A short break in social democracy

Felix Salmon recalls the impact the appearance of wealth, and Buenos Aires’ status as a quasi-European city, had on Argentina’s finances; part of the reason the banks thought it could pay back the money they lent it was that it looked OK, or rather the steaks were superb, the wine better, the company classy (and white); how could anything go wrong?

It’s worth reading. It’s also interesting, as it’s his response to a debate between carta dell’oro glibertarians Tyler Cowen and Megan McArdle about why those terrible lefties persist in believing that Cuba is richer than northern Mexico. Cowen’s argument is essentially that there is a distinction between perceived wealth and actual wealth; the outsider sees crappy roads but not humming export industries, handsome Spanish buildings but not stinking jails. This is OK as far as it goes, but there is a far more interesting and fundamental point here.

Essentially, what they are talking about is J.K. Galbraith’s paradox of private affluence and public squalor. Naturally, right-libertarianism obliges them to carefully avoid citing him, but this is exactly the point he made in the 1950s; it’s quite possible, indeed common, for prosperity to coexist with ugly and generally ‘orrible visuals, precisely because people will optimise the stuff they control and which affects them individually, like their own homes. Further, there is some sort of indifference curve between private and public goods; people are willing to put up with crappier public spaces if they can compensate with greater private comfort. You can argue endlessly about the slope of the curve, but there is at least some tradeoff.

The international aspect, though, is interesting and I think original; as a foreigner, the visual terms of trade are inverted. You don’t spend time in private space, and you spend much more time than usual in public or semipublic, so private affluence is invisible except in so far as it spills over into the public square (good steakhouses, say, and high culture). Further, a lot of travelling occurs between cultures where different private-public exchange rates apply. It occurs to me that much tourism is motivated by precisely this factor; tourism as a form of commuting from the suburbs of private affluence to the city of public prosperity. In a sense, urban tourists are unconsciously spending a few days in socialism. (Other forms of tourism may provide something similar by creating pseudo-public spaces of great luxury, the poverty of the country being concealed.)

This goes double for questions of egalitarianism – tourists don’t stray into the favela, and a colleague of mine recalls the Ericsson engineer he worked with who was robbed of all his possessions down to and including his underpants on the first day of the project, so private suffering is as invisible as private affluence – and maybe triple for questions of politics.

After all, you’re unlikely to be the object of oppression as a visitor unless you’re actually coming to seek it out; if you don’t speak the language you’re unlikely to miss much through the censorship of the news. Add to this some special factors that apply to visitors who have come to do something rather than just to visit; if business is good, your old friends the fundamental attribution error and the salience heuristic will assure you that things are OK, if you’re as smart as you are. If it’s bad, well, look how dirty the streets are.


  1. Chris Williams

    “tourism as a form of commuting from the suburbs of private affluence to the city of public prosperity. In a sense, urban tourists are unconsciously spending a few days in socialism.”

    Speaking as a man who’s just returned from a week in Lisbon (mainly work, but my brain was full for the last couple of days so I went tourist), I agree entirely. Hell, they even had a Communist Party rally on Saturday – which I was warmed by, what with the PCP being about the only one in Europe who’ve done something to be proud of in my lifetime.

  2. Matthew Henty

    I agree with that entirely, and was also thinking of Lisbon. I was there for the weekend, staying with some friends who live on the northern edge of the city. I have been trying to work out how my perceptions of Lisbon might have been different had I been there as tourist only – I certainly wouldn’t have been drinking in the bars I was in, and wouldn’t have got near the residential areas I spent most of my time in.

    And I also saw the PCP rally on Saturday – I particularly enjoyed seeing a group of teenagers draped in their PCP flags rushing out of McDonalds with their Big Macs to hear the speeches.




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