Tuesday, 3 November 2015

Fujimori - Peru's Japanese President

One more excerpt from Daniel Yergin and Joseph Stanislaw's book The Commanding Heights

Most Indians have not heard of Alberto Fujimori, a person of Japanese descent, who became President of Peru. Barack Obama of Kenyan descent and Italian-born Sonia Gandhi are much more famous.

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During the 1960s Peru had built up a fishing fleet larger than Japan's. A left-wing military dictatorship nationalized this and it collapsed. Post military Democrat Alan Garcia,  captivating orator imposed price controls, severed Peru form global economy, cut taxes, gave wage increases and opened floodgates of government spending. The economy contracted 25% and inflation hit 3000%.

Shining Path, a terrible terrorist group led a civil war. In the 1980s, another option El Otro Sendero, the Other Path, written by Hernando de Soto, discussed Milton Friedman and  Friedrich von Hayek. The researchers said there were five lakh laws and executive orders affecting the economy. It took 289 days and 1231$ over 30 monthly minimum wages to register a simple sewing company. This group only attracted a small circle.

In 1987, Alan Garcia announce he would nationalize all banks and financial institutions. Maria Llosa led Libertad, launched a tirade against Garcia in an article, "Towards a totalitarian Peru" and a demonstration in Lima which was expected to draw a few thousand professionals, attracted a hundred thousand people.

In 1990 Llosa was front runner for President. He traveled to Taiwan which had $1000 per capita in 1960,same as Peru but in 1990 rose to 7530. Also stopped by Margaret Thatcher in England who advised him to press on but warned he would be very lonely.

Alberto Fujimori, an agricultural engineer and University rector, of Peru very small Japanese community ran, criticizing Llosa 's shock therapy. His coalition had evangelists, dispossessed, who campaigned for him in slums. He was attacked because his mother did not speak Spanish, none of his relatives was buried in Peru. He contrasted Llosa's aristocratic European, evoking Spanish conquerors, looks with his own Inca looking Asian features. He won and applied Fuji shock. He also said he was better prepared to emulate Asian countries than someone of European descent.

But when he won, he unleashed  shock therapy more far reaching than Vargas Llosa had proposed. He slashed public spending and devalued the currency. Llosa called this Fujishock.

"It was very difficult to fight violence and implement economic reforms simultaneously" he said. "But my mind worked like an engineer's, even on Shining Path. People advised fighting poverty before violence. That was a fallacy. We had to fight violence before poverty. Businesspeople had no hope. But I was sure, I had Oriental patience, I waited for results. I was firm. Even stubborn. "

The campaign against Shining Path was reorganized and intensified. It took two years. A house in Lima was found to produce more trash than expected for the two people living there. In a raid, they found it was a safe house for Shining Path, including its leader Abimael Guzman. He was paraded on the streets. No longer a fearsome guerilla, he implored his colleagues to lay down arms.

With violence tamed, Fujimori deregulated financial and labor markets, reduced and simplified tariffs, enabled privatization and reopened Peru to foreign investment. Peru  became a puma economy but it was not fast enough for Fujimori. He changed his cabinet ending up with advisers who had been against him once.

"The situation was a mess with many controls against poor consumers and favoring political power. I was independent, and I thought like an engineer, not a politician. Once an engineer sees a problem, he finds a solution, even if a limited solution."

He won two more elections, though he was accused of becoming a strongman when he dissolved parliament and suspended the Constitution and dismissed much of the judiciary. He was finally brought down by  corruption. Much of Peru's power elite was discovered to be involved in a stunning Web of corruption, revealed on videotapes made by Montesino, his powerful minister, on Peruvian television. Fujimori escaped and sought asylum in Japan.

His successor Alejandro Toledo ran against Alan Garcia, Fujimori's ultra leftist predecessor, who had devastated the country economically and politically. Toledo's victory signaled the final break of Peruvian public with Marxist economics.

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Related Links

Llosa and Marquez - A Lack of Economic Knowledge
The end of Maoism in China - Deng Xiaoping and Japan
Science and Writers - Peter Medawar
Ludwig von Mises - The AntiCapitalistic Mentality

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