Hernando de Soto Creates Buzz in Clinton Hallways

DeSotoClinton.jpg  Hernando de Soto and Bill Clinton at the second annual Clinton Global Initiative.  Source of photo:  online version of the WSJ article cited below.

 

. . . the buzz in the hallways centered on a topic that until recently most philanthropists all but ignored:  registering poor people’s property so they could borrow against it to build businesses, pay taxes or for other purposes.  Many citizens of developing countries don’t formally have title to their land, and many economists — including Peruvian economist Hernando de Soto, another conference attendee — see this as a key source of urban poverty.  According to Mr. de Soto’s research, the value of unregistered land in developing countries totals over $9 trillion.  Mr. Clinton told the audience that these assets "cannot be converted into collateral for loans — wealth locked-up and locked-down — keeping people in grinding poverty instead of being an asset that can lift them up."  Up to 85% of urban land parcels in the developing world are unregistered, Mr. Clinton said, citing Mr. de Soto’s research.

But standing in the way of widespread land-ownership records are insufficient legal frameworks, confusing procedures and corrupt property registries.  And establishing land ownership is all but impossible in communist and socialist countries, where property usually is owned by the state, said John Bryant, chief executive of Operation Hope, a nonprofit in Los Angeles that provides financial services to the poor.

 

For the full article, see: 

SALLY BEATTY. "GIVING BACK; Helping the Poor Register Land." Wall Street Journal (Fri., September 29, 2006): W2.

(Note:  ellipsis added.)

“Free to Choose” Turns Estonia into “Boomtown”

  Source of book image:  http://search.barnesandnoble.com/booksearch/imageviewer.asp?ean=9780156334600

 

If, like Mr. Laar, you are only going to read one book in economics, Milton Friedman’s Free to Choose, is not too bad a choice:

(p. A23) Philippe Benoit du Rey is not one of those gloomy Frenchmen who frets about the threat to Gallic civilization from McDonald’s and Microsoft.  He thinks international competition is good for his countrymen.  He’s confident France will flourish in a global economy — eventually.

But for now, he has left the Loire Valley for Tallinn, the capital of Estonia and the economic model for New Europe.  It’s a boomtown with a beautifully preserved medieval quarter along with new skyscrapers, gleaming malls and sprawling housing developments:  Prague meets Houston, except that Houston’s economy is cool by comparison.

Economists call Estonia the Baltic tiger, the sequel to the Celtic tiger as Europe’s success story, and its policies are more radical than Ireland’s.  On this year’s State of World Liberty Index, a ranking of countries by their economic and political freedom, Estonia is in first place, just ahead of Ireland and seven places ahead of the U.S. (North Korea comes in last at 159th.)

It transformed itself from an isolated, impoverished part of the Soviet Union thanks to a former prime minister, Mart Laar, a history teacher who took office not long after Estonia was liberated.  He was 32 years old and had read just one book on economics:  ”Free to Choose,” by Milton Friedman, which he liked especially because he knew Friedman was despised by the Soviets.

Laar was politically naïve enough to put the theories into practice.  Instead of worrying about winning trade wars, he unilaterally disarmed by abolishing almost all tariffs.  He welcomed foreign investors and privatized most government functions (with the help of a privatization czar who had formerly been the manager of the Swedish pop group Abba).  He drastically cut taxes on businesses and individuals, instituting a simple flat income tax of 26 percent.

 

For the full commentary, see:

JOHN TIERNEY.  "New Europe’s Boomtown."  The New York Times  (Tues., September 5, 2006):  A23.

 

Cuban Bureaucrats Fooled by Castro Impersonator

CastroImpersonator.jpg  Castro impersonator Eddy Calderón.  Source of photo:  online version of WSJ article cited below. 

 

(p. A1)  Mr. Calderón says the work can be risky.  Once, he recalls, a woman whose relative had been executed by the revolution hurled a dinner plate at his head.  At a recent gig, a tiny, white-haired lady shouted at him:  "Why did you ruin the country?" Mr. Calderón, as Fidel, answered that she should thank him because if it hadn’t been for him, she’d be stuck in Cuba instead of living well in Miami, "where you can buy hair dye and dentures."

After the Aug. 13 performance, a ballroom attendant, Armando Montes de Oca, approached Mr. Calderón while he was still in his Castro beard and told him:  "If I didn’t know you were Calderón behind that beard, you would never leave (p. A9) this room alive."

"Thank you," Mr. Calderón replied.

Mr. Calderón has been doing his imitation of Fidel for about a dozen years.  He became a local superstar two years ago when a cable-TV channel started weekly broadcasts of a skit called "La Mesa Retonta," or "The Idiots’ Table," a takeoff on a weekly "Meet the Press"-style show Mr. Castro has done in Cuba, called "La Mesa Redonda," or "The Roundtable."

Mr. Calderón’s Fidel voice is so good that on about 50 occasions, he has telephoned Cuban bureaucrats in Havana or Cuban diplomats abroad and fooled them into thinking they were on the line with the man himself.  Mr. Calderón taped the calls, which he still often plays on a Miami radio show.

Two years ago, Mr. Calderón held a 12-minute conversation with Cuba’s deputy construction minister, ordering him to build a giant retractable roof over Havana’s Latin American stadium, as a way to improve conditions for Cuban baseball players and dissuade them from defecting.

"We need a revolutionary roof to uphold the pride of the Cuban Revolution," said Mr. Calderón during the taped telephone call, in a dead-on imitation of Mr. Castro’s edgy, high-pitched, nasal voice.

"I am your unconditional soldier," replied the hapless minister, who promised to get the job done.

That same year, Mr. Calderón telephoned a luxury hotel at Cuba’s Varadero beach resort and ordered the hotel manager to provide a week-long all-expense-paid vacation for one of Cuba’s leading dissidents, whose movements are shadowed by the secret police, to show the government’s good will.  Before hanging up, the hotel manager, Mr. Calderón says, promised to make the reservation.

A year earlier, Mr. Calderón as Fidel told transport official Gumersindo Gómez to round up 200 scarce buses for an outing of some 700 priests of the Afro-Cuban religion Santería, and to find room for their sacrificial goats and chickens.  Make sure the buses don’t have any graffiti saying "down with You-Know-Who," he added.

"Fatherland or death," Mr. Calderón said.

"Onwards to victory," replied Mr. Gómez, according to the tape of the phone call.

 

For the full story, see:

JOSÉ DE CÓRDOBA.  "Fidel Castro’s Illness Has Impersonators Scrambling to Adapt In Miami; Mr. Calderón Does El Jefe’s Voice Perfectly; New Role for Brother Raúl."  Wall Street Journal  (Fri., August 18, 2006):  A1 & A9. 

Eleven-Year-Old Crippled for Life by Mao Supporters


  Source of book image:  http://www.holtzbrinckpublishers.com/henryholt/Search/SearchBookDisplayLarge.asp?BookKey=1524294


(p. B29) This improbable journey, from Maoist orthodoxy to the entrepreneurial quasicapitalism officially described as “socialism with Chinese characteristics,” is the main theme of “Chinese Lessons,” but Mr. Pomfret, a reporter for The Washington Post, gives his tale a twist.  He tells it not only through his own experiences as a student and journalist but through the life stories of five university classmates, who suffered through the Cultural Revolution as children, found inspiration and hope in the growing democracy movement and lived to see a China that neither they nor their parents could have imagined.  . . .

All the lives Mr. Pomfret explores are extraordinary, and each sheds its own light on recent Chinese history.  Perhaps the most endearing of his characters is Guan Yongxing, better known as Little Guan, who as an 11-year-old suffered social ostracism after accidentally using a piece of paper with “Long Live Chairman Mao!” on it to wipe herself in the bathroom.

After classmates threw her to the ground, no doctor would treat her dislocated shoulder, leaving her crippled for life.  Her father’s job as a schoolteacher made the Guan family a prime target for abuse, and Little Guan, rather than endure ridicule and torment at school, picked cotton and sprayed fertilizer on the fields, her back constantly burned by chemicals leaking from the tank on her back.  Tough, determined and highly intelligent, she survives and eventually prospers in the new China.

. . .

Zhou Lianchun, called Book Idiot Zhou by a contemptuous Communist Party official, meted out insults and torture as part of a Red Guard brigade.  “I did what I was told and, being 11, I liked it,” he tells Mr. Pomfret.

. . .

More even than sex, students want just a little bit of the good life that seems to be in reach as China’s rulers relax their economic policies.  To get it they master a strange kind of doublethink, pledging allegiance to the party and Communist ideals while scheming to start a business.

Book Idiot Zhou, a history teacher by day, jumps into a business partnership to process urine for the pharmaceutical industry.  “Several days a week, he taught Marxism, Leninism and Maoist thought and railed against the exploitation of the capitalist class,” Mr. Pomfret writes.  “The rest of the time he spent as a budding entrepreneur, employing dozens at rock-bottom wages, working the system to enrich himself, his partners and his family.”

. . .

His classmates have done well.  But their lives, and the China described in “Chinese Lessons,” bear a heavy load of suppressed grief, terrible compromises and boundless cynicism.  At a new drive-in called the Happy Auto Movie Palace, Mr. Pomfret notices something strange about the concrete slabs underneath his feet.  They show the marks of tank treads.  The drive-in owner bought them after the government repaved Tiananmen Square.

This strikes Mr. Pomfret as bizarre, but not the owner.  “It was a good deal,” he says.

 

For the full review, see: 

WILLIAM GRIMES. "Books of The Times; Twisting Along China’s Sharp Curves." The New York Times (Fri., August 4, 2006):  B29.
(Note: ellipses added.) 


Russians Try to Steal Rocker’s Vacuum Tube Factory

Mike Matthews holding one of the vacuum tubes produced in the Russian factory he owns.  Source of photo:  online version of the NYT article cited below.

 

(p. C1)  SARATOV, Russia — Mike Matthews, a sound-effects designer and one-time promoter of Jimi Hendrix, bought an unusual Russian factory making vacuum tubes for guitar amplifiers.  Now he has encountered a problem increasingly common here: someone is trying to steal his company.

Sharp-elbowed personalities in Russia’s business world are threatening this factory in a case that features accusations of bribery and dark hints of involvement by the agency that used to be the K.G.B.

Though similar to hundreds of such disputes across Russia, this one is resonating around the world, particularly in circles of musicians and fans of high-end audio equipment.

Russia is one of only three countries still making vacuum tubes for use in reproducing music, an aging technology that nonetheless "warms up" the sound of electronic music in audio equipment.

"It’s rock ‘n’ roll versus the mob," Mr. Matthews, 64, said in a telephone interview from New York, where he manages his business distributing the Russian vacuum tubes.  "I will not give in to racketeers."

Yet the hostile takeover under way here is not strictly mob-related.  It is a dispute peculiar to a country where property rights — whether for large oil companies, car dealerships or this midsize factory — seem always open to renegotiation.  It provides a view of the wobbly understanding of ownership that still prevails.

. . .

(p. C4)  If the tube factory dies, so will the future of a rock ‘n’ roll sound dating back half a century, the rich grumble of a guitar tube amplifier — think of Jimi Hendrix’s version of "The Star-Spangled Banner" — that musicians say cannot be replicated with modern technology.

"It’s nice and sweet and just pleasing sounding," Peter Stroud, the guitarist for Sheryl Crow, said in a telephone interview from Atlanta.  "It’s a smooth, crunchy distortion that just sounds good.  It just feels good to play on a tube amp."

He added:  "It would be a catastrophe for the music industry if something happened to that plant."

 

For the full story, see: 

ANDREW E. KRAMER.  "From Russia, With Dread; American Faces a Truly Hostile Takeover Attempt at His Factory."  The New York Times   (Tuesday, May 16, 2006):  C1 & C4.

 

The transistor disrupted the vacuum tube, a case that would usually be described as an episode of creative destruction.  One secondary lesson from the story above is that there may be a previously unremarked symmetry to the process of disruption.  A disruptive technology typically appeals only to a niche in the market, while the incumbent technology dominates the mainstream.  But after the disruptive technology improves sufficiently to capture much of the mainstream market, maybe there often will remain a niche market that still prefers the older disruptive technology?

To use Danny DeVito’s example in "Other People’s Money," the car may have disrupted horse-and-buggies.  But for some nostalgic "jobs" the horse-and-buggy may still be the better product, so there will likely remain some demand for buggy whips.

To the extent that this phenomenon is significant, it might serve to ease the labor market transition when one technology leapfrogs another.

 

VacuumTubeBox.jpg A vacuum tube used in guitar amplifiers, that was produced in the factory that Mike Matthews owned.  Source of photo:  online version of the NYT article cited above.

An Unintended Use of Shipping Containers

Source of top image:  online version of NYT article cited below.  Source of bottom image:  http://www.2odessa.com/wiki/index.php?title=Seventh-Kilometer_Bazaar

 

SEVENTH-KILOMETER MARKET, Ukraine, May 16 – Most of the shops here on the airport road outside Odessa are neither buildings nor stalls.  They are shipping containers, stacked two high in rows long enough to be called streets, though these are little more than overcrowded alleys.

From their steel gates spills a consumer abundance of inexpensive clothes, shoes and toys, kitchenware, hardware and software, cosmetics, sporting goods and various sundries — virtually everything, in short, in a part of the world that not long ago was used to getting by with virtually nothing.

. . .

”They were growing wheat here when I came,” said Aleksandr Sedov, who once programmed computers for the Soviet space program and now sells, mostly, suspenders and women’s blouses.  ”Now this place is called the field of wonders.”

It was also a dump and a garbage incinerator — paved over and torn down, respectively — when the last Soviet city fathers of Odessa expelled the pioneers in a previously unknown free market from the city, banishing them to a 10-acre spot seven kilometers, or about four miles, from the city’s limits, hence the name.  That was in 1989, as the Soviet Union itself was unraveling, and what has since emerged is Europe’s most extraordinary and, some say, largest market.

 

For the full story, see: 

Steven Lee Myers.  "Seventh-Kilometer Market Journal: From Soviet-Era Flea Market to a Giant Makeshift Mall."  The New York Times  (Fri., May 19, 2006):  A4.

 

“Everybody wants to be like Bill Gates”

Vietnamese university students hoping to see Bill Gates.  Source of image:  http://www.nytimes.com/2006/04/27/world/asia/27vietnam.html?ex=1303790400&en=255d4d4996b1a9a6&ei=5088&partner=rssnyt&emc=rss

 

HANOI, Vietnam, April 26 — It was Lenin’s birthday.  The most important Communist Party meeting in five years was under way. And the star of the show was the world’s most famous capitalist, Bill Gates.

The president, the prime minister and the deputy prime minister all excused themselves from the party meeting on Saturday to have their pictures taken with Mr. Gates, who has more star power in Vietnam than any of them.

When people heard he was in town, hundreds climbed trees and pushed through police lines to get a glimpse of him.  He was the subject of the lead article in the next day’s newspapers.

This is where Vietnam stands today, moving cautiously toward a new version of communism while the people and their leaders lunge eagerly for the brass ring of capitalist development.

"That was very symbolic," said Le Dang Doanh, an official in the Ministry of Planning, speaking of the reception for Mr. Gates.  "It is a very clear sign of the new mood of society and the people.  Everybody wants to be like Bill Gates."

 

For the full story, see:

SETH MYDANS.  "Communist Vietnam Lunges for Capitalism’s Brass Ring."  The New York Times (Thurs., April 27, 2006):  A3.

Note:  the version of the article above corrects an error in the print version that had misidentified the day of Lenin’s birth, and Gates visit as a Sunday (it was a Saturday).