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Alex Nowrasteh

In the October 1 vice-presidential debate, Senator JD Vance (R‑OH) said, “Look, in Springfield, Ohio and in communities all across this country … you have got housing that is totally unaffordable because we brought in millions of illegal immigrants to compete with Americans for scarce homes.” (Emphasis added.) Vance is correct in saying that immigrants increase the price of houses.

The intersection of supply and demand determines housing prices, like all prices. When housing supply curves are upward-sloping, increased demand from immigrants will increase housing prices. Immigrants are people who want roofs over their heads, after all. Housing supply is relatively inelastic in many places, partly because of government policies like zoning and height restrictions and urban growth boundaries. Land use liberalization could make the housing supply more elastic, but the housing supply will not become perfectly elastic even if all land use laws are abolished. That means that higher demand, all things equal, will drive up prices and the quantity of housing.

Immigrants also induce a housing supply effect because 10 percent of all foreign-born workers labor in the construction industry, which rises to 14.9 percent for noncitizens, according to the 2023 American Community Survey. Only 6.2 percent of native-born Americans work in construction. Estimates show that about 30 percent of all construction workers are immigrants, with higher rates in California, Texas, Florida, New York, New Jersey, and Nevada. Deporting those workers or halting more immigrants will reduce the growth in the housing supply.

However, all immigrants demand housing. Even immigrants who work in construction increase housing demand first before they can construct more housing. That increase in demand drives up prices and incentivizes new supply through further construction, renovation, or increasing the supply of rental units through other means. However, the marginal immigrant increases housing demand more than he increases housing supply.

There is much empirical work to support this theory. My first stop on this journey is Albert Saiz’s 2007 Journal of Urban Economics paper, “Immigration and Housing Rents in American Cities.” The paper’s abstract merits quoting in full:

Is there a local economic impact of immigration? Immigration pushes up rents and housing values in US destination cities. The positive association of rent growth and immigrant inflows is pervasive in time series for all metropolitan areas. I use instrumental variables based on a ‘shift-share’ of national levels of immigration into metropolitan areas. An immigration inflow equal to 1% of a city’s population is associated with increases in average rents and housing values of about 1%. The results suggest an economic impact that is an order of magnitude bigger than that found in labor markets.

Saiz’s last sentence is especially worth noting because most of the debate over the economics of immigration is focused on wages, which are barely affected by immigration. In presentations to students, I often say that housing is the market where prices are most affected by immigration. Relative to the labor market, the marginal immigrant affects housing prices by a factor of 3 to 10 more than wages, depending on your preferred wage elasticity. Other papers find directionally similar effects.

Jacob Vigdor found that an additional immigrant in a county increased the price of the median house by about 12 cents ($0.116) in 2010. More than two-thirds of native-born Americans own their own homes, and about two-thirds of all houses in the United States are owned by native-born Americans, most of whom are middle class. Thus, most of the increase in housing wealth caused by immigration accrues to native-born Americans, if we take Vigdor’s research seriously. (Disclosure: Vigdor is working on updating these figures for Cato. I’ll report back if the effect still holds). 

According to Vigdor’s research, over 90 percent of housing prices comes from other economic factors and immigration has become less important since 2015. Vigdor also notes that a significant part of the increase in housing prices occurs in areas where housing prices likely would have fallen in the absence of immigration, like in Springfield.

Decreased immigration also reduces residential housing construction, which puts upward pressure on housing prices. Justin Wolfers tweeted this recent working paper that uses an exogenous immigration enforcement shock that was rolled out in a staggered way across US jurisdictions that decreased the supply of construction workers that then, in turn, reduced residential homebuilding and raised the quality-adjusted price of housing. That’s all well and good. Secure Communities, the immigration enforcement program used as the exogenous staggered shock, was almost surely not randomly rolled out across US jurisdictions (see Figure 2 in the paper). But that probably doesn’t matter for the purposes of this paper. As mentioned above, immigrants also make up a disproportionate share of construction workers.

Bringing the discussion back to Springfield, Ohio, where Vance started, housing prices have increased there as more Haitian migrants have moved in. According to Redfin, the median sale price of a single-family home sold there increased from $78,500 in August 2019 to $158,000 in August 2024, a 101 percent increase in nominal terms. The nationwide increase was 46 percent in nominal terms during the same period. That has made renters and first-time home buyers worse off in Springfield and homeowners, who are mostly native-born, better off.

One can slice and dice the increase in housing prices in multiple ways. Houses are bigger than they used to be but the real price per square foot is up nationwide. However, the price per square foot as a share of income is flat. The first measure is the best for evaluating Vance’s claim in the debate and it supports his point.

Is this a problem? And what does it mean for policy?

The government should not seek to increase, reduce, or stabilize housing prices in the United States. It should merely respect property rights for land use and get out of the way to allow housing supply and housing demand to equilibrate to prices that change as the world does.

“Getting out of the way” would require state and local governments to eliminate zoning and land use policies and for the federal government to leave the mortgage business, among other changes that I support. The government should liberalize immigration, and market prices should adjust. However, it is safe to say that immigrants increase housing prices in the United States.

There’s much to disagree with in Vance’s statements about immigration—their economic effects on the United States, the desirability of his policy suggestions, and his inaccurate descriptions of current policy in his quote at the beginning of this piece. I’ll yield to no one in my defense of the huge net benefits of immigration for Americans, immigrants, and foreigners overseas.

However, we must be honest and intellectually rigorous when writing about the effect of immigration in the United States. Vance is correct that immigrants drive up housing prices. You can decide whether that’s good or bad, but you should accept it as true. 

Scott Lincicome

Skeptics routinely mention “cheap t‑shirts” from abroad as an insufficient counterweight to globalization’s supposed costs. This argument, however, misunderstands the modern global economy and the many people here and abroad involved in making even the simplest of products. So, as part of Cato’s Defending Globalization project and working with a major multinational clothing retailer, we made our own t‑shirt to document its surprisingly complex supply chain, which involved dozens of people in several countries, including the United States. We also created a new website documenting the t‑shirt’s journey from idea to doorstep and letting users explore the shirt’s many stages of production. Here, for example, is the design stage, which involved people in Seoul, San Francisco, Raleigh (NC), Washington, Miami, and Guatemala. When you click on Miami, you see that someone there helped with the shirt’s 3D rendering.

Five other stages are detailed at the website, so be sure to check out (and scroll/​click through) the whole thing.

As our project has shown, the free movement of things, people, capital, and ideas—aka “globalization” —has many benefits beyond just inexpensive clothing. Still, our t‑shirt’s journey shows that even the simplest of goods today generates economic activity far beyond just its manufacture and consumption. Its label reads “Made in Guatemala,” but, in truth, the shirt was made all over the world, via a web of voluntary human interactions so complex that no label or person could hope to describe it.

Just as Leonard Reed’s famous “I, Pencil” essay first taught us decades ago, in today’s global economy, even a “simple” t‑shirt is anything but.

Jeffrey Miron

Insider trading is the purchase or sale of securities—typically stocks or bonds—by someone with material non-public information (MNPI) about these companies. MNPI is corporate news or information that has not yet been made public and could impact security prices. Some critics of insider trading argue that it violates the principle of equal opportunity because actors are trading on information available only to them, while others claim it creates inefficiencies by discouraging investment.

Neither argument is convincing. Every security transaction has a willing buyer and a willing seller. Moreover, much “insider” trading is legal, such as hedge funds trading on their own research. Insider trading is likely to make markets more efficient by incorporating MNPI into stock prices faster. According to a 1992 study, on both insider trading days and those leading up to the eventual announcement of information, pre-announcement price drift occurs. Were the market to remain static, investors would face greater risks as security prices would not reflect the true value informed by insider knowledge.

Further, non-governmental mechanisms can protect non-insiders. Amazon enforces trading windows, pre-clearance requirements, and restrictions on sharing MNPI for its employees, protecting investors from insider trading. Other companies may implement confidentiality agreements and blackout windows to prevent selective disclosure. Companies can also offer clawback provisions that reduce profits from employees’ insider trading. The government’s only regulatory measure would then be enforcing these contracts.

While most countries have strong protections against insider trading, historical evidence suggests that efficient economies do not need such regulations. Hong Kong only banned insider trading in 2003, and a 2004 study found that the Hong Kong Stock Exchange ranked tenth in efficiency out of 25 of the strongest markets from North America, Europe, and Asia. Insider trading bans thus seem unnecessary to ensure market efficiency or protect investors. Allowing market forces and private contracts to handle insider trading would foster more accurate pricing without the need for heavy government intervention.

This article appeared on Substack on September 30, 2024. Jonah Karafiol, a student at Harvard University, collaborated on this column.

Alex Nowrasteh

Immigration and Customs Enforcement (ICE) recently responded to Rep. Tony Gonzalez’s (R‑TX) question on the number of noncitizen criminals on ICE’s docket for removal (deportation) from the United States. The data in the letter have blown up in a big way during the presidential election cycle, with former President Trump highlighting the letter’s contents at recent rallies and Vice President Harris struggling to respond.

Commentators focused on the letter’s claim that ICE did not detain 13,099 migrants convicted of homicide, but they tended to misunderstand the data. Even former President Trump distorted the evidence by claiming that the criminals all entered during the Biden administration. Those commentators and former President Trump are making several untrue claims about the new ICE data. The following will correct the record.

The first untrue claim about the data is that the 13,099 non-detained migrants convicted of homicide are free to roam the United States. That is not true. Migrants incarcerated for homicide are considered “non-detained” by ICE when they are in state or federal prisons. When ICE uses the term “non-detained,” they mean not currently detained by ICE. In other words, the migrant murderers included in the letter are overwhelmingly in prison serving their sentences. After they serve their sentences, the government transfers them onto ICE’s docket for removal from the United States.

The second untrue claim is that the small number of migrant murderers who are not in prison were released willy-nilly. This claim has been commonly leveled against President Biden and DHS Secretary Mayorkas. However, releases of criminal migrants fell after Biden took office compared to the Trump administration. U.S. law requires migrants who are convicted of homicide to be detained pending their deportation, but there are exceptions. The major one is for migrants who were convicted, served their time in prison, and are unable to be deported because there is no repatriation agreement with their countries of origin or they routinely violate those agreements. The U.S. does not have agreements or has limited agreements with Iran, Cuba, China, Vietnam, Laos, and more. 

Many other countries like Venezuela periodically suspend their agreements for political reasons, or the United States government suspends deportations because of civil disorder in the destination country. The small number of non-detained migrants convicted of homicide who aren’t in prison because they served their time are mostly from one of those countries. Repatriation agreements are required because foreign governments do not have to accept their nationals back. 

The government should remove migrants convicted of violent and property offenses from the United States. Still, the small number of non-detained migrants who served their sentences and were released from prison are from countries without a repatriation agreement.

The third untrue claim is that these 13,099 migrants convicted of homicide committed their crimes recently. Those migrant criminal convictions go back over 40 years or more. Confusion over the period covered by a dataset afflicts the interpretation of other criminal datasets too. If there really were 13,099 migrants convicted for domestic homicides in 2023, then they would have accounted for about 99 percent of all homicide convictions in the US last year despite being about 4 percent of the population. That is obviously not the case because no group of people is criminally overrepresented by a factor of 25 above their share of the population. 

Even when the 13,099 homicide convictions of migrants are spread out over the entire Biden administration, migrants would have accounted for about one-third of all homicide convictions from 2021 through 2023. That’s obviously not true. The problem comes from erroneously increasing the numerator (the number of homicide convictions) for a single year and decreasing the denominator (the total number of homicide convictions in just one year) rather than spreading out the convictions and the total number of all murders over a 40-plus-year period.

Texas has the best criminal conviction data by immigration status. Illegal immigrants in Texas are about 7.1 percent of the population, but they accounted for just 5 percent of all homicide convictions in 2022. From 2013–2022, there were 472 convictions of illegal immigrants for homicide in Texas out of a total of almost 8,000 total homicide convictions. The state of Texas has the second-highest illegal immigrant population outside of California. It is not plausible that the migrants convicted of homicides were convicted for recent offenses unless illegal immigrants in Texas are radically less crime-prone than others. 

Those 13,099 migrants convicted of homicides committed their crimes over the last 40 years or longer.

The fourth untrue claim about ICE’s data is that all these migrants were convicted for homicides committed in the United States. Some of them were, but many of them were convicted of homicide in other countries and then apprehended in the United States. They should be removed, but many of them are from countries without repatriation agreements.

Immigration data in the United States can be complex. ICE and other government agencies use terms in ways that are confusing to the general public, commentators, Presidential candidates like Donald Trump, and immigration experts. The best way to interpret these data releases is to first define the terms like “non-detained” before jumping to conclusions.

More importantly, do these newly released ICE data show that illegal immigrants are more likely to be murderers than others? No, these ICE data do not show that illegal immigrants are more likely to commit homicide than native-born Americans. 

Assuming all the migrants convicted of homicide committed their crime in the US (a major assumption that biases the calculation against my research), they are responsible for about 1.6 percent of all homicides during that time while being about 3.1 percent of the population. Assuming a homicide clearance rate of 65 percent over those 40 years, they are still responsible for less than 2.5 percent of all homicides under assumptions that maximize their domestic criminality. 

In other words, the ICE data confirm that illegal immigrants account for a smaller share of convicted murderers than their share of the population would suggest.

Tad DeHaven

Democratic presidential candidate Kamala Harris released a “policy book” this week, laying out the policies she would pursue in office. It clocks in at eighty-two pages, but approximately fifty pages have text as there are lots of pictures and filler. 

Inspired by my colleague Chris Edwards’ selected word count for the president’s fiscal 2024 budget, I decided to do the same with the Harris policy document. For people who don’t have the time or interest in reading the entire Harris document (i.e., normal people), this should quickly provide the gist. (Note: I tried to omit instances where a word’s usage was unrelated to proposed policies.) 

The first word that pops out when looking at the table of contents is “lower,” as in lower costs for Americans, which Harris is promising to do for, well, just about everything. Indeed, “lower” and its related variants like “lowering” show up almost 40 times. I recommend reading my colleague Ryan Bourne’s book, The War on Prices, to understand why one should be wary of politicians pursuing such a seemingly noble cause.

The big winner is “invest” and variations like “investments,” which clocks in at almost 70 times. Sometimes, grandiose adjectives are added to describe these “investments,” like “historic” or “largest.” When politicians say “invest,” it’s almost always a euphemism for spending more money via taxes and federal debt. Sure enough, that’s the case with Harris’s policy proposals. Other words that politicians euphemistically employ so they don’t have to say “spending” are “support” and “strengthen.” The former (and its variants) clocks in at almost 30 times, the latter more than 20. 

Some words and phrases tellingly don’t make an appearance. Searching for things like “lower spending,” “cutting spending,” and “reduce spending” (and variations of) turns up zero results. 

Interestingly, “spending cuts” make one appearance. On page 9 I found this: 

The Wall Street Journal agrees: ‘Vice President Harris, the Democratic nominee and GOP rival Donald Trump aren’t the same on fiscal policy. She has outlined or endorsed enough fiscal measures—tax increases or spending cuts—to plausibly pay for much of her agenda. He has not.’ 

The footnote shows that the quote comes from a September article written by Wall Street Journal reporter Richard Rubin titled, “Federal Debt Is Soaring. Here’s Why Trump and Harris Aren’t Talking About It.” It’s not exactly a flattering piece on the vice president, and I’m not even sure what spending cuts Rubin is talking about other than proposing to save on Medicare prescription drug costs.

In sum, the word count indicates more spending, more debt, and federal meddling with prices under a Harris administration.
 

Colin Grabow

Some Americans may be surprised to learn (or perhaps not, given trillion-dollar budget deficits) that a federal law requires the government to pay inflated prices for many of the products it buys. Passed in 1933, the Buy American Act (BAA) grants, with some exceptions, a significant price preference to US-produced goods and materials in federal procurements. By tilting the playing field against less expensive imported products, the law means the government must spend more money, and purchase fewer goods, or some combination thereof. 

While government has never been a byword for efficiency, such protectionism makes it even less so.

Although the flaws of BAA protectionism have long been recognized, quantifying its damage is no easy task. That, however, hasn’t stopped a group of economists from taking a crack. In a recent paper, four economists attempted to calculate the law’s cost by constructing a dataset of federal purchases and then comparing the share accounted for by foreign firms to private sector consumption of imports.

Their finding: Buy American requirements have created up to 100,000 jobs at a cost of $111,500-$137,700 jobs. With production and nonsupervisory employees in goods-producing jobs averaging about $65,000 annually in wages, that’s hardly a stellar return on investment.

Even worse, this cost per job is likely to increase. While manufactured items have traditionally been required to have at least 50 percent of their materials of US origin to be considered domestic, that’s set to rise to 75 percent by 2029. The economists project this tightening of restrictions will create a further 41,300 jobs at a cost of $154,000 to $237,800 each.

For perspective, these 141,300 current and future positions (maximum) created by BAA protectionism amount to just 1.1 percent of the country’s nearly 13 million manufacturing jobs. Furthermore, such costly job creation comes amid concerns over a national labor shortage (including by manufacturers).

Not surprisingly, the paper’s authors found “scant evidence of the use of Buy American rules as an effective industrial policy.”

And the Buy American Act isn’t the only law with domestic content requirements on the books. 

The Buy America Act—included as part of the Surface Transportation Act of 1978 and since expanded by the Build America, Buy America Act passed in 2021—requires that federally funded infrastructure projects use domestically produced iron, steel, manufactured products, and construction materials. The Berry and Kissell Amendments, meanwhile, require the Departments of Defense and Homeland Security to purchase certain items that are entirely domestic in origin.

Given their similarity to the BAA, there’s good reason to think these laws produce similarly meager results in exchange for outsized costs—many of which aren’t easy to capture.

Buy America requirements, for example, can lead to delays on infrastructure projects (with attendant impacts on cost) as time is spent finding materials with sufficient domestic content or jumping through various hoops to obtain a waiver of the law. The Berry Amendment, meanwhile, restricts servicemembers’ selection in finding comfortable running shoes—how does one calculate the cost of uncomfortable footwear?

Yet another cost of such protectionism is its role in undermining international support for a free and open trading system. If the United States won’t follow the path of free trade, why should others? When Americans embrace protectionism, they shouldn’t be surprised when their trading partners follow suit (indeed, some BAA supporters advocated the measure’s 1933 adoption to counter a cotemporaneous “Buy British” campaign).

Economic theory holds that wealth and prosperity are maximized by allowing goods and services to be purchased from their most efficient producers. By preventing such free exchange, the Buy American Act and related laws unnecessarily inflate costs for little gain. In other words, this latest study about the BAA’s costs only confirms economic common sense: forcing the country to pay more for products is an act of self-impoverishment.

The Buy American Act’s over ninety-year existence has provided ample time to study and demonstrate the counterproductive effects of such protectionism. Policymakers looking to advance the country’s fiscal health, good governance, and sound trade policy would be well advised to incorporate the long-overdue demise of the BAA—as well as related laws—into their agenda.

Daniel Raisbeck

Venezuela’s 75-year-old president-elect, Edmundo González, fled to Spain on September 8, soon after the Chavista regime issued an arrest warrant against him. González’s exile is the product of the regime’s reign of terror, unleashed since autocrat Nicolás Maduro lost the July 28 election by a 67-to-30-percent margin. Six Latin American countries recognize González’s legitimacy, while the United States acknowledges his electoral victory.

After the election, González initially took refuge in the Dutch embassy in Caracas and then went to the Spanish embassy, where he was coerced into accepting his removal from Venezuela. Under threat, González signed a letter, drafted by the regime’s officials, in which he accepted the Venezuelan Supreme Court’s decision to proclaim Maduro as the election’s winner. González’s subsequent exile appeared to be a significant Chavista victory.

The regime had been under exceptional pressure since opposition leader María Corina Machado, who was banned from running against Maduro, acted to prevent the electoral authorities from getting away with fraud on a colossal scale. Machado’s team of electoral witnesses got a hold of the tallies at over 20,000 voting centers, more than 80 percent of the total, and quickly published them on a website. The data specifies the exact location of each voting center and includes QR codes that give access to all scanned tallies, each signed by a representative of the National Electoral Council. The regime, meanwhile, has yet to publish any evidence to back its preposterous claim of a Maduro victory.

The day after the election massive protests arose, mostly in poor, traditionally Chavista strongholds. Disgruntled Venezuelans even toppled statues of Hugo Chávez himself. For some, the regime’s fall seemed nigh. Things look different now. Maduro and his accomplices are clinging to power, and the opposition must work to prove it can maintain its momentum. The regime followed a series of steps that it has used often before. So often, in fact, that they could be listed in a step-by-step manual for the contemporary tyrant.

Repress Large Protests

Prior to the election, Maduro warned that an opposition victory would lead to a bloodbath. He kept his word. The regime’s official and informal forces have killed at least 24 people. More than 2,000 protesters have been detained, Maduro claims. He also announced the creation of two “maximum security prisons” that will “re-educate” political opponents. Arbitrarily, the regime has arrested electoral witnesses and at least four journalists. Security forces are canceling citizens’ passports and seizing their mobile telephones to search for anti-regime messages or material, which can land someone in jail. Maduro has attacked WhatsApp, the popular messaging service, and blocked Twitter / X, the social media site, accusing its owner, Elon Musk, of violating Venezuelan law by inciting hatred. Venezuela’s descent into a police state is now complete.

Yet the brutality should surprise nobody. The regime has used the same methods in the past to quell protests and discourage mass gatherings that demand political freedom. For instance, in 2017, as an uprising erupted when Maduro nullified the power of the National Assembly, which the opposition controlled since 2015, the regime proved its willingness to use protestors as cannon fodder. It left 163 dead in a matter of weeks. The regime also arrested over 5,000 citizens, according to independent observers. Soon, the protests died down. Similarly, the protests that erupted after the July 2024 elections have become smaller as time passes and repression intensifies. The Chavista state’s methods are ruthless yet effective in terms of removing protesters from the streets. 

Arrest Opposition Leaders, Manipulate Hostages

Another common Chavista tactic of intimidation has been the arbitrary arrest of pro-freedom activists and leading opposition figures. According to Foro Penal, an independent research institute, there were 1,793 political prisoners in Venezuela as of September 2, 2024.

High-profile opponents of Chavismo who have been incarcerated for years include Leopoldo López, a party leader and local mayor in Caracas, and former Caracas Mayor Antonio Ledezma, who spent two months in jail before being granted house arrest for health reasons. Both managed to flee Venezuela eventually.

Since the July 28 election, the regime has arrested Freddy Superlano, a leading figure in the Voluntad Popular political party, as well as former National Assembly Representatives Williams Dávila and Américo De Grazia. On August 7, the Chavista regime’s agents seized María Oropeza, a local coordinator for Machado’s Vente Venezuela party in the state of Portuguesa. Oropeza livestreamed her arbitrary arrest to thousands of her followers on Instagram.

Naturally, the regime’s harassment is not limited to opposition leaders themselves. It is also directed at their families. Tellingly, the Chavista authorities did not allow one of Edmundo González’s daughters to travel with her father to Spain. Maduro and his accomplices will hope that, with González’s child as a de facto hostage, the president-elect will think twice before making a vigorous case for his legitimacy from abroad.

Lean on Cuba

Many liberal democracies in Latin America, most notably Argentina and Uruguay, have condemned Maduro’s latest power grab. But the regime still has the full support of the region’s unabashed dictatorships: Nicaragua and Cuba.

In the case of the communist regime in Havana, many commentators mistakenly assume that the Díaz Canel / Raúl Castro autocracy is merely one of Maduro’s many unsavory allies. These include Russia, China, North Korea, Iran, and the rest of the world’s rogue regimes. In reality, Havana’s state apparatus absorbed that of Venezuela long ago. As Chávez himself proclaimed in 2007, Cuba and Venezuela “operate as a single nation.” Thus, for the Cuban tyranny, keeping Maduro in power is a matter of survival.

After all, as a politician, Maduro himself is a Cuban creation. As author Maria Werlau highlights in her prescient book, Cuba’s Intervention in Venezuela: A Strategic Invasion with Global Implications, Maduro, who joined violent left-wing groups as a teenager, received extensive political training in Havana as a 24-year-old under the auspices of the Venezuelan and Cuban communist parties. Following Chávez’s failed coup and subsequent arrest in 1992, Maduro acted as a link between the imprisoned Chávez and the Cuban regime. Two decades later, when Chávez chose Maduro as his vice president and successor in 2012, it was under Cuban pressure. There are even reports, Werlau writes, that the Cubans preferred to have Maduro at the helm rather than Chávez, regarding the former as a more reliable and malleable underling.

This is revealing given that Chávez was such a loyal subject that, by 2011, Venezuela was covering over 60 percent of Cuba’s energy needs, with average oil exports of over 100,000 barrels per day to the island at heavily discounted prices.

Venezuela still subsidizes Cuba’s energy, albeit at a far lower rate than before given the socialist-induced collapse of the national oil industry. In exchange, Cuba exported to Venezuela its unique brand of political violence and repression, perfected since 1959 under the Castro brothers’ unmatched know-how.

Survivors of the regime’s torture chambers in Caracas have recounted the active involvement of Cuban agents. Just days before the 2024 election, the Financial Times writes, “local media reported the arrival of four planeloads of Cuban special forces… a clear signal that the government was braced for mass protests”—a clear signal indeed.

Over the years, a certain pattern has emerged in Venezuela. The opposition applies pressure against Maduro, the regime seems to wobble, and forthwith Western academics begin to evoke Latin America’s fallen military regimes of the 1980’s, or the Eastern European nations that shook off the Soviet yoke in the early 1990’s, as clear precursors to what is about to happen in Venezuela. But Cuba’s security apparatus always has a different outcome in mind, and it constantly prevails thanks to its methods and experience.

Cuba was one of the few communist regimes that did survive the Soviet Union’s demise. As recently as 2021, the Cuban regime demonstrated its own savagery in putting down any rare instance of mass dissent on home soil with state violence. Its commitment to keeping power at all costs—both in Cuba itself and in Venezuela—is unquestionable.

Cuba also outlasted all of Latin America’s “right-wing” military dictatorships of the late 20th century, in large part because Fidel Castro was far more ruthless than the generals of Brazil and the Southern Cone, none of whom was a committed Marxist revolutionary. It is widely known that over 3,000 Chileans were either killed or disappeared under Augusto Pinochet; yet 7,062 Cubans were killed or disappeared at the regime’s hands under Fidel Castro, according to the research center Cuba Archive. The figure includes over 3,000 executions, but not the tens of thousands who have died at sea while fleeing the regime.

Whereas Chile eventually returned to democracy and became Latin America’s richest country, Cuba remains mired in tyranny and socialist squalor. Plus, Pinochet, unlike the Castros or Maduro, took part in a free election—the 1988 referendum—accepted the adverse result, and stepped down in 1990, thus putting an end to 16 years of military rule. By contrast, Cubans can now lament over six-and-a-half decades under communism.

Venezuelans have already endured the Chávez-Maduro regime for over a quarter century. We know for certain that around 70 percent of those inside the country want to do so no longer. If the ca. 8 million people who have left the country in recent years had been allowed to vote, the anti-regime block would have been even larger. But the Cuban security apparatus will do everything in its power to keep Venezuela subdued. 

Count on “Democratic” Leftists Abroad

Also pernicious is the tepid tolerance of Maduro’s left-wing allies in Brazil, Mexico, and Colombia, which hold geopolitical sway as the region’s largest nations population-wise. These countries are also viewed as liberal democracies that seemed to have left the days of Latin American autocracy far behind. And yet their current leaders—Brazil’s Lula Da Silva, Mexico’s Andrés Manuel López Obrador, and Colombia’s Gustavo Petro—have aided Maduro in their current role as supposed intermediaries between the opposition and the autocrat.

On August 15, Da Silva suggested that Maduro should either form a coalition government with opposition figures or hold a new election, a farcical proposal by any means. By insisting that he awaits the regime’s proof of its alleged victory—as do López Obrador and Petro—and his lukewarm expressions of “concern” for Venezuelan democracy, Da Silva bought precious time for Maduro while the world’s attention shifted elsewhere.

The persecution of González merely led the Brazilian and Colombian governments to issue a statement in which they expressed “deep concern” over the sentence. Mexico abstained from commenting.

Beyond the diplomatic niceties, the alarming fact is that each of these countries is currently on an authoritarian path of its own. In Mexico, López Obrador, who is in his last full month in office, is using a recently obtained congressional supermajority to attempt a political takeover of the independent electoral system and the judiciary branch, thus threatening the separation of powers and the very fabric of the USMCA. As economist Isaac Katz and others have warned, López’s constitutional amendments, if successful, would create an autocratic system, with the executive in control of all branches of government.

In Brazil, the state apparatus has banned X (formerly Twitter), the only country in the region to do so besides Maduro’s Venezuela. The ban, which includes hefty fines for Brazilians who access X via VPN’s (virtual private networks), came after Supreme Court Justice Alexandre de Moraes pressured X and other social media companies to “deplatform” opposition politicians and journalists who are critical of the current government. Da Silva is the main beneficiary of such a frontal attack on freedom of speech, especially in the wake of the Lava Jato corruption scandal, in which Da Silva’s Workers’ Party played a central role, for which it deserves much scrutiny. 

In Colombia, Petro, a long-time ally of both Chávez and Maduro, has been waging a dangerous, rhetorical campaign against the current constitution, arguing that it is irredeemably corrupt and illegitimate. True power, Petro says, lies with “the people,” whom he claims to represent despite approval levels of 30 percent or less. Hence his reckless suggestion that he will summon an extralegal constitutional assembly, bypassing Congress, the courts, and even the electorate, to introduce a new, fully statist constitution with a radical environmentalist, anti-free-market ethos.

The whiff of authoritarianism in Mexico, Brazil, and Colombia should raise suspicions about their governments’ alleged concern for rules-based, democratic institutions in Venezuela and elsewhere. The Venezuelan opposition would do well to realize that Da Silva, Petro, and López Obrador do not have the interests of Venezuelan democracy at heart. Nor are they honest brokers vis-à-vis Maduro.

Blame External Enemies in the Rich North

Hugo Chávez constantly told his supporters that the United States would invade Venezuela; he even forced the civilian population in certain areas to carry out military exercises in preparation for the Marines’ imminent arrival. Stirring fear helped Chávez cement his arbitrary rule at home and win support abroad; his tirades against George W. Bush, whom he called “Mr. Danger,” won him the fawning admiration of left-wing academics and celebrities in the West. His anti-Yankee rhetoric also served to portray the opposition’s leaders as treasonous imperial lackeys or, in Chávez’s parlance, pitiyanquis. 

Maduro has applied the same tactic, although the latest target of his broadsides is not the sitting U.S. president, but rather Elon Musk. The tech entrepreneur, Maduro alleges, was behind a cyberattack against the National Electoral Council that helped the opposition sabotage the vote-counting process and claim victory. Maduro even published a cartoon video in which he appears as a superhero called “Super Moustache,” who, with a Bible in hand, defeats a diabolical Musk as he plots—with a gringo accent in Spanish—to steal Venezuela’s mineral wealth. 

Maduro and Chávez’s anti-imperialist propaganda is crude. If it resonates at all, it is because it revives the old Latin American mindset expressed most effectively by Uruguayan writer José Enrique Rodó. In “Ariel,” an essay published in 1900, Rodó argued that Latin America, though poor and militarily weak, was nonetheless superior in spiritual and aesthetic terms to the purely materialistic, utilitarian, and money-obsessed United States, whose irredeemable philistinism stemmed from the lack of a hereditary aristocracy. Hence the Shakespearean dichotomy between a pristine Latin American Ariel and the monstrous, Anglo-Protestant Caliban to the north.

Ultimately, Rodó glorified poverty and denounced the bourgeois values that, beginning in the 18th century, led to the world’s “Great Enrichment,” as discussed by Cato scholar Deirdre McCloskey. The Ariel vs. Caliban tension thus echoed throughout the last century of Latin American history, most notably in the rise of the “romantic,” anti-capitalist revolutionary figures of Che Guevara and Fidel Castro, Chávez’s ideological predecessors. Not in vain, since 1959 the Cuban Revolution has touted the “dignity” that Castro allegedly restored to Cuba by antagonizing the United States, but only at the cost of denying Cubans the right to life, liberty, and property. “Dignity” is a term that Maduro often uses himself. 

“Negotiate,” Delay, Tarry

In 2014, protests erupted over Venezuela’s accelerating economic collapse and the regime’s violence against students. The opposition, then led by former Miranda Governor Henrique Capriles (who claimed that Chávez was a “false socialist”), accepted the regime’s offer of negotiations, which were mediated by both the Vatican and UNASUR, a grouping of mostly left-wing governments set up by Chávez. Though hailed as “historic,” the talks did nothing to make the regime any less vicious, its socialism any less harmful, or the electoral system any more transparent. They did help Maduro to appear as conciliatory, with a “negotiated settlement” as a plausible option to bring about an eventual transition of power. Believing this fiction, opposition figures have entered futile talks with the regime time and again.

In 2016, the Vatican mediated a series of talks once more, with opposition leaders walking out of a third round of negotiations since they correctly perceived an utter lack of progress. As Bloomberg wrote at the time:

“Previous rounds of negotiations showed promise as the opposition agreed to call off protests and the government released a handful of jailed activists. Since then, talks have stalled as the clock ticks on the opposition’s drive to force a referendum to remove Maduro before the end of the year.”

Alas, the clock ticked further and the referendum against Maduro never came. But “negotiating” allowed the regime to diffuse the seething discontent on the streets, thus strengthening its grip on power.

The opposition has fallen into a similar trap—if not an identical one—often since then. There were the failed talks of 2017, held in the Dominican Republic at the behest of José Luis Rodríguez Zapatero, a former socialist prime minister of Spain who often acts on the Maduro regime’s behalf. For its part, the Norwegian government organized talks in 2019 between the regime and the “interim government” of Juan Guaidó, whom the United States and numerous other democracies recognized as Venezuela’s legitimate president since he headed the National Assembly elected in 2015. Again, the talks led the opposition nowhere. As The Economist wrote last week, Guaidó “went into exile in 2023 and now lives in relative obscurity in Florida.”

In 2021, Norway continued “assisting the parties in Venezuela in finding a solution to the country’s conflict,” as the Ministry of Foreign Affairs website states. A “Memorandum of Understanding” declared Norway as the facilitator on new negotiations, with the Netherlands and Russia as accompanying countries and Mexico as the host nation. After a much-touted launch, numerous rounds, forums, a suspension of the negotiations, a resumption of the talks in Barbados instead of Mexico, and other “important milestones,” a deal was reached in October 2023. At the time, one observer wrote:

“Venezuela’s government and the opposition have reached an agreement laying the groundwork for a competitive presidential election in 2024 (….) (The parties) agreed on 17 October to level the playing field through electoral reforms ahead of the 2024 polls. The deal marks a return to the path of formal negotiations between the sides and creates hope that the forthcoming election could genuinely be competitive…” 

The United States did not take part in the deal but the State Department greeted its signing, calling it “a concrete step toward the resolution of Venezuela’s political, economic, and humanitarian crisis.” Simultaneously, the Treasury Department’s Office of Foreign Assets Control relaxed a series of Trump-era sanctions on the Maduro regime.

We now know, of course, how level the playing field turned out to be in the July 28 elections, prior to which the Maduro regime banned Machado from running and even her initially chosen replacement, an octogenarian academic named Corina Yoris. And yet weeks ago, when President-elect Edmundo González was still hiding from the regime’s forces in Caracas, experts such as María Angela Holguín, Colombia’s former foreign minister, were calling for “a credible and realistic negotiation process with the accompaniment of guarantor countries.”

In practice, negotiating with Maduro flips Otto von Bismarck’s maxim on its head, whereby one should treat gentlemen with extra courtesy and pirates with double the belligerence. It is rather like meeting a murderous Corsair on the high seas, dagger clenched between his teeth and intent on slashing your throat, only to graciously invite him aboard to splice the main brace.

Divide the Opposition

By luring his rivals into lengthy and futile negotiations, Maduro gains the additional advantage of dividing the opposition. The global media then stresses the split between moderates—i.e., those who take Maduro’s bait—and so-called hardliners.

The division allows the regime to cover its usurpation with the thinnest veil of legitimacy. For instance, in 2017, when Maduro created a National Constituent Assembly to bypass the legitimate, opposition-controlled National Assembly, four opposition governors proceeded to recognize the fraudulent new body. Other opposition leaders refused to do so, but still negotiated with the regime in the Dominican Republic.

By contrast, Machado’s greatest political virtue—and the reason she became the undisputed leader of the opposition some years ago—has been her “hardline” (or, rather, realistic) stance vis-à-vis negotiations with Maduro, which she correctly regards as a mere dilatory tactic by which the regime tarries, delays, and hoodwinks the opposition, thus buying time to perpetuate its tyranny. 

Still, in recent weeks the regime has reacted according to script, portraying González’s Spanish exile as proof that the opposition is yet again divided. Diosdado Cabello, Maduro’s main henchman, claimed that González told nobody in the opposition of his imminent departure, as if it had been a betrayal of Machado’s leadership. González later clarified that he was strong-armed into his sudden departure. The opposition can expect renewed attempts by Maduro’s regime to discredit and divide its current leadership. 

What Options Are Left?

It is evident that the Cuban model will not allow the Maduro regime to fall through peaceful protests or internal rebellion. Serious political opposition is banned, and negotiating with the regime is a dead end. Maduro has sufficient support abroad—even from nominally democratic powers in the region—to withstand the diplomatic pressure of liberal democratic governments, which is mostly symbolic in the best of cases. The conclusion must be that only the force of arms can topple the regime. Yet the hope of a deus ex machina in the form of a US intervention—such as Operation Just Cause against Panama’s Manuel Noriega in 1989–1990—is remote if not fanciful.

During his time in office, Donald Trump’s foreign policy was non-interventionist, a reaction to the debacles in Iraq and Afghanistan. It is also doubtful that Trump would start a potential second presidency by sending the Marines to Caracas. Nor are Joe Biden and Kamala Harris likely to do so. There is no popular support for a military intervention in Venezuela, which is thus untenable politically.

Beyond the politics, there is no reason for American servicemen to risk their lives for the sake of Venezuelan democracy, with the US taxpayer footing the bill. After all, Venezuela poses no imminent military threat to the United States. Nor is there a need to lend credence to Maduro’s whimsical claims of a US government push to oust him from power, a desperate attempt to conjure nationalist sympathies.

What options are then left to the Venezuelan opposition?

In a recent editorial about Venezuela, The Washington Post wrote about “the crying need for fresh thinking about how to fight dictatorship in all the ways it is metastasizing and expanding.” Since summits, news releases, and sanctions have proven ineffective, the Post added, “it is time to start looking for better — and more effective — answers: for a new democracy playbook.”

This is correct. In Venezuela, a new playbook should involve looking to history—including the history of the country’s own independence—to find ways to restore a democratic republic. 

Michael Chapman

During a conference in Buenos Aries sponsored by the Cato Institute and Libertad y Progreso, Argentine President Javier Milei explained why socialism always fails, why big government (the “State”) is criminal, why Argentina is now on the side of the private sector and those who innovate, and why he is a libertarian who believes in freedom.

“My friends, I’m a liberal libertarian” and “I believe in freedom,” said Milei in explaining his rejection of the “socialist and controlling policies” of the politicians who ran Argentina’s economy into the ground over the last 100 years. “I’m not going to do” what they did, he added. “I don’t believe that politicians are gods.”

Milei gave his speech on June 12, following a live interview on X between entrepreneur Elon Musk and Cato Senior Fellow Johan Norberg at the event. The two-day conference (June 11–12), attended by up to 1,000 people, was entitled “The Rebirth of Liberty in Argentina and Beyond.”

Milei, the most outspoken and orthodox libertarian elected to the presidency of a major country, took office in December 2023. Although his critics and much of the mainstream media have tried to characterize him as an impractical zealot—El Loco, the madman—so far Milei has implemented a good portion of his agenda. In turn, Argentina’s economy and quality of life are slowly improving.

For instance, since taking office, Milei has slashed government spending up to 30%, fired more than 25,000 federal workers, reduced federal agencies, frozen public works projects, lowered a major import tariff, maintained budget surpluses every month, reduced monthly inflation to 4.2% (August 2024) from 25% (December 2023), and is pushing for currency competition among the peso, US dollar, and other currencies.

It is not all roses, however, as he explained in his speech because his administration is fighting against 100 years of government intervention. This soft socialism has corrupted the government, the courts, the economy, the culture, the schools, and the people.

“We have governed these first six months of the year uphill, managing the worst inheritance in history and without the legislative power or instruments that all governments before ours have had,” said Milei. “Politics, since before we took power, has put sticks in our wheels. They put sticks in our wheel by tearing up the balance sheet of the central bank. And they put sticks in our wheel every single day that we try to govern.”

“But you know what?” he said. “All this is proving that the ideas of freedom are stronger because, despite the foul political caste, we’re doing right. We’re beating inflation.”

“There is no doubt that Argentina is facing a turning point,” he added. “[W]e can return to the path of freedom that we should never have wandered from and return to the values and ideas that once made Argentina a global power, resume the defense of life, freedom, and private property, and aspire to be a country at the level of our identity and our history once again.”

Between 1860 and 1930, Argentina “grew more rapidly than the United States, Canada, Australia, or Brazil” in terms of “population, total income, and per capita income,” according to Agriculture and Economic Growth in Argentina, 1913–84. By 1913, Argentina was among “the 10 wealthiest countries in the world,” with a per capita income similar to Switzerland, the Latin American Economic Review reported. 

That changed with a military takeover in 1930, which introduced statist, big government policies tainted by socialist thinking. Government intervention and economic malaise have characterized Argentina for the last 100 years. Milei is trying to reintroduce the libertarian policies that once made Argentina great.

“[I]n Argentina we are rediscovering ideas that made the modern Western world the greatest civilizing and economic development achievement in human history,” said Milei. “We want to be a haven for those who defend and live these ideas throughout the entire planet.”

Today, “Argentina is on the private sector side, not the state,” he said. “On the side of those who work, those who trade, those who strive; on the side of those who take risks, those who invest, who innovate.”

“As developed countries become bogged down in unnecessary regulations and obligations, we remove the regulations that have bound our people for decades,” said Milei, “and we invite capital from around the world to cooperate with Argentina because we understand free economic activity as the most natural act of cooperation of the human race.”

Milei also explained how big-government bureaucrats in Argentina and other countries corrupt the economy with socialist policies. “As Hayek said, every time the state intervenes, it generates a worse result than if it hadn’t intruded,” said Milei. “Why? Because state intervention causes distortions in the pricing system. It prevents correct economic calculation and consequently nullifies what Hayek called the correct functioning of the market as a discovery process.”

With capitalism and free pricing you have better “information about quantities of goods or services that are wanted and at what price,” said Milei. Collectivism, however, inhibits the discovery process and “binds the entrepreneur’s hands and impedes them from producing better goods and offering better services at a better price.”

Part of the reason why the Soviet Union collapsed and why Cuba and Venezuela are economic basket cases today is because the government tries to control prices instead of allowing the marketplace and “discovery process” to operate freely. (In the US, both Donald Trump and Kamala Harris have proposed price controls and import tariffs, destructive policies that hurt American consumers.)

Where economic freedom is allowed, there is more political freedom, said Milei. “[F]reer countries have a GDP per capita 12 times larger than oppressed countries. Even the inhabitants of the lowest decile of the free system live better than 90% of the population in the repressed countries. That is, free enterprise capitalism is superior to socialism even on the main task that socialism supposedly does better, which is to help the less fortunate.”

Social justice, charity for “those who have the least,” said Milei, “it is good, but if you do it with your own pocket [money]” and not with money that belongs to someone else. When the state intervenes in the name of social welfare, it confiscates “assets from a private person, which are theirs by natural right, which means that the state is a criminal and violent organization, as it is funded with a coercive source of income called taxes.”

Echoing Hayek, Milei said the more the state intervenes “the less free the markets are and the worse they work, producing misery instead of wealth.”

In closing, he said, “If we manage to remove the state enough for society to flourish, we will have succeeded because free economic activity will lead to benefits for all of society. If we achieve this, it won’t be a triumph of ours but of society as a whole, which will have left behind 100 years of statism and decadence. Therefore, as we travel the road to that new Argentina, I thank you all for being here. God bless the Argentines and may the force of Heaven be with us.

“Long live freedom, damn it! Long live freedom, damn it! Long live freedom, damn it! Thank you.”

To watch the entire speech, click here. 

Colleen Hroncich

As a mom with six daughters, Sharon Sedlar saw firsthand that one size doesn’t fit all when it comes to education. “At first, my children attended a private elementary school, then we later switched to our district school,” she says. “My older daughters graduated from our district school and greatly benefited from it. But my youngest had a traumatic experience in second grade there, which took her from being a bright, happy child who loved school to one who begged to stay home. I tried working with the school for months but eventually had to remove her and enroll her in a cyber school. It’s made a world of difference for her.”

Seeing how her own children benefited from having educational options—and realizing many families didn’t know these options existed—inspired Sharon to create Pennsylvania Families for Education Choice. “I didn’t want other children to be trapped in a school that wasn’t working for them the way my daughter was for nearly an entire school year,” she explains. “I wanted to make sure families knew what their current options were. And I wanted to help expand education choice in Pennsylvania.”

Sharon is clear that she embraces all education models and just wants to ensure all children have access to an education that works for them. The PaFEC site has resources that describe how the public school system works and the education options available in Pennsylvania. It explains how to apply for the state’s private school choice programs, the Educational Improvement Tax Credit and the Opportunity Scholarship Tax Credit.

Through the group’s website, social media platforms, and school choice fairs, Sharon has reached thousands of parents. She coaches parents to help them become advocates for their children at school and with lawmakers. Having experienced the difficulty of navigating the special education process for her daughters, Sharon often attends individualized education plan meetings with parents who are trying to get services for their children with special needs.

“I have assisted countless parents understand their education options and make choices for their children. As part of that, I’ve heard hundreds of heartbreaking and inspiring stories,” she says. “Parents are fighting to make sure their children receive a quality education. But sometimes these fights take years—or, worse, are never really resolved. This can have devastating results for the children involved.” Sharon hopes her efforts to ensure families have access to a variety of educational options will help them avoid having to battle their local district.

Over time, Sharon has added new resources to PaFEC’s offerings. There’s an educator services directory to help families find private schools, homeschool support, and more. Regional parent volunteers—of which I am one—are spread throughout the state to give parents a local support person. There’s even an “Edupreneur Center” to help parents and teachers who want to start a microschool or other unconventional learning option. 

PaFEC has been a true family affair for the Sedlars. Sharon’s daughters created the website, learned how to use bulk email programs to distribute her newsletter, helped her with social media, and have supported the organization in myriad ways since she founded it in 2021. And the whole clan pitches in when she hosts school choice fairs and other events. They’ll be out in full force this weekend for the Pennsylvania Families for Education Choice K‑12 Education Freedom Showcase in Pittsburgh.

While founding a statewide nonprofit to support education has been a lot of work, Sharon says the rewards have been priceless. “Parents and other caregivers often send me photos of the children who have been helped by our efforts,” she says. “Seeing their joyful faces and knowing they’re finally in an educational environment that works for them makes it all worthwhile.”

What started as one mom’s effort to support her own children has blossomed into an organization that serves as a resource for all Pennsylvania students. Sharon is amazed by this unexpected journey she’s been on in the last three years. “What we do today will hopefully help to shape and improve education for generations to come,” she says.

Peter Van Doren

The Committee on Health, Education, Labor, and Pensions, chaired by Senator Bernie Sanders (I‑VT), held a hearing on Tuesday in which he asked the CEO of Novo Nordisk why its diabetes and weight loss drugs, Ozempic and Wegovy, cost much less in Europe than in the United States. Senator Sanders reflected popular sentiment when he said, “Treat the American people the same way that you treat people all over the world. Stop ripping us off.”

Why do drug prices vary across countries? An article in the Fall issue of Regulation offers some insight from economists.

The knowledge embodied in pharmaceuticals is a global public good. The incentives are for all countries to avoid the fixed costs of drug development and clinical trials and pay only the marginal costs of producing a drug. The demand for health care increases with income and population, so the worst-case possibility is that the richest and largest country—the US—pays all the fixed costs of drug development, and all other countries free ride and pay only the marginal costs.

The authors gathered data on sales revenue and compared the revenue to estimates of marginal cost to calculate each country’s contribution to the fixed costs of drug development. They conclude that a country’s GDP explains 83 percent of the variation in contributions across countries and the effect of income is greater than proportional. A country with a 100 percent higher GDP contributes 129 percent more to pharmaceutical R&D. 

So, the U.S. does contribute disproportionately to drug development costs. The rest of the world’s contribution is not zero but is less than would be predicted by income and population alone.

The authors conclude: “Our findings indicate prospective gains from international cooperation—from formal or informal international agreements among high-income countries. If other wealthy countries agreed to contribute more to the global public good, they, and the world, would benefit.”