WEBVTT NOTE 36. When Capital Is Nowhere in View 1 00:00:00.000 --> 00:00:04.880 When Capital is Nowhere in View 2 00:00:04.880 --> 00:00:10.520 A travel channel episode of No Reservations, a cooking-focused show narrated by Anthony 3 00:00:10.520 --> 00:00:15.760 Baudin, took viewers to Port-à-Prince, Haiti. 4 00:00:15.760 --> 00:00:19.480 I had heard that the show offered unique insights into the country and its troubles. 5 00:00:19.480 --> 00:00:24.520 I couldn't imagine how, but it turns out to be true. 6 00:00:24.520 --> 00:00:29.560 Through the lens of food, we can gain an insight into culture, and from culture to 7 00:00:29.560 --> 00:00:42.440 Through this micro-lens, we gain more insight than we would have if the program were entirely 8 00:00:42.440 --> 00:00:45.360 focused on economic issues. 9 00:00:45.360 --> 00:00:49.560 Such an episode on economics would have featured dull interviews with Treasury officials and 10 00:00:49.560 --> 00:00:56.080 IMF experts and lots of talk about trade balances and other macro-economic aggregates that missed 11 00:00:56.080 --> 00:00:57.880 the point entirely. 12 00:00:57.880 --> 00:01:04.640 Instead, with the focus on food and cooking, we can see what it is that drives daily life 13 00:01:04.640 --> 00:01:11.160 among the Haitian multitudes, and what we find is surprising in so many ways. 14 00:01:11.160 --> 00:01:15.800 In a scene early in the show, set in this giant city after the earthquake, Boudin and 15 00:01:15.800 --> 00:01:18.920 his crew stop to eat some local food from a vendor. 16 00:01:18.920 --> 00:01:22.400 He discusses its ingredients and samples some items. 17 00:01:22.400 --> 00:01:24.800 Crowds of hungry people begin to gather. 18 00:01:24.800 --> 00:01:27.840 They are doing more than gawking at the camera crews. 19 00:01:27.840 --> 00:01:31.520 They are waiting, in the hopes of getting something to eat. 20 00:01:31.520 --> 00:01:38.960 Baudin thinks of a way to do something nice for everyone, realizing that in this one sitting, 21 00:01:38.960 --> 00:01:43.300 he is eating a quantity of food that would last most Haitians three days. 22 00:01:43.300 --> 00:01:48.720 He buys out the remaining food from the vendor, and gives it away to locals. 23 00:01:48.720 --> 00:01:54.080 Nice gesture, except that something goes wrong. 24 00:01:54.080 --> 00:01:59.280 Once the word spreads about the free food, word of mouth in Haiti is faster than Facebook 25 00:01:59.280 --> 00:02:06.640 chat, people start pouring in, lines form and get long, disorder ensues, some people 26 00:02:06.640 --> 00:02:11.220 step forward to keep order, they bring belts and start hitting, the entire scene becomes 27 00:02:11.220 --> 00:02:18.040 very unpleasant for everyone, and the viewer gets the sense that it is worse than we are 28 00:02:18.040 --> 00:02:19.040 shown. 29 00:02:19.040 --> 00:02:23.940 Bourdain correctly draws the lesson that the solutions to the problem of poverty here are 30 00:02:23.940 --> 00:02:29.220 are more complex than it would appear at first glance. 31 00:02:29.220 --> 00:02:32.060 Good intentions go awry. 32 00:02:32.060 --> 00:02:35.620 They were thinking with their hearts instead of their heads, and ended up causing more 33 00:02:35.620 --> 00:02:39.860 pain than was originally there in the first place. 34 00:02:39.860 --> 00:02:44.020 From this event forward, he begins to approach the problems of this country with a bit more 35 00:02:44.020 --> 00:02:46.340 sophistication. 36 00:02:46.340 --> 00:02:52.340 The rest of the show takes us through shanty towns, markets, art shows, festivals and parades, 37 00:02:52.340 --> 00:02:56.580 and interviews all kinds of people who know the lay of the land. 38 00:02:56.580 --> 00:03:01.060 This is not a show designed to tug at your heartstrings in the conventional sort of way. 39 00:03:01.060 --> 00:03:07.020 Yes, there is obvious human suffering, but the overall impression I got was not that. 40 00:03:07.020 --> 00:03:13.460 Instead, I came away with a sense that Haiti is a very normal place, not unlike all places 41 00:03:13.460 --> 00:03:21.680 we know from experience, but with one major difference – it is very poor. 42 00:03:21.680 --> 00:03:25.400 By the time the show was made, the glamour of the post-earthquake onslaught of American 43 00:03:25.400 --> 00:03:29.280 visitors seeking to help had vanished. 44 00:03:29.280 --> 00:03:33.160 One who remains is actor Sean Penn. 45 00:03:33.160 --> 00:03:36.640 Although he's known as a Hollywood lefty, he's actually living there, chugging up and 46 00:03:36.640 --> 00:03:42.840 down hills of a shanty town unshaven and disheveled, being what he calls a functionary, and getting 47 00:03:42.840 --> 00:03:46.040 stuff for people who need it. 48 00:03:46.040 --> 00:03:50.540 He has no easy answers, and he had sharp words for American donors who think that dumping 49 00:03:50.540 --> 00:03:59.160 The people of Haiti, in the documentary, conform to what every visitor says about them. 50 00:03:59.160 --> 00:04:06.220 They are wonderfully friendly, talented, enterprising, happy and full of hope. 51 00:04:06.220 --> 00:04:09.780 Like most people, they hate their government. 52 00:04:09.780 --> 00:04:14.460 Actually, they hate their government more than most Americans hate theirs. 53 00:04:14.460 --> 00:04:18.580 Truly, this is a precondition of liberty. 54 00:04:18.580 --> 00:04:23.820 There is a real sense of us versus them alive in Haiti, so much so, that when the presidential 55 00:04:23.820 --> 00:04:31.260 palace collapsed in the recent earthquake, crowds gathered outside to cheer and cheer. 56 00:04:31.260 --> 00:04:36.360 It was the one saving grace of an otherwise terrible storm. 57 00:04:36.360 --> 00:04:41.500 With all these enterprising, hardworking and creative people, millions of them, what could 58 00:04:41.500 --> 00:04:44.860 possibly be wrong with the place? 59 00:04:44.860 --> 00:04:48.600 Well for one thing, the earthquake destroyed most homes. 60 00:04:48.600 --> 00:04:54.240 If this had been the United States, this earthquake would not have caused the same level of damage. 61 00:04:54.240 --> 00:04:58.400 This led many outsiders to think that somehow the absence of building codes was the core 62 00:04:58.400 --> 00:05:05.000 of the problem and hence the solution is more imposition of government control. 63 00:05:05.000 --> 00:05:09.400 But the reality shows that this building code notion is some sort of joke. 64 00:05:09.400 --> 00:05:14.380 The very idea that a government could somehow go around beating up people who provide shelter 65 00:05:14.380 --> 00:05:20.060 for themselves while failing to obey the central plan is simply laughable. 66 00:05:20.060 --> 00:05:25.260 Coercion of this sort would bring about no positive results and lead only to vast corruption, 67 00:05:25.260 --> 00:05:28.260 violence and homelessness. 68 00:05:28.260 --> 00:05:34.880 The core of the problem, says Robert Murphy, has nothing to do with the lack of regulations. 69 00:05:34.880 --> 00:05:39.020 The problem is the absence of wealth. 70 00:05:39.020 --> 00:05:43.420 It is obviously true that people prefer safer places to live, but the question is, what 71 00:05:43.420 --> 00:05:47.280 What is the cost and is this economically viable? 72 00:05:47.280 --> 00:05:52.760 The answer is that it is not viable, not in Haiti, not with this population that is barely 73 00:05:52.760 --> 00:05:55.220 getting by at all. 74 00:05:55.220 --> 00:05:57.000 Where is the wealth? 75 00:05:57.000 --> 00:06:02.740 There is plenty of trade, plenty of doing, plenty of exchange and money being exchanged. 76 00:06:02.740 --> 00:06:06.420 Why does the place remain desperately poor? 77 00:06:06.420 --> 00:06:09.780 If the market economists are correct, the trade and commerce are the key to wealth and 78 00:06:09.780 --> 00:06:15.240 When there is plenty of both here, why is wealth not happening? 79 00:06:15.240 --> 00:06:19.360 One can easily see how people can get confused, because the answer is not obvious, until you 80 00:06:19.360 --> 00:06:22.700 have some economic understanding. 81 00:06:22.700 --> 00:06:26.880 A random visitor might easily conclude that Haiti is poor because somehow the wealth is 82 00:06:26.880 --> 00:06:30.180 being hogged by its northern neighbor, the United States. 83 00:06:30.180 --> 00:06:34.140 If we weren't devouring so much of the world's stock of wealth, it could be distributed more 84 00:06:34.140 --> 00:06:38.340 evenly and encompass Haiti too. 85 00:06:38.340 --> 00:06:42.660 Or another theory might be that the handful of international companies or even aid workers 86 00:06:42.660 --> 00:06:47.180 are somehow stealing all the money and denying it to the people. 87 00:06:47.180 --> 00:06:53.220 These are not stupid theories, they're just theories, neither confirmed nor refuted by 88 00:06:53.220 --> 00:06:55.540 facts alone. 89 00:06:55.540 --> 00:07:01.880 They are only shown to be wrong once you realize a central insight of economics. 90 00:07:01.880 --> 00:07:08.960 It is this, trade and commerce are necessary conditions for the accumulation of wealth, 91 00:07:08.960 --> 00:07:13.280 but they are not sufficient conditions. 92 00:07:13.280 --> 00:07:19.120 Also necessary is that precious institution of capital. 93 00:07:19.120 --> 00:07:20.640 What is capital? 94 00:07:20.640 --> 00:07:28.480 Capital is a thing, or service, that is produced not for consumption, but for further production. 95 00:07:28.480 --> 00:07:33.020 The existence of capital industries implies several stages of production, or up to thousands 96 00:07:33.020 --> 00:07:37.240 upon thousands of steps in a long structure of production. 97 00:07:37.240 --> 00:07:41.480 Capital is the institution that gives rise to business-to-business trading, an extended 98 00:07:41.480 --> 00:07:47.200 workforce, firms, factories, ever more specialization, and generally the production of all kinds 99 00:07:47.200 --> 00:07:52.680 of things that by themselves cannot be useful in final consumption, but rather are useful 100 00:07:52.680 --> 00:07:56.040 for the production of other things. 101 00:07:56.040 --> 00:08:01.600 Capital is not so much defined as a particular good, most things have many varieties of uses, 102 00:08:01.600 --> 00:08:04.880 but rather a purpose of a good. 103 00:08:04.880 --> 00:08:09.840 Its purpose is extended over a long period of time, with the goal of providing for final 104 00:08:09.840 --> 00:08:12.100 consumption. 105 00:08:12.100 --> 00:08:17.120 Capital is employed in a long structure of production that can last a month, a year, ten 106 00:08:17.120 --> 00:08:20.280 years or fifty years. 107 00:08:20.280 --> 00:08:26.400 The investment at the earliest, highest stages has to take place long before the payoff circles 108 00:08:26.400 --> 00:08:30.120 around following final consumption. 109 00:08:30.120 --> 00:08:36.280 As Hayek emphasized in The Pure Theory of Capital, another defining mark of capital 110 00:08:36.280 --> 00:08:42.180 is that it is a non-permanent resource that must nonetheless be maintained over time in 111 00:08:42.180 --> 00:08:46.820 order to provide a continuing stream of income. 112 00:08:46.820 --> 00:08:51.620 That means that the owner must be able to count on being able to hire workers, replace 113 00:08:51.620 --> 00:08:56.940 parts, provide for security, and generally maintain operations throughout an extended 114 00:08:56.940 --> 00:08:59.480 period of production. 115 00:08:59.480 --> 00:09:05.700 In a developed economy, the vast majority of productive activities consist in participation 116 00:09:05.700 --> 00:09:12.000 in these capital goods sectors and not in final consumption goods sectors. 117 00:09:12.000 --> 00:09:18.080 In fact, as Rothbard writes in Man Economy and State, at any given time this whole structure 118 00:09:18.080 --> 00:09:21.280 is owned by the capitalists. 119 00:09:21.280 --> 00:09:26.180 When one capitalist owns the whole structure, these capital goods, it must be stressed, 120 00:09:26.180 --> 00:09:29.960 do him no good whatever. 121 00:09:29.960 --> 00:09:31.880 And why is that? 122 00:09:31.880 --> 00:09:39.400 Because the test of the value of all capital goods is conducted at the level of final consumption. 123 00:09:39.400 --> 00:09:45.460 The final consumer is the master of the richest capitalist. 124 00:09:45.460 --> 00:09:50.760 Many people – I've been among them – rail against the term capitalism, because it implies 125 00:09:50.760 --> 00:09:55.640 that freedom is all about privileging the owners of capital. 126 00:09:55.640 --> 00:10:01.560 But there is a sense in which capitalism is the perfect term for a developed economy. 127 00:10:01.560 --> 00:10:07.680 The development, accumulation and sophistication of the capital goods sector is the characteristic 128 00:10:07.680 --> 00:10:17.680 The Thriving of the Capital Good Sector was the great contribution of the Industrial Revolution to the world. 129 00:10:17.680 --> 00:10:29.680 Capitalism did, in fact, arise at a specific time in history, as Mises said, and this was the beginning of the mass democratization of wealth. 130 00:10:29.680 --> 00:10:35.680 Rising wealth is always characterized by such extended orders of production. 131 00:10:35.680 --> 00:10:42.520 These are nearly absent in Haiti. Most all people are engaged in day-to-day commercial 132 00:10:42.520 --> 00:10:49.840 activities. They live for the day, they trade for the day, they plan for the day. Their 133 00:10:49.840 --> 00:10:55.120 time horizons are necessarily short and their economic structures reflect that. It is for 134 00:10:55.120 --> 00:11:00.200 this reason that all the toil and trading and busyness in Haiti feels like peddling 135 00:11:00.200 --> 00:11:04.880 a stationary bicycle. You are working very hard and getting better and better at what 136 00:11:04.880 --> 00:11:13.880 Now, this is interesting to me, because anyone can easily miss this point just by looking 137 00:11:13.880 --> 00:11:19.240 around Haiti, where you see people working and producing like crazy, and yet the people 138 00:11:19.240 --> 00:11:22.480 never seem to get their footing. 139 00:11:22.480 --> 00:11:26.880 Without an understanding of economics, it is nearly impossible to see the unseen – the 140 00:11:26.880 --> 00:11:32.800 capital that is absent that would otherwise permit economic growth. 141 00:11:32.800 --> 00:11:37.560 And this is the very reason for the persistence of poverty, which after all is the natural 142 00:11:37.560 --> 00:11:39.500 condition of mankind. 143 00:11:39.500 --> 00:11:45.840 It takes something heroic, something special, something historically unique to dig out of 144 00:11:45.840 --> 00:11:47.560 it. 145 00:11:47.560 --> 00:11:52.720 Now to the question of why the absence of capital. 146 00:11:52.720 --> 00:11:56.620 The answer has to do with the regime. 147 00:11:56.620 --> 00:12:02.080 It is a well-known fact that any accumulation of wealth in Haiti makes you a target, if 148 00:12:02.080 --> 00:12:06.180 If not of the population in general, which has grown suspicious of wealth, and probably 149 00:12:06.180 --> 00:12:11.840 for good reason, then certainly of the government. 150 00:12:11.840 --> 00:12:16.140 The regime, no matter who is in charge, is like a voracious dog on the loose, seeking 151 00:12:16.140 --> 00:12:20.740 to devour any private wealth that happens to emerge. 152 00:12:20.740 --> 00:12:26.380 This creates something even worse than the Hixian problem of regime uncertainty. 153 00:12:26.380 --> 00:12:33.220 The regime is certain, it is certain to steal anything it can, whenever it can, always and 154 00:12:33.220 --> 00:12:35.300 forever. 155 00:12:35.300 --> 00:12:38.940 So why don't people vote out the bad guys and vote in the good guys? 156 00:12:38.940 --> 00:12:44.420 Well, those of us in the United States who have a bit of experience with democracy know 157 00:12:44.420 --> 00:12:46.100 the answer. 158 00:12:46.100 --> 00:12:49.660 There are no good guys. 159 00:12:49.660 --> 00:12:55.640 The system itself is owned by the state and rooted in evil. 160 00:12:55.640 --> 00:13:00.920 Change is always illusory, a fiction designed for public consumption. 161 00:13:00.920 --> 00:13:06.680 This is an interesting case of a peculiar way in which government is keeping prosperity 162 00:13:06.680 --> 00:13:07.680 at bay. 163 00:13:07.680 --> 00:13:13.040 It is not wrecking the country through an intense enforcement of taxation and regulation 164 00:13:13.040 --> 00:13:15.840 or nationalisation. 165 00:13:15.840 --> 00:13:20.620 One gets the sense that most people never have any face time with a government official 166 00:13:20.620 --> 00:13:24.580 and never deal with paperwork or bureaucracy really. 167 00:13:24.580 --> 00:13:28.980 The state strikes only when there is something to loot. 168 00:13:28.980 --> 00:13:33.180 And loot it does, predictably and consistently. 169 00:13:33.180 --> 00:13:39.700 And that alone is enough to guarantee a permanent state of poverty. 170 00:13:39.700 --> 00:13:44.020 Now to be sure, there are plenty of Americans who are firmly convinced that we would all 171 00:13:44.020 --> 00:13:50.300 be better off if we grew our own food, bought only locally, kept firms small, eschewed modern 172 00:13:50.300 --> 00:13:54.940 and conveniences like home appliances went back to using only natural products, expropriated 173 00:13:54.940 --> 00:14:01.820 wealthy savers, harassed capitalistic class until it felt itself unwelcome and vanished. 174 00:14:01.820 --> 00:14:04.900 This paradise has a name. 175 00:14:04.900 --> 00:14:06.660 And it is Haiti.