Letters

The Economist published my response to this article.

SIR – You suggested that the supply of Somali shillings is fairly fixed despite a number of forgeries (“Hard to kill”, March 31st). In fact, it was the introduction of forged notes that ultimately removed the incentive to increase the supply of shillings in circulation.
The 1,000 shillings note exchanged for roughly $0.13 when General Muhammad Aideed employed a printing firm to reproduce the note in 1996. As the number of notes in circulation grew, the exchange value fell to just $0.03, which is the cost of producing an additional note. Since the exchange value equals the cost of production, forgers can no longer profit by increasing the supply. Today, the Somali shilling is a commodity money. Its supply is governed by the cost of ink and paper required to produce a note.

Attack on "A Libertarian Utopia"

In response to this op-ed piece, I replied with a letter to the editor containing the following:

How Ironic is it that the IDS would print Indira Dammu's commentary "A Libertarian Utopia" in the same issue as one providing a picture of a Che Guevara caricature on the side of a dilapidated building in Cuba? It requires thick ideological glasses to reach her conclusions that the United States had a laissez-faire banking system and that free market principles have destroyed the livelihood of people in developing countries around the world.

The mortgage-backed security market exists because of the Government Sponsored Enterprises’ Freddie Mac and Fannie Mae. Interest rates throughout the banking system are distorted by the Federal Reserve, and numerous acts of regulation manipulate the behavior of banks. The current crisis is the result of political altruism, in the form of politicians pushing others to expand homeownership to absolutely everyone.

Like a creationist lamenting the scientific process in biology, Dammu's irreverence for Milton Friedman's "statistical concepts" and "economic abstractions" are equally misplaced in blaming markets for poverty in South America and Africa. When Chile was overtaken by a murderous and totalitarian military regime, Friedman did advocate to their leaders the implementation of markets.

What Friedman understood was that markets required freedom in personal life, which could not stand in contradiction with totalitarianism in public life. Instead of adopting a system where government controls resources and ultimately the personal lives of its citizens, thereby guaranteeing a future of isolationism and poverty, Chile adopted the personal freedom of markets and prospered economically. Today they are one of the most stable and democratic nations in South America.

Dammu was right in calling Friedman a radical, as he argued against the War on Drugs, the draft, the fixed exchange rate, and in favor of all voluntary interactions regardless if they were from home or abroad.

Hat Tip: To Don Boudreaux, whose magical keyboard has inspired economists everywhere to write these types of letters.