36. When Capital Is Nowhere in View

0:00When Capital is Nowhere in View A travel channel episode of No Reservations, a cooking-focused show narrated by Anthony Baudin, took viewers to Port-à-Prince, Haiti. I had heard that the show offered unique insights into the country and its troubles. I couldn't imagine how, but it turns out to be true. Through the lens of food, we can gain an insight into culture, and from culture to Through this micro-lens, we gain more insight than we would have if the program were entirely focused on economic issues.

0:45Such an episode on economics would have featured dull interviews with Treasury officials and IMF experts and lots of talk about trade balances and other macro-economic aggregates that missed the point entirely. Instead, with the focus on food and cooking, we can see what it is that drives daily life among the Haitian multitudes, and what we find is surprising in so many ways. In a scene early in the show, set in this giant city after the earthquake, Boudin and his crew stop to eat some local food from a vendor. He discusses its ingredients and samples some items. Crowds of hungry people begin to gather. They are doing more than gawking at the camera crews. They are waiting, in the hopes of getting something to eat.

1:31Baudin thinks of a way to do something nice for everyone, realizing that in this one sitting, he is eating a quantity of food that would last most Haitians three days. He buys out the remaining food from the vendor, and gives it away to locals. Nice gesture, except that something goes wrong. Once the word spreads about the free food, word of mouth in Haiti is faster than Facebook chat, people start pouring in, lines form and get long, disorder ensues, some people step forward to keep order, they bring belts and start hitting, the entire scene becomes very unpleasant for everyone, and the viewer gets the sense that it is worse than we are shown.

2:19Bourdain correctly draws the lesson that the solutions to the problem of poverty here are are more complex than it would appear at first glance. Good intentions go awry. They were thinking with their hearts instead of their heads, and ended up causing more pain than was originally there in the first place. From this event forward, he begins to approach the problems of this country with a bit more sophistication. The rest of the show takes us through shanty towns, markets, art shows, festivals and parades, and interviews all kinds of people who know the lay of the land. This is not a show designed to tug at your heartstrings in the conventional sort of way. Yes, there is obvious human suffering, but the overall impression I got was not that.

3:07Instead, I came away with a sense that Haiti is a very normal place, not unlike all places we know from experience, but with one major difference – it is very poor. By the time the show was made, the glamour of the post-earthquake onslaught of American visitors seeking to help had vanished. One who remains is actor Sean Penn. Although he's known as a Hollywood lefty, he's actually living there, chugging up and down hills of a shanty town unshaven and disheveled, being what he calls a functionary, and getting stuff for people who need it. He has no easy answers, and he had sharp words for American donors who think that dumping The people of Haiti, in the documentary, conform to what every visitor says about them.

3:59They are wonderfully friendly, talented, enterprising, happy and full of hope. Like most people, they hate their government. Actually, they hate their government more than most Americans hate theirs. Truly, this is a precondition of liberty. There is a real sense of us versus them alive in Haiti, so much so, that when the presidential palace collapsed in the recent earthquake, crowds gathered outside to cheer and cheer. It was the one saving grace of an otherwise terrible storm. With all these enterprising, hardworking and creative people, millions of them, what could possibly be wrong with the place?

4:44Well for one thing, the earthquake destroyed most homes. If this had been the United States, this earthquake would not have caused the same level of damage. This led many outsiders to think that somehow the absence of building codes was the core of the problem and hence the solution is more imposition of government control. But the reality shows that this building code notion is some sort of joke. The very idea that a government could somehow go around beating up people who provide shelter for themselves while failing to obey the central plan is simply laughable. Coercion of this sort would bring about no positive results and lead only to vast corruption, violence and homelessness. The core of the problem, says Robert Murphy, has nothing to do with the lack of regulations.

5:34The problem is the absence of wealth. It is obviously true that people prefer safer places to live, but the question is, what What is the cost and is this economically viable? The answer is that it is not viable, not in Haiti, not with this population that is barely getting by at all. Where is the wealth? There is plenty of trade, plenty of doing, plenty of exchange and money being exchanged. Why does the place remain desperately poor? If the market economists are correct, the trade and commerce are the key to wealth and When there is plenty of both here, why is wealth not happening? One can easily see how people can get confused, because the answer is not obvious, until you have some economic understanding.

6:22A random visitor might easily conclude that Haiti is poor because somehow the wealth is being hogged by its northern neighbor, the United States. If we weren't devouring so much of the world's stock of wealth, it could be distributed more evenly and encompass Haiti too. Or another theory might be that the handful of international companies or even aid workers are somehow stealing all the money and denying it to the people. These are not stupid theories, they're just theories, neither confirmed nor refuted by facts alone. They are only shown to be wrong once you realize a central insight of economics. It is this, trade and commerce are necessary conditions for the accumulation of wealth, but they are not sufficient conditions.

7:13Also necessary is that precious institution of capital. What is capital? Capital is a thing, or service, that is produced not for consumption, but for further production. The existence of capital industries implies several stages of production, or up to thousands upon thousands of steps in a long structure of production. Capital is the institution that gives rise to business-to-business trading, an extended workforce, firms, factories, ever more specialization, and generally the production of all kinds of things that by themselves cannot be useful in final consumption, but rather are useful for the production of other things. Capital is not so much defined as a particular good, most things have many varieties of uses, but rather a purpose of a good.

8:04Its purpose is extended over a long period of time, with the goal of providing for final consumption. Capital is employed in a long structure of production that can last a month, a year, ten years or fifty years. The investment at the earliest, highest stages has to take place long before the payoff circles around following final consumption. As Hayek emphasized in The Pure Theory of Capital, another defining mark of capital is that it is a non-permanent resource that must nonetheless be maintained over time in order to provide a continuing stream of income. That means that the owner must be able to count on being able to hire workers, replace parts, provide for security, and generally maintain operations throughout an extended period of production.

8:59In a developed economy, the vast majority of productive activities consist in participation in these capital goods sectors and not in final consumption goods sectors. In fact, as Rothbard writes in Man Economy and State, at any given time this whole structure is owned by the capitalists. When one capitalist owns the whole structure, these capital goods, it must be stressed, do him no good whatever. And why is that? Because the test of the value of all capital goods is conducted at the level of final consumption. The final consumer is the master of the richest capitalist.

9:45Many people – I've been among them – rail against the term capitalism, because it implies that freedom is all about privileging the owners of capital. But there is a sense in which capitalism is the perfect term for a developed economy. The development, accumulation and sophistication of the capital goods sector is the characteristic The Thriving of the Capital Good Sector was the great contribution of the Industrial Revolution to the world. Capitalism did, in fact, arise at a specific time in history, as Mises said, and this was the beginning of the mass democratization of wealth. Rising wealth is always characterized by such extended orders of production.

10:35These are nearly absent in Haiti. Most all people are engaged in day-to-day commercial activities. They live for the day, they trade for the day, they plan for the day. Their time horizons are necessarily short and their economic structures reflect that. It is for this reason that all the toil and trading and busyness in Haiti feels like peddling a stationary bicycle. You are working very hard and getting better and better at what Now, this is interesting to me, because anyone can easily miss this point just by looking around Haiti, where you see people working and producing like crazy, and yet the people never seem to get their footing.

11:22Without an understanding of economics, it is nearly impossible to see the unseen – the capital that is absent that would otherwise permit economic growth. And this is the very reason for the persistence of poverty, which after all is the natural condition of mankind. It takes something heroic, something special, something historically unique to dig out of it. Now to the question of why the absence of capital. The answer has to do with the regime. It is a well-known fact that any accumulation of wealth in Haiti makes you a target, if If not of the population in general, which has grown suspicious of wealth, and probably for good reason, then certainly of the government.

12:11The regime, no matter who is in charge, is like a voracious dog on the loose, seeking to devour any private wealth that happens to emerge. This creates something even worse than the Hixian problem of regime uncertainty. The regime is certain, it is certain to steal anything it can, whenever it can, always and forever. So why don't people vote out the bad guys and vote in the good guys? Well, those of us in the United States who have a bit of experience with democracy know the answer. There are no good guys. The system itself is owned by the state and rooted in evil. Change is always illusory, a fiction designed for public consumption.

13:00This is an interesting case of a peculiar way in which government is keeping prosperity at bay. It is not wrecking the country through an intense enforcement of taxation and regulation or nationalisation. One gets the sense that most people never have any face time with a government official and never deal with paperwork or bureaucracy really. The state strikes only when there is something to loot. And loot it does, predictably and consistently. And that alone is enough to guarantee a permanent state of poverty. Now to be sure, there are plenty of Americans who are firmly convinced that we would all be better off if we grew our own food, bought only locally, kept firms small, eschewed modern and conveniences like home appliances went back to using only natural products, expropriated wealthy savers, harassed capitalistic class until it felt itself unwelcome and vanished.

14:01This paradise has a name. And it is Haiti.