“We Grow at Night, While the Government Sleeps”

HarareNightStreetMarket2017-09-10.jpg“In Harare, unauthorized street vendors wait until dark to avoid the police. The government says 95 percent of the work force is involved in the informal economy.” Source of caption and photo: online version of the NYT article quoted and cited below.

I remember my Wabash College economics professor, Ben Rogge, telling us that during one of his visits to Brazil, many decades ago, he asked an entrepreneur how the Brazilian economy managed to grow in spite of the heavy government regulations. With a smile, the entrepreneur told Ben: “We grow at night, while the government sleeps.”

(p. 6) HARARE, Zimbabwe — Dusk falls and thousands of vendors fan out across central Harare. Through the night, they hawk their wares — vegetables, clothes, kitchen utensils, cellphones — from carts, wheelbarrows or even the pavement, transforming the city’s staid business district into a giant, freewheeling village market.

On Robert Mugabe Road, around the corner from the city’s remaining colonial-era luxury hotel, the Meikles, Victor Chitiyo has sold dress shirts since losing his job as a machine operator at a textile factory several years ago.
“Since then, I’ve never been employed,” Mr. Chitiyo, 38, said under the dim light of a street lamp. “If the economy improves, I’d want to be employed at a company again. But I don’t think that will happen. It’s been a long time since we were optimistic in Zimbabwe.”
Harare’s night market is the most visible evidence of Zimbabwe’s swelling informal economy, which the government estimates now employs all but a small share of the country’s work force.
Even as Zimbabwe’s government, banks, listed companies and other members of the formal economy lurch from one crisis to another, the thriving informal economy of street vendors, traders and others unrepresented in official statistics helps keep the country afloat. For the government of President Robert Mugabe, that parallel economy is both a source of stability — and a potential challenge.
Once one of Africa’s most advanced economies, Zimbabwe has rapidly deindustrialized and shed formal wage-paying jobs, forcing millions like Mr. Chitiyo to hustle on the streets in cities and towns.
From 2011 to 2014, the percentage of Zimbabweans scrambling to make a living in the informal economy shot up to an astonishing 95 percent of the work force from 84 percent, according to the government. And of that small number of salaried workers, about half are employed by the government, including patronage beneficiaries with few real duties.
. . .
The government has occasionally cracked down — sometimes violently — on the street vendors, who are not licensed, describing their activities, near the seat of government and businesses, as an eyesore. Some of the vendors have also staged protests against Mr. Mugabe’s rule.
But the government mostly turns a blind eye, clearly calculating that a permanent crackdown on the livelihoods of an increasing number of its citizens would result in greater political instability. According to an unspoken rule, the street vendors are allowed to operate only after dark on weekdays and starting in late afternoon on weekends.
“If I come too early, the police will take my wares away and I’ll be broke,” said Norest Muza, 28, who sold popcorn and chips while carrying her 2-year-old son on her back. “Evenings, the police don’t come.”
Many of the street vendors arrive in Harare’s business district at dusk and spend the night on the streets before going home at dawn with the morning’s first taxis and buses.
. . .
Mr. Mugabe’s violent seizure of white-owned farms starting in 2000 precipitated a decline in manufacturing and a process of deindustrialization. Manufacturing peaked in 1992, accounting for about 30 percent of the gross domestic product. Now it is 11 percent and declining.
. . .
With the government now strictly controlling the transfer of dollars outside Zimbabwe, companies dependent on trade are finding it increasingly difficult to import critical goods.
“We have companies scaling down or discontinuing certain lines that are heavy on import requirements,” said Busisa Moyo, president of the Confederation of Zimbabwe Industries.
. . .
As the formal economy keeps shrinking, more and more people have been crowding the area where Mr. Chitiyo sells shirts on Robert Mugabe Road.
Across the street, a girl’s voice was crying, “Twenty-five cents for a cob!” It belonged to Tariro Dongo, 13, on her first evening working as a street vendor. It was past 9 p.m. Tariro said she was good in school and wanted to become a teacher.
She had bought 20 corn cobs for $2 near her home in Epworth, a poor township outside Harare. If she sold everything, her profit, after transportation, would amount to a couple of dollars. Sitting on a black bucket and fanning the coals in a small charcoal burner with a piece of cardboard, Tariro roasted the cobs.
She was happy with the money she had made on her first day, Tariro said.
“Twenty-five cents,” she cried. “One cob left!”

For the full story, see:
NORIMITSU ONISHI and JEFFREY MOYO. “Trade on the Streets, and Off the Books, Keeps Zimbabwe Afloat.” The New York Times, First Section (Sun., MARCH 5, 2017): 6.
(Note: ellipses added.)
(Note: the online version of the story has the date MARCH 4, 2017, and has the title “Trade on Streets, and Off Books, Keeps Zimbabwe Afloat.”)

Liberal Democrat Hesburgh Condems Obama Administration’s Killing School Vouchers

My Chicago professor Milton Friedman proposed educational vouchers in Capitalism and Freedom, a great book based on lectures that Friedman delivered several decades ago at Wabash College at the invitation of my first economics professor, Ben Rogge.
Friedman’s belief was that parents generally care about their children, and will seek a good education for them, if provided the means to choose among credible alternatives.
Special interests are arrayed against this idea, but that does not mean that Friedman was wrong.
Another distinguished educator who supports vouchers (see below) is Father Hesburgh, who for many years was President of Notre Dame in my hometown of South Bend, Indiana.

(p. A19) If Martin Luther King Jr. told me once, he told me a hundred times that the key to solving our country’s race problem is plain as day: Find decent schools for our kids. So I was especially heartened to hear Education Secretary Arne Duncan repeatedly call education the “civil rights issue of our generation.” Millions of our children–disproportionately poor and minority–remain trapped in failing public schools that condemn them to lives on the fringe of the American Dream.

. . .
. . . , I was deeply disappointed when Sen. Richard Durbin (D., Ill.) successfully inserted a provision in last year’s omnibus spending bill that ended one of the best efforts to give these struggling children the chance to attend a safe and decent school.
That effort is called the Opportunity Scholarship program. Since 2004 it has allowed thousands of children in Washington, D.C., to escape one of the worst public school systems in the nation by providing them with scholarships of up to $7,500.
Despite its successes, it is now closing down. On Tuesday the Senate voted against a measure introduced by Sen. Joseph Lieberman (I., Conn.) that would have extended the program. Throughout this process Mr. Duncan’s Education Department and the White House raised no protest.
. . .
I know that some consider voucher programs such as the Opportunity Scholarships a right-wing affair. I do not accept that label. This program was passed with the bipartisan support of a Republican president and Democratic mayor. The children it serves are neither Republican nor Democrat, liberal or conservative. They are the future of our nation, and they deserve better from our nation’s leaders.
I have devoted my life to equal opportunity for all Americans, regardless of skin color. I don’t pretend that this one program is the answer to all the injustices in our education system. But it is hard to see why a program that has proved successful shouldn’t have the support of our lawmakers. The end of Opportunity Scholarships represents more than the demise of a relatively small federal program. It will help write the end of more than a half-century of quality education at Catholic schools serving some of the most at-risk African-American children in the District.
I cannot believe that a Democratic administration will let this injustice stand.

For the full commentary, see:
THEODORE M. HESBURGH. “A Setback for Educational Civil Rights; I cannot believe that a Democratic administration will let this injustice of killing D.C. vouchers stand.” The Wall Street Journal (Thurs., MARCH 18, 2010): A19.
(Note: ellipses added.)
(Note: the online version of the article was dated MARCH 17, 2010.)
Reference to the Friedman book mentioned above:
Friedman, Milton. Capitalism and Freedom. Chicago: The University of Chicago Press, 1962.

55% of Nebraskans Favor School Vouchers

The Friedman Foundation mentioned in the passage below, was founded by Nobel Prize winning economist Milton Friedman who is often credited with creating the idea of education vouchers in his classic book Capitalism and Freedom.
Capitalism and Freedom was based on a series of lectures that Friedman delivered at Wabash College at the invitation of my much-missed mentor Ben Rogge. (Before teaching me economics in Indiana, Rogge was a native Nebraskan who earned his bachelor’s degree from Hastings College.)

(p. 4B) A majority of Nebraskans are open to school-choice reforms such as school vouchers and tax­-credit scholarships, according to a survey made public Thurs­day by a national school-choice group.

“It really appears Nebraska is ready to start talking about school-choice reform options,” said Paul DiPerna, director of partner services for the Fried­man Foundation for Educational Choice, which commissioned the survey.
The group partnered with the Nebraska Catholic Conference and other state and national groups to conduct the telephone survey of 1,200 likely voters.
Fifty-five percent of those sur­veyed said they favored school vouchers and supported a tax­-credit scholarship system, which would give tax credits to indi­viduals and businesses that con­tribute money to nonprofit orga­nizations that distribute private school scholarships.

For the full story, see:
Dejka, Joe. “Support for school choice tax plan seen; An Indianapolis organization says its survey shows Nebraskans would back a pending bill.” Omaha World-Herald (Fri., Sept. 18, 2009): 4B.

Mackerel Money: “If a Dog Eats It, It’s Dog Food”

Mackerel.jpgLevineLarry.gif Mackerel on left; Larry Levine on right. Source of photo and image: online version of the WSJ article quoted and cited below.

In discussing the nature of money, my Wabash College economics professor, Ben Rogge, used to say “if a dog eats it, it’s dog food.” (The moral being that, if people use it as money, it’s money.)
There are many examples of unusual money: large stones, cigarettes, and now mackerel (see the article quoted below).
P.S. In an earlier entry, I worried that Rupert Murdoch would kill the WSJ‘s quirky trademark front-page article. Score one for Rupert’s ability to change his mind for the better, when it matters.

(p. A1) When Larry Levine helped prepare divorce papers for a client a few years ago, he got paid in mackerel. Once the case ended, he says, “I had a stack of macks.”

Mr. Levine and his client were prisoners in California’s Lompoc Federal Correctional Complex. Like other federal inmates around the country, they found a can of mackerel — the “mack” in prison lingo — was the standard currency.
“It’s the coin of the realm,” says Mark Bailey, who paid Mr. Levine in fish. Mr. Bailey was serving a two-year tax-fraud sentence in connection with a chain of strip clubs he owned. Mr. Levine was serving a nine-year term for drug dealing. Mr. Levine says he used his macks to get his beard trimmed, his clothes pressed and his shoes shined by other prisoners. “A haircut is two macks,” he says, as an expected tip for inmates who work in the prison barber shop.
There’s been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That’s when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.
Prisoners need a proxy for the dollar because they’re not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After (p. A16) the smokes disappeared, inmates turned to other items on the commissary menu to use as currency.
. . .
Mr. Muntz says he sold more than $1 million of mackerel for federal prison commissaries last year. It accounted for about half his commissary sales, he says, outstripping the canned tuna, crab, chicken and oysters he offers.
Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few — other than weight-lifters craving protein — want to eat it.
So inmates stash macks in lockers provided by the prison and use them to buy goods, including illicit ones such as stolen food and home-brewed “prison hooch,” as well as services, such as shoeshines and cell cleaning.
The Bureau of Prisons views any bartering among prisoners as fishy. “We are aware that inmates attempt to trade amongst themselves items that are purchased from the commissary,” says bureau spokeswoman Felicia Ponce in an email. She says guards respond by limiting the amount of goods prisoners can stockpile. Those who are caught bartering can end up in the “Special Housing Unit” — an isolation area also known as the “hole” — and could lose credit they get for good behavior.

For the full story, see:
JUSTIN SCHECK. “Mackerel Economics in Prison Leads to Appreciation for Oily Fillets; Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp.” The Wall Street Journal (Thurs., OCTOBER 2, 2008): A1 & A16.
(Note: ellipsis added.)

The classic article on cigarette money, is:
Radford, R.A. “The Economic Organization of a P.O.W. Camp.” Economica, New Series 12, no. 48 (Nov. 1945): 189-201.

When the Ship Is Sinking, Schumpeter Suggests: “Rush to the Pumps”

Wabash economics professor Ben Rogge’s best lecture focused on a question made famous by Schumpeter: “Can Capitalism Survive?” In some ways, Ben’s message was a pessimistic one.
But near the end of his lecture, Rogge included the following quote from Schumpeter’s Capitalism, Socialism and Democracy:

(p. xi) This leads to the charge of “defeatism.” I deny entirely that this term is applicable to a piece of analysis. Defeatism denotes a certain psychic state that has meaning only in relation to action. Facts in themselves and inference from them can never be defeatist or the opposite whatever that might be. The report that a given ship is sinking is not defeatist. Only the spirit in which this report is received can be defeatist: The crew can sit down and drink. But it can also rush to the pumps.

Source of quote:
Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

Reference to Rogge’s collection of essays that includes the title essay mentioned above:
Rogge, Benjamin A. Can Capitalism Survive? Indianapolis: Liberty Fund, Inc., 1979.

Aleksander Solzhenitsyn, Hero of Freedom, RIP

I heard last night that Aleksander Solzhenitsyn had died late that on that day, August 3, 2008.
Like all of us, he had his flaws. But he had strong moral courage in standing up against the enslavement of the masses by the communist tyranny of the USSR. For that he paid a huge price, partly in the form of the years of forced labor in the prison camps that he carefully documented in his massive The Gulag Archipelago. (I must admit that I never read The Gulag, although I believe my father, to his credit, read every page.)
I remember my mentor Ben Rogge reading The First Circle and highly recommending it to us. The book’s title is based on Dante’s Inferno which describes the nine circles of hell, where each successive circle assigns increasingly horrendous eternal punishments, for those guilty of increasingly terrible sins. In the first circle, good people born before Jesus, are allowed to pursue their interests much as they had on earth. Socrates, Plato and Aristotle, for instance, engage in eternal dialogue.
In Solzhenitsyn’s version, Stalin allows a group of scientists to have better living conditions, and somewhat more freedom than ordinary Soviet citizens, so long as the scientists make progress on projects that enable Stalin to extend his power.
One of the revelations in the book is that those who imposed the tyranny, had motives that were not always evil. One bureaucratic candidate for villainy, for instance, did bad things, in order to protect his family. At the top there is Stalin, but he is portrayed as insane.
The point is one that Rogge often made—people are pretty much the same everywhere. What mainly explains the differences in different societies are different institutions that provide differing incentives and constraints.
It is a fitting tribute to Solzhenitsyn that the first unabridged English translation of The First Circle will soon be published.
I salute Solzhenitsyn for his insights, and even more, for his courage at standing up against an evil system.

William F. Buckley, Jr. Will Be Missed

BuckleyWilliam.jpg“William F. Buckley Jr. in 2004.” Source of caption and photo: online version of the NYT obituary cited below.
I write on Weds., Feb. 27th, at about 1:30 PM. As I ate an early lunch a couple of hours ago, I was listening to U.S. Senate speeches on C-SPAN. After a good speech on Iraq by Senator Lindsey Graham, Senator Joe Lieberman appeared and interupted the proceedings, asking the Senate’s indulgence for him to speak for 10 minutes on a special topic.
He announced that William F. Buckley, Jr. had passed away today (2/27/08); and then he delivered a heartfelt, sometimes humorous, and wholly appropriate tribute to Buckley.
I have mentioned a couple of my favorite Buckley stories in an earlier entry.
Lieberman emphasized that Buckley cared about ideas, and that is most important to emphasize. Listening to Buckley speak was entertaining, and educational.
Strange what we remember–when I think of Buckley, the following episode always comes to mind.
Sometime while I was an undergraduate at Wabash (1971-1974), my mentor Ben Rogge arranged to have his friend Bill Buckley give a speech on campus. Ths speech was paid for by another of Rogge’s friends, Pierre Goodrich, the founder of Liberty Fund.
After the speech there was to be a special reception for members of the John Van Sickle Club, the small libertarian club on campus, of which I was a member.
The speech was well-attended, and some non-members of the Club got wind of the reception and tried to gain admittance. They were turned away, and were miffed, and complained.
The issue made it into the college newspaper, and I wrote a letter to the editor defending the John Van Sickle Club, using one of Rogge’s favorite sayings: “he who pays the piper, calls the tune.”
Some of the details are fuzzy, but I ended up in Rogge’s office, and heard from him that he was not happy with my letter. He felt that Goodrich might be embarrassed by the campus turmoil on the issue.
I remember feeling devasted that Rogge was annoyed with me. I apologized profusely (although I still think I had a point). Rogge must have seen my cresfallen appearance, because he changed his tone and ended the conversation by saying that I shouldn’t worry about it, because Goodrich probably would never see the newspaper article and letters, anyway.

The online version of the New York Times obituary for Buckley is at:
DOUGLAS MARTIN. “William F. Buckley Jr. Is Dead at 82.” The New York Times (Weds., February 27, 2008): ?.