Venezuela, After Liberation: Justice

Por Alejandro Chafuen: Publicado el 23/2/19 en: https://www.forbes.com/sites/alejandrochafuen/2019/02/23/venezuela-after-liberation-justice/#5309f92160b8

 

Liberation should be coming soon for Venezuela. After liberation will come celebration. Almost immediately should come justice. Punishing the culprits will be difficult, but it will be easier than making restitution to all the victims.

Problems of justice fall under (a) commutative justice (justice in transactions and contracts) and (b) distributive justice (what every participant should contribute to decisions that have a “common” cost, and how much each should receive from the “common pool”).

The usual topic of justice in post-socialist transitions is the restitution of private property to its legitimate owners. Such restitution, though, seems a topic for commutative justice. If the confiscated property came under state control, however, part of the restitution should also be guided by principles of distributive justice.

As St. Thomas Aquinas—in line with Aristotle’s thought—clarified, the role of this justice is to distribute “common goods proportionately.”[1] This is totally different than taking from the rich and giving to the poor, a perverted concept of distributive justice. The late-scholastics, Aquinas followers who focused more on economics, argued that profit, salaries and rents were topics of contract law, a part of commutative justice, it is not the government’s task to determine them.

Under the horrors of 21st-century socialism, Venezuela has suffered many common violations of distributive justice. Favoritism is a typical one of these. Some concrete manifestations of favoritism are nepotism and cronyism. It is an injustice in the distribution of common goods when one party is preferred to another not by reason of merit but for another undue cause, such as family relationships. Multiple accusations have surfaced against family members of government officials, and these will have to be investigated.

Corruption, which often goes hand in hand with favoritism, is another violation of distributive justice. High inflation, overregulation, high taxes and confusing tax structures are powerful corrupting incentives, especially in countries with high inequality. Such cases have always led to widespread tax evasion, justifying a large informal economy and undermining respect for the rule of law. Sadly, giving restitution to all victims of inflation and unjust regulations is impossible and would create further victims and distributive injustices. Venezuela has high rankings of corruption, inflation and overregulation. In the rule of law index compiled by the World Justice Project it ranks last in the world. In economic freedom, only North Korea rans worse.

Another strong incentive to corruption is differential exchange rates and official exchange rates that diverge from free-market rates. These are easy to evade, can enrich bureaucrats and their associates, and – from the standpoint of natural law – appear so artificial that those who violate their regulations feel justified in their attempts. A merchant who declares that he is exporting less than he really is could be violating rules and lying, but the foreigners who buy from him see nothing wrong when asked to pay the total value to a foreign account or a subsidiary owned by the merchant. I believe that this factor was a primary contributor to the corrupt practices of Venezuelan socialists and their allies.

Some damages—such as confiscation of property with insufficient compensation—can be calculated more or less justly. It will not be simple, though. Someone from whom a piece of land was unjustly confiscated, for example, may receive it back with its productive capacity almost intact; while, on the other hand, someone who lost an industrial enterprise or a factory that was then allowed to fall into ruin, or was not maintained or kept up to date, might likely receive an industry that can only generate losses. Only exception is when it owned valuable brands and other intellectual property. I found cases such as these during transitions away from communism in Central and Eastern Europe. Justice was never served.

We then have cases where some received payments for their expropriated assets while others did not. Take the case of steel companies, such as Sivensaand Sidetur, confiscated by the Chávez regime with no compensation to their owners. It is difficult to calculate the value of these businesses before the socialist debacle, but some place it at almost $1 billion. On the other hand, Sidor, the steel company created by the Venezuelan state, was later privatized by President Caldera in 1997 and then renationalized by the Chávez regime in 2008. Compensation of nearly $2 billion was paid. The owners of the Ternium company (which received the compensation), have been accused of paying bribes to the Venezuelan government during these transactions.

I know of another case in Venezuela in which the dictatorial regime tried to resort to legal finagling to confiscate a large rural estate. Government agents tried to go back to property titles from the colonial period (back to 1493!) to argue that the land should belong to the state. The family fought in court, and, as happens in such cases, the government offered to back down in exchange for an under-the-table payment. The family members got together and honorably decided that they would prefer to lose everything rather than become accomplices of evil.

A useful guide for those who advocating for restitution is the website Un País de Propietarios (A Country of Property Owners), a project of the leading free-society think tank in Venezuela, CEDICE. It has a list of many of the regime’s violations of justice and offers a place for citizens to file their complaints. There are many, however, that we will not be able to calculate and restore adequately. The damage caused by shattered dreams, professional careers cut short, deteriorated health and families torn apart is impossible to calculate. In Latin American countries that fought against communist guerrillas and in which socialists or their sympathizers then came to power, “justice” granted large compensation to former subversives. In the same fashion, countless Venezuelans should receive recompense from the state for harm to civilians caused by the Chávez and Maduro governments. Once socialism falls, the new Venezuelan government will have resources coming from the restoration of government, as well as the resources it can recover from the guilty. But these will never be enough, and unequal treatment of victims is something that can affect the post-transition period. Three decades have passed since the fall of the Berlin Wall, and these debates continue today in post-communist countries.

Those making transition plans urgently need to carry out comparative analyses of similar experiences in order to identify which victims should be favored. Some of the more realistic transition plans envision the privatization of much of Venezuela’s petroleum production. A portion of these resources, like others that liberation could produce, should be structured so as to benefit the most easily identifiable victims. But given the need to achieve economic growth fairly quickly, it is certain that only part of the victims will be able to receive what is owed them.

Regarding the guilty who profited from the 21st-century socialist regime, again it will be difficult to punish everyone. A distinction will have to be made between those who established relationships with the regime in order to continue operating their companies and those who, at the other extreme, created fictitious companies or used their own companies for unjust and corrupt profit. Some businessmen received privileges such as monopolies in certain places, or special permits in the exchange and financial markets. If these businessmen are not punished, they should at the very least bear disproportionate moral responsibility for helping during the transition.

One possibility is to focus the corrective work of distributive justice on the most serious cases. A typical remedy in post-communist countries was that of prohibiting those most at fault from occupying public posts and certain business posts for a period of time. A case that Venezuelans ought to study is how the Brazilian justice system took up the theme of corruption in Odebrecht and Petrobras.

My recommendation to those responsible for justice during the transition is (1) not to neglect themes of distributive justice; (2) to work immediately to create an assessment committee made up of people who are beyond reproach and who have successful experience in these cases; and (3) to lend support to institutions with credibility in topics of justice and morality. For this assessment committee, from the Americas I would invite experts from Brazil and Chile. From the rest of the world I would include Central and Eastern European policy actors.

To create support for decisions regarding distributive justice, it will be imperative to gain the support of the Catholic episcopate. They have played an exemplary role during these troubling times. Before being clouded by the populist and statist view of social justice, the non-socialist tradition of distributive justice took shape in the Catholic Church. Bishops and committed laypeople from this tradition must be the ones who bring back true distributive justice and help to rebuild Venezuela, aiding those who need forgiveness and those who build a healthy consensus.

[1] St. Thomas Aquinas, Summa theologiae, II-II, q. 61, a. 1.

 

Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE.

A Philosopher For Supply Side Economics Tackles Inequality

Por Alejandro Chafuen: Publicado el 25/7/18 en: 

 

In Rich and Poor: Equality and Inequality, Spanish philosopher Leonardo Polo (1926-2013) offers profound thoughts which can serve as a foundation to change the debate on inequality. Polo inspired thousands of students during his academic career, mostly at the University of Navarra, but also in other schools. His collected works fill almost 20 volumes. Think tanks and research centers studying his work have been founded in at least seven countries, and he directed more than 40 doctoral dissertations.

Although he was much better known as a philosopher, Polo also delved into economics. Polo pays attention to some of the great influencers in this field, from John Maynard Keynes to Milton Friedman. As he did with philosophy, he also goes beyond traditional arguments and methods. He pays attention, for example, to “spatial economics” or the influence of geography in economic development. He saw Brussels, placed strategically in the productive corridors of Europe, as destined to increase its political economic power. However, he did not like the Belgian model which, according to him, rested “entirely on big business whose guarantors are, at the same time, its parasites.”

Leonardo Polo essay on inequality appearing for the first time in an accessible booklet in EnglishMANUEL CASTELLS AND LEONARDO POLO INSTITUTE OF PHILOSOPHY

The writer who perhaps had more influence on Polo’s views on wealth is George Gilder. Labels are almost always dangerous, but Polo can be justly described as a supply-sider philosopher of economics. He called to leave most of Keynesianism behind, preferring the views of Jean Baptiste Say (1767-1832). The latter emphasized the importance of supply rather than demand, the latter being the pet peeve of Keynesians of all colors.

Polo argues that the essence of true capitalism is giving. By this it is meant the type of giving that requires taking risks without knowing if one would ever be able to recoup the investment. The true entrepreneur, and a healthy capitalism, gets corrupted by the Keynesian vision. While the true entrepreneur is someone who sees an opportunity to create, and has the talent and willingness to attract resources and invest in them before seeing a result, the Keynesian entrepreneur, according to Polo, is someone who likes to ride the coattails of higher growth, assuming little or negligent risks.

Keynes policies lead “to the rise of what we could call businessmen of convenience, not by vocation. This type of people, in which the eagerness for risk is very limited, have been the real promoters of the consumer society.” By consumer society, Polo understands a society where most actors focus on the material side of economics. These types of entrepreneurs are more interested in being “spies of the signs of demand (practice of marketing) than discovery, creation and assuming risk.”

 

Polo has special views on distributive justice which, unlike the typical redistributionist interpretations, are consistent with the free society. For him, “distributive justice guarantees what is usually called the common good, that is, that the interplay of human endeavors in society be good to all.” The two main forces working for this kind of justice are the family, with its functional inequality, and the risk-taking entrepreneur. Both are based on giving rather than taking, and as the work of the entrepreneur benefits people who are far from his family, it seems that it involves more immediate generosity than that of a family member.

Polo makes it clear that redistribution and subsidies rather than helping solve the problem of poverty tend to make it worse. Despite its inefficacy, Keynesians and bureaucrats seemingly love this approach. “Risk” Polo wrote, “does not attract the socialist bureaucracy either, both the Keynesian businessman as well as the social-democratic politician are incapable of promoting human dignity: they are shot through with inauthenticity, their activity is intimately unattended, he pays no heed to distributive justice.”

Through his academic work at the University of Navarra, Leonardo Polo influenced thousands of students and academicians around the globe MANUEL CASTELLS

The giving which is essential for a just and free society is not only material, it is also spiritual and must derive from what is ours rather than from what belongs to the common pool. Polo adds: “[S]trictly speaking, distributive justice compels one to be daring: in the case of the businessman, to not wait until one has a guaranteed buyer before producing, to trust in supply.” Polo’s views are different from the traditional classic Aristotelian and Thomistic view of distributive justice: that which deals with the rules needed for maintaining and distributing what is held in common (public buildings, the proceeds from taxes, government appointments, etc.), but they do not contradict it. Polo is aware that commutative justice (justice in contracts), despite its importance, does not guarantee a free and just society. Contracts also need to be complemented by distributive justice. The rules that determine distributive justice, however, are even more difficult to discern.

Polo’s views about distributive justice are more in line with neglected notions of social justice, which regard redistribution as a problem but consider it a virtue to work for the common good. An entrepreneur who risks advancing supply could be looked upon as favorably as a philanthropist – if not more so. This kind of social and distributive justice is essential, but is beyond courtroom justice. No one can be taken to court for being unwilling to assume risks.

Polo’s theories would benefit from a greater emphasis on the role of free prices to help guide entrepreneurs so that “endeavors in society be good to all” or at least to most. That was a key insight in the teachings of Nobel laureate F. A. Hayek and also of Ludwig von Mises. Polo does not quote Von Mises but reaches similar conclusions when he writes that “accumulating capital is an activity of a spiritual nature.” In Human Action, his most important treatise, Von Mises wrote: “The ‘productive forces’ are not material. Production is a spiritual, intellectual, and ideological phenomenon. It is the method that man, directed by reason, employs for the best possible removal of uneasiness. What distinguishes our conditions from those of our ancestors who lived one thousand or twenty thousand years ago is not something material, but something spiritual. The material changes are the outcome of the spiritual changes.”

Polo is a strong critic of the current views that distributive justice consists of taking from the rich and subsidizing the poor. He correctly saw that the weakening of the entrepreneurial spirit leads to the weakening of the common good. He was very concerned about bureaucracy which he saw affecting not only government but also large corporations.

Relevance for today’s Spain

Adam Smith, the most famous economist of all times, sometimes labeled the “father of economics,” was a moral philosopher. His views greatly influenced economic policies since their introduction during the 18th century Scottish Enlightenment. Since then, there is a declining proportion of economists who make an effort to understand and incorporate philosophical analyses into their work. Philosophers similarly tend to avoid economic matters. Leonardo Polo is a healthy exception. He never abandoned his philosophical language, difficult and sometimes unique, but he nurtured his analyses by reading some of the best economists.

His economic philosophy can play a salutary role in providing direction to the platforms of center-right and conservative parties in Spain. It combines understanding of economics and includes profound insights about the human condition.

As Spain’s political scene is being rebuilt and given the growing interest in the work of this philosopher, Polo’s views might become more influential than ever. He was not a typical conservative, his father died in exile for siding with the opponents of Francisco Franco. His economic views are likely to be more attractive to the parties that favor the free-market, like the rejuvenated Popular Party, which, after some contention, decided to name Pablo Casado Blanco, an attractive and intelligent 37-year-old as its leader. The budding Vox party, the most conservative force but still very small, can also learn from Polo’s views. Ciudadanos the party led by Alexis Rivera, also an appealing leader, might agree more with Polo’s economics than his views on the family. Ciudadanos is still searching for the right combination of principles that will increase its national appeal.

On the left, the Partido Socialista Obrero Español (PSOE), which leads the current eclectic government coalition, could also learn, but they will have to reject part of their bourgeois socialism. Polo wrote that during the 1980s, the PSOE was rejecting Keynesianism, but still endorsing redistribution because “socialism becomes uneasy when someone has more than another.” Alberto I. Vargas, a co-founder of the U.S.-based Leonardo Polo Institute of Philosophy asserts that the PSOE could adopt some of the social and communitarian views of Polo as well as his views on workers, who, when better informed about the conditions and decisions of their companies and markets, are also creative entrepreneurs. The road to reduce poverty lies not in reducing inequality but in creating wealth by liberating and enhancing the entrepreneurial-giving spirit in both workers and investors. Vargas concludes: “Polo’s views on how to help the poor are very rich and far from paternalism, rather in the line of freedom and the power of giving.”

 

Alejandro A. Chafuen es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), fue miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Es Managing Director del Acton Institute, International y miembro del Consejo Asesor de Red Floridablanca. Fue profesor de ESEADE.