The last couple of days, I've been doing interviews in the province of Anta, right outside of Cusco, where I'm back living with the family I stayed with when I was doing my language training.
The government of Anta is controlled by the Peruvian Socialist Party--one of the only places where the party is a going concern. The socialists like to kick and scream about the state of the capitalist system, the financial crisis, and the way the Peruvian anticrisis package is helping the capitalists and hurting the rural people, but when it comes down to it, they're really pretty pragmatic in government, doing pretty non-socialist things like supporting local entrepreneurs in building a quality local dairy industry and training local restaurant owners in cooking in order to improve the local "gastronomic tourism" industry.
Some of these things sound like state-led capitalism to me. They're certainly doing things that Austrian style economists would disapprove of--the local government is certainly promoting certain industries at the expense of others--but they're also things that don't look terribly inefficient or anti-market to me. In fact, they seem to be helping to overcome development traps and market failures to make the market work more efficiently.
The local government has built and funded an artificial insemination post to improve the breeding of local cattle, and they buy wholesale quantities of seed for the improvement of pastureland and sell it to locals at cost. It doesn't seem entirely inappropriate to see this as a replacement for foreign direct investment, except without the foreign part. Effectively, the municipality is helping the locals to overcome a development trap--the absence of capital accumulation--to promote industries which would simply not have the opportunity for improvement without the government assistance otherwise.
It should be noted that, if the local officials are to be believed, the results have been impressive. They have increased the yield of the milk industry somewhat, but apparently the primary improvement has been the quality of the local product. While local cheese had previously been sold on blankets in the street, for example, they now produce cheese that's cleanly packaged in plastic, vacuum-sealed bags and sold in Peruvian supermarkets. If the local officials are to be believed, local government intervention was a necessary condition for the organization and capitalization of the dairy sector in Anta.
Clearly, of course, there are times when such government intervention doesn't work very well--and we all know how inefficient government can be. On the other hand, it's hard not to look at our economic situation today and think that sometimes, free markets aren't all that hot either. But state capture and the resulting inefficacy and inefficiency is a real concern in a place like this--but the province of Anta appears to have largely avoided that, thus far.
Of course, I could be wrong. But if I'm right, what's the explanation?
I don't have an answer at the moment--I need to keep doing interviews. But I wonder if the outcomes seen in Anta are a result of (a) a strong local party structure based on internal institutions which promote long-term party viability rather than short-term individual political viability, (b) the prior construction of institutions for democratic, downward accountability through transparency and elections, and (c) the early adoption of a median-voter strategy by the current government. This last one is a result of strategic interaction coming out of an awareness (by the local government) that they don't have as much wiggle room when it comes to pursuing self-enrichment through political office.
This doesn't explain, however, why the system hasn't resulted in particularistic, patronage politics, which I think should be a more likely result of the wild and wacky Peruvian local electoral system. But maybe that's what is going on, and I just haven't seen it yet.
Maybe next week...
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