Mexico’s newly elected President Andrés Manuel López Obrador has made a surprise announcement of a $30 billion Marshal Plan to lift the people of Central America.
“We’re putting together a proposal to invest in productive projects and job creation,” Obrador said, with little detail currently available on how this would work.
One very successful model is that of the United Europe, which has lifted to nearly first world standards some 250 million people from central and Eastern Europe as well as, to a lesser extent, the Balkans.
Their playbook is necessarily complex, but in its foundations it is somewhat simple. What poor and developing countries lack the most is knowledge, and in particular the knowhow of institutions. So you send some people to tell them this is how it works and this is what you need to do.
How it works, in simple terms, has to start with taxes. Part of earned money goes to the state, then the state effectively pays it back through wages to health workers, police, judges, firemen and so on. Those workers then pay their “neighbors” by spending their wages on food, housing, entertainment and so on. Part of it goes back to the state, and the cycle repeats.
In the process, of course, value is created through labor. Much does grow on trees, like fruits. Much you can find just by digging. Roads and pavements are sort of refined earth with that refinement done by labor.
There are plenty of things that can be refined or criticized in this model, but in its foundations it generally works and fairly well. The problem poor and developing countries have is getting that cycle up and running. Which is where something like a Marshall Plan, if executed well, can come in.
It worked last century, and it has generally worked fairly well for EU which can be criticized in many ways, but what they have done for hundreds of millions does court great praise.
So what do richer countries get back? Well, customers, nice neighbors, good friends, and all at a far cheaper cost, both at an emotional level and at an economic level, than spending billions on walls, detention centers, flight returns, court appeal processes, and so on.
“The biggest part of the immigration that has arrived here is from groups that are socioeconomically medium or high,” Javier Urbano, a migration expert at the Iberoamerican University, said.
As in, generally the smartest and the most able ones leave, causing a brain drain in their home country and what is far worse, causing lost skills, knowledge and expertise for the entire human race.
That’s because in some cases fine scientists, academics, or even doctors, are reduced to pizza delivery men or whatever other low skilled work due to primarily lacking language skills to the level needed for such high positions in the host nation.
Which means most of them probably don’t want to leave, but they sort of have no choice because it isn’t easy to live in a land where there is no rule of law.
Yet establishing that rule of law, now a centuries old invention, can be fairly easy with external assistance, as we’ve seen in the then very poor Eastern Europe which now, in the case of Estonia for example, is more advanced in some ways than even Germany, Britain or America.
The United States, however, has failed to do its part since the 40s and 50s. While West Germany was able and willing to lift East Germany and Western Europe was able to lift Eastern Europe, America has lifted no one since the last century.
For that, and we say it with great regret, they should be ashamed, especially Christian America. The teachings of Jesus far too advanced even for our times, but whether atheist or of whatever religion, the principles of love thy neighbor and the rest are very sound for evolved men and women.
They have now turned to nationalist rhetoric in a disgrace for any man or woman of intellect. We say this as backers of Trump in the election considering the two choices available. Yet we backed him primarily for one reason, terrist attacks had to be stopped by any means necessary within reason as the people were getting some dangerously angry and in some ways rightly so.
We, or rather they, say terrist, but now so many years on it looks like it was more to do with nationalist Arabs and what may be their dream of a greater Arabia which they quite stupidly perhaps thought they can get by gun (no history books read presumably, i.e Napoleon and the other one?), rather than through peaceful and voluntary cooperation ala Europe.
Anyway, hopefully that chapter has now been closed and hopefully we can look forward to a new era of general global peace.
And we said what we think had to be said regarding US, but we do suspect this is probably US money, at least partially. They perhaps think they can’t say so publicly because plenty would say it could have been spent in US, but then those same people or others turn around and say they terk our jabs.
Teach a man how to fish is not just a saying, but with all this new technology, will they be able to fish better once they learn how to fish?
As in can there be a role for crypto or blockchain tech in this Marshal Plan, or is that unrealistic?
If we go back to taxes, which has to pay for the rule of law, they are usually not easily collected in developing countries because everything is paper based.
They don’t have banks. They might have one or two, but effectively no one uses debit cards and so on. Almost all of them, however, have smart phones and plenty have more than one.
A bank in your pocket used to be the mantra in this space because you just download a wallet app and there you are, you now have a bank account.
If we are to be realistic, from the point of view of building a country, you can’t really call it a bank account if it is only in bitcoin, eth, or whatever crypto. You could perhaps in dai, but that’s not quite ready as it needs far more time to prove it has no bugs especially with the upcoming multi-collateral changes.
In a decade perhaps or two decades, but for now they’d need that wallet app to be able to operate in fiat.
The poster boy here is China, which is or was in the same position as most developing countries, i.e. no banks. Some entrepreneur there launched an app and there, they all now have banks with almost all transactions in China through these fiat apps.
China is a very unique country, however, and somewhat authoritarian. They worry cryptos would undermine the central bank’s ability to manipulate yuan, so they banned it.
For Central America, while cryptos might not have a primary role, they can have an important role in one sector of their economy that accounts for 20% or more of their GDP: remittance.
Cryptos are digital and they’re just code that autonomously runs by itself. By definition, therefore, they are far cheaper than any paper based system or any system where human labor is required as in the current financial system where accountants and whatever have to keep books and check for double spending when money is moved.
So you can send 100 eth for a penny, but to send the equivalent $10,000, you’d probably pay $100 or more. Even to send just $100, you’d pay $20 or more, rather than a penny.
Now $20 for us in the west maybe isn’t that much, but in some areas, especially for farmers, it might be a month’s wages.
So for a developing country building a new digital banking system, the bank app can natively incorporate cryptos, allowing for a seamless exchange through the app.
Then you get the best of both worlds. Fiat to pay for things while they wait for merchants to accept crypto if they wish to, and crypto where is its strength: cheap and pretty much instant international transfers.
Some would say that while moving the crypto itself is pretty much free (depending on the crypto used) and instant, you have to buy the crypto first and that would have fees, then you’d have to sell it, again incurring fees.
Which is true, but a Honduran in America, for example, can also download the same app and buy the crypto from the app or this can all be underneath with the app itself sending crypto regardless of whether they transferred fiat.
That however just moves it to one turtle down because regardless of whoever buys the crypto, someone has to. However the app can itself run a crypto exchange, and so effectively can buy it directly, or it can buy it from established exchanges where trading fees are 0.1% or so, effectively zero.
It would probably work to reduce fees considerably which can make a big difference when we’re talking of billions and billions. Indians, for example, paid about $4 billion in remittance fees this year.
Now with all this money available in this Marshal Plan, a smart entrepreneur in Central America could perhaps apply for funding, with the plan maybe asking for 20%-30% share, so making it an investment with potential returns rather than just the handing out of money.
Obviously private enterprise can do the same, but they might have different conditions to a somewhat more altruistic endeavor which nonetheless can benefit all parties in growing the pie, or rather growing the trees and the national as well as the global production levels.