Illusions and Picaresque (Conclusion)

Picaresque derives from Spanish picaresco … relating to picaro … which also derives from Spanish, [and] means ‘rogue’ or ‘bohemian.’ [or ‘adventurer’] … Typically, the picaresque novel centers around a wandering individual of low standing who happens into a series of adventures among people of various higher clases, often relying on his wits and a little dishonesty to get by….” Merriam-Webster

The first known use of the term was in the Spanish novel, Lazarillo de Tormes, relating the tale of a poor orphan apprenticed to a blind, wily beggar who teaches him to live by his wits, with the ultimate aim of purchasing his dead father’s shop. Published in 1554, the novel antedates by generations and centuries novels such as Moll FlandersOliver Twist, or Huckleberry Finn, which also depicted less than savory characters. Perhaps the best known “picaresque” novel was the French Gil Blas (1615), similarly depicting a street-wise personage who in the end “goes straight” and retires in honorable comfort.

In a nutshell, the Spanish form of the picaresque or picaro (pronounced peekuhroh in Spanish) represents a man or woman who desires to live right but is pushed by circumstances to cheat, all the while desiring to return to an honorable life before death.

I seriously doubt the McKinsie consultants who analyzed the disappointing measurable economic growth in Latin America (see last week’s blog post [Last Week’s Post]) were required to read Lazarillo de Tormes or Gil Blas, but they should have been. That might have given them an insight that, in my opinion, was lacking in their final report. 

In her zeal to ensure the American indigenous peoples were properly “cared for”, the crown imposed impossibly suffocating regulations and requirements on the colonists. For example, the land they stewarded was not considered legally theirs and could not be bequeathed to their inheritors (see the series on ranchitos beginning here). In this case, the colonists and their descendants (known as Criollos) either ignored the regulations or pretended to submit to them while cleverly circumventing the strict application of Spanish laws so as to eventually be de facto owners of their lands.

Before the reader judges them too harshly, please remember that our American Pilgrims also decided to ditch the socialistic requirements imposed on them by their financial backers in London. They abandoned the communal approach and adopted the private property approach and thereby were able to pay their financial backers despite having gone against the arrangement those backers had required and imposed. The Spanish colonists and Criollos could not do the same with the Spanish crown. Instead, they resorted to the picaresque.

The infuriating reality is that some colonists or criollos treated the indigenous peoples very well, including actually granting lands to the more industrious and worthy, whereas others treated them terribly. The point is that this was the case even with the Crown’s exasperating regulations and laws. How much better would it have been had the crown recognized the need to reward her subjects with lands from the very beginning along with injunctions to treat the “natives” with respect and love.

We’ll never know, but we can surmise.

And so the picaresque is intimately associated with the Spanish, especially the Spanish descendants in Latin America, even though it is a term that is applicable to peoples from all areas of the world. Mark Twain, call your office!

And that is what I found a bit annoying with the McKinsey report on Latin America. In effect it called for more regulations in order to induce those living by their wits (street vendors and others in the “informal economy”) to come out and join the legitimate economy and to be measured by conventional means.

And go hungry.

This was not in the report, but that would be the effect. At least at this time.

At the moment, many entrepreneurial street vendors and others in the underground economy in Latin America earn and save enough to send their children to college or to place them in more advantageous circumstances thereby improving the lot of their homes. 

The street vendor economy may not be able to be measured at the present. However, given time, their descendants will be outstanding members of the “measured economy” and that will improve the measured results overall for all of Latin America.

McKinsey’s report goes on to recommend other steps such as “family planning” and “property value capture” (meaning higher property taxes). These go beyond the scope of this post but we hope to revisit in the future. For now, the reader will notice that the proposals for the most part do not empower the Latin American family or home economy, but certainly grow the State. Precisely what our neighbors need less of!



Images for the Lazarillo de Tormes, first known picaresque novel (1554). Antedates Huckleberry Finn by over three centuries.
One of the first impressions any visitor to South America will have is the abundance of street vendors. Many of these do well and seek to leave a better future for their children.

Illusions and Picaresque

Carlos André Pérez is usually known as the Venezuelan president who, in the early ’90s, sought to apply some sound economic policies on the country and steer it away from her headlong rush into Socialism. However, his attempts were clumsy, sudden, and, at the time, gave the concept of free markets a bad name in Venezuela. His approach caused large riots and even Hugo Chavez’s attempted coup in 1992. 

What is less remembered is his first term in the late 1970’s whereby he expropriated the iron and petroleum industries and plunged Venezuela further into the Socialism that alarmed him a mere decade later.

Shortly after his first inauguration in 1974, I walked into an elevator in Ciudad Guayana and saw someone standing at the buttons asking “qué piso?” I thought he was joking. But no, he was one of thousands who now were “employed” thanks to a presidential decree which compelled building managers/owners to install a flesh and blood “operator” in each elevator which, up to then, was perfectly controlled by a mere push of a button with the floor’s number inscribed. 

With one “presidential decree” we were all thrust to the 1935 Waldorf Astoria, sans the luxury, with uniformed elevator operators handling the controls, only these controls were push button automatic, not manual.

It “looked good” in the sense of, “Wow! Look at all these new jobs!” But an elementary school kid could also see what was not seen: the other jobs or capital improvements that were set aside in order to budget for unneeded elevator push buttoneers.

This is illustrative of how the “seen” does not necessarily reflect reality, but rather an illusion.

A few years ago, McKinsey & Company, the well-known and highly regarded global consulting firm, published a paper, Where Will Latin America’s Growth Come From?, which delved into the reasons why seeming economic growth in that massive and resource-rich continent was actually an illusion, or at most, was less than met the eye.

One of several disquieting indices is that Latin America (Mexico, Central and South America, and the Caribbean) whose sovereignty exceeds 13% of the earth’s area, constitutes a mere 7% of the world’s Gross Domestic Product (GDP). The comparable figures for The United States are 6% and 15%, respectively, an almost perfectly inverse relationship: half the sovereignty and double the GDP.

In addition, there is little if any measurable economic growth in Latin America. While global annual growth averaged 3.5% in the last three years, Latin America’s averaged 1%.

For the most part, McKinsey’s conclusions and recommendations are rather predictable, not to say pedestrian.

For example, the report criticizes the weak enforcement of “stringent regulations”. Which is it: weak enforcement, or stringent regulations? Why not take the more politically incorrect position of recommending the lifting of Latin America’s sclerotic regulatory empires?

McKinsey rightly, but inconsistently, criticizes the monstrous labor laws that make it very difficult for employers, and employees, to act freely, whether this means firings or re-assignments. 

And here is an eye-opener: 

“Service sectors, too, suffer from poorly enforced regulations that encourage informality and therefore constrain productivity growth. Informality arises as many firms have strong incentives to avoid becoming formal because of high taxes, poor auditing capabilities, and low levels of sanctions. Inefficient informal players stay in business and prevent more productive, formal companies from gaining market share, constraining overall productivity. ….the substantial cost advantage that informal companies gain by avoiding taxes and regulations more than offset their low productivity and small scale, and distorts competition. Regulations are therefore needed that reduce the cost of formal employment … and raise the risks of noncompliance (for example, better monitoring and prosecution of informal operations)….” (emphasis mine)

Bravely spoken.

In sum, what McKinsey skates around is that there is an “informal” (underground) economy in Latin America that is not measured and that avoids the implacable obstacles and barriers to business set up by the bureaucratic Latin American regimes. This underground economy is so efficient and pervasive that it depresses the “regulated” economic performance. 

Would it not make more sense then, to imitate and replicate that “informal” economy? To find why it succeeds? To reduce the regulations that ensure it continues unabated? But no, McKinsey recommends tossing a massive wet blanket on that economy and bringing it to heel along with the rest of the slow-moving, molasses of business that operates under “stringent” regulations. 

In other words, “inefficient” informal players hinder more efficient formal ones, according to the report. Could it be that the “informal” players are very efficient? They’ve figured out how to make a living by setting themselves free from the heavy regulatory load imposed by clueless bureaucrats and politicians who believe that forcing the hiring of employees to push elevator buttons will increase employment overall. 

Could it be that such “inefficient” informal players cannot be measured since they are underground, after all?  I wonder what Latin America’s true GDP is. Could McKinsey apply its considerable talent and figure out a way to measure Latin America’s informal (underground) economy and incorporate it to the conventional measurements? 

When it comes to Latin America, I believe the standard measurements are an illusion.

I have utmost respect for McKinsey and such consulting firms in general. Having cut my teeth at Arthur Andersen I do appreciate the hard work and effort required to prepare a report addressing a business entity, let alone a massive region of the world. However, the professions do tend to have conventional views, despite their reputation as beings who know how to “think outside the box.”

But modern consulting firms take far too little account of the folks who, because of circumstances (regulations and obstacles) imposed on them, must either die or learn pretty quickly to live by their wits.

This brings us to the picaresque, whose etymology hearkens to Spain.

We will look at this term and its implications to Latin America next time.

(The McKinsey report has other observations worthy of further discussion. We’ll return to it in future posts.)

Manual controls: when elevator operators were needed.
In 1974, pursuant to a presidential decree, elevators in Venezuela henceforth had to be operated by an elevator operator employed to push buttons like the above.
It is not unusual for street vendors such as the above (Quito, Ecuador) to put their children through college selling mangoes. Instead of more regulations to discourage these hard working folks, how about less regulations to encourage them to become “legit”?