What Will You Do in the Approaching Third World?

There’s a very interesting interview with Ed Dowd (thanks to Celia Farber for the tip), in which Ed discusses, among other things, his view (starting around 56:00) that the American economy is headed into a period that will in many ways resemble third-world economies.

It’s bold statement, but I don’t think he’s wrong. No, I don’t think (and I don’t think he thinks) that we will hit sub-Saharan-African levels of poverty in the near future. But I do believe we are about to experience levels of routine dysfunction to which very few of us are accustomed. This has already started, and Dowd gives some examples. I can think of examples from my own life – from staffing shortages in restaurants and hospitals, to difficulty finding replacement parts for equipment and building materials.

I imagine that when most people think “third world”, they think poverty and desperation. I think opportunity. But that’s because I’ve spent time in the third world, and I’ve seen what people are capable of creating when they have even the most fundamental levels of systemic infrastructure in the form of some property-rights protection and some degree of a hands-off policy on the part of the government.

The countries I was most familiar with (China and Vietnam) were communist in name, but were implementing free-market reforms in the hope of lifting the people who lived there out of excruciating poverty. I imagine a lively debate could be had today, on the question of which country had more of a genuine free market: China in the 1990s, or the US during the same period. I think it would be very hard to argue that America of the 2020s is more economically liberal than 1990s’ China.

Americans tend to have a view of Asian cultures as being very conformist, anti-individual, and not especially creative. There is some truth to this – Confucian education especially instills a fear of making mistakes, an impulse to do things the “right” way, and very often literally beats any creative drive out of kids at an early age.

All of which makes what I saw in China and Vietnam even more impressive. As governments loosened their grip on economic activity, people’s creative energy began to push through whatever cracks it could find. Once barren and dark streets suddenly lit up with strings of lights and neon, families started restaurants in their living rooms, and every entrepreneurial venture imaginable sprang up on streets and sidewalks. People were trying new things. Many of these ventures were based on traditional businesses, but some were not. People were exploring, looking for the cracks into which they could grow.

I wrote about some of that here, here, and here. Among my favorite ventures were the independent “credit centers” in Vietnam, offering market-based interest rates. One of these centers would pay its depositors returns based on the price of gold, during times of high inflation.

So when I look ahead to what I see coming for the US and other Western countries, I think of all of those third-world entrepreneurs, the repair shops set up on blankets on the sidewalk, the little carts and stands offering a seemingly infinite variety of food and drink – illegal for the most part here in the US, but ubiquitous throughout Asia back then.

I think about all of the dysfunction we are already experiencing in our economy, and I think about the level of dysfunction these people were responding to – decades worth of communist rule that had snuffed out the provision of even basic human needs. And inside of that dysfunction is opportunity. Opportunity to create what has been suppressed – so long as there are enough cracks for that creativity to push through.

We have those cracks here in the US and elsewhere in the Western world. In the form of our common-law heritage, our concepts of fundamental individual rights, and structures such as the private membership association (PMA). And as our economy falters and things we have come to depend on start to break down, the cost of reaching for those cracks, of reaching for something new, will diminish relative to the cost of staying put in a decaying system.

So as our systems become more dysfunctional, as it becomes more difficult to find the things we want and need, or the people we need to hire, as more hospitals shut down, and those that remain become even more understaffed, as the purchasing power of the dollar continues to shrink, and as those in power grow ever more desperate to retain that power… what cracks do you see? Where will you launch your creativity? What will your street-side noodle cart look like?

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