Editor’s Note: Last summer President Alan Garcia of Peru announced that his government was nationalizing all locally owned private banks. Almost immediately novelist Mario Vargas Llosa, probably Peru’s best-known citizen at home and abroad, raised his voice in protest. Within a few days groups of small businessmen, traders, farmers, housewives, and students had organized a movement supporting his position—the first truly grass-roots opposition to statism in the history of Latin America. As a result of Vargas Llosa’s statement, first published in El Comercio, one of Lima’s leading dailies, he is being openly talked about as an opposition candidate in the next presidential elections. This is the full text of Vargas Llosa’s statement, translated by Mark Falcoff.
The decision of President Alan Garcia’s government to nationalize banks, insurance companies, and companies providing financial services is the most important step ever taken in Peru to assure that the country remain in a state of poverty and under-development. It also means that, as a consequence, the incipient democracy our country has been enjoying since 1980—far from consolidating itself—is bound to become, once again, a polite fiction.
The regime has said that through this act of despoliation the state will become the sole source of credit and insurance; that through the stock portfolios thus acquired (extending its hold on innumerable private industries and small businesses), it will transfer ownership “from a group of bankers to the Nation itself.” To which there is only one adequate response: This is an act of demagoguery and mendacity.
The truth is this. Those enterprises have been taken—against the letter and the spirit of the Constitution, which guarantee private property and economic pluralism, and also, prohibits monopolies—from the very people who created them and brought them to their present state of development, and assigned to bureaucrats who in the future (as with all bureaucracies in underdeveloped countries, all without a single exception) will be run for the sole benefit of their managers and of the State.
In every underdeveloped country, as in every totalitarian country, the distinction between State and government is a juridical illusion. It becomes a reality only in advanced democracies. In the former, laws and constitutions (as well as official rhetoric) pretend to separate the two. In practice, they are as inseparable as two drops of water. Those who control the government also take complete possession of the state apparatus, and employ its resources for their own purposes.
What better proof of this do we have but the case in our own country of the famous SINACOSO (National System of Social Communication), set up by the military dictatorship (1968-1979), and which ever since has been a docile mouthpiece of every government that has followed it? I refer, of course, to that chain of radio stations, newspapers, and television stations all transferred to the State sometime after 1968: can it be said that these media are the property of all Peruvians? In no way. Rather, they publish, glorify, and manipulate the news for the exclusive benefit of those who govern, in Olympic disdain for the views and beliefs of all other Peruvians.
The inefficiency and immorality that inevitably accompany expropriations and nationalizations arise principally from the servile dependence in which the affected enterprise, thus transferred to the public sector, languishes in the face of political power. We Peruvians know this better than ever since the dictatorship of General Velasco Alvarado (1968-1972) when—betraying the social reforms which we all desired—the government used expropriations and confiscations to destroy industries that had reached a marked degree of efficiency—notably, fisheries, cement, and some sugar refineries—in the end trans-forming us into importers even of the potatoes which our laborious ancestors had given to the Western world! Extending the public sector from less than 10 to almost 170 enterprises, the dictatorship—which used as its justification the need for more “social justice”—actually increased poverty and inequality and in the process made black market operations and illicit commerce generally an irresistible temptation. Both have proliferated since then in a cancerous fashion, becoming the greatest single obstacle to the creation of national wealth.
This is the model which President Garcia so enthusiastically embraces. It pushes our economic system in a direction which puts it just behind Cuba, and actually alongside Nicaragua. I do not deny, to be sure, that there is a difference between General Velasco and President Garcia: one was a de facto dictator; the other is a leader legitimately chosen in free elections. But I cannot ignore the fact that the Peruvians who chose him, in a characteristic landslide vote, did so in order to consolidate our political democracy through social reform, not to make a quasi-socialist “revolution” which would end it altogether.
Because—deny it if you will—there is no democracy that can survive such an overwhelming accumulation of economic power in the hands of the State. If you doubt my word, ask the Mexicans, in whose country the public sector—enormous as it is—falls short of the boundaries contemplated by the Peruvian government’s present nationalization bill.
The first victim of that law will be freedom of expression. To be sure, the government need not proceed in the same fashion as General Velasco, that is, dispatching armed detachments to bang down the doors of radio and television stations or daily newspapers (though even that cannot be definitively ruled out). The matter will be simpler, and more elegant, since the State will now become the major source of advertising, and through the simple manipulation of its publicity accounts can engage in a refined form of ideological blackmail. Or, if that fails, the State can deny these media access to credit, without which no business can operate. There is no doubt that, rather than die of consumption, most newspapers and radio stations will opt for silence or obsequiousness. Others, those few who rigidly adhere to high principle, will disappear. Once criticism disappears from public life, absolute power will corrupt absolutely. The Peruvian horizon will be blackened by the silhouette of the “philanthropic ogre” (to borrow Octavio Paz’s characterization of Mexico’s Institutional Revolutionary Party).
The progress of any country consists in the extension of property and liberty to the greatest number of citizens. It consists, also, in the strengthening of the rules of the game, some explicit, some implicit; in rewarding effort and talent; in stimulating responsibility, initiative, and honesty, on one hand, and punishing parasitism, unproductive consumption, lassitude, and immorality on the other. This state of affairs is utterly incompatible with a macrocephalic state where the protagonist of all economic activity is the functionary rather than the entrepreneur or the laborer; and where, in the majority of fields of activity, competence will have been replaced by the brute fact of monopoly. A state of nature demoralizes and annuls the entrepreneurial spirit. It also transforms influence- peddling into the most profitable form of human activity. That is the path which leads whence so many Third World countries have gone—into a swamp of inefficiency and poverty, from which there is no apparent escape.
Peru is still very far from that, fortunately. But measures like the one I am criticizing here can catapult us sharply in that direction. The point needs to be repeated loud and clear, particularly so that the poor will hear it, since they above all will be its propitiatory victims. We must make every effort, by every legal means possible, to prevent its consummation. We must ignore the invectives hurled at us by the government press or by the “masses” mobilized by the governing party, who take to the streets in a frank effort to intimidate those of us who are protesting. Both things—stage-managed media campaigns of character assassination and the threat of mob action against those who disagree—are troubling signs of what will occur in our country if the government succeeds in concentrating total economic power in its hands, an event which is always the first step towards political absolutism.
All of us—citizens, free institutions, democratic parties—should make every effort to prevent our country, which already suffers from too many misfortunes, from being converted into a pseudo-democracy manipulated by incompetent bureaucrats, a place where only corruption can prosper.