Nicaragua Too Poor to be Socialist

While the author admits this idea comes from scribbles on a cocktail napkin at Rancho Santana rather than a serious study, he does make some good points. It is from the Australian edition of The Daily Reckoning and looks at Nicaragua's economy vs. just the US food stamp program.

With most of our readers in the US, it is a useful data point for those who are concerned that Nicaragua is too Socialist to agree with their political views.

Last year, the Supplemental Nutrition Assistance Program (SNAP) - i.e. food stamp program - in the United States spent $7.4 billion more than it did the year before. $7.4 billion happens to be almost identical to the entire GDP of Nicaragua, a nation of 5.9 million inhabitants.

SNAP used its additional $7.4 billion to feed 4.4 million of America's poorest citizens. Meanwhile, all 5.9 million Nicaraguans - rich and poor alike - managed to "live on" $7.4 billion.

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Have had a few discussions

Have had a few discussions comparing US to Nicaragua economically and at this point I can't help but feeling that the prosperity of the US and other countries is directly connected to the social programs these countries provide. Yes, I read Thomas Sowell and I have watched plenty of fox news and I agree that many people abuse the system. But look at countries that have social programs versus those that don't. In Nicaragua, for instance, with no social safety net, people are desperate for work. People who are desperate for work are willing to accept subsistence wages and that puts a tremendous amount of downward pressure on wages.

Now consider what happens in the US. People who are out of work can generally get a steady unemployment check until they can find another job. So they are more selective. They will not accept any job, they will not accept subsistence wages. This reduces to some extent the downward pressure on wages. Eventually these people go back to work and they can be confident in bargaining a fair wage or salary since they are not in danger of starving to death. My parents received help from the government for several years when I was growing up. There simply was not a lot of work at the time. Eventually they became middle income and have since payed back way more in taxes than what they received.

Then there are the out and out scammers. They are living off the government. They are taking our tax dollars. If social programs disappeared would these people magically stop being scammers? I feel they would continue being dishonest and would target individuals. So is it better that individuals lose a large amount of money or that we all loose a little bit of money? Sometimes it is not about what is fair but it is about what works in the real world. Just like lowering the upper tax rates has caused increases in tax revenues in the past. When Kennedy lowered the maximum tax rate, the federal government saw an increase in revenues because for some people it was no longer worth it to keep their money in tax shelters. Is it fair that billionares often pay less in taxes than people with upper middle-class incomes? Maybe not but reality is reality and revenue is revenue which is what the IRS was put in place for.

Expedition Nicaragua Build in Nicaragua

Jane Jacob, Cities and the Wealth of Nations

The whole thing is circular -- you need a good economy to have a decent social safety net. In Nicaragua in the countryside, the social safety net is the family, and access to land with one source of year round running water (or Lake Apanas, which is used to irrigate a lot of fields, approved by MARENA or not). If people have that, they won't starve. There are people from Mexico to South America who do subsistence farming/fishing/hunting and who will kill you if you try to change that. No nation state wants to have a high percentage of subsistence farmers/hunters/gatherers because they don't pay taxes.

In some societies, the only source of capital that can invest in complex projects is the government (19th Century Japan, Costa Rica for education and health care, here for water systems and health care).

I don't think there's one thing that makes Nicaragua poorer than the US, or one thing that's bringing the US down compared to Europe. The US still has the biggest economy in the world, but the GINI index is now less equitable than Nicaragua's. GINI indexes over 50 go with political instability, regardless of the kind of economy or political system. GINI indexes under 30 tend to make countries very stable.

Rebecca Brown

You are arguing with a

an internet search engine article for one of the investors at Rancho Santana.

Teach the seniors to fish?

The author's criticisms are in respect to a fallacy he sees per SNAP justification (the "broken window fallacy"). The problem is that this very criticism is the result of a different fallacy, his fallacy (the "straw man" fallacy). Note that his FDA opponents do not actually state the SNAP program leads to or delivers prosperity. They claim giving the equivalent of food to people below a stated poverty line has economic benefits beyond the cost of the food itself (they are trying to show demonstrate - rightly or wrongly, well or poorly- that money distributed in this program is not money wasted, the common argument against most or all government subsidy programs). Though they do not state it in the documents he cites, they are not justifying the existence of the program on arguments from prosperity; they believe there are moral arguments for the existence of the program (he doesn't touch those). Yet his criticisms are in terms of their program not creating prosperity. Prosperity and economic activity are not the same thing (he used to work for Barron's, The Wall Street Journal, Money, etc. – so presumably this isn’t news).

Additionally, when discussing prosperity he ignores the reason for the program in the first place: they are called food stamps, because they deal with food, not with prosperity (otherwise we might call them prosperity stamps – and that really would be a bad idea). Feeding someone does not result in that person, or his neighbor, becoming wealthy. No one actually claims that, least not anyone he has cited. Granted, the FDA isn't helping matters by justifying their not-s-bad programs with bad ideas, or badly implemented ideas (if too many people who do not deserve assistance are on the program, lower the payout and/or threshold of the program). While FNS "parties" might not be the most brilliant idea, cherry-picking SNAP administrative details, also isn't a brilliant idea – unless you are merely preaching to the choir. Their goal of FDA outreach programs was to make sure people who qualified at least knew they qualified.

It is worth adding that massive growth in the SNAP program was a Bush-sponsored act, first. SNAP use grew nearly 65% under Bush, mostly due to outreach – and FDA's use of major advertising channels all started under Bush in 2004. While the author claims SNAP job-creation assessments are meaningless, on some importance sense so is his entire analogy to Nicaragua: it is not revealing, insightful, or meaningful. The author's gripe is more per bad economic theories (what people currently sometimes use to justify the old program) than bad public policy (the old program itself). He does offer an idea at the end: "…provide help to those who need it; spare the rest of us the bogus economic theories that justify the government's intrusion into every nook and cranny of private life…". Hmm, so providing help is o.k., or not o.k.? Providing help is o.k., as long as you don't advertise the help exists? Or, providing help is o.k., just don't try to justify it with an economic argument we don't use at the Wall Street Journal? This is where the article falls apart though, not where it comes together. When the gripe and poor analogies are done, he doesn't have anything to offer.

One big problem SNAP has (not one of the cherry-picked examples in the article) is that many seniors do not know they qualify or what the basis of the program is. Rather than teaching them how to fish, the author has nothing to offer per how SNAP will reach people so they at least know they qualify – even if they do not pursue the benefits. A view from yet another economist who appears to not personally know any poor people, let alone any poor seniors (teaching them to fish, or much else, isn't an answer at this point is their lives).

I Heard An

NPR segment on food waste in the US. The number is estimated to be from $100 to $165 billion annually. That's a big variance, but it probably comes from your definition of "waste". That number dwarfs the cost of food stamps.

I've never had a problem with the food stamp program. It's a small amount of money, and despite the many abuses, some of it must wind up (food, not money) in the mouths of hungry children. I've always been a fan of free school lunches. The food goes directly into the mouth of the child, and is not filtered through druggie parent middlemen.

It's easy to be critical of the recipients, especially while standing in line at the check out stand. The computerized registers separate out what is "food stamp purchasable", and the cigarettes (at $50 /carton in California) and the booze have to paid for in cash. There is such a wide slice of the country receiving assistance now that there is no well defined food stamp recipient anymore. When your social contemporaries are struggling to find a job, keep their homes, it's much harder to dismiss assistance recipients as freeloaders.

It's looking more and more like we may have another four years of pain. Although it's never over until the proverbial fat lady sings, another four years of political gridlock will put additional thousands out of their homes, postpone their dreams, and yes, make for more hungry kids.

I've recently been comparing my purchases against the average Nica daily wage in my neck of the Campo. That "Original $6 Burger" from Carls Jr is a buck more than a young Nica man earns for a day's machete work. The elegant $200 dinner would be 40 days of labor; the bottle of wine alone 10.

We have so much in the US, and we waste so much of what we have.

Here is a tropical country with year round agriculture

A lot of comparing the US to here is very much like comparing declawed house cats to White Tailed Deer. People who have access to land here (often their absentee boss's) can pretty much feed themselves (one friend's coffee production drops by at least a third if he doesn't visit weekly). I've heard of people living for years without a full time permanent cash job. They ate a lot of fish out of Lake Apanas.

The need in the campo is for zinc roofing, which allows people to keep a cleaner house and avoid the Chagus bugs that show up in thatch. And cell phones.

Rebecca Brown

carter and dukakis

were ahead at this time. don't beleive the skewed polls.

"Maybe, just once, someone will call me 'sir' without adding, 'you're making a scene." -Homer J. Simpson

Title gets your attention, A Nicaraguan story I thought...but no

The author very soon forgot about Nicaragua and went off into la la land and more napkins.

The clue was on the photo and chart.