Bolivian local governments vs. Brazilian national governments

More on my comparative advantage binge:

Another interesting thought I had after one of my interviews here in San
Ignacio has to do, again, with the nature of government intervention in
local economies. Why is it that government intervention here seems to
be relatively efficiency-enhancing, compared to, for example, Brazilian
government intervention during the Brazilian Import Substitution
Industrialization (ISI) period from the 1950s to the 1980s (maybe
Maureen can correct me if my dates are wrong).

The standard story for Brazilian economic under-performance in the '70s
and '80s after a rapid economic boom in the '60s and '50s is that ISI,
which aimed to generate rapid economic growth by promoting internal
markets (and mostly did this by keeping foreign goods out) ultimately
failed because ISI somehow "ran down," after government intervention in
the economy resulted in inefficient outcomes, mostly because of corrupt
rent-seeking behavior, and because very interventionist government
policies caused market distortions that made economic growth easy at
first, but increasingly difficult as time went on, because growth
eventually came to depend on competitive markets abroad for industrial
machinery and other expensive industrial goods. The "Brazilian Miracle"
turned Brazilian nightmare is one of the typical cases used to explain
opposition to state-centered capitalist approaches to development.

Of course, there are other examples of economic growth which seem to
tell a different story--China, South Korea and Vietnam seem to tell a
story about interventionist policies generating sustainable economic
growth, despite the potential for rent-seeking.

And my observations of local governments down here seem to suggest that
local government economic intervention, even in Latin America, tends to
generate more efficient outcomes.

I wonder if one of the differences between these "good" and "bad" cases
are, first, the presence of democratic accountability (not the case in
China or the other Asian economies, but these Latin American local
governments are pretty democratic, especially at the local level), and
second, the presence of mechanisms to promote competitiveness with firms
outside. Although the Asian economies started out very closed, they
relied more on exports to generate growth than internal markets.

In the case of Bolivian municipalities, there are no formal barriers to
trade between municipalities, so firms within each municipality are
competing against other firms in other municipalities, and many of these
municipalities also seek to export their products, with the result that,
even with government intervention, local firms still need to compete.

The result may be pressure for competitiveness that might not have been
present in the Brazilian case, or at least not in the later phases of
Brazilian ISI, when relatively smaller markets for expensive goods
tended to produce less competition between firms.

Could it be that the absence of competition was the cause of both
rent-seeking behavior and high costs? As opposed to rent-seeking
behavior leading to an absence of competition etc.?

Comparative advantage, collective action problems, and rent-seeking

I was thinking more about the blog posting I wrote yesterday, in which I
talked about comparative advantage at the local level (apparently, I'm
on this kick again), and I had a couple interesting thoughts.

First, why does local government intervention in local markets differ so
markedly from national government intervention in national markets--that
is, anecdotally, government intervention in markets is typically bad,
corrupt, rent-seeking, inefficient, and a host of other undesirable
things. Just ask Uncle Milton. On the other hand, the local government
interventions in local economies that I see down here don't seem to me
to be self-evidently associated with rent-seeking behavior. Instead, it
makes sense that most of government activities I see actually make
governments _more_ efficient by addressing local market failures or the
absence of certain institutional elements that permit the presence of a
market.

After another interview I had this morning in which I talked to the
municipal agricultural official, I asked why the municipality used so
many resources in supporting agriculture, and in particular, ranching,
which is a major economic activity here. His idea went along with the
comparative advantage idea--"we gain from the development of industry
here in the municipality. It's good for us economically, and it gains
us political support when we can help people out... we support ranching
because our environment here is well suited to ranching--the soil here
is thin and fragile, so agriculture isn't always good, but the
environment here is good for cattle, and San Ignacio also has a history
of ranching going back many years."

This got me thinking that, essentially, the municipality was working to
support industries that had already made the choice to be here in San
Ignacio. Why would they attempt to promote firms that would not be
successful here? But they know that the municipality has a long history
of successful ranching, and the municipality is aware that by supporting
ranching through infrastructure development and other projects, they
will improve local economic conditions, local standards of living, and
they will gain political support in the process. Based on this history,
economic support to ranching won't be wasted, because ranching has
proven to be a successful source of local economic growth in the past.

In effect, the invisible hand of the market had already decided that
ranching here is an efficient local industry, and the government is
working to solve collective action problems and direct public investment
so that ranching and other appropriate agricultural activities (dairy,
coffee, chickens) can be more successful, and can efficiently compete
against similar industries in other areas.

At the local level, where the pie is already pretty small and the
government faces stiff competition from other factions for control, does
it typically make political sense for governments to promote efficiency
in markets, rather than become involved in rent-seeking?

San Ignacio and Comparative Advantage

One of the biggest things that comes out of neoclassical economics is
the notion that government intervention in the economy tends to get
bogged down in distributional politics (dividing up the pie rather than
trying to make it bigger) and tends to be non-productive and inefficient.

One of the interesting things to me down here is how rarely this seems
to be the case. Though there are a few cases I can point to of local
governments doing inefficient things when they get into the economy (the
provincial government of Carhuaz, Peru building a market in Vicos that
seems to get no use), there are at least as many cases of markets gone
wrong (excessive use of chemical fertilizer in rural Guatemala to get
bigger, more marketable veggies, with the end results that your kids all
get cancer and have birth defects).

In general, when local governments get involved in local economies, they
often seem to be solving collective action problems in ways that make
markets more efficient--by building infrastructure, for example, or by
pooling resources in such a way that large-scale investments can be made
that individual producers wouldn't be able to pay for.

Market fundamentalists might argue that these sorts of things could be
done more efficiently by firms, but they would be wrong. Because
mechanisms for contract enforcement are so weak down here, it's very
difficult for individual firms to conglomerate as larger firms, or to
join as cooperatives. The end result is that local governments, which
are sometimes seen as more trustworthy, and anyways, can force people to
comply with tax regulations (for example) are a good solution to these
problems of public investment.

Here in San Ignacio, there's a lot of government support for ranching
and cattle-raising on a small scale. The municipal personnel believe
that they're promoting this industry, both to gain the support of
citizens, and also to increase municipal tax revenue. In either case,
it wouldn't make sense for them to support industry in an inefficient
way, since doing so would mean either worse electoral/political results,
or worse economic/revenue results.

San Ignacio de Velasco

Man, what a pretty little town! Beautiful reproduction of the Jesuit
mission church on the plaza de armas, with elaborately carved and
painted hardwood columns and trim, brick-paved streets (when they're
paved), adobe roof tiles, horses grazing in the plaza...

I also had really good luck this afternoon getting interviews--three
interviews in in the afternoon, which feels really good, after having
spent so long without getting any significant number of interviews.
I'll spend more time talking about the content of those interviews
tomorrow, but at least so far, it sounds like good things are happening
here in San Ignacio.

The only place I could get a reservation in this town was at the most
expensive hotel here, which goes for $55/night. This is not a cost I
can afford, but I was afraid of getting here after an all-night bus trip
and not having a place to stay. So I'm enjoying the cushy bed and
swimming pool while I'm here. This afternoon, I found another place
which is a lot cheaper, though probably still too expensive, but looks
really comfortable and is literally right next door.

And tomorrow, I'm going to try to get a couple more interviews. I'll be
curious to hear how many Aubrey, Boz and Maureen have gotten, but I'm at
92 now, but I'm trying to break 100 (which I figure is pretty good,
because Robert Putnam says he gets "over 100" interviews in preparation
for _Making Democracy Work_, which is something like 30 years of
fieldwork. And I've already got better facial hair going for me.

By the way, sorry for the crappy formatting. Internet is ungodly slow
here, which means I need to post from my e-mail, hence the formatting
issues.

Local Government and Zoning

This is the kind of quality governance I believe we could all support in whatever location around the world.

Some new pictures up

Actually, a lot of these are old pictures, but you can get to them from here, or from the link in the sidebar. Political graffiti and campaign signs.

Back in Bolivia

I love the fact that leaving the Sta. Cruz airport by taxi, you're immediately greeted by two billboards, one that's for the "Yes" (on the constitutional referendum a couple months ago) and another one that's an advertisement for a local cement company. The "Yes" billboard has been defaced with anti-Evo Morales graffiti, while the billboard next door carries a response that's anti-opposition (anti-Tuto, as it happens).

Heading Back

Had a great visit to Boulder for a couple of days after my presentation at the ISNIE conference (International Society for the New Institutional Economics) on participatory problem-solving fora in Peru. The conference, though productive (and very fancy) was not as great as I hoped.

ISNIE Highlights:
1. Seeing Daron Acemoglu's keynote (a little shady, but pretty interesting stuff using Napoleonic invasions as a natural experiment)
2. Really good burritos in San Francisco
3. Checking out Oakland
4. Wearing my wicked awesome Cusco-made three piece suit for the first time
5. Giving a very detailed presentation on a quantitative analysis of the effects of participatory problem-solving fora in Peruvian local agricultural policy, then getting asked, "So, what's Peru like?"

WWE Raw

Although I would not have thought it possible, I believe that Donald Trump's presence on WWE's Raw is actually making professional wrestling less classy.

Mankiw's wrong again...

...this time about ice cream. The only reason he can think that some outfit called "Graeter's" can have the best ice cream in the world is that he's never been to Carhuaz, Peru, and tried the chirimoya flavor, served by some old indigenous guy in a fedora and rubber tire sandals.

Buena Vista

I'm back in Sta. Cruz today--got in a good day of interviews yesterday, but nothing is open over the weekend, and although Buena Vista, my case study site is a pretty little town with some hiking opportunities, the hotel I was staying in was a little too gross to stick it out for no good reason.

The "bien limpiacito" bathroom, by the way, was a shared bathroom that never got cleaned in the three days I was out there, and hotel room came complete with women's underwear hanging off the fan.

I found another (cleaner) place to stay when I go back out there after I get back from ISNIE. Then I left.

Education and Incentives, again.

Zane asks an interesting question: aren't we basically thinking about free-market incentives for education because the incentives faced by local school districts through local democracy aren't working very well?

I guess the answer is "yes," but with some caveats.

First off, there are many places around the United States where local democracy generates very desirable educational outcomes--these tend to be in places with strong civil society and healthy tax bases, generally affluent suburban school districts.

And, of course, there are lots of places where local school districts to a terrible job. Probably not coincidentally, these tend to be poor and they also tend to be places with a lot of other problems--crime-ridden inner-city school districts, islands in Maine where people shoot one anothers' cats for fun...

And there are some real questions about the ways we measure student achievement, both nationally and cross-nationally. Mostly, we use standardized tests, and there are some significant concerns about whether those really measure anything important about education.

But with some caveats, I think the answer is "yes." We're thinking about market incentives because out system isn't doing a very good job.

I guess, then, the important follow-up question is "Why isn't our existing system working very well?" Is it because local democratic incentives are failing, and if so, in what way?

Personally, my strongest impression is that local democratic incentives are failing, and the biggest reason is because the unwillingness of unions to allow the kind of market incentives that would encourage better teaching, which I guess contradicts what I assumed in my earlier post--that market incentives and local democratic incentives are somehow exclusive.

One related thing is that I think "reforms" like No Child Left Behind--which use neither market incentives nor local democratic pressures, but use a bureaucratic command-and-control model based, again, on standardized testing, is much less likely to solve our problems than attempting to re-invigorate either other type of incentive structure.

"Peru is a circus..."

Or so says Lucy, after finding out that General Edwin Donayre, former commanding general of the Peruvian armed forces, is running for president.

This is old news, so forgive me. But this is the same guy who threatened to send Chileans home in plastic bags and was widely suspected of selling Peruvian military goods on the black market for private profit, among other things.

Mmm...

If this is the circus, guess it makes Alan Garcia the ringmaster?

At least it looks like Toledo and Lourdes Flores might run again.

Buena Vista

Made it to Buena Vista today, which is my next Bolivian case study. It's a small town near Amboró national park, just a couple hours out of Santa Cruz. Pretty little place, where it's been easy, so far, to spot places that I should visit, to try to get interviews. Unfortunately, today's a holiday, so everything's closed. Spotting potential interview spots is as far as it's gotten.

That cold I had really put a kink in my plans--I've only got one more business day this week, then the weekend, then I need to be back in Santa Cruz to fly to the states for the ISNIE conference next week. Hopefully, therefore, tomorrow's a productive day.

In the meantime, I wandered around town. Read my book (on pirates). Took a nap. Ate a hamburger.

Thoughts on Cochabamba and Sta. Cruz

All right, so I get why Krister likes Cochabamba so much.

Really, when it comes down to it, it's kind of a cool city--big city, but with a pretty small-town feel. Nice place. Lots of bootleg DVDs for sale. Pretty good fast food. Reasonable architecture.

I don't think those are the things on his list, but I'm okay with Cochabamba. For those of you who don't know, it's on the edge of the Bolivian highlands, and supposedly has the best climate in the world. Climate's not so good for skiing, but actually, it's pretty comfortable. And it's a prosperous city, but not so far away from the Bolivian working-class reality that you can forget about it.

And Santa Cruz is also a beautiful city which, despite being the biggest city in the country, doesn't feel much bigger than some of the small towns I've been in, except it's got better food and trendier people. It's supposed to be hot as Hades in the summertime, but it's pretty comfortable at the moment.

But that's my primary objection to Sta. Cruz. This town is too cool for me. Figuratively. Also, a little too fascist.

The prosperity you see around Sta. Cruz somehow seems more obscene when you know that so many people around the country are hungry and suffering. Not that it's a crime to be prosperous (or a sin, for that matter), but the kind of extravagance that's on display here tees me off in Boulder. Here, it's even worse.

And the political tension about Evo Morales is palpable--even more so than in La Paz. I can just imagine what it would have been like a couple of months ago!

But maybe I'll feel better about the place once I'm over this cold I've got.

More on Guatemala

Although it makes me nervous to rely on a single popular press to pronounce that something striking is happening, this article in the LA Times suggests that the Mexican cartels are moving south into Guatemala, or maybe Guatemalans are moving into the gap left by the Mexican narco-traffickers.

Although I didn't predict it, this is predictable, at least under the economic theory of illicit drug trafficking.

When supply goes down and demand doesn't, prices go up. This creates new incentives for drug production and shipment (you can make more money that way, because prices are higher) and the end shot is the kind of violent conflict that makes Al Capone look like a syphilis-infected teddy bear.

Given that we have no evidence that we can reduce consumption through interdiction, legalization, and punitive action (and that's it's so damn costly, both in human lives and in economic terms), is it time to think about legalizing some (or all) illicit drugs?

More on alcoholism in rural Peru

Denise asks a good question--whether I witnessed more alcoholism in males in rural populations in Peru, as she suspects.

The answer is yes--or at least, people seem to be convinced that alcoholism is a more prevalent in the male part of the population. Although there does seem to be some alcoholism amongst females in some places. Not surprisingly, perhaps.

Two interesting things about this:

First, this seems to be a problem throughout Latin America, if not around the world. Alcoholism and alcohol abuse was a serious problem amongst the male sex in Guatemala as well. This is apparently one of the appeals of evangelical Christianity for women--they feel that evangelical men tend to make more reliable partners. Evangelicals here in South America expressed their frustration with the Catholic religion's tendency to demand (or encourage, perhaps) high expenditures at frequent festivals and celebrations, which made it difficult for the rural poor to break the cycles of poverty they've been bound to.

I think there was just an article in CPS that discussed the relationship between protestantism and democracy. Interesting. You can find it here.

I've got a copy of Weber in my backpack that I probably won't get to before the ISNIE conference in two weeks, but I will get to it eventually--it's been on top of my list for a long time. Weber's idea of the growth of the protestant work ethic as the key element in development seems to find some echoes nowadays in Latin America--especially up in Guate.

The other interesting thing about the male/female alcoholism gap is a story about former Peruvian president Alejandro Toledo. First indigenous president in Latin America (although when you say that, it really seems to drive people batty. Apparently, for a lot of people, "Harvard Trained Economist" and "Native Guy" are not compatible. Whatever.)

Toledo is a moderate right-winger (as you would expect an economist coming from the age of the Washington Consensus to be), who was a big advocate of small government and, among other things, market-based solutions to poverty in Peru. He pushed a micro-credit program for women in Peru. At the time, one of the big concerns was that money lent to women might be taken to finance the purchase of alcohol or gambling and wasted. To combat this problem, women were given a whistle at the same time as their loan. The idea was that if a man came around to take their money, the woman could blow her whistle, and all the other women in the village could come running to chase him off.

According to Toledo, the system worked, though I've never heard a confirmation from a less biased source. Still, it's nice to think that a whistle is all that lies between the success and failure of such a program.

European Parliament stuff

I'm really hoping that Gellman's comments about the Euro Parliament election here are tongue-in-cheek. If not, it's an unfortunate sign of how closed-minded some individuals are in every field of Political Science.

I can't say that I find the kind of work most Americanists do as interesting as, say, Comparative or IR, but I recognize the value of the study of American politics, and (perhaps more importantly), I realize that Americans and other people around the world might have something to gain by learning about European politics (another area that I don't study).

Strange that the brilliant and talented Gellman wouldn't instinctively agree with this.

Thinking about moving on

After a very successful first day of interviews here in Sorata (got in
four interviews--a personal record, I think), I felt like I had pretty
much gotten the story--corrupt government gets very little done, and
particularly, very little done in terms of forestry policy. After not
getting any further interviews in yesterday, I've been thinking about
moving on--not sure how much more I'm going to learn about what makes
forestry policy work in this town (where not much at all seems to be
working when it comes to government). The story seems simple here,
where, according to one source, municipal politicians have stolen more
than half the municipal budget for each of the last three years, the
municipality pays for two offices in La Paz, and where the mayor is
rarely in town.

Even so, it's been a very pleasant visit--this is a pretty little town
with friendly residents, and I hope I can come back here someday to do
some hiking--there are some really good hiking routes out of here, and
it might even be justified as a research activity to hike out to some of
the outlying areas in order to learn more about community governance way
out there.

I've also had a couple of interesting interviews, including meeting with
an agronomist working for an NGO today, and meeting with a politically
involved radio station manager in the offices of "Radio Maya," one of
two local radio stations (the other one is run by the Catholic church
and rarely appears to be in operation).

And I got in two more interviews today, and might have a lead or two
further.

Even so, as Emily reminds me, I have too little time to be fiddling
around doing things like hiking. So, with about six interviews here in
town, I'm going to head back to La Paz (probably tomorrow), get some
laundry done, and get moving on to my next case study, further down in
the lowlands. I'll probably head to Cochabamba, where I should meet
with Krister's colleagues at Bolivian research institute CERES.

Then on.

Sorata politics

As I mentioned in the last post, Sorata is right on the regression line
in most forestry-related outcomes. This is a little disconcerting,
because it's quite clear, at the end of my first day of interviews, that
the municipal government is incompetent, corrupt, or (most likely) both.

That said, there do seem to be some good things happening in the
municipality, although most seems to be happening as a result of a
Norwegian Evangelical missionary organization. I'm no NGO
scholar--there are other people that have more experience to pass
judgment on these types of things, but I generally have been much more
impressed with religious organizations down here than secular ones.
While secular aid workers primarily seem motivated to keep their jobs
(makes sense, really), religious workers are trying to save souls and
convert others to their faith, which means they may have a stronger
incentive to help the people on the ground.

Another bright spot came out in one of my interviews in which a young
guy recommended to me by a local ex-pat as politically involved and
honest warned me that he was a biased source, since he was planning on
running for office in the near future. He has a pretty strong vision of
how he would like to see Sorata, and it sounds to me like he would make
a good mayor (or at least wouldn't make a worse one).

The role of the "political entrepreneur" in promoting accountability and
good governance through democratic means.

My apologies...

...dear reader, for the crazy order of the last couple of posts. I accumulated a number of blog postings when I was in Sorata, and rather than dump them on y'all all at once, I post-dated a couple of them, to put them up one day at a time.

I messed up, though, in that my first entry went up last. So if you were confused, it's my fault.

In other news, the Sorata posts will be going up for another couple of days (check out the pictures, by the way), but I'm in Cochabamba. A nice city, although I don't quite get why Krister likes it so much.

Think I may be here for another day or so, but I can't stay too long--need to head on to Santa Cruz and my next case study site.

For the moment, I think I'm going to head out and get something to eat. Maybe some of Eli's famous New York style pizza?

Thoughts on Sorata

I arrived last night in my first Bolivian case study site, the Yungas
town of Sorata, which is about four hours from La Paz, to the north.
"Yunga" is a Quechua word that means "jungle," although the region is
actually the Eastern slope of the Andes--not quite Jungle yet (although
someone who knows more about the definition of jungle might disagree
with me).

The trip to Sorata (as with all third-world travel) was a little
nerve-wracking, but everything went off without a hitch.

The bus leaves from the Cemetery district in La Paz, site of the (you
guessed it) La Paz General Cemetery. I had walked up to that part of
town the day before, just to make sure I knew where I was going, though
in the end, I took a taxi--just too far to walk in the midst of the
crowds of the La Paz "Black Market" district, which isn't quite as shady
as it sounds, but is nevertheless a pretty good place to go if you're
looking for the experience of getting pickpocketed.

The "bus" turned out to be a van--a combi--and the trip turned out to be
pretty close to the four hours the Lonely Planet says. The price was 15
Bolivianos, which is about two dollars at the current exchange rate.
Sorata is, incidentally, a minor tourist center with reasonable
facilities (which makes me feel guilty), but it's right on the
regression line, which makes it a good place to see.

The truth is, though, that "reasonable facilities" still means I need to
use my screw-in electric socket plug adapter to use my computer in my
room, so maybe I shouldn't feel so bad?

The trip out first goes through urban La Paz and the city of El Alto.
El Alto, which means "The High One" or something like that, bills itself
as "The Aymara Capital of the World," and also a pretty good place to
get ripped off if you don't keep your eyes open. Not that being
predominantly Aymara has anything to do with the shadiness of the
place. It's a very poor industrial city with a very high rate of
unemployment. And frankly, the people who would rip you off could
probably really use the $45 they could get for your camera. Not that
I've ever actually spent any time there (so take everything I say here
with a grain or two of salt).

One thing I can vouch for from personal experience, however, is the
beauty of the Altiplano from both El Alto and beyond. The road out to
Sorata runs Death Valley straight, passing by picturesque (though dusty)
villages and beautiful glaciated peaks that pop up a couple thousand
meters above already ridiculously-high La Paz. After about two and a
half hours, the road, drops precipitously down into the Yungas,
switchbacking down a narrow road that is, at least, mostly paved.
Perhaps the most disconcerting part of the trip is not the steepness of
the descent, but the propensity of other drivers to pass on blind
corners on a road that probably should only have one lane in the first
place, and where a miscalculation of a foot or two could send you a
couple hundred feet (at least) down. Our driver was good, but I
wondered what the passengers in the other vehicles thought.

Sorata itself is perched on a steep hillside, and the route to my hostel
from town takes me down an eroding path at about 50 degrees and across a
footbridge at the bottom of a narrow ravine. The town seems to have as
many stairways (named as streets) as paved roads.

It's very beautiful, although also very muddy, because it rained most of
the day.

The view from the hostel, and the views from town, are really quite
breathtaking, and remind me a lot of Guatemala, with partially wooded
hillsides and tiny villages and tiny agricultural plots stretching down
the valley, to the mining zone further down, on the edge of the jungle.

There is some tourism here, and it's a well-known area for backpacking
and hiking, but the biggest part of the economy (and the biggest source
of municipal revenue) comes from mining, and most of the population is
still engaged in agriculture, somewhere near the subsistence level.

The place where I'm staying has no internet, and in fact, has no phone,
so it will be a couple of days before this gets posted. In the
meantime, I will be doing interviews and writing two papers for the
ISNIE conference in about three weeks.

New pictures up

Put up (finally) some new pictures of Bolivia (especially La Paz) and an album of pictures of Sorata, my first Bolivian case study. Click on the links in the sidebar to view.

Things I don't like about Sorata

1. Getting ripped off to the tune of Bs. 120 (about $20US) my first
night here.
2. How difficult it is to get on the internet here.
3. The absence of Inka Kola.
4. Does anybody sell razors for shaving in this town?