Blog
25 November 2016
Will some economies ever learn?
“Chavez is the best president Columbia has ever had” ~ Columbian home owner
Albert Einstein is said to have defined insanity as doing the same thing over and over again and expecting different results. In Wriston’s Law of Capital and Sleeper pins, reports I wrote in 2012 and 2014, I have defined the term ‘going Venezuela’ as “doing the wrong thing repeatedly and with great conviction.”¹
The two ideas are related. Both imply the absence of learning. The term is consistent with the Iron Law of Failure and Wriston’s Law of Capital, and is widely applicable to economies and societies that fail.
Two prominent textbook examples of long-term economic failure are Egypt and Argentina. At the beginning of the 19th century, both Egypt and Argentina were in an excellent position to excel. They were both larger than Germany at the time and multiples larger than South Korea, for example.
Today, the GDP per capita of both Egypt and Argentina is nearly four times lower than that of Germany and more than two times lower than that of South Korea. I believe neither has learned from their mistakes.
The fascination with Venezuela’s failure is not its magnitude, but the speed of the decay and the romanticised Che Guevara-manner by which the economic self-mutilation has been inflicted upon the oil-rich Dutch disease-suffering Latin republic.
The problem today is that the West is in a negative feedback loop with large parts of the industrialised world “going Venezuela” too.
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