based in extractive regimes in two senses. First, inequities
persisting for centuries under extractive regimes make
voters in newly emerging democracies vote in favor of
politicians with extreme policies. It is not that Argentinians
are just naïve and think that Juan Perón or the more recent
Perónist politicians such as Menem or the Kirchners are
selfless and looking out for their interests, or that
Venezuelans see their salvation in Chávez. Instead, many
Argentinians and Venezuelans recognize that all other
politicians and parties have for so long failed to give them
voice, to provide them with the most basic public services,
such as roads and education, and to protect them from
exploitation by local elites. So many Venezuelans today
support the policies that Chávez is adopting even if these
come with corruption and waste in the same way that many
Argentinians supported Perón’s policies in the 1940s and
1970s. Second, it is again the underlying extractive
institutions that make politics so attractive to, and so
biased in favor of, strongmen such as Perón and Chávez,
rather than an effective party system producing socially
desirable alternatives. Perón, Chávez, and dozens of other
strongmen in Latin America are just another facet of the
iron law of oligarchy, and as the name suggests, the roots
of this iron law lies in the underlying elite-controlled
regimes.
T HE N EW A BSOLUTISM
In November 2009, the government of North Korea
implemented what economists call a currency reform.
Severe bouts of inflation are often the reasons for such
reforms. In France in January 1960, a currency reform
introduced a new franc that was equal to 100 of the existing
francs. Old francs continued in circulation and people even
quoted prices in them as the change to the new francs was
gradually made. Finally, old francs ceased to be legal
tender in January 2002, when France introduced the euro.
The North Korean reform looked similar on the face of it.
Like the French in 1960, the North Korean government
decided to take two zeros off the currency. One hundred old
wons, the currency of North Korea, were to be worth one
new won. Individuals were allowed to come forward to