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A Warning Voice from Peru

April 1, 1988 -

If the government of President Alan Garcia persists in its ambitious plans to nationalize the important sectors of Peru's economy, Peru will fall prey to bureaucratic incompetence and widespread corruption.

This blunt warning by the highly respected Peruvian novelist, Mario Vargas Llosa, was first published in one of Lima's leading dailies shortly after Garcia announced plans in the summer of 1987 to nationalize banks, insurance companies, and companies providing financial services. Llosa thus initiated a major grassroots movement protesting statism in Peru.

According to Vargas Llosa, the route taken by the Peruvian government will lead to the same kind of political and economic backwardness afflicting most Third World countries. By making the state the central force in economic affairs, the government violates Peru's constitution, which guarantees private property and economic pluralism. Companies will be run for the benefit of their managers and of the state, while ordinary citizens, entrepreneurs and workers will become utterly dependent on the state."In every under-developed country, as in every totalitarian country," writes Vargas Llosa, "the distinction between State and government is a juridical illusion." This has been amply demonstrated in the nationalization schemes of Peru's military dictatorship (1968-79): "The inefficiency and immorality that inevitably accompany expropriations and nationalizations arise principally from the servile dependence in which the affected enterprise, thus transferred to the public sector, languishes in the face of political power."

The progress of any country consists in the extension of property and liberty to the greatest number of citizens. "It consists, also, in the strengthening of the rules of the game, some explicit, some implicit; in rewarding effort and talent; in stimulating responsibility, initiative, and honesty, on one hand, and punishing parasitism, unproductive consumption, lassitude, and immorality on the other." When the state becomes the central power in the economy, influence peddling and corruption spread like a disease. "That is the path which leads whence so many Third World countries have gone—into a swamp of inefficiency and poverty, from which there is no apparent escape."

Vargas Llosa's caution against the centralization of power is a timely reminder to countries such as Canada, where there is still life apart from the state, to treasure their freedom and not be taken in by the growing chorus of those who believe that the government has a solution to every imaginable problem. (Mario Vargas Llosa, "Toward a Totalitarian Peru," Crisis, December 1987, pp.41-42. For an in-depth analysis of the Latin American situation, see Carlos Rangel, The Latin Americans: Their Love-Hate Relationship with the United States, 1976; Third World Ideology and Western Reality: Manufacturing Political Myth, 1986.)