Would it be of any help going back to the gold standard in a 3rd world country?
Of course it would allow to get rid of most local crises, but you would suffer the effects of cyclical crises in developed countries that still cling to fiat money.
Perhaps someone from Hong Kong (where private fiat money is used) can tell me about the way people see the effects of a foreign crisis in the country.
Does your private money cushion those problems well enough or do the people ask for a public money system?
Pity the theory which sets itself up in opposition to the mind!
Carl Von Clausewitz
An interesting argument is made by the Peruvian libertarian Hernado de Soto, in his book The Mystery of Capital (Basic Books, 2000). He argues that the principle problem in thirld-world countries is the lack of property right laws—maybe, more accurately, lack of the concept of private property rights. I haven't had the benefit of reading his book in its entirety, because I have been focusing on the Great Depression, but I would wholeheartedly suggest it. Thomas diLorenzo uses it as a source in the book How Capitalism Saved America; he applies it to why the original settlements in the Americas failed. Thomas diLorenzo's argument is that the lack of the concept of private property in early settlements eliminated any motivation to compete and improve the living standards of the settlers.
The book states:
"When the first settlers came to American in the early seventeenth century, the word capitalism had not yet been coined. But the most improtant ingredient of capitalism—private property—was reponsible for their very survival, and indeed for the creatio nof America. As Tom Bethell explains in The Noblest Triumph: Property and Prosperty Through the Ages, the American settlers originally adopted communal ownership of land and property, and as a result most of them starved to death or died of disease—a problem endured in later centuries by virtually every communist country that adopted collectivized agriculture."
It goes on, later that chapter:
"The problem was that all of the men were indentured servants who had no financial stake in the fruits of their own labor. For seven years, all that they produced was to go into a common pool to be used, supposedly, to support the colony and to generate profits for the Virginia Company. Working harder or logner was of no benefit to them, and they responded as anyone would, by shirking. Having been given free passage to the new world, these settlers were supposed to compensate the Virginia Company through their labor, so they were effectively reneging on their contracts."
de Soto's thesis is in the first chapter of his book:
"I will also show... that most of the poor already possess the assets they need to make a success in capitalism. Even in the poorest countries, the poor save. The value of savings among the poor is, in fact, immense—forty times all the foreign aid received throughout the world since 1945... But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded, outside of narrow local circles where people know and turst each other, cannot be used as collateral for a loan, and cannot be used as a share against an investment."
So, in short, I think a return to the gold standard is not the key to prosperity in the Third World. There must be other, more basic, changes in regards to their economic liberty and the establishment of clear property rights—that is, property rights through recorded social contracts, which cannot be broken by the government or by any other force of tyranny.
Gold standard are for tyrants
Mind explaining that?
You have no idea what counterfeiting means, do you?
scineram: You have no idea what counterfeiting means, do you?
its a pretty simple concept...are you sure you know what it means?
I don't think you know what the gold standard is.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
Ok, of course there are other, more fundamental issues involved in the third world being the third world. The very concept of poverty is a problem. Before the Industrial Revolution, being poor meant that you would probably die of hunger or cold. With the technological boost experienced by agriculture and transportation, hunger was a thing of the past in industrialized countries.
The so much worshiped "subsistence agriculture" is the responsible to the existence of hunger in places like Ivory Coast, Bolivia and Southern Mexico. They should allow small farms to perish and give way to industrial agriculture, Cargill style.
The slow (or non-existent) industrialization in many African countries is a consequence of the hostile view towards foreign investments. In Latin America they are ok with foreign investments, but are very hostile to allowing the earnings to leave the country.
Even considering these problems: there is not an order to make the change towards laissez-faire capitalism in 3rd world countries. We just have to advance all the changes we can. The paperwork and our seduction skills will naturally make some go before others.
Personally, I believe things like the social security (intergenerational solidarity) and inflation (government's fiat money), for being actual crimes should have priority. I am uncertain if getting rid of inflation would be easier with gold currency under government control or with competing fiat currencies in a free market.