.  Saudi did too, but Abu Dhabi, unlike Saudi, could more easily extract political gains in addition to the economic returns from a bailout.  

Thus, the bailout.  Stocks still seem to have reacted well, despite its wholly predictable nature.  Ni modo.

Magersfontein, December 11th

  Eighty-five years and one-day ago, on December 11th, 1924, the Republic of Finland celebrated a very special anniversary.  The state and the military establishment hosted it at the Officers’ Casino Building in the Katajanokka neighborhood of Helsinki. The celebration commemorated the 25th anniversary of the Battle of Magersfontein, part of the Anglo-Boer War of 1899-1902.

The conservative newspaper Uusi Suomi (New Finland) advertised the event on its front page, and the periodicals of the Finnish Civil Guard published articles on the conflict between the Boer republics and the British Empire.  The celebration opened with the the Finnish Naval Orchestra’s performance of “Kent gij dat volk,” the South African anthem. Among the guests of honor were Lauri Malmberg, the minister of defense, and Per Zilliacus, the chief of staff of the Civil Guard. The Finnish Civil Guard also sent a wreath tied with blue-white ribbons to South Africa, where it was laid at the monument on the battlefield of Magersfontein. 

Why did independent Finland celebrate a battle fought in a British colonial conflict in South Africa?  Simple:  Finnish volunteers had fought in the battle as soldiers of the Scandinavian Corps of the Boer forces.  The Scandinavian Corps was founded in Pretoria on September 23rd, 1899, supposedly as a testimony of loyalty felt by the Scandinavian immigrants towards the South African Republic. It included 118 men; 48 Swedes, 24 Danes, 19 Finns, 13 Norwegians and 14 other miscellaneous nationalities, mainly Germans and Dutch. In addition, three Swedish women served as nurses in a separate ambulance unit. The Scandinavians fought in the siege of Mafeking and the battles of Magersfontein and Paardeberg; of these, Magersfontein was the most significant.

After the war, a special Scandinavian monument was constructed on the battlefield. The monument consisted of four cornerstones, representing the four Nordic countries, each decorated with the Scandinavian valkyrie and national symbols of each country. The verse is from Johan Ludvig Runeberg’s March of the Pori Regiment, these days the ofificial Finnish presidential march: “On valiant men the faces of their fathers smile.”

The names of the fallen soldiers are engraved on the shield. Emil Mattsson died in Magersfontein; he’s buried in the field. The British captured Henrik Hägglöf, who died from his wounds at an infirmary near the Orange River. Johan Jakob Johansson — whose name is mistakenly written “Jakobsson” — died at the prison camp on St. Helena and is buried in grave number 18 at the Knollcombe cemetery. The name of Matts Laggnäs, another Finnish volunteer who died in captivity on St. Helena, is missing.

My very first peer-reviewed academic article concerned this very topic, and it was published in the Finnish Journal of History a few years ago. Afterwards, I was delighted to note that an Afrikaner fluent in Finnish had read my article and discussed it in his own blog. Reading my own text translated in Afrikaans was an interesting experience. The term “Boer War” was translated as Tweede Vryheidsoorlog, the “Second War for Freedom.”  The official term in the Afrikaner historiography for the wars against the British Empire in 1880-1881 and 1899-1901 were the First and Second War for Freedom, and the terms seem to still be in use.  Non-Afrikaner South Africans do not seem to use the phrase, understandably enough.

The history leaves us with three obvious questions.  What significance does the Anglo-Boer War have today, eleven decades after the war broke out?  What is the significance of the Finnish Republic’s 1924 commemoration of its citizens’ participation in that war?  And what are we to make of the fact that an event considered highly significant in 1924 has been almost forgotten in 2009?

Beer, banks, and revolution

  Doug Muir observes that breweries and banks seem to survive civil wars.  Now, Doug would never tell you, because he’s modest, but it so happens that he has a friend who’s a little bit knowledgeable about the effects of political violence and instability on economic activity.  His friend has even written an entire book about banking and instability. 

So, is Doug correct that banks and breweries tend to make it through political instability?  Short answer:  yes. 

Long answer:  well, let’s examine the data from one of the worst bouts of political instability to afflict any country with a substantial financial sector and developed manufacturing, at least outside the benighted continent of Europe.  Between 1910 and 1929, Mexico suffered a revolution, two insurgencies against the winner of the revolution, a counter-revolution, a counter-counter revolution, a civil war among the winners of the counter-counter-revolution, a military coup, another bout of civil war after an attempted coup by the Secretary of the Treasury, a presidential assasination, three more attempted coups, and a third civil war fought by angry Catholic guerrillas with a penchant for dynamiting passenger trains.  Among all that, what happened to the banks and breweries? 

Let’s start with the breweries.  Mexico’s domestic industry was created almost overnight during the last decade of the 19th century, with local monopolies established in virtually every major city by the 1900.  One of the industry’s leading firms (the Cervecería Cuauhtémoc of Monterrey, Nuevo León) came to control 28 percent of the national market.  It went on to spin off a glass bottle making company (Vidriera Monterrey) that quickly established itself as a domestic glass monopoly.  The other two major breweries were the Cervecería Moctezuma (of Orizaba, Veracruz) and the Compañía Cervecera de Toluca y México near Mexico City.  

During the civil wars, armed factions viewed factories as strategic assets that could be used to generate income for the army.  What typically occurred in occupied areas was that a faction would seize the factories and run them for its own benefit, or it would threaten to do so unless the management made a “loan” to the revolutionaries.  In April 1914 the forces of Pablo González took control of Monterrey.  For most of the year González occupied and ran the Cervecería Cuauhtémoc, where he continued to employ the brewery’s workforce.  By November the company’s stocks of raw materials had been used up. 

At that point, having extracted what he could from the operation, González returned the factory, apparently undamaged, to its owners.   

The upshot is that while production dropped during periods of generalized violence — 1914-19 and to a lesser extent 1922-24 — the breweries themselves pretty much came through intact.  In fact, beer was such a good market that the Cervecería Modelo started up in 1925, while the country was still rather unstable. 

So what about the banks?  Well, the banks didn’t fare that well during the civil wars.  They were where the money was. Governments and revolutionary factions plundered their cash reserves, forced them to make loans, and engaged in the unrestricted printing of currency.  It did not do good things for the banking system, which by 1916 ended up in government receivership — although in many cases the Carranza government wound up with little more than a Mexico City branch office and some papers.  On the other hand, the governments that came to power after 1916, however, regardless of their stated ideologies, all recognized that they needed a source of credit in order to restore political order.  

    

It took a while to put humpty-dumpty back together again.  A private banking system came back to life, but a December 1920 banking panic caused most of them to fail.  In 1921, President Álvaro Obregón announced that twelve banks would be returned to their owners; only five were able to reopen.  The government tried to regain access to foreign capital markets by restarting payments on the foreign debt, but the civil war triggered by Treasury Secretary Adolfo de la Huerta’s revolt put paid to that.  On the same day the revolt began, Banamex (the largest private bank, and one that existed before the Revolution) transferred $13.5 million to the International Bankers Committee.   The government simultaneously borrowed $5 million from the Huasteca Petroleum Company against future oil tax liabilities, with the intention of using the funds to make additional payments on the foreign debt.   Instead, the funds went to fight De la Huerta.  The diversion of funds meant that the government had to borrow from Banamex to pay foreign creditors ... on July 2nd, 1924, the government gave up and defaulted once again, this time for good.

In other words, this was not a healthy banking system.  A snapshot in 1917 would have showed it as pretty much dead ... but no matter how you put it, five banks did survive (including the two largest) and the system schlumped along despite the occasional civil war.  The government needed the bankers too much to kill the system dead.  In fact, it went out of its way to reactivate bank lending in 1925.

So how did they reactivate the banking system in 1925?  That’s another story.  The moral of this story is that Doug is right:  banks and breweries can survive even extreme levels of violence. 

Doug in Congo, first days

   My good friend Doug Muir is in Congo, and as usual he has some interesting things to say.  So I’ll post some links below.  The fact that it never ever ever occurs to Doug to do likewise on either of the blogs that he regularly posts on, regarding either this blog or serious academic work, is not relevant.  

Here is a brief discussion of Congo’s bizarre borders, or at least the poor country’s lack of an Atlantic coast.  Congo is effectively land-locked, what with the eponymous river being impassable in its lower reaches.  I am surprised to hear that the railroad from Mabadi still works at all.  Doug tells you why the border was drawn so that Congo cuts the Cabinda enclave off from the rest of Angola, and how this weird geography sparked a long secessionist battle against Luanda. 

The unmentioned wrinkle is that Cabinda rests on a sea of oil, first discovered in 1962, late in the colonial era.  (It says something about the Portuguese desire to get the hell out of Africa that they didn’t set up Cabinda as a separate neocolonial enclave; it’s what Charles de Gaulle would have done.)   Cabinda’s Block Zero produces about 22% of the country’s production.  Block 14 produces another 3%, but it’s production is set to rise from 55,000 bdp to 340,000 by 2010.  Onshore exploration in the portion of Cabinda labeled “CN” on the map is underway. 

Currently the provincial government gets 10% of the oil revenues from its territory, which has done a lot to en ... uh ... lower the intensity of the insurgency.  Or at least get it down to a level where government ministers can credibly declare an end to the organized rebellion.  A Chinese company is supposedly developing a highway-bridge combo that will provide a direct link over Congo to the rest of Angola; I have my doubts, but it will be cool if it gets built.  (Note:  the article at the other end of the link was paid for by the government of Angola; it is not a real news report.) 

Meanwhile, here and here are some of Doug’s early impressions of Kinshasa; the place seems to make Tegucigalpa seem lively, Caracas seem safe, Maputo feel orderly, and Jalalabad seem ... well, it is probably better than Jalalabad.  Maybe.  That secret police story creeps me out, more so since they don’t seem to be a very effective secret police at creating a, you know, police state.  I eagerly await more reports.  Even if the jerk never bothers to link to me.

The Chávez boom

 Back in the comments on the post about Venezuela’s electricity crisis, Scott expressed surprise at the claim that the Venezuelan economy has grown like gangbusters since 2002.  “Has growth really been that dramatic?” he asked.  “It doesn't square with a lot of what you read about Venezuela.” 

In point of fact, growth really has been that dramatic.  Last year, there was a back-and-forth between Francisco Rodríguez and Mark Weisbrot about the accomplishments of the Bolivarian Revolution.  There was an slight pin-angel quality to their dispute.  Rodríguez’s data on spending shares and literacy changes were fairly incontrovertible. Their dispute over inequality hinged over the treatment of zero-income households, but even if you throw them out of the sample you get generally stagnant inequality, which is less than revolutionary. 

Similarly, the two argued about the extent of poverty reduction, but Rodríguez’s point was that the Bolivarian Republic had done a lousy job of reducing poverty given the extent of economic growth, not that it had failed to reduce poverty.  In short, the dispute hinged on whether the country deserved a mulligan for the oil boom.   Rodríguez wanted to grade the government on a curve, Weisbrot didn’t. 

So how big was the oil boom?  Big.  Real GDP doubled between its nadir in the first quarter of 2003 (when the national oil company tried to overthrow the government) and the second quarter of 2008.  From a base of 100 in 2003, real private consumption leapt to 115 in 2004, 133 in ’05, 157 in ’06, 187 in ’07, and 202 in 2008.  Even the inequality measures that include zero-income households remained basically unchanged over this period (with a weird spike in 2005), indicating that the consumption boom was pretty well spread.  Poverty dropped from a peak of 55% in the second half of 2003 to 26% by the beginning of 2008; extreme poverty fell from 25% to 7% over the same period.  To be fair, the reduction in 2007 is really hard to measure, since the poverty basket uses official prices, and most staples have been rationed at the official price since then.  (Although Mickey-D’s has not been affected, as best as anyone can tell me.  Ditto most private markets.  Weird sort of socialism, that.  But I digress.)

There is some evidence that the boom bypassed the poorest of the poor:  The percentage of underweight babies born in Venezuela, for example, increased from 8.4 percent to 9.1 percent between 1999 and 2006. During the same period, the percentage of households without access to running water rose from 7.2 percent to 9.4 percent, and the percentage of families living in dwellings with earthen floors multiplied almost threefold, from 2.5 percent to 6.8 percent.  On the other side of the ledger, infant mortality dropped from 21.4 per 1000 live births in 1998 to 18.5 in 2003 and 14.2 in 2006, while the number of primary care physicians in the public sector rose twelvefold.  That said, the above is a red herring for the purposes of this post:  the point is not that the Bolivarian Revolution has been less than revolutionary; the point is that the country underwent a huge boom in 2002-08, and that boom trickled down to the bulk of the population, if not necessarily the poorest. 

The boom certainly translated into jobs.  Formal-sector employment grew 42% from 4.53 million in 2003 to 6.45 million in 2008; informal employment stayed basically unchanged, drifting up from 4.99 million to 5.02 million.  Public employment outpaced private, growing from 11.6% of total employment (formal and informal) to 16.6%, but since my readers are smarter than Michael Steele, they recognize that a job is in fact a job.

So, jobs, incomes, consumption, all way up.  Not as far up as in places that handled the hydrocarbon boom better, like Alberta or Trinidad or Bahrain, but still way up.  Which leaves me curious.  Scott, what did you read that left you with a different impression of economic conditions in Venezuela over the last half-decade?

Housing the Revolution

  One place where the Chávez administration superficially appears to have fallen down on the job is housing construction.  Building residences is one of the easiest ways that I can think of to translate oil money into political support, while at the same time building a class of people dependent on your party’s patronage.  Less cynically, it is also one of the easiest ways to translate an oil boom into a lasting increase in well-being.

 
Yet the actual amount of housing construction has been pretty low.  Cabdrivers (I seem to get a lot of opposition cab drivers) love to point out the above clump of houses on the road to the airport, the orderly red-roofed ones towards the bottom of the picture.  “Look at that!  Big deal!  New face of Venezuela!” they say, sarcasm knife-thick.  Of course, absence of evidence is not evidence of absence; the lack of massive building along the airport road indicates only a (rather sensible) lack of massive building along the airport road.  (Here is a 2005 look at another public housing project.)  Rather, evidence of absence comes from the government’s statistics on the number of new housing units constructed every year:

 

Public construction hasn’t returned to the halcyon days before Chávez, let alone reached new heights.  Now, to be fair, you don’t need to construct a whole lot of public housing to create an effective political machine.  Mexico’s PRI managed to use access to housing as a very effective tool of political support in the 1970s while building only 57,000 houses a year.  Of course, the flip side of that is when the Mexican economy collapsed in the subsequent decade and the PRI needed more support, the Mexican government churned out more houses, building 253,000 per year during the 1980s.  In other words, the Mexico of Miguel de la Madrid and Carlos Salinas managed to churn out six times as many houses every year as the current Venezuela of Hugo Chávez.

The private boom looks interesting, but really isn’t.  It is exactly what you’d expect to happen in a country undergoing an oil boom.  In point of fact, it is a little hard to distinguish public and private homebuilding in Venezuela, since most private housing is financed via a public program called “Ahorro habitacional,” a subsidized lending program.  The program predates the Bolivarian Republic, although it has been changed.  The old program financed mortgages via a forced savings scheme in which employees contributed roughly 3% of their wages into a common pool, from which they could then borrow once they could come up with a down payment worth 3% of the property’s value.  The new program is more complex and involves direct subsidies, but essentially works similarly. 

The bottom line is that the government has not built a whole lot of houses.  In a sense, it doesn’t have to.  The Socialist Party has enough support without a massive homebuilding program.  And such a program, while technically straightforward, would get the government involved in a mass of planning and siting issues that it might prefer to avoid.  But in another sense, it is a puzzling failure, a chance to spend oil money for a threefer:  (1) improve living standards; (2) reward the government’s friends; and (3) put a long-lasting stamp on the built environment, show the Revolution in bricks and mortar. 

The government of Trinidad and Tobago has managed to win re-election besides completely botching up law & order partially on the fact that it used the hydrocarbon boom to fundamentally transform life on the island via the construction of massive tropical Levittowns ... at least massive by the scale of a small country.  So what does the People’s National Movement understand that the United Socialist Party does not? 

Maybe I am missing something.  I only study political machines, I’ve never run one.  Thoughts? 

The Bolivarian military

  Another cat-like day spent sleeping yesterday.  17 hours!  Damn.  I’ve also been craving football, so far as to watch replays of old games on Channel 265.  Strange.

 
Venezuela recently reinstated national military service.  This is only the latest in a series of military reforms.  Taken together, the reforms have fundamentally reshaped the military establishment ... although with so much of the Bolivarian Revolution, its hard to know how well the changes have been executed, or how deeply they run.
 
The reforms started in 2004, when the Army replaced its old woodland camo with a solid olive drab uniform called the “Patriota.”  It was deliberately intended to evoke Cuban revolutionary garb. In 2005, a new National Reserve and Territorial Guard replaced the traditional reserve system.  The National Reserve fulfilled the functions of a traditional reserve, at least at first.  The Territorial Guard went beyond that, establishing a new military branch.  New recruits were trained over 20 consecutive Saturdays, during which they earned 16 bolívares.  By 2006 the government claimed to have trained up 110,000 reservists with a further 800,000 on the waiting lists.  The distinction between the two branches of the reserves, however, had by then blurred.

Those of you have served in a national military will understand that 20 days spread over as many weeks is a rather ineffective way to train soldiers ... whether that was the purpose is left as an exercise for the reader.

The “26 laws” that I marched against in 2008 further extended the reforms.  Superficially, they renamed the National Armed Forces the Bolivarian National Armed Forces.  More profoundly, they put more heft on the Bolivarian National Militia’s bones, constituting it as an official fifth branch of the military, after the Army, Navy, Miltiary Aviation, and National Guard.  (The Guard is oriented towards maintaining domestic order.)  The law also established links between the Militia and the “communal councils” that the government had earlier established.  Communal councils could now go down to the local Bolivarian Militia office and declare themselves an official unit, after which they would receive “advice, adequate training, and all actions pertainining to social questions, the solution of problems.” 

The latest reform took place last month, when the government issued an updated conscription law, replacing the old one from 1978.  The new law strengthens most of the current system of selective service registration, even though the Constitution of 1999 technically bans conscription.  In fact, the government will increase the fines for failing to register, and the new law requires that military documents be presented from anyone desiring to work for the government. 

In theory, now, every Venezuelan now owes a year of military service.  In practice, who knows?

It’s hard to tell what it all adds up to.  The Bolivarian Militia is badly trained, barely uniformed, and generally disorganized.  It might be an attempt to use state resources to train up the “Bolivarian Circles” that used weapons to defend Chávez back in 2002.  In September, the BBC reported that Socialist Party “patrols” were fusing with the militia, but the evidence was pretty half-assed, and it was monumentally unclear what such a fusion would get the government.  After all, the militia thus far seems not a whole lot better than what a devoted political party with government support could do by itself, without the bureaucratic bother.  I understand Rocío San Miguel’s fears, but they seem a bit premature.  The Bolivarian National Militia is still pretty far from a parallel military. 

Conversely, turning the Army into a large-scale conscription machine would be a fairly effective way to implement social change:  the Bolivarian Republic would be far from the first government to use military service in such a way.  Problem is, the Venezuelan military isn’t set up to train the 550,000 people who reach military age every year.  It isn’t even set up to train half of them. 

Of course, we haven’t reached the end-state yet — perhaps the goal is to eventually get to a point where the armed forces are omnipresent enough to serve as a means of social control, and where universal conscription serves as a way to reshape society.  In that view, we are simply not there yet.  Or maybe the goal is just to build up a legal body of Socialist Party thugs capable of breaking heads.  In that view, the mission has been accomplished with just enough socialist rhetoric to hold some weak margin of support that an open program of partisan militia-building would lose.  Or ... and this would be my guess ... it’s a way to give an ideological dressing to a scheme designed to plonk eight dollars into the hands of happy supporters in return for a fun Saturday afternoon playing soldier. 

The military reforms are like so much else about the Bolivarian Revolution over the past year:  too serious to be just window-dressing on a political machine, but not serious enough to be a real attempt to remake the country.  (Rephrased for Chávez’s foreign policy adventures:  too serious to be costless domestic posturing, not serious enough to actually extend Venezuelan power.)  At some point, you’re left scratching your head.  At least I am.

Thoughts?

Failure modes of the United States, part 1a, a counterfactual

  Gah.  Still can’t sleep, but my concentration keeps coming in-and-out.  Here goes a short post on a random topic.

The story of how the Supreme Court tried to hold up much of the New Deal is well known.  Roosevelt tried to appoint six new justices, which thankfully failed, and the Supreme Court reversed itself.  In an earlier post, I argued that it would have made little difference had the Court stuck to its initial rulings.  All that would have happened would have been a constitutional amendment reading something like the following:

Congress shall have the power to legislate in all cases for the general interests of the union, and also in those in which the states are separately incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual legislation.

A less poetic version listed an economic laundry list (wages, health and safety, etcetera) and then said:

The due process of law clauses of the fifth and fourteenth amendment shall be construed to impose no limitations upon legislation by Congress or the several states with respect to any of the subjects referred to in Section 1, except as to the methods or the procedure for the enforcement of such legislation.

Such amendments would have changed pretty much nothing.  The Gun-Free School Zones Act of 1990 would have been upheld, and that’s about it.  So not a very big change.

That said, there was another very different amendment in play at the same time, proposed by Senators Burton Wheeler (D-Montana) and Homer Bone (D-Washington).  It had a lot of support, and since Wheeler was one of the biggest opponents of FDR’s court-packing plans, it was probably the most likely amendment to pass.  (Or so I take away from Bruce Ackerman’s book.)  It read:

In case the Supreme Court renders any judgment holding any act of Congress or any provision of any such act unconstitutional, the question with respect to the constitutionality of such act or provision shall be promptly submitted to the Congress for its action at the earliest practical date that Congress is in session, but no action shall be taken by the Congress upon such question until an election shall have been held at which members of the House of Representatives are regularly by law to be chosen.  If such act or provision is re-enacted by two-thirds of each House of the Congress to which such members are elected at such election, such act or provision shall be deemed to be constitutional and effective from the date of such re-enactment.

That is a bit like Canada’s “notwithstanding” clause.  Congress would have been able to override the Supreme Court with a two-thirds vote.  Unlike Canada’s clause, which requires a notwithstanding declaration to be re-authorized every five years, a Congressional override would have been permanent.  It also would have required a Congressional re-vote, rather than merely authorizing one.  On the other-hand, two-thirds is a rather high bar to jump over. 

Unlike the more concrete economic amendments, which would have changed very little, it is not unreasonable to conclude that the Wheeler-Bone Amendment might have had very significant effects on American history.  The question is how significant, and in what direction.  Could a removal of a veto point create a failure mode?   

Things that make you go “hmmm”

   Can’t sleep, my head is so stuffed up.  (Sleeping 17 hours the day before probably didn’t hurt.  Docs think I had a virus but kept wandering around in the rain anyway, allowing a secondary infection.  Lesson:  machismo does not pay.)  So I surf the net.  And what do I find?  France’s “hamster hotel.” 

Every country, paradoxically, has a typical way to be weird.  Most Americans, for example, don’t own more guns than socks, or dress like something out of a blaxploitation flick, but those would be very American ways to be outside the American norm.  You can all think of others, or examples from different countries.

So all I can say here is that a hamster hotel is not only weird, it is a very un-French way to be weird.

Aliens attack Montevideo!

  I always said that if you were piloting a spaceship to Earth and had to choose a place to settle, you'd pick the River Plate.  Fertile soil, easily extractable oil, great climate, nearby resources when you'll need them.  So it makes sense that's where the giant alien robots would invade!

Man, I hope Sam Raimi makes that movie.  Won't the Argentines be annoyed that the aliens didn't go for Buenos Aires first!

Hat tip:  Will Baird.  It sent me right into a coughing fit that still hasn't abated, so maybe I should be annoyed.

Immigration and assimilation in Venezuela

  Still beat down under the weather.  Ugh.  This is awful.  The congestion.  The congestion.  This is not a recent picture.

 
But Randy McDonald asked me about immigration to Venezuela, so I’ll talk a little about immigration to Venezuela.  Venezuela has experienced several waves of immigration, but the big ones from Europe came in the 1950s and the 1970s.  In the 1950s, Europeans migrated because of the oil boom.  Roughly 450,000 people acquired legal permanent residence during this wave.  The new democratic government in 1958 restricted migration (not unsurprisingly) and net migration turned negative during the period.  Then in 1973, with the second oil boom, immigration again spiked upwards.  By 1976, Venezuela had 270,000 resident Spaniards, 223,000 Italians, and 107,000 Portuguese.  Now, these numbers have to be interpreted carefully:  they also include, for example, 79,672 Americans, most of whom did not settle down permanently.  Nor are the figures comparable with the permanent residency figures also presented above.  But they are what we have. 

In 1976, at its peak, the various European nationalities (counting only those born overseas, not their Venezuelan-born children) made up about 3 percent of Venezuela’s then-population of 13.1 million.  It was a large migration, but it wasn’t transformative.  On the other hand, it did transform the nature of the country’s elites.  The European migrants were remarkably successful, going on to found myriads of small businesses.  In fact, it has been the descendents of those migrants, mostly Italian, who suffered the most from the government’s recent nationalization of the oil service companies.  (More on that in another post, when I’m feeling better.) 

One interesting question about immigration is:  how quickly (if at all) do the children of immigrants lose the cultural predilections of their parents?  Jewish-Americans, for example, continue to vote Democratic at far higher numbers than their income or occupational status would predict.  Does this apply to Venezuelans? 

Francisco Rodríguez of Wesleyan and Rodrigo Wagner, a grad student here at Harvard, have used the Maisanta list to ask just that question.  Maisanta, you’ll recall, was a list published by the Venezuelan government containing the names of everyone who had signed a 2004 recall petition against Hugo Chávez.  The list contained ID numbers, which can be cross-referenced against income data in the Venezuelan Social Security Institute database.  They then used people’s surnames to trace them back to various Italian regions.  They had to eliminate non-regionally-specific surnbames like Rossi, Russo, Ferrari, Esposito, Bianchi, Romano, and Colombo.  So, given all the potential objections to the methodology, what did they find?

Nothing.  There is no relationship between the political predilections of their parents’ region-of-origin in Italy and the predilections of Italian-Venezuelan voters today.  Inasmuch as Italian-Venezuelans have overwhelmingly achieved middle and upper-class status in Venezuela, they have also assimilated to the political predilections of those groups.