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Revolt of the Misesians

October 8, 2001


The government is probably no more interventionist-minded than the United States, and all governments seek ever more power and are limited, as Ludwig von Mises pointed out, only by the level of public resistance. But Guatemalans do not have a long history of well-developed private enterprise, and thus they are capital-starved to the point that even small hindrances to trade are felt very strongly. The annual output of the country is $16 billion, which is less than half of the new spending the US government authorized after the terrorist attack.

Last year, the US and the IMF took a look at Guatemala with an eye toward fixing up the economy, with the goal, of course, of reshuffling the country's loan portfolio. After extensive study, the conclusion of the geniuses was the following: the country needs more financial transparency and higher taxes.

Now, the financial transparency issue is a red herring. It helps the banking class keep a close eye on the finances of a particular country, which matters for the accountants but does little to promote prosperity. As for high taxes, there turns out to be a political problem with that. The way the US sees it, the economy will be helped by higher taxes to fund infrastructure and more compliance with existing taxes.

This summer, the Guatemalan Congress passed a new consumption tax of an additional 2 percent to the existing rate of 10 percent. But it turns out that the people were not pleased. Workers in all twenty-two provinces went on strike. Eighty percent of public transit stopped, and the entire country, apart from the political class, joined together in outrage. Students were appalled and gathered to protest.


The crowds continued to grow, and by noon, they numbered 16,000 in Guatemala City alone, to say nothing of the rest of the country, where the business class joined with peasants to denounce the state. And there was violence, particularly against politicians. Government buildings were attacked and their windows broken. The residences of some members of congress were burned. In a nearby farming community, the mayor's house was torched, and the local banks, said to favor the tax, were vandalized.


Meanwhile, the government stuck to its position on taxes: "The country needs resources to respond to social demands," a spokesman said. "Congress, the government, and the ruling party are aware of the political cost, but it is necessary."





The US embassy is particularly struck that such opinions would take root in Guatemala, because there is virtually no socialist threat, particularly not an academic one. "There are probably fewer Marxists at San Carlos University today," the report observes with candor, "than at many American universities."

But of course socialist doctrine is different from run-of-the-mill government intervention only by degree and not kind. It is useful, in fact, to think of socialism as nothing more than complete permission for government to do what it instinctively wants to do anyway, which is order people around as much as possible.

What the Misesians have done in Guatemala is create an intellectual infrastructure that promotes a hard-core attachment to freedom among the business class, which dovetails very nicely with the working classes' instinctive opposition to taxes.

Yes, this infrastructure sustains an abiding hatred of socialism, but it does something more: it creates a love and longing for liberty, which is the necessary precondition for economic advancement. In the end, this intellectual infrastructure is more important to the country's future than all the natural resources or foreign aid, to say nothing of the IMF's preposterous advice.



And we can draw a lesson here from this incident-namely, that the government fears political rebellion most of all when it is backed by a serious intellectual movement. The right combination is beginning to exist in Guatemala, and it is having a huge effect.

Credit goes to Manuel Ayau, who founded the Francisco Marroquin University in Guatemala. He is a disciple of Mises who has worked to build an independent intellectual presence there.

And when his institution and ideas were blamed for raging political violence, Ayau didn't back down. He stated very plainly that the ideas he holds are the same as those of America's Founding Fathers. The real scandal, he said, is that the US is now trying to work against those ideas in the tax policy it is pushing on the world.



Llewellyn H. Rockwell, Jr. is president of the Ludwig von Mises Institute in Auburn, Alabama and editor of LewRockwell.com.  Send him email at Rockwell@mises.org.  See also his Mises.org Daily Archive


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