This article was originally published by Don Olanrewaju at The Mises Institute. 

What’s Responsible for Third World Economic Problems: The Monetary System or Dishonesty?

In a video of Jayant Bhandari at a Hans Hoppe conference—Property and Freedom Society (2024)—titled “Understanding India.” To summarize, he mentioned a number of cultural ideologies and mindsets he experienced in India, which were totally different from what he experienced when he first came to the Western world.

The contrast was so great that he had a culture shock when he came to the West and he did not know how to react. When listening to the video, however, I kept thinking, “Surely, he is talking about Africa! He must mean Nigeria, Kenya, Zimbabwe, right?” I double-checked the title of the video to verify that he was, in fact, talking about India. What struck me, particularly as an African, was how many similarities there seemed to be between the cultural ideologies and thinking of the two regions. Here is a summary of some of the traits:

1. Submission to authorities without question or accountability is disguised as honor. Those in power in any form—from government even to leaders of small groups or estates leaders are to be honored, not questioned.
2. Lack of integrity/trust. Everyone is trying to cheat each other. People lie openly because “everyone knows everyone lies anyway.” Betrayal is normalized. Showing kindness and doing things properly is seen as a sign of weakness and such people who do that are usually exploited.
3. A class/caste system. People are divided into different classes, typically based on their possession of money or power.
4. Sycophancy. People only respect others because they see them as higher than them in class and are able to grant some advantage.
5. Abuse of power/oppression. Once people get even a little power—even if it’s to direct traffic at a church conference—the power gets into their heads, and they start to oppress people. Politicians oppress police, police oppress men, men oppress women, women oppress children, children oppress their fellow children in school, etc.
6. Corruption/lack of rule of law. It is very difficult to make progress with a business or idea without having a “connection” to the government.
7. Greed. Everything is seen as a zero-sum game. As long as it favors me and my family, we are good. This inhibits mutual exchange (i.e., a positive-sum game).
8. Celebrating criminals. Here is a former Governor in Nigeria who was arrested by the Financial Crimes Authority in Nigeria for embezzling state funds and using it to pay for his children’s school fees, up to class levels that his children had not reached yet. Watch the video and see him being celebrated by the citizens he robbed on his return from detention back to his state on bail.
9. Lack of respect for individual rights and liberty.
10. Highly religious, with politicians mixing with religious leaders freely while also acting in highly immoral ways.

After writing the above, I went back to Jayant’s video to look at the comments. I found this comment from another man who lived in South America:

This individual said these cultural traits can also be witnessed in South America. One thing in common with these countries is that they are countries with huge government control, huge levels of price inflation caused by massive government money inflation, and low GDP per capita. Thus, here lies the question: is it the money, the people, both, or neither?

The Money

With reckless money printing and the resulting massive price inflation, most of the people—particularly fixed-income earners and the working class—are usually damaged the most because they are usually farthest from the money supply injection points and tend to have few assets that increase in value with inflation. Thus, they tend to require more effort for the same level of living standards. This is another way of saying their purchasing power gets eroded quickly. A fixed-income earner, for instance, a laborer or teacher who needed to work 20 hours to afford rent and vacation will quickly discover that he now needs 35-40 hours of doing the same work for the same benefits.

What then is the result? More physical and mental stress on those individuals. Some who used to survive easily on one source of income might be required to look for other sources of income. Now imagine that he or she meets with a politician or government official or government contractor who gives him a large sum of money or links him up with a government job that brings the teacher close to government spending—in a job where he can receive kickbacks with little effort which pays equal to or even more than what he used to earn—you can see why he would remain “loyal” and sycophantic to the politician or “big man” who connected him to such position. He might even celebrate such a man no matter how proven corruption allegations against the man may be. Imagine the married man who works as an accountant with a mid-sized business who is facing pressure to pay his children’s school fees, which just doubled in one year due to inflation, he would be more tempted to falsify books of his company than when there is low price inflation.

As all students of the Austrian-Mises business cycle know, inflationary manipulation of the money supply and interest rates usually leads to price inflation, sometimes even stagflation, resulting in massive unemployment. With massive unemployment comes many people (labor) vying for the fewer available jobs, giving the few entrepreneurs and business managers who are able to thrive selection power over job candidates. There can be more opportunity for many managers in such positions to abuse power. The people on the receiving end of that power abuse then tend to go out to look for their own means of exerting such oppression on other people. With fewer jobs or positions available in such an economy and massive selection power to the few managers or leaders with viable business organizations, it should be no surprise that they would want to give their own family members, friends, associates, or children of their associates, the jobs or contracts, so corruption would be rife.

Greed can also be explained in such economies. With the government having used money printing and legislation to take the saved resources from the citizens, most citizens are left to grapple for the remaining resources in the economy. When a human becomes desperate, he may be further tempted to engage in greed, backstabbing, betrayals, and even other social vices such as violence and crime as witnessed in nations like Venezuela.

Another major lesson is that inflation tends to lead to high time preference. Civilizations that have endured and developed, such as the US, thrived because of periods of low time preference, saving, and investment in capital goods. This leads to long-term growth and development. However, in a high inflation environment, no one is concerned about the future. They cannot be. How do you plan for the future when you don’t know how high prices will be? How can you build long-term capital for the future? Unfortunately, this short-term thinking spills over into other areas. Everyone is in a hurry so no one wants to take the time to build long-term relationships. These I believe are valid reasons to blame the monetary system.

Is It the People?

The basic libertarian principle espoused by Frederic Bastiat in The Law is that every man has natural rights from God that no one can take away—life, liberty, and property. However, one aspect of the natural right of liberty is self-determination—the right of a group of people to live on their own terms and relate only with people they want to relate with. Thus, for example, a libertarian or free markets enthusiast may believe that free trade, no war on drugs, and no borders would lead to economic development in a community, but, if the overwhelming belief of a community is strictly against drugs/alcohol (such as a Christian community), open borders, or free trade with foreigners, then the liberty demands that such people be left alone to determine their own system of laws, policies, and economic structure. In other words, the culture or ideology of people matters. What is seen as virtue and exalted, as well as what is seen as shameful and criticized, goes a long way to determining the economic and social development of the community or nation.

Unfortunately, in recent times, the “Western world” seems to have joined in with bad behavior. I witnessed the covid years of lockdowns and mandates in the West and saw what I thought I would never see: people fighting over tissue paper in the stores, people ratting out neighbors to the police, destroying decades of bond of trust, sycophancy to government officials, looting of covid funds (PPP in the US), abuse of power by bureaucrats to shut down people’s businesses and churches, citizens taking matters into their own hands to oppress fellow citizens who resisted government lockdown and mask mandates. People were totally fine with a class/caste system—essential and non-essential, vaccinated and unvaccinated, etc. Many celebrated the tyrants and criminal politicians who championed such policies. This was not just a monetary problem but a moment of adversity causing people’s core values to be on full display. Was the rioting and looting in the US in 2020 and 2022 a monetary problem?

In conclusion, this seems to be a chicken-or-egg question, but I think it’s a mixture of both the monetary system and cultural values.