A Peruvian bus trip demonstrates to Old Mutual economist Terence Moll just how ineffectual government economic controls can be
ACROSS the valley, lights loomed in the desert night and a subdued murmur ran through the bus. The large Peruvian woman in front of me hitched her seat forward and I stretched for the first time in three hours. Turning, she spoke to me in rapid Spanish and thrust a package into my hands. I shook my head, baffled, and pushed it away.
It was almost 1am. A policeman directed our bus to a halt and ordered everybody out. We collected our possessions together and trooped down the road, shivering in the stiff mountain breeze.
“What now?” I whispered as a rifle was waggled in our direction. But my companion and I had it easy. The Peruvian officials were impressed by our South African passports and didn’t bother to inspect our luggage.
The other people from our bus weren’t so lucky. One by one their suitcases and parcels were searched. Every now and then a policeman would crow with joy and haul out an item. Many were electronic games and plastic dolls, bought cheaply in Arica, the northern Chilean town we had left the previous evening. A pile of contraband accumulated near the bus. Cases not claimed were broken open and their contents added to the pile.
Several of the sturdy women from our bus thinned down remarkably, once toys and Walkmans had been taken from under their clothes.
After two hours we were allowed back onto the bus. There was far more space now, with much luggage gone and several people having being arrested. But shortly after we had set out again, the treasures began appearing. Proud women brought toys and video tapes from the strangest of hiding places, clearly planning to sell them for a profit in Peru.
Thirty kilometres from Arequipa, the first major town on the road, the bus stopped and most of the successful smugglers climbed out, clutching their baggage, and trudged off into the desert.
Whenever governments try to control economies, people will try to evade their restrictions. When I visited Peru in late 1987, industrial imports were strictly rationed, no doubt to protect local manufacturers and their allies. The smugglers on my bus were responding to large price differences between Chile and Peru, risking months in jail for the profits they might make.
But governments may be losing the battle. Fifty years ago, it was relatively easy to
control — and repress — economic activities. These days we live in a different world. News zips around the globe via newspapers, radio and TV, thus the ignorance about other countries characteristic of Castro’s Cuba is end-ing. Transport is becoming faster and cheaper. And, as people become more educated and knowledgeable, they increasingly resent governments telling them what they can or cannot do.
Moreover, economic controls often collapse from within. Several of the Peruvian policemen I saw were clearly in league with the smugglers they were pretending to search. I also wonder how many “confiscated” items never made it to the Customs warehouses. Officials are only human, after all, and when they subvert their own rules, change often looms.
We know about such things from our own history, of course. Post-war South Africa was ruled by an all-encompassing government, leading to endless efforts to evade its clutches. A mere decade ago, for example, hawkers were risking months in jail when they set up their wares on city pavements.
Likewise, hundreds of thousands of black workers evaded strict labour regulations, moving illegally to urban areas where they could earn more. And many residents have evaded the exchange controls preventing them from taking their money abroad.
Markets are spreading everywhere, not only because they often work well, but because they undermine efforts to limit them. In a few decades we may look on customs and exchange control officials as dinosaurs — ruling the world for a long time, but ultimately destroyed by small persistent forces beyond their control. In much of Europe, for example, barriers to trade and capital movement have been eliminated.
Sooner or later the Peruvian government will give in. The policemen I saw may have to move into the transport and security businesses.