My Adventures in “Socialist Country” presented by Ben Powell

– Thank you for coming to
this afternoon’s event. My name is Doug Irwin. I’m a professor in the
economics department and co-teaching Government 68: The Future of Capitalism this quarter. The Political Economy Project sponsors a lot of public events. I just want to highlight the next one which will be next
Monday here in this room, Rocky I, at 4:30. Adam Gopnik, writer for The New Yorker, is coming to talk about his
most recent book on liberalism. I believe the title of the talk is Liberal Minds and Liberal Morals, and he’ll be talking about
a defense of liberalism. So, please join us for that
if you’re at all interested. Today we’re very pleased to have Ben Powell of Texas Tech University here with us to talk about his new book, called Socialism Sucks: Two Economists Drink Their
Way Through the Unfree World. In Gov 68, one of the
things we’re trying to do is talk about different economic systems and how they work. And it’s very hard, if you’ve been born and
raised in the United States, to think outside of the U.S. box. What alternatives are out there? He has done the unusual thing
of playing economic tourist and actually going to visit
some rather extreme countries, but ones that are still on
the map, very important today, in terms of how you might
organize your society, organize your economy. So, he has different sections here. Well, he’ll tell you all about
the countries that he visits, from Vietnam, to China, to Venezuela, and everywhere in between. The theme of the book and
the tour was, of course, not just economic tourism,
but testing out the beers and the local brews in various places, and that’s one unifying
theme throughout the book. Here’s a copy that goes to the best student question of the afternoon which he will be determining,
perhaps with my input, but I’ll leave this right
here as an incentive to think about a good question because we do want to
have this as a dialogue. He’ll speak for about
30 to 40 minutes or so and then we’ll open it up for Q&A. Welcome to Dartmouth, Ben Powell. (class applauding) – Thank you very much, Doug. It’s a pleasure to be here and to have been visiting
for the last week or so. I’m pleased to be able to talk
to you about this book today. It just released this summer. And I have at least around
a dozen or so universities this fall that I’m going to
be talking at about the book, but you guys are the first, which is probably bad for you because the jokes will improve, or at least get less bad, by the 12th. But it also means actually
you’re going to help me out because based on you I’ll
start adjusting this as we go. I should say something
about the project overall as we get started. And I think the title of the
event was something more like My Travels in Socialist
Countries, or something like that. The book title is a little
bit more provocative because I cared about selling books. But we actually kind of
backed our way into it. The original subtitle was something like, two economists’ adventures
in the unfree world, or travels in the unfree world. And the publisher kept
sending us cover art, and it had big, frothy beer mugs on it. One even had a German beer
girl in the outfit with two… I’m like, your guys’ marketing team is not quite getting this because these covers look good to me. There’s no “sucks”
implied in these covers. They’re like, oh, okay, so
broken beer glasses then, and they kind of come up with this. I’m like, yeah, okay, but there’s still nothing why a book about socialism and
two economists’ travels that indicates why you should have beer on the front of the book. So, the subtitle evolved to that. It is, the book, it’s
an accurate reflection of Bob and I’s travels. Bob is a professor at Southern Methodist and one of my best friends. And he and I do tend
to drink our way around when we’re going places, and we wrote up this story as an honest account of our travels. In fact, the publisher’s
original description of it said that Socialism Sucks is
the bastard stepchild of Milton Friedman and Anthony Bourdain. And I was like, yes, that’s exactly the
genre we were going for. But the beer, as Doug mentioned then, it’s not just gratuitously consumed but actually then serves as a metaphor for how these different
economies function, but reaches an audience in
a, say, more palatable way than us usually just
talking about economics so that it’s a way to describe the different economies as well. So, this project started in 2016, for actually a couple of reasons. One, Bob wanted to go get drunk in Cuba, and my wife didn’t really want me to just go on vacation with him. And two, I wanted to figure out a way to write it off my taxes. So I’m like, I got an idea for a book. We’ll write up this test
chapter while we’re in Cuba. Because it’s a genre, this is nothing like any
other project I’ve ever done. All the other books, even when
written for normal people, have been like academic presses. This is written for, like, normal people. Well, or messed up
normal people, whichever. And we’re like, I don’t know
if we can write in this, we have to describe smells, and
colors, and stuff like that. That’s not what economists usually do. But it ended up working out. We didn’t know if we were going
to end up self-publishing it or having a bestseller, so it’s worked out better
than our expectations. That was kind of the fun, pragmatic reason at the start of it. The intellectual reason is
what was going on in 2016 is this, at least to me, was the first time I
started becoming aware of the increasing popularity of socialism, particularly among young people. So, Bernie Sanders had just
come off his primary campaign that was very successful. Of course, now it’s much more successful this time around so far. But we started seeing things like this. Michael Moore tweeting
out that young people are in favor of socialism,
which he calls fairness, instead of capitalism,
which he calls selfishness. This just didn’t strike me
right as a college professor who not only lectures at my university but travels around and talks
at tons of other universities. Average college student I met didn’t seem much like a socialist. They seemed like good people who see genuine problems in the world. But somehow, when they’re giving
answers to these questions now they’re saying the
answer is socialism. I’m like, that’s just not right. Some people aren’t thinking about what socialism really is. And some free market economists maybe aren’t doing a good enough job of empathizing with the
problems that they’re point out and saying, yeah, this is right, but there’s alternative
solutions in voluntary society and markets that probably could better deal with these things. So, this is what motivated us to start, try to do this in a different style. And it’s not just Michael
Moore making up stuff. The Victims of Communism
Memorial Foundation survey asked young people, young, I think in this
case, was like 36 and under, what’s your favorite economic system. 44% said socialism, 7% said communism, 42% said capitalism. You’ve seen the chapters of Young Democratic Socialists of America popping up on campuses around the country. I don’t know if you have one here. I forgot to look, actually. Anybody know? Don’t know, okay. But people have pointed out that there’s just not that stigma attached to saying you’re a socialist
like there used to be, not among the younger people. But it’s not just young people. I don’t want to make this just
like a millennial type thing. If you look, The New York Times, on the 100th anniversary
of the Russian Revolution did a column called Red Century. For 52 weeks they ran a
column in The New York Times dedicated to exploring
some aspect of socialism. Out of that year, I can count
one column that was dedicated to the economic stagnation
in the Soviet Union, maybe a handful, a half dozen, that mentioned any of the mass murders or other atrocities by socialist regimes. But instead you get columns like, “Why Women Had Better
Sex Under Socialism.” Which, even if true, I don’t
know how we weight that against about 100 million dead bodies. Actually, I’ve got some
idea how I might weight it. But they had other ones
of Lenin’s Eco-Warriors talking about land set off
for no development in Siberia, meanwhile not mentioning the horrific environmental
record of the Soviet Union. There was a whitewashing, if you will, of the Red Century throughout that column. And then of course you’ve
got Bernie still running. When he says things like, democratic socialism, I favor socialism, well, what do you mean by that? Oh, countries like Denmark,
like Sweden, and Norway. Well, I think this confuses things for a lot of people because
there’s a big problem. Those countries aren’t socialist. And I’m also not sure how honest Bernie is because this is the guy
who went for his honeymoon in the Soviet Union, and liked it. Or you can find AOC now saying stuff, she identifies as a democratic socialist. I put “insert crazy quote
here” as a placeholder but then I decided it was more appropriate just to leave it like that. Although… I will say, though, and the guy who wrote
the postscript to this… Heh, wrote the postscript to this. We live drank the postscript together, recording it on his BlazeTV show. Matt Kibbe. He’s convinced me a lot of this is that a lot of the young people who
were attracted to Ron Paul are a lot of the same people who are attracted to
AOC and Bernie Sanders. And you’ve got Ron Paul who
is definitely not socialist, very free market, capitalist loving guy. And then they’re the opposite. But they do have something in common. They both rage against the machine. They rail against the establishment in DC, the cronyism, the inside. I see that in common. The thing is, I think people get the rage and see the injustice but don’t think through the
policy prescriptions afterwards the same way. So, while she says crazy stuff, I think the anger at some things is very similar to people
with very different positions on good economics. So, here’s the tour that we go on. So we’re going to start out
in Sweden, not socialism. We’ll go to Venezuela,
Cuba, Korea, sort of, China, Russia, Ukraine,
the Republic of Georgia, and then we end back in the USSA by going to the largest
socialist conference in the United States. Which is, it was Socialism
2018, fittingly in Chicago. It was fun, I learned a lot. All right, so first, let’s
just get our terms straight. Socialism, what it means. So, this means we abolish private property and the major factors of production and you replace it with some
form of collective ownership. In practice, for any country-sized thing, this means de facto state ownership of the means of production and that you’re then going
to plan your economy, because if you don’t have private property and those means of production, you don’t have markets for
the means of production, which means it’s not entrepreneurs, and prices, and profit and loss, that are going to coordinate
economic activity. If you don’t have that market process and you don’t have a central plan, then you’re in autarchy
and you’re super poor. Your hippie commune ain’t going
to make an iPhone, comrade. So you need to coordinate
across industries and workers in order to have advanced
material production. And a central plan is
going to do it poorly, but it’s going to do it better
than having no plan at all if you do not have
markets to do it for you. So, that’s the definition. Now, the thing is, in the real world, it’s not all ones and zeros
of communist, socialism. I can think of these things as a spectrum. Pure capitalism on one far end, pure socialism on the other end, all countries in the real world falling somewhere in
between on this spectrum. So, there is no purely capitalist economy where there’s no government ownership of any of the means of production. And I should say, government
ownership or control. So, often de facto
control is what matters. You have private ownership but government regulations or
controls that are so pervasive that you take away the
decision making power from the nominal owners. You have no society that’s
a pure capitalist one where all decisions are private like that. You have some degree of regulation. And you have no society,
now or in history, that was literally 100% government ownership or control
of the means of production. The closest you probably come is the Soviet Union during
the period of war communism during the early years of Lenin’s power, which was an utter disaster, and he backtracked on it, going
to the New Economic Policy which reintroduced some markets and limited scale of private
ownership and business. Or maybe Mao during the Great Leap Forward from the 1950s to the early 1960s. The other Russian and Chinese
systems at other times were collectivist and easy
to call socialism, but not, they never hit 100% pure on that. Just like we’re not 100% purely capitalist in the United States. For government ownership of means of pr– The K-12 education system. That’s got to be about, what, 90% government owned and controlled? Other industries in the
United States like healthcare, they’re heavily regulated. Still have markets and private
ownership, to some degree, but there’s attenuations in this. It’s true on both ends of the spectrum. But the main thing that we’re
going to care about here is is the decision making
private and coordinated through markets and
voluntary transactions, or through government plan. And then we can look on this spectrum. With that, Sweden, Norway, Denmark, they’re not socialist. The major factors of
production are privately owned, and they use markets to coordinate most of their economic activity. My coauthor on this book
is also the coauthor of the Economic Freedom
of the World Annual Report which basically scores
countries on how capitalist or how socialist you are. Sweden comes in 27th freest on that index. It’s mostly a capitalist economy. Denmark scores even
better, so does Norway. What these countries have
is a big welfare state. That’s true, and it’s got high taxes, but that’s not socialism. I, as an economist, actually think there’s a problem with it. I think high taxes and a big welfare state are bad for a country. But it’s not socialism, and it’s not going to impoverish
you the way socialism does. My read on the evidence of countries that adopt the big taxes
and big welfare state, it slows their economic growth down. It might help you achieve some other goals but your cost of that is going
to be slower economic growth. Sweden was dirt poor in
the mid-19th century, became very laissez-faire, grew rapidly to the mid-20th century, put in a big welfare state
and high taxes, growth slowed. They’re now in the bottom
half of OECD countries in terms of their average incomes. But it’s still a nice place. And guess what, there’s lots of good beer. That’s a picture outside Cafe Duvel, so not very far from Belgium. I love Belgian beers. I was having delicious Belgian beer there. Problem was, it costs a lot because they tax the
bejesus out of everything. But the variety and the
quality is still there. All right. Venezuela. We call this one starving
socialism, unfortunately. So, these pictures that you see here, and I’m going to vary between
some statistics and pictures throughout the talk. Top left and right next to it, that’s the bridge, if you’ve
seen on the news recently, where they blocked the bridge and won’t let the aid trucks in. That’s the bridge between
Cucuta, Colombia, and Venezuela. There’s actually two bridges in that town. So, when we went down there,
those bridges were open. It wasn’t aid trucks that
were flowing across it. It was two things. Or, it was Venezuelans, and they were doing one of two things. Either top-right, applying to
migrate and leave Venezuela, or what most of them were
doing in the top-left which is going to Colombia
to buy basic necessities, stuff that you see stacked
up in the bottom right. Because Venezuela essentially cannot feed or provide much of anything else to its own population anymore. And what’s weird in
seeing this, Bob and I, both of us have probably been to somewhere around 50 countries. We’ve seen plenty of third
world poverty different places. This is different than that. It’s probably a little bit
small in these pictures but if you actually see the clothes and the luggage that people are using, these were middle class,
upper middle class people, who still had some wealth,
some cash of some value, that they had access to who were going there to
buy basic necessities. One couple that we had one of
the better conversations with, they were on a six-day
round trip to buy groceries. Six days. Three days one way,
three days the other way. They said they weren’t
going to make the trip very many more times because
it was becoming too dangerous of people stealing it
from you on the way back. Which, when we crossed
into Venezuela illegally on that bridge, that Venezuelan checkpoint
could give two damns about a couple gringos walking in. They were more interested in
the people lugging suitcases because the police were stealing from the people bringing
the suitcases back in. Apparently their wives sent
them with a grocery list to check out from the people who were legitimately buying things. So, what I want to say, then, about what’s gone on in Venezuela… And I apologize. With a brief talk here and a
tour of a bunch of countries we’re going to do a little teeny snapshot of each one of these places that doesn’t do any one
of them fully justice. But Venezuela, I want to point
out, this was a rich country. You go back to 1970, its per capita income
was higher than Spain. It was one of the richer
countries in Latin America. It went through a long
period of stagnation. It used to also be, by the
way, pretty free market. 1970s, the earliest year of
those economic freedom indexes, it was top 10 in the world that year in terms of economic freedom. It lost its freedom slowly
over a couple decades and went into kind of
an economic stagnation where it fell farther and farther behind. And where the poor weren’t
having the same privileges as the rich in the country. That’s the vacuum where
Chavez comes to power in 1998. So, formerly rich country, lost its economic freedoms gradually, elects a guy who’s going
to do Bolivarian socialism. Notice I said elects. Free, contested elections. This was democratic socialism starting. Jimmy Carter was one of the
international observers. Everybody said this was
free and fair elections. He got reelected, after that
putting in a new constitution that gave him more of the economic powers that he’s going to later use. So it comes democratically to
power, and things look good. For a lot of the 2000s, people say, look, Venezuela is working well. That’s democratic socialism working. Except the economy was
hollowing out underneath. What was going on is Venezuela sits on the world’s largest oil reserves. And remember, government ownership or control of the means of production. The state oil company was
extracting those reserves while prices were high, using the revenue from that
to import goodies from abroad that they handed out to the population. This made it look like things were okay but meanwhile they were losing the ability to produce things themselves. Eventually, right after Chavez, pretty close after when
Chavez dies in 2013, and you’ve got people
like Salon at that time writing columns saying it’s
Hugo Chavez’s economic miracle. See, democratic socialism works. Thing is, as soon as oil prices came down now they weren’t… Actually, not only did
oil prices come down. It turns out, the state’s not really good at running the oil company. Production is way down as well because they don’t do capital
improvements the same way. They’re not earning
enough foreign exchange. They can’t import the food and other necessities to feed the people. My colleague Kevin Grier did one of the better studies on this. It’s called a synthetic control. Basically, what it means is you take a basket of other countries and weight an average of them together that mirrors Venezuela’s performance. Basically, you create a fake Venezuela that never gets Chavez. Then you see what’s the
difference in their paths. It turns out, during that
time when everyone said, oh look, Venezuela is doing kind of good, they should have been doing
a heck of a lot better based on what their previous trends were. Their incomes didn’t go up
as much as it should have. Infant mortality didn’t go
down as much as it should have. Poverty didn’t get reduced
as much as it should have. The only thing that they exceeded on was inequality went down by more, except it did that
without incomes going up, and without poverty improving. So, basically they chopped off the top without raising up the bottom. That’s what you got during the
successful years of Chavez. And of course, today… By the way, and this oil
prices coming down, say, oh, well, it’s the fault of oil prices. Listen, I live an hour and a half from the Permian Basin
in the United States. I was living there when
oil prices came down. Still looked pretty good. This, it’s they had lost
their ability to produce. So now, when they’re not
importing the same way, the average Venezuelan in 2017 lost something on the order of 24 pounds. They didn’t all of the sudden discover Jenny Craig. This is not being able to feed yourself. In terms of the beer metaphor, the country ran out of beer. Now, they have beer back,
and it was just temporary. But they had a national beer shortage. Why? Well, they have a nominally
private producer, Polar, but the government planners allocate the foreign exchange to import. Venezuela doesn’t make barley. They did not allocate enough
foreign exchange to the brewer to import barley. No barley, no beer, monopoly,
essentially monopoly producer, national beer shortage. I don’t know about you. If I were a socialist central planner, like, beer, toilet paper. These are the two things
that I wouldn’t screw up. I mean, I would screw them up
because I’m a central planner, but I’ll screw them up
less than everything else. So, what I want to point out
here, a lesson in Venezuela. One, it’s a rich country
that this can happen to. But two, it’s no longer
democratic socialism. It’s merely socialism. Last year, Maduro got reelected with something like 66%, 68% of the vote. This does not pass the smell test. Like, we know when you
have high unemployment or bad inflation you throw
the bums out of office. How do you get elected with
2/3 or more of the vote when your country is losing weight and you have hyperinflation? You’re cooking the books. So, people who run for the state run firms are ordered to vote for
him or lose their job. They hand out food aid at polling places. They repress opposition parties. The National Assembly this January declared an interim president, as they’re allowed to by the Constitution, who has not been able to take power because Maduro uses the
military to suppress it. If you don’t have a large
degree of economic freedom, the government then
controls your livelihood and can punish dissent. Because a socialism system is necessarily going
to generate stagnation in the nature of the incentives
and the economics in it, that’s going to have a populace
that’s going to vote it office. But once you’ve centralized
the power and the plan you’ve given the ability to repress. You lose your democratic freedoms. This is why it’s not an accident that every socialist regime
that we’ve seen in the world has become a totalitarian
oppressive government. When today’s socialists say, that’s not my type of socialism, I want democratic socialism, the word democratic is
not magic fairy dust that means socialism doesn’t mean ownership or control
of means of production. You still have that feature, which means you’re still going
to get similar economic outcomes and the tendency on the political side to lose those freedoms as well. All right. Let’s get a little bit
lighter and more fun. Cuba. It’s weird to say, but yeah. Cuba is, like, the
softer side of socialism. As in it’s at least functioning. We call it subsistence
socialism in the book. It’s chugging along, doesn’t
seem to be going anywhere. The people aren’t starving, but they’re not prospering either. And Cuba, of all the places that we go, Cuba is really easy to be an economist and observe just mundane economic activity because you’re free to
travel wherever you want, you’re very safe from any sort of crime, and as long as you don’t talk
politics with dissidents, you’re at very little risk from the Cuban government
doing anything to you. So you can really observe and participate in economic activities there a little bit. So, let’s just do some pictures
for this one, with stuff. Remember, government ownership
of the means of production. Hotels, part of the means of production, so you have a whole bunch
of government owned hotels all over Cuba. Now, there’s a nice
one, the Hotel Nacional. That’s where the diplomats go. It’s a five-star hotel. We could have stayed there, but that’s not really giving it… Like, the Soviets can send a
cosmonaut into outer space. You can have one good hotel in Cuba. But we weren’t going to sandbag it and try to go to shitholes either. So we asked a friend for a recommendation, and they said the Hotel Triton. It’s in the suburb of
Havana, right on the ocean. Reasonable prices. I think it was like $65 a
night, something like that. Which sounds cheap, but
that’s not cheap in Cuba. That’s a picture of when
it opened, gleaming white. That’s what it looks like
today on the upper floors. Notice how tall this building is. They have four elevators. You can start seeing
the word on the left one where it’s going to be out of service. Three of the four were out of service, which meant it was impossible
to ever get the other one so you end up hiking up eight flights of unconditioned stairs with your bags, which gets you sweaty in Cuba. Some pictures from the hotel. Top one, panel missing
in the bathroom ceiling. And turns out that actually wasn’t the worst part about the bathroom because water was optional. Not just hot water. One morning we had no water for our hotel room. Now, when you pay musicians and plumbers essentially the same wage,
as the Cuban government does, guess what you get. Lots of musicians, clogged toilets. (class laughing) This wasn’t the only one we stayed at. We also stayed at Hotel Caribe. We’d been on a long
drive back from Trinidad. We were hot, sweaty, and pissed off. We had a beer and a meal, and there was a hotel right next door. This is right down the street from the central government building. Bob’s like, we should
just get that hotel room. And I’m like, if it’s
as bad as the other one, I’m like, don’t do it. He’s like, I’ll check it out. I think the air conditioning
just tricked him. Because the other one, that’s the bag that came out, the glass that came out
of the sanitary bag, the hole that was in the towel. You can see the bolt missing on the toilet which makes it really fun because the seat just
slides randomly off on you. And they left the soap
from the previous guest. (class chuckling) Contrast. Little over a decade ago, I think about a decade ago, they legalized casa particular. People who can rent out
their own apartments. You can actually do this from
the United States via Airbnb. Now, internet isn’t
very pervasive in Cuba, but Cubans all have relatives
who live in Florida. And the relatives who live
in Florida put pictures up. By the way, your credit cards
also don’t work in Cuba, but they do work in Miami. And the relatives take payment, and you can arrange the sale in. You can also just walk
around and find them. They’re plentiful. This was a two bedroom
apartment in Central Havana. You can see the two bedrooms there, a little kitchenette, the living room. Everything was neat, well maintained. The person met us there on time. Oh yeah, the government
one, I didn’t even tell you, they didn’t have a
record of our reservation so we had to pay twice. Originally we paid through a
British website from abroad. This is just incentives
of private property versus collective ownership. The Cuban hotels suck
because no one gives a damn. The casas that people
have property rights, to a limited extent, but property rights, and their profits from renting it out, thus they reinvest some of the revenue to maintain the capital
and attract customers. Difference of incentives. Notice, same exact service being provided, accommodation to stay. Same people doing it, same place. One big difference. The incentives of the
economic system operating. Also, by the way, note, when I said it’s not zeros and ones. So, government ownership
of the means of production is predominant in Cuba, but there’s still some carve outs of some sort of private ownership, or private control rights
over flows, at least, of some things. Ah. Let’s play a game. Top-left picture. Students only. This is a commercial
street in downtown Havana. What’s missing? – [Student] I would say
signs and advertisement. – Yeah, signs and advertisement. I don’t know what’s there. In fact, the way Bob
and I did this is, like, we’d walk around, get hot, stop, drink, do again, and just keep doing this from like 12:00 PM til midnight. The first, like, 8:00
AM to 12:00 PM sucked. But after that I was just chain smoking and drinking the rest of the day and it was more tolerable. But that strategy was actually hard there because you walk up to a street
corner, and you look down. Is there any place I can
stop and get a drink there? I don’t know. How am I going to find out? I guess I got to walk all
the way down the street and look at each storefront. This is not poverty. Go to any poor country around the world. There’s plenty of signs. Whoever produces beer in the country makes signs and gives them
away to any other restaurant just to indicate that you
can get their beer there. This is nobody giving a damn. Government ownership of
the means of production. If you’re not a private store that makes profits by people going there, why do you care if customers find you? Don’t bother. Next picture, top right. That’s a well stocked convenience
store in Central Havana. What’s wrong with this picture? Hm. – [Participant] There
aren’t a lot of options. – Not a lot of options. That’s well stocked, but there might be two dozen, if we’re lucky, distinct items. So it’s like, that’s cola at the bottom, but it’s all the same. I called it commie cola. That wasn’t the real name. But each one of those packages, there’s no variety. The socialist planners tell you
you’re going to get equality but what they deliver on,
if they deliver at all, is a lot of sameness, bland sameness. Contrast that, I stopped
on my way up here today at a gas station in rural New Hampshire and the variety was great. I mean, you had all the
national beers were there but then there’s Free Flow IPA from Otter
Creek Brewing in Vermont. Never heard of it. Variety was there. The entrepreneur had an incentive to put things where I might want them, and someone else had an incentive to brew a tasty IPA that
I can drink during my talk because I wrote a book with
drinking in the subtitle. (class laughing) All right. Bottom two pictures. These are private restaurants. So they, over time, have
legalized some private. So they have government restaurants, government ownership
of means of production. They also have some private restaurants. It used to be they couldn’t
serve meat or seafood, and you could only seat like 12 people. The number has gone up of
how many people you can seat and there’s no more restriction
on meat and seafood. They have the right incentive,
just like the casa owners. They try hard. And at first they seem okay. The government ones, by
the way, are godawful. The last night we went into it… Well, I’ll explain in a moment. They’re trying, in fact,
some of them even had modern stainless steel kitchens that you’d expect to see
in a restaurant here. But what seemed good at
first, after even a few days you start to notice it
all tastes the same. All the different restaurants have about the same 12
to 18 items on the menu. And they’re all bland. Cuban food in Cuba sucks. Cuban food in Miami is delicious. A Cuban sandwich that’s delicious in Miami is a crappy ham and cheese in Cuba. The difference isn’t the Cubans. The difference is the economic system that they operate under. And in this case, both
have an incentive to try but one deals with the state
supply chain for ingredients. As a result, they have no
variety for their inputs so you get the same
blandness in that as well. So, real quick on cars. Cars in Cuba. So, I intentionally picked a
modern car in this picture, but you can see the quintessential classic 1950s American
car in the background. They drive a bunch of 1950s cars that are held together with
popsicle sticks and bubblegum. We have an embargo on… Excuse me, we. Doug and I do not have an embargo on Cuba. The U.S. government
has an embargo on Cuba. But it’s not a blockade. There’s no U.S. government ships preventing Kias from going in. They keep using those old U.S. cars, and other older but not as old cars that were imported before, because the Cuban
government severely rations how many imported cars they’re
going to let into the country. Now, I told you that the
hotel room and the casa… Oh, the casas were like $50 a night. There was one I got for
$25 a night that was great. Want to take a guess on
what a 1950s U.S. car goes for in Cuba, in dollars? And keep in mind, average incomes in Cuba. Income statistics are BS in
a socialist country, too, because we don’t have market prices. But somewhere on the order of $2,000 to $3,000 per capita, probably. Yeah. – [Participant] 30,000. – You’re in the right direction. Less than that for the
1950s ones, but 15,000 for something that maybe someone would pay four grand for, three grand for, in the United States,
which is much richer, in order to restore. That guy in the front that doesn’t even exist
in the United States, that’s more like 30,000 because it might have disc brakes, or potentially even air conditioning. Restrict supply enough, price goes up. All right. Korea. So, we spent some time in South Korea. Wonderful place. But we promised our wives
we wouldn’t get imprisoned or killed while writing this book. It’s also the case that I
direct the Free Market Institute and Bob directs the O’Neil Global Center
on Markets and Freedom. We’re not going to be real popular to give a visa to from the
North Korean government. So, the way we decided to deal with this is we traveled in South Korea. And then you can see a
little bit from the DMZ, but because it’s the DMZ there’s
not as much to see there. We went up to Dandong, China,
on the northern border. And Dandong is the major trade
city with North Korea there, across the Yalu River from it, and we traveled up and down the
Yalu River a bit to look in, and then to talk to
people on the Chinese side to the extent we could. Although, I still regret this, we missed out on the
best opportunity on that because we had a Chinese
fixer who was with us who had worked for BBC and was introduced by a mutual friend. And there was actually a
strip club in Dandong, China. And I’m like, we got to go in there. Bob’s like, that’s a bad idea. And I’m like, no, it’s a great idea. And the fixer is like, no, no,
not safe, this is not good. I mean, one, it would have just been huge man points as an accomplishment. But more, really, the real
reason that I wanted to go in is a lot of the North
Koreans who sneak out end up working, in some
fashion, in the sex industry on their way getting
smuggled out of the country, or sometimes getting
trapped and not smuggled, so it would have been a better
chance to interview people. You know if you’ve seen
the story from Yeon-mi Park on her journey for freedom and describes the trials that
she went through getting out. It would have been an opportunity to be able to talk to people more. But anyhow, you can see, I mean, we were a couple… We were 100 yards off
the North Korean shore which also led to weird things like Bob looking and saying, look at the Chinese Navy
presence in this river, and me saying, yeah, thank god. I didn’t think I’d say that. But here’s what I want to show you. Some of you are familiar,
have seen this before, in terms of the economic development of South Korea versus the North. The satellite image at night just showing the absence of light or economic activity in the North. Well, you also see this from ground. Actually, the lighting in
here isn’t very good on this. This top-left picture, you
can see the lights in Dandong. You can see on the left
side kind of three arches. That’s the bridge headed across
the river, that’s lit up, and then you can see
darkness on the other side. Same picture in the morning, you can see those same three arches, and you can see a city of 300,000 people on the other side of the river that’s virtually invisible at night. So, we’re starting to run a
little bit shorter on time here. (class laughing) That was supposed to be a nice contrast. Like on that side you see Chinese skyscrapers, other shoulder, you see that house that was in the picture two slides ago. Like, a couple hundred
yards of separation. That’s not a natural occurring thing. That’s the difference in
policies between two countries. And the difference between
North Korea and China is less extreme than, of course, North Korea and South Korea. This is where you have a
great natural experiment. Post-World War II, North
Korea, if anything, was richer than South Korea. Entire peninsula gets decimated
during the Korean War. GDP per capita, to the extent
you can believe these numbers, roughly on par by 1960 after U.S. and Russian
aid go into the country after the Korean War. South Korea today, of
course, high average incomes. It’s top 20 in economic freedom. Life expectancy shoots
up, infant mortality down. Everything is wonderful. And by the way, Belgian beer
can be had in South Korea cheaper than it can be had in Sweden that’s right almost next door to Belgium. North Korea today, to the
extent you can believe it, under $2,000 per capita income. About three million people
starved to death in the 1990s. No place on Earth do you get
one people, one language, one culture, one history,
one small geography, with such differences in
economic outcomes like that where the most significant
difference between the two is one has collective ownership and control, and the other does not. China, we call this one fake socialism, because it’s a Communist
Party that runs the country, but they’ve reformed the system so much that it would now be a
mistake to call it socialism. So, the banking sector is
largely still socialized. There are still state-owned industries. But the lion’s share of the
economic output of China now comes from private firms. It used to be socialist. In fact, under Mao it was one of the most socialist regimes
that ever occurred. But the reforms starting
in 1978 with Deng Xiaoping, I’d say up through today, but I’d say really more up
through about a decade ago, have transformed it into a
crony capitalist economy. I think there’s problems
with crony capitalism. But when you compare it to what was going on under socialism, it’s a big improvement. And go into any major Chinese city, you’re going to see major
international brands, commerce and markets, private ownership. And a lot of the thing in China is, in Bob’s Economic Freedom
Index is the biggest improver since 1980, in Asia, in terms
of its economic freedom score. But that’s national level policy
which really understates it because a lot of the reform in China has been at the local
level, and in particular, enterprise zones in major
cities that they’ve created that have greater economic freedoms than other parts of the country. This one’s in Shanghai. That’s the kind of iconic
skyline that you see in Shanghai. But this is looking the same way. So this is actually old Shanghai
on this side of the river, which is the side I took
that picture from on the top. Across the river was the slum. That’s across the river now. In early 1990s, that across the river became the largest free trade zone with also better financial freedoms, too, in China, and it boomed. Average incomes today are
close to $20,000 per person on the other side of
the river right there. South Korea is a dramatic success story. That’s about a generation and a half to go from pre-industrial
to first world status. That was 1990. It’s like a blink of an eye that it’s happened there in China. I’ll skip the hellish history of it. I think some people are– Some people just don’t
know the magnitude of it. During the Great Leap Forward, Frank Dikotter’s new book, he had better access to the archives, is probably the best estimate
that’s out there now. Puts it at about 45
million unnecessary deaths during that time period. And this is when they really
collectivized agriculture, collectivized land, forced labor. The reform process I’ve
already talked a bit about but the one part I want to say, migration. I gave a talk on migration last week here. The income differences between rural China and cities in China are often as big as the income differences between Latin American
countries and the United States. You lose some of your
state welfare benefits when you move in China, but you’re essentially free to move from the rural area to the cities, and hundreds of millions of them have. And a lot of that big economic
growth we’ve seen in China has been migration driven. If we had greater freedom
to migrate between countries we’d see some more of
that growth like that here in the United States too, possibly. Still a scary police state. While I was there I was invited to speak at the Unirule Institute. Unirule Institute has been
independent free market institute in Beijing since the early 1990s that’s advocated for greater
economic freedoms and reforms. When I spoke there with Bob
and a couple other people, they were having a conference on Ayn Rand and Austrian economics, and
I was like, this is cool. I’m like, I’m in Beijing and
I’m getting to talk about this with a bunch of Chinese academics. That was, I think, a Friday night. Saturday morning the conference
was supposed to continue. We weren’t part of it anymore. But I got an email from the friend who had introduced us to them, saying, I hope you didn’t
go to the conference today. The Chinese government shut it down. They chained the doors to the building, had thugs there to beat
up people trying to go in, and the founder of the
institute, who was in his 80s, was put under house arrest for the day. That was 2017. Unirule just shut its doors last month because the government ceased
giving it authority to exist. I’m skipping, rush, so let’s just talk about a success story before we wrap up then. So, former republic, former Soviet Republic of Georgia. Here’s a country where you get essentially no economic reform for over a decade after the fall of the Soviet Union. And this actually we talked about before. I’m not sure that this
is much of a crisis, but this is just a leadership change that had different ideas. Saakashvili becomes president. He’s educated in, I think a
lawyer from Columbia University. From Columbia University. And he basically has some
Washington Consensus type ideas about reform and growth. But he appoints this
guy, Kakha Bendukidze, who is a very wealthy person,
at the time in Ukraine, but who’s basically a
libertarian capitalist, to be his finance minister. And says, go ahead and reform the economy. So this doesn’t start–
Rose Revolution is 2004. He gets into power and starts
making these economic reforms. They put in a 12% flat income tax, eliminate bunches of other
taxes and reduce rates. So, most economic indicators in Georgia start improving pretty quick. The one that doesn’t is unemployment. Unemployment goes up to something like 36% because he fired entire bureaus at once. He just went through it. It’d be like walking into
the Department of Agriculture today and being like, all right, all of you are fired. Actually, what he did, this
was really kind of cute. He’d go to some of the bureaus and he’d call for everybody to come into a central room like this, and he’d ask his assistant to count how many people were in the room. The assistant would
count, and then he’d say, how many does it say work here? There’s 100 people in the room. It says 600 people. Okay, now only 100 people work here. Everybody else is fired. And would do that repeatedly. In fact, my favorite one is he fired the entire country’s
traffic police in one day. All of the traffic police, gone. And the joke is in Georgia
that crime went down (class laughing) because they were super corrupt and they just pulled you
over to extract bribes. In fact, today, this is a
police station in Georgia. When they build new police
stations they make them of glass to signal transparency. They came down really hard on
this regime, on corruption, which I want to say is mostly a good thing in the context of these reforms as they had to break the cycle. But ultimately they were
very harsh on people in their punishments for
very mild acts of corruption and that grew resentment that eventually got the president out of office, probably. Unions are legal, but they
have no special privileges that any people don’t have on their own. They put in something called
the Economic Freedom Amendment which keeps deficits below 3% of GDP, debt below 60% of GDP. And if you want to pass a new tax, you have to ask for a popular referendum. The government can’t
put it in place itself. So basically he handcuffed
the next government when he was leaving office. And they renewed it. When we were in Georgia they
were debating the renewal and we got to debate some
local professors on that. But they ultimately renewed it. They cracked the top 10 in
economic freedom in the world. Something that was unranked before 2004 because you couldn’t even
get data out of them. Dramatic transformation. Country’s booming. Incomes are up. It’s still very poor,
about $8,000 per capita. But actually using that same
synthetic control approach Grier and Lawson did a paper
together on Rose Revolution. It’s about 40% higher than what
would be expected otherwise in terms of the incomes. And in terms of the
booze, also great success. The Soviet central planners
were commies, not idiots, so they figured out that
warm Georgia could make wine better than, say, Siberia. So, Georgia made wine
for the Soviet Union, but they did it on fertile farmland and they used international grapes that you’d be familiar with, Merlots, Cabernets, and such. That’s all gone because
they mass produced swill. So, once they got economic
freedom they tore that stuff up, went back to indigenous Georgian grapes, names of which you’ve never
heard of and I can’t pronounce, and old school winemaking practices. Where is that previous picture? Down there in the bottom this is actually in somebody’s house. And this goes down to clay
vats that are below ground. And they crush the grapes, leaving the stems and the
skins on, even on whites, and let it ferment there
and then extract it. So there whites are like a golden color. It’s very different than any white wine that you’ve had in the
United States, probably. And it’s delicious. And it’s booming. Exports to the United States were up 50% year-over-year last year from
the Georgian wine industry. So, again mirroring what’s
going on in the economy. So, to wrap up, then. We end up back in the USSA,
attend the Socialist Conference. And didn’t really argue
with people at all. I just asked them all,
what brought you here? What does socialism mean to you? What are you interested in? And the summary of what I
learned from them is, basically, half, maybe more than half,
aren’t really socialists. Point blank, ask them, do you
want to abolish private property and replace it with some sort of state or collective ownership, nope. So, what concerns you? And then it’s usually an issue, pick it, whether it’s environment, immigration, gender issues, income
inequality, pick some issue. They see an injustice, and actually, most of these things when they say them, I’m like, yeah, I agree with you. That’s not right. And then they say, so
socialism’s going to fix that. I’m like, socialism means, like, big government control of the economy. I don’t think that’s a good way to– Even if that would fix your problem, the host of other problems
you’re going to get with that are going to be awful. And in often this case, I actually don’t think it’s
going to fix your problem. It might make it worse. Then there’s a minority of
them, but still significant, who really do mean collectivize
the means of production, but they want it to be
socialism from below, or democratic socialism,
and explicitly say, no real world socialist
system is what I talk about because I want democratic socialism. And they miss this connection between collectivizing the means of production and losing your political
freedoms in the bargain. But mostly good, well intentioned people who I think we need to do a better… People like me need to do a better job talking to them and recognizing
the problems that they see. And saying, well, there’s
better ways that we can do this to reform our own system that don’t equate to
jumping on to something called socialism without
really understanding it. I’ll also say that the hotel, and this is the beer taps
on the other picture there, you see a green one with a big fist and a red star on it. That’s Revolution IPA. Revolution is a brewing company. It’s the largest independent
beer bottler in Illinois. And all of their beers have
commie logos of some sort, and memorabilia. But the irony is that this
privately owned company that was making beer that was being sold at the Socialist Conference makes a greater variety
and quality of beer than all of the socialist
countries in the world combined. (class chuckling) It’s differences in the incentives. So, I’ll wrap up with, the
book has done really well. We made it all the way up
to number five on Amazon, like, overall. So, by far the best nonfiction
selling on Amazon that day. And my own personal thing
that I thought was cool, for almost continually since
we’ve released this summer it’s been the number one book
in the category of socialism simultaneously with the
number one category of beer. (class laughing) Wasn’t a life goal, but
it is an accomplishment. So with that I’ll end there and take whatever
questions you might have. By the way, Professor Irwin said the best question gets this book for free, but the rest of you, fear not. I have books with me that
I’ll happily sell you for $20 (class laughing) if you ask crappier questions. (class laughing) (class applauding) – [Professor Irwin] The floor is open. Only students are
eligible for the free book so you have to judge
the best question by… – Luckily, I don’t discriminate against older people who have $20 bills. (class laughing) Yes. – Quick question with your approach to deciding which beers to drink, as weird of a question as that sounds. Because you mentioned
that you were drinking Belgian beer in different places, and I was wondering if
you were trying to… Like, I know a lot of countries have a national beer brand. And I was wondering if you were analyzing both the ability to get foreign beers in these various countries, and the quality of the national beer, because that would be two
different measurements of just how well the
economy is functioning and the ability to have variety. – Yeah, that’s a great question. So, yes, we did both. And maybe I could have emphasized some more of it in the talk. So, Cuba, you’ve got two types
of beer, Bucanero or Cristal. And one of them is like 4.5%
alcohol, one’s 5% alcohol. They both taste like a Budweiser that you left out in the sun too long. You have very low penetration of any foreign beers available there. Contrast that with
China, the Tsingtao beer, I don’t think it’s very good. I mean, I can drink it. But you go to any major city and you’ve got places that
have a wide variety… We found a Belgian beer bar in Dandong. Like, it wouldn’t surprise me to find them in Shanghai and Beijing, but Dandong? Awesome, okay, cool. Yeah, it’s not just what
they produce themselves. Because, listen, I’m
originally from Massachusetts. I don’t want to drink
any Massachusetts wine, but I have no problem
having a great variety of good quality wine
when I’m in Massachusetts because they import it from
everybody everywhere else. But you don’t see that the
same in the other countries. And by the way, the Korean beer, the North Korean beer is godawful. Bob and I drank one of them on camera with someone doing an interview, and we couldn’t get through it. I’m not the type of person
who doesn’t finish a beer. I’ve had to change my words because when I go into a bar, if I see taps and I see
something I haven’t had I’ll be like, oh, I’ll try that, and they bring me over
a little shot glass. I’m like, no, no, no,
I meant it like a man. When I say try it, give me a glass. I will drink it all. And if I don’t like it, I’ll switch after. The North Korean, I
couldn’t make it through. What Bob said is, he said if he lived there he
guessed he could drink it, but he’d hope it killed
him before the state does. (class chuckling) Other questions. Yeah. – So, you mentioned inequality towards the end of your talk. Was just wondering if
you think it’s an issue. And if so, if democratic
socialism isn’t the answer, what do you think is? – I think… I think inequality is a symptom of something that’s a problem. To me, inequality per
se is not the problem. It’s how it’s generated. So, I’d want to think
about barriers to mobility, barriers to success, barriers to realizing
your dreams, ambitions, however you want to pursue them. And it might be that you pursue goals that make your incomes wildly
unequal with other people, but if you’re free to pursue
your passions and ambitions and you get the outcome
you want and desire but it’s income inequality,
I’m fine with that. But when I think about things that prevent people from doing that, and generate the inequality,
that’s where I think… So, things like occupational
licensure in the United States. It’s becoming widespread. Arizona licenses rain dancers. How are they ensuring quality with this? Don’t know. It’s pervasive across states, now a number of occupations being… And then the other states
don’t recognize it. But that means when
one part of the country is being successful and
another country is stagnating, it’s harder for people to move. There was a study, I think it said if you worked in a licensed occupation you were something like 30% less likely to move between U.S. states. That’s a big barrier to people adapting to an economic system in order to keep generating income that makes things unequal in the end. That’s by far not the only one, but I’d think about other
things that are like that. The way that we regulate housing and make housing completely unaffordable so that your unequal
incomes then matter a lot for people trying to live on
either coast of the country. I live in Lubbock, Texas. It’s going to remain affordable because they let you build new homes. And because the land’s flat and you can just keep building on it. But they don’t limit the permissions. California severely
limits their permissions. What’s scarce in California
isn’t buildable land, it’s permission. And I think that makes the
inequality of incomes there worse because your cost of living
is jacked up so much by it. So I would think about things like that. Because I think the
young socialists who say, incomes are getting more
unequal, does it matter? I’m like, yeah, I think it does, but let’s talk about real ways to get at helping people. Yeah. – What’s the best example that you encountered in your travels of entrepreneurial spirit in
a clever way under socialism? So like a hustler, or someone basically being
clever in a black market. I think there’s always
some interesting examples from socialist countries of
people’s entrepreneurial spirit. – Hair sellers. Venezuelans who lack the money to buy the necessities
in Cucuta, Columbia, there were entrepreneurs in Cucuta. In fact, I talked with one, it was an interesting
conversation, on the bridge. They were yelling out for
people to sell their hair. (participant speaking indistinctly) Yes, and they use them
to make hair extensions. If you’re a Venezuelan who
just had hair but no money you could go and sell your hair. I read about it before, so when I heard them doing
it I went up to them. And my Spanish is very bad. I grew up playing basketball
with Puerto Ricans and took one class in high school. But I still try. But I had a guy from the PanAm Post who was with us then too, and so then he started to try to translate because when I asked, she
just kind of laughed at me and said she didn’t want my hair. (class laughing)
I’m like, come on. Red hair is scarce where we are right now. But apparently it’s also
not in demand. (chuckling) But what I was trying to
get from her was the price. And it varies. And it was like, long, high quality hair could get you as much as 70 bucks. But normal was 20, 25 bucks, I think, if I remember correctly. Which doesn’t sound like much, but in terms of what you
could buy for supplies that was a non insignificant– That might be minimum
wage earnings for a week or something like that. I’m spitballing that actual number. Yeah, that might be the most interesting. Yeah. – So, you started the talk by stating that the younger generation is more likely to favor socialism over capitalism. And I guess I’m just wondering
if you have discovered any, or can plan any mechanisms
that have allowed or prompted socialism to be so glorified
among the younger generations. And if you think that
people’s opinions would change if they had the opportunity
to travel to these countries. – Okay, so, definitely yes
on the second part of this. And hopefully, if they just read the book that will be a poor substitute. On the first part, and it’s just the evidence, I’m only seeing a little bit of it and it’s not in the book at all, but actually there’s a difference between millennials and Gen Z where it becomes less popular with Gen Z. I wonder how much of this goes with the significant number
of millennials coming of age, or coming to economic activity, at the time of the Great Recession and equating that with capitalism rather than that being a bad
version of crony capitalism, a lot of what went on there. I think there’s something to that. That’s not science. This is casual empiricism
that I’m suspicious of there. Then I think with everybody, just if you grew up post-Cold War era I think there’s something to that as well. You wanted to… (participant speaking indistinctly) – Right. It’s also consistent with who was at that Socialism Conference. If you grew up during the Reagan years, or if you came of age in the ’80s or ’90s, you were not at the Socialism Conference. It was people under 35 and ex-1960s hippies who
are now in their 70s. Not entirely, but basically. Yeah. – [Participant] So, a lot of people that are very critical of capitalism, to me, the most compelling argument is that income inequality is really, such drastic income
inequality is unhealthy. But when we look at the
countries that you went to where the government
really runs a lot of it, the corruption is rampant and there’s no real
check on the government. Whereas in capitalism the
government can be a check on the rich and powerful. So, why do you think
there’s a disconnect there between people that are
very anti-capitalism and they’re saying the government
should have all the power, but they’re not understanding that when the government is
the end-all, be-all, then corruption is rampant. How do you explain that? What’s the best way to extend that to… – Rhetoric versus reality, right. Socialism preaches goals of equality, but you end up with two-tier systems where the government and
the ruling elite live well, and the normal person does not. But it starts with what
sounds like noble goals. And I think it’s the
appeal of the sound of it without thinking through
what’s the political economy of how it’s actually going
to operate and function. Yeah. – (mumbling) if the Georgia
situation was actually a miracle and they may be able to
improve their country, then why isn’t it very
obvious to these countries that are obviously suffering
to just adopt a model that is similar and just
(speaking indistinctly) – I don’t think there’s a
universal answer to that. Professor Irwin and I were talking a little bit at lunch today about… Because part of the answer is it’s often not in the interest of those people who have power
to let such reforms happen. So they live well and
are going to be displaced and not be better off if reforms happen. What we were talking about
is things like crisis that break political equilibria. Then often it’s a bit of
an accident of history of who’s there with the right ideas. Sometimes it’s standard
interest group politics stuff. But other times, the right
people at the right time, which is really what I’d
call the Georgia one. Bob is the real expert on Georgia. He’s been there something
like 17 times now. And I grilled him on this a bit because the Virginia political
economy kept coming through. Well, what was the
interest group formation? How did it align (mumbling) And he’s really, like, there was no ideological
shift in Georgians. There was no real… He’s like, the guy
walked around with roses to show that he was peaceful and he was not going to be corrupt. He got elected, and he got
the right finance ministry. That was basically his answer to Georgia. I wouldn’t be looking for North Korea making a transformation
like that any time soon. – [Participant] He was holding
his hand up for much longer, so I’ll let him go first. – [Ben] So we’re doing this
Soviet style, we get in line? (class laughing)
We could use a market. I’ll take a buck from
whoever wants to go first. – This might be a bit out
of the scope for your book. But looking at your experience in Cuba, how do you think socialism
relates to the digital world? Obviously Cubans have kind of gone through the private
sector with Airbnb, or like casas particulares,
but with services. So how do you think that plays into (mumbling) emerging from the private
sector in the digital space? – I think the bigger
tension is in China, right, because you have
political repression there but in an economy where they care about still having booming economic growth. And so there’s a tension
between these two things. If you limit access to
information and internet you’re going to not do as
well in the growth thing that you might care about, but you need that for your
political suppression. That’s where the bigger tension. Cuba, I don’t know if they give a damn about economic growth. I mean, the place is
still using 56k dial-ups, and not very often. All right. – [Participant] Was there
anything that you came across in your travels that
challenged your expectations of what you were expecting from either socialism or capitalism? – Not so much in the system, but maybe the particular
manifestations of it. I think what was striking with Venezuela was seeing that it wasn’t poor Venezuelans that were making it to the border, that this is what happens to
upper middle income people, middle income people. That was fairly striking. The question we got in Georgia
a lot that was very good, and it’s not surprising
to me as an economist but it’s a good question of how a normal person perceives this, is they’d hear talks by Bob and I, because we’ve lectured at universities when we were there too, about economic freedom, and how Georgia is doing great, and how it just causes prosperity. Then they’d say, but we’re still poor. And we’d be like, yeah, because
growth compounds over time. You can’t go from being poor to being rich like (snaps fingers) that. Unless you migrate across
borders, then you can do that. But in your own country
it’s got to compound. I mean, that wasn’t surprising to us. It’s a great place to go to work because it is booming, but it is still like Eastern Europe was maybe circa, at least Czech Republic circa
2000 or something like that. Going to Czech Republic now, you might as well go to Western Europe. It’s not that much different. Going to Georgia is still different. It’s still very much in
transition, and it’s very safe. That said, I hope we get to a world where there is no tourism of, oh, you can see a place that’s different because it hasn’t grown yet. I’d like them all to succeed and grow. – [Participant] You mentioned welfare. How do you feel about the
Andrew Yang, or UBI in general? – That UBI is a horrible idea. I don’t think it’s
actually good for someone’s character, honestly. But when it comes to specific proposals in the United States, any UBI that would be big
enough to deal with poverty cannot be a UBI. The arithmetic doesn’t work. – Kind of like the proposal
from the United amendment the crowdsourced constitutional amendment, the United amendment. It’s more focused on
people who need the income. – As soon as we’re
focusing on people in need, which I agree is what we should be doing instead of everybody, then we’re not doing
universal basic income. Because the whole attraction
of universal basic income is everybody gets that
income no matter what so you don’t get any of the bad incentives where if I do more I earn less type thing, and you’re not looked down
upon for being on the dole because everybody gets the same thing. Just to do it to everybody makes it really, really expensive. Which means the number that
you can actually give everybody is enough so that the person
who is only getting UBI isn’t getting out of poverty. So, I think I’d like to, instead of… I think UBI is just
something that people talk that there’s no probability of it happening in the United States. I’d rather think about, I
guess back to your question, about how do we get
barriers out of the way for people getting out of poverty. – [Professor Irwin] We’re
just about out of time, so we have time for one last question. – [Ben] Yes, sir. – [Participant] How do you
think socialism and automation can play a role with each other? And what do you think the governments… I guess, do you think governments
should restrict automation in order to keep workers employed? – No. Whether it’s automation, whether
it’s technological change, whether it’s changes in trade flows, our economy is innovating and advancing, and to do that you always have
to be able to destroy jobs. What we want to do is
make the labor market as flexible as possible to
let people get re-employed and back to work. That locking anything in place
is a recipe for stagnation. That would be bad for us. And I do think, though,
that when you talk to… So, young people overwhelmingly
in post-socialist countries are happier making a
transition to capitalism. You can find old people who say, I like the old system better. And the older you are
when you’re displaced, the harder it is to
re-employ as productively. This is true for older workers in the Midwest in the United States when we trade with China
more, who get unemployed. It’s also true for older
people in the Soviet Union who worked under that old system then getting re-employed
in a market economy. I think those two things are related. So, with that, I’ve got a
candidate for the winner. – [Professor] Okay, you have
a book right there, so… – Yours was the question
about the hair, right? – No.
– Yours right there. Okay, I knew it was right there. Are you okay with that?
– Absolutely. – Otherwise the beer
question right out the gate. I almost threw you the book then. All right, well thank you all very much. (class applauding) Thank you.


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