The AZIMA panel, from left: moderator Evan Wyloge of the Arizona Capitol Times, Democrat Kevin Spidel, and Republican Jeremy Vaught.

If you thought social media was all fun and games and engaging with friends, look out!

The political world is on to it and is looking for ways to manipulate – ahem, inform — you, just as they have with traditional media.

Two well-known political consultants in Arizona – Republican Jeremy Vaught, who is working on the McCain re-election campaign, and Kevin Spidel, a Democrat volunteering for the Goddard for Governor team – shared their perspectives during the Sept. 14 meeting of AZIMA at the Scottsdale Hilton. Evan Wyloge, new-media specialist for the Arizona Capitol Times, served as moderator of the hour-long chat.

Vaught and Spidel are rivals but friends, and the evening involved good-natured jabs. They both agree with the notion, articulated by Vaught, that social media teams “don’t create the message, we describe it.”

“The difference between working with companies and working with politicians is that, in business, opposing companies aren’t showing up at your events and filming you and actively bashing you,” Vaught said. “There’s a lot of messaging going on that may not be your messaging.”

Spidel pointed out that such actions are part of the process.

“We want to maximize exposure to blunders,” he said.

Spidel advocates “rocking the data”: looking at voter files, assessing trending data and identifying sentiments.

Political consultants are now accessing tons of marketing data, just as corporations do, he said. They are targeting segments of the population.

“We can identify ‘cat lovers’ and create a direct-mail campaign,” Spidel said. “There’s a tool – Aristotle 360 – that can provide a social footprint for each individual.”

Politicians are using all of this information to hone appeals for contributions.

They can match a $500 donor to a friend or neighbor and then use the donor’s name in a phone call soliciting a contribution, Spidel said.

Campaigns are also spending a lot of time “listening” – following what bloggers are saying about the candidate. They look to influence bloggers who are passionate about an issue.

Vaught shared that Sen. John McCain stops by his desk every day to hear what’s being said. He then gave a dead-on impression of the 74-year-old Arizona senator checking in on the social media team.

Politicians are using the same social media tools to attract voters. Video endorsements from “average” citizens appear on YouTube, voters can “like” a candidate on Facebook and comment on issues, and supporters are encouraged to use Twitter to hype attendance at rallies.

The Democrats have created a page Organizing for America on Facebook to gain support for President Obama’s re-election. Individuals in each state can learn who’s canvassing for votes and in what areas, if they want to get involved.

Spidel believes mobile-phone apps that will provide depths of information on voting, voters and issues in real time.

“It will change the game dramatically,” he said.

Speaking at the Economic Outlook event at the April 22 Economic Club of Phoenix luncheon were, from left, Arizona State University professors Dr. Lee McPheters and Dennis Hoffman and John Arnold of the Arizona Governor’s Office.

If the challenge of improving Arizona’s economy was analogous to a hike, we would all be at the bottom of the Grand Canyon and looking to climb out.

The state began to see the downturn in December 2007, 28 months ago, Dr. Lee McPheters told a crowd of 200 at the April 22 Economic Outlook luncheon held by the Economic Club of Phoenix at the Arizona Biltmore.

“On the way down, all of the economic indicators – like employment, GDP, corporate profits, retail sales, consumer confidence — are falling,” he said. “When you get to the bottom of the canyon, the recession is over — but you still have a long way to climb to get back to where you came from.”

By his account, the recession in Arizona is just about over. But now there is a two- to four-year recovery ahead.

Of some concern is lagging consumer confidence and a number of foreclosures for 2010 that will exceed 2009′s.

“The No. 1 driver is unemployment,” the JPMorgan Chase Economic Outlook Center research professor said. “Jobs are the key driver to propel the economy forward but we are not seeing growth.”

He estimates that the United States has lost 8.4 million jobs in the last two years.

“2010 will be ugly,” he said in his remarks. “2011 will be homely.”

Dennis Hoffman, the director of L. William Seidman Research Institute at ASU, said this is Arizona’s first “real” recession. Other downturns have ended in two years, he said.

In 1990 Arizona faced a similar challenge with a collapse of the housing market. There were problems at the federal level and state officials raised taxes. Fast growth followed.

But, Hoffman noted, consumer spending in the state is back to 1998 levels, which is not good for state tax revenues.

As for the national picture, the jobs situation is a big concern.

“In 2001 there was not a deep slide in job losses but there was still a ‘jobless recovery,’ which took four years,” he said.

In his presentation, Hoffman compared the current recession to the Depression. The most significant difference was, in 2008-09, the nation did not see the drop in consumption that occurred in the early 1930s.

Also, in 2008-09, the federal government jumped in and backed the banks. It also used its spending to keep the economy from collapsing.

“In crises, debt-to-GDP ratios jump,” he said. “The concern should be: What is the strategy to have the economy grow faster than the debt load.”

The two economists were joined at the luncheon by John Arnold, director of the Governor’s Office of Strategic Planning and Budgeting.

Arnold said Arizona saw a 30 percent decline in revenues, to $6.2 billion, for 2010. Even by keeping spending at 2008 levels, the state will seen shortfalls going forward, like the $2 billion gap for 2010 (despite federal stimulus money).

Why not just cut more program funding from the budget? Well, Arnold said, if there state were a household, this would be “like losing 40 percent of your income and adopting three kids.”

Schools are spending at 2004 amounts but there are 112,000 more pupils, he said. The Medicaid rolls – services to low-income families – surged by 202,000 in the last year, to 475,000 recipients.

The state also has more prisoners, he said.

Arnold said it’s not like the state is not being proactive. It has increased eligibility requirements for Medicaid, eliminated mental health programs, reduced welfare assistance, eliminated services under KidsCare, reduction spending on education and state universities, dropped payroll through a hiring freeze and 5 percent salary reductions, and reduced the number of prison beds for out-of-state prisoners.

The governor’s office is projecting a 2011 budget with a structural deficit of $1 billion.

The state will present to voters a temporary sales-tax increase of 1 percent to the current 5.6 percent to close the gap.

Proposition 100 proposes that two-thirds of the revenues generated would fund K-12 education, with the other one-third going health and human services and public safety. The sales tax would be automatically repealed on May 31, 2013.

The election will take place on Tuesday, May 18, 2010.

The alternatives are additional budget reductions, additional state debt and various transfers and rollovers, Arnold said.

“If it fails, we will need to find $850 million in cuts – in K-12 education, higher education, public safety, health care and human services,” he said.

Let’s look at the United States in 2010. It has the most diverse population it has ever had. Every study today – and a glance in any office or classroom – shows an array of races and ethnicities. It is right in front of you.

Ironically, Arizona – the subject of current controversy over the recently approved immigration law – is a saucepan to the nation’s melting pot.

In Arizona you’ve got: Hispanic Americans, Native Americans, African-Americans, Central Americans, white Americans, Asian-Americans, Indians and Pakistanis, Iraqis and Afghanis, and more than a few citizens of European descent.

You’ve also got: senior citizens, Mormons, Muslims, bikers, Buddhists, computer engineers, golfers, models, ex-pro athletes, RV owners, plastic surgeons, NRA members, celebrities, landscapers, the super-wealthy, waiters, call-center employees, cowboys, rocket scientists, and international students.

There are a lot of guys in pickup trucks, gals in convertible sports cars, families in SUVs with video consoles, couples in sedans doing 50 mph on the freeway, crews in landscaping trucks, and drivers of delivery trucks.

Arizonans know all of these people. They work with them. They’re friends with them. They married their daughters or sons, sisters or brothers. They sit next to them at school concerts and sporting events.

They may like them, or they may find them aloof, conceited, humorless, cheap, ultra-sensitive, liberal, conservative, a big talker, a deadbeat … fill in any adjectives overheard at any family reunion. And it probably has nothing to do with the races of the people involved.

Let’s go back to America in 1810. Or 1860. Or 1910. Or 1960. What did the racial landscape look like in each of those eras? As we’ve all been taught, it’s not pretty. Generations of families of all backgrounds – including slaves and European and Chinese immigrants – faced rules limiting their opportunities, restrictions on participating in elections or owning property, and access to public facilities and capital.

But times change. Anyone under the age of 50 grew up in a different world — with “Sesame Street,” “Electric Company,” “Welcome Back, Kotter,” new games, “Star Trek,” Oprah, Michael Jackson, Jennifer Lopez, Jackie Chan, Halle Berry, Nancy Lopez and Tiger Woods. We’ve seen Thurgood Marshall replaced by Clarence Thomas, Ruth Bader Ginsburg join Sandra Day O’Connor, and Nancy Pelosi elected speaker of the House of Representatives. Most of us wanted to “be like Mike” or laughed with Cheech & Chong or danced to Carlos Santana or the Commodores. Barack Obama is our president.

Schools continue to teach messages of tolerance, sharing, and cultural awareness. If someone steps out of line, he or she is ostracized for not being “politically correct.”

Businesses that reject candidates based on background, gender or race limit their access to the pool of talent. It may make the owner or manager feel better, but in the long run – as the free market demonstrates – the business person is limiting his or her chances at success.

Yet, despite these lessons, accusations of racism committed by white Americans – now white Arizonans — persist. Are they fair?

Do Arizonans want a crackdown against Mexicans because they don’t like them and don’t want them in the state? No.

Arizonans don’t want to welcome any person who defies authority, ignores the accepted immigration rules, and commits crimes in the state. The opinion is not based on race; it’s based on a desire for a safe and livable community.

Are all human conflicts race-based? While to the victim a criticism, snide comment or disapproving glance could be construed as “racist,” in today’s society it’s more likely that the response was a commentary on the individual’s actions or conduct, not his or her race. The “victim” may have been loud or rude, or disrespectful, or patronizing, or dull, or insensitive. The “perpetrator” may have been having a bad day and been a bit short with a customer. It’s unlikely it was because of the individual’s race.

To the extent that people stereotype other people, it should be noted that sometimes stereotypes have grains of truth. Think of people with piercings and tattoos who are often “rough around the edges.” Or folks who act pretentiously to project a superiority. Or young men with their pants low and boxers showing. Often people dress and act specifically to be perceived a certain way, or to fit in, or to gain the benefits or advantages that a stereotype might provide.

One can hear the comments of others on such appearances, and ethnicity may never come up. Yet someone who “suffers” from any scrutiny may instinctively think it is racism.

The situation is not helped when firebrands like Al Sharpton parachute in and attempt to commandeer the debate along racial lines, playing on some people’s ignorance.

It’s 2010. Let this be the year Americans of all backgrounds say “Enough!” and simply refuse to grant legitimacy to those who seek to divide us by race. Deflect the charges, knowing in your heart that America is not racist.

What’s going on?

According to polling, about 70 percent of Arizonans support the law and its intent. These individuals have seen what’s been occurring in the state: people-smuggling and drug-smuggling; violence in neighborhoods and on interstate highways; gang crimes; and the recent killing of a southern Arizona rancher. They also hear of illegal immigrants “mooching” off the social safety net, crowding emergency rooms and filling classrooms in public schools because no one except the INS is allowed to enforce immigration laws.

Most Arizonans “came from someplace else.” Many are naturalized immigrants – from Mexico, India, China, Canada, the Middle East and eastern Europe. They came for work, opportunity and the climate.

Many of these people are a part of the 70 percent. Their reasoning? These are the rules; immigrants know them. The process is in place not to deny immigration but to control it. The process takes years – extending individual rights to immigrants and encouraging them to participate in the country’s unique system of self-government.

Those immigrants who show contempt for these rules – who don’t want to nor ever intend to follow them, who want to “game” the system, or who don’t want to follow any rules at all – are who this law is addressing.

Is this racist? To the 70 percent, the injection of race is a red herring designing to inflame the Hispanic community and divide the state. It’s not unlike the Islamic fundamentalists who intimidate moderate Muslims to not oppose their jihad.

Are there Hispanic Americans who support this new law? Undoubtedly. Will you see them confronting Hispanic leaders who call the law racist? No way.

The new law brings back bad memories from the summer of 1997 in Chandler, AZ. Over three days the local police department conducted “sweeps” of the downtown area, stopping individuals who looked Hispanic and asking for identification. While they apprehended some illegal immigrants, they also (egregiously) violated the civil rights of hundreds of Chandler citizens. The city paid for it in settled lawsuits, a community black eye, and friction among the races.

What is often forgotten, however, is that the sweeps were motivated by complaints by Hispanic Americans in Chandler that illegal immigrants from Mexico were terrorizing the area. In addition to committing crimes, Mexican men were harassing teenage girls on the street, assaulting them, and threatening to kidnap them and take them to Mexico. To residents, the threats were very real – and an unwelcome extension of Mexican culture into their city. (There remains a sliver of nationalist Mexicans in Arizona who refuses to acknowledge the U.S. government, citing its “takeover” of the territory in the Mexican-American War of 1846.)

Of course, the biggest fear with the new law is that police officers will run amok, stopping and challenging the citizenship of everyone. This conveys to them too much power, too much authority. Good officers will act responsibly; bad ones could hurt a lot of people and undercut the U.S. Constitution. That cannot be underplayed.

It is also the reason some police chiefs oppose the law, because of the position in which it puts local police officers. They believe immigration enforcement is best left to the federal government.

Supporters of the law would argue that the federal government is not doing its job on immigration. Enforcing the border is not a priority. Cynics believe a Democratic administration opposes such enforcement, because it would limit potential supporters.

The irony is that the nation has grown and thrived because of immigration. Arizona has benefited from immigration and the seasonal flow of migrant workers.

What has changed has been the introduction of the organized criminal element.

The state’s message to its brethren in Mexico is that Arizona is not racist; its residents simply want immigrants to follow the rules for a civil society.

Yet, as adults, if a stranger approached us and asked to share our car, we would probably walk briskly in another direction.

This contradiction is one of many real-life examples that reflect the misperceptions and, ultimately, guilt held by many Americans in a capitalist society. It also explains why the nation in the last century has moved closer and closer to socialism, despite the public’s denial about it.

The issue has become even more prominent – and misunderstood – because of the financial crisis since 2008 and the discussion of Obamacare.

The Ayn Rand Institute’s Yaron Brook spoke to 60 people March 25 at Arizona State University.

Fighting that trend is the Ayn Rand Institute of Marina del Rey, Calif., whose president and executive director, Yaron Brook, spoke to about 60 people Thursday night at Arizona State University. The event was staged by the ASU Objectivist Club, a group inspired by the writings of Ms. Rand – author of “Atlas Shrugged” — from the 1930s to 1970s.

The early conditioning of children leads to confused adults, who grow up thinking sharing is the ideal, and want to live in a world of altruism and sacrifice. But that collides head-on with capitalism, which economists note is about the individual, his freedoms, his self-interest and putting himself first.

The problem is, that’s not how adult Americans act. When you buy a new TV, or new shoes or a new dress, are you doing it to help the economy, to give work to someone, to make someone else happier? Of course not. You do it to make yourself feel better, he said.

When you go to work, who are you doing it for? For the owners of the company or for yourself – for pay, for your passion, for your desires?

Did Steve Jobs invent the iPhone to make the world a better place? No, it is a neat product that Apple’s backers thought could make money. The iPhone probably has a 50% profit margin; should Jobs sell it for less because that’s not “fair” to the buyers?

The more successful the product, the greater return for company shareholders and higher salaries for employees. Is that a bad thing?

This is the free market, Brook said. Every individual pursuing his own self-interest. And that’s OK.

But then you hear about someone who is less fortunate, and the guilt kicks in. Capitalism is about the self, but modern morality says that selfishness is evil.

So when it comes time to vote, often Americans are encouraged to do “what’s right,” he said.

“Given a choice between voting for (measures that lead to) a great economy or voting for what’s ‘right,’ people will vote for what’s ‘right,’” he said. “That’s why we’ve moved left. Socialism is consistent with this.”

Politicians – who grew up with the same messages – play to this guilt. Government should take care of those less fortunate – giving them shelter, food, health care, and other services. What uncaring person would be opposed to that?

So the government requires more money to help more people with more things. The government doesn’t make a profit, so its motives are virtuous. These are “public servants,” after all, Brook said.

So here’s the battle: free capitalism where individuals pursue their self-interest vs. a collective socialism in which a central government collects and redistributes what its current leaders deem “fair.”

Put that way, it’s understandable why so few people stand up for capitalism.

Yet, this is where there’s a huge disconnect, Brook said.

“If you look back over the last two and a half years, isn’t it fair to say that capitalism failed?” he asked. “But that’s assuming what we had was capitalism.”

Capitalism is freedom, free markets, acting in your own self-interest, and protecting private property rights, he said.

He argues that the sources of the crisis – the housing bubble, the mortgage industry, and the banking collapse – were because of the lack of free markets.

In housing, the government tells you where you can build, limits land uses and preserves arbitrary “green zones.”

“They control it, not the market,” he said.

Anyone who rents or owns a home outright is subsidizing Americans who have mortgages, because mortgage-holders get a tax deduction, he said.

“So there’s an incentive to borrow,” he said. “Then the government set up Freddie Mac and Fannie May to make mortgages cheaper and insure them.”

The mortgage industry is not a free market; it’s heavily regulated and controlled by the feds, he said.

Now let’s talk about banking, he continued.

“Everyone thinks banking is a free market with no controls,” he said. “Yet to open a bank you need government approvals for your management, your board, your investors and your business plan.

“And you are regulated by four different agencies,” he said. “Government controls about 80% of all banking.”

When the industry failed, who was blamed? “The evil bankers,” Brook said. “Not the government auditors, bureaucrats or regulators.”

The real blame for this crisis belongs to the biggest regulator of all, the Federal Reserve Bank, he said.

“If the Fed does something, who’s affected?” he asked. “Everybody!”

The Fed sets short-term interest rates. That determination sets the value of every asset.

“It’s 12 bureaucrats sitting around a table,” he said. “They can never get the price controls (for money) right.”

“If they make the price too low, everyone wants to buy and you get massive shortages,” he continued. “If it’s too high, no one wants to buy and you have surpluses.”

Last decade the Fed set the short-term loan rate at 1%. The inflation rate was 3%. Everyone borrowed because of the “cheap” money. For homes, cars and on credit cards.

When the price went up – through adjusting rates – people couldn’t pay their debts.

“This crisis is a crisis of leverage,” Brook said.

When there are problems, everyone wants to cite a failure of “free markets.”

You see that with the health care debate, he said.

“Everyone said, ‘We tried to keep government out of medicine and it didn’t work. So we now need government to come in and save us from the free market,’” Brook said. “‘The only solution is government intervention.’”

He noted, however, that more than 50% of all dollars spent on health care in the United States is spent by the government. “It seems like there is a lot of government involvement,” he said.

The federal government is also heavily involved in the health-insurance industry, the pharmaceutical industry and the regulation of doctors.

Brook said that he is disappointed that, in the entire discussion of health-care “reform,” the Republicans’ proposals were simply a version of “Democrats Lite.” There was no real analysis of introducing free markets to the issue of health-care delivery.

Capitalism is freedom, and freedom is free markets.

“Look at Beijing, or Hong Kong, or Eastern Europe,” he said. “You give people a little freedom and see how many more people climb out of poverty.”

Yet the United States is moving in the other direction. More government, more taxation, more central control, more restrictions on individual freedoms.

He believes there should a free-market solution to issues like “climate change.”

“The state should have no role,” he said. “Neighbors can get together to address issues.”

If there is a dispute, between peoples or nations, you fall back on private property rights and the legal system, he said.

Brook saved some of his most pointed comments to undercut opponents of “global warming.”

“What if, in the middle of the 19^th century, the people of London were having trouble breathing because of the smoke from burning coal,” he said. “They decided to end the use of coal out of concern for ‘future generations.’

“So out of concern for us, we wouldn’t have had the Industrial Revolution,” he continued. “I say, let the future generations address how to deal with disasters to fit their society .”

But the climate-change proponents push the “guilt” buttons and Americans drive hybrids to make themselves feel better, just like they penalize bankers, he said.

Brook believes the nation has two decades to return to its smaller-government, individual-freedom roots.

“The country will be bankrupt in 20 years,” he said. “Our unfunded liabilities for just Medicare, Medicaid and Social Security are $103 trillion. How are we going to pay it back?”

He sees the country on a raft heading toward a waterfall and “we’re sitting there with our oars and rowing!”

“Sometimes we row fast, like this week with health care,” he said. “Sometimes we row slower, like under Reagan. But the waterfall is getting closer.”

What the raft really needs is a motor to go in the other direction.

“We need a moral revolution,” he said, noting that the phrase should not have religious overtones. “Americans at their core still have that ethic, we’re still about the inalienable right to pursue our own happiness. Not the state’s right to pursue social justice.

“Individuals want the freedom to be left alone.”

Santiago, Chile is refined, isolated, modern, and architecturally beautiful.

Lima, Peru is scrappy, noisy, dusty and crowded.

Santiago has subways; Lima has private minivans stuffed with workers.

Santiago has a hillside park with a funicular, a zoo, an amphitheater below a towering statue of the Virgin Mary.

Lima has a few parks squeezed between one-way streets.

And those streets are congested with honking taxis making their own lanes.

Still, Lima has its charms.

The Miraflores district south of downtown bustles with shops, restaurants, and hotels. There are major retailers along with “pocket” storefronts offering men’s clothes, jewelry and art.

Downtown Lima – dating back to the 1600s – has several large squares. The famous Plaza Mayor boasts the Government Palace to the north (with a Buckingham Palace-like look), the Cathedral of Lima to the east, the Municipal Palace to the west, and now commercial buildings to the south. The architecture is Spanish colonial, dating back to the 17th and 18th centuries. The facades and balconies are incredible.

Several blocks from the Plaza Mayor are the San Francisco Church and Monastery. The sprawling compound was built between 1657 and 1774 in Spanish Neoclassicism and displays incredible original artwork by painters like Peter Paul Rubens.

One room features 12 murals depicting the Stations of the Cross. Another has a Peruvian take on the Last Supper. (Alas, photos aren’t permitted.)

The convent’s library is world-renowned both for its design and its centuries-old books. Below the church are catacombs displaying bones and skulls of some of the 25,000 “elites” buried there.

Most disappointing is the upkeep of the art and structures; it seems no one has the time or money to care for it. So they just wear away, which is sad.

Over the last 20 years Peru has moved away from its recent state-controlled past to embrace private enterprise, international trade, individual freedoms, government that’s more accountable and less inclined toward social engineering, and an independent central bank.

Privatization is improving Lima.

The airport, which former prime minister Pedro Pablo Kuczynski once called a “dump,” is now modern, with efficient flows of people and baggage.

The port of Callao, just northwest of Lima, has been updated by its outsourcing to world port manager Dubai World.

And then there’s this oddity: Lima has miles of property along the Pacific Ocean. It’s vacant. Nothing. Rocks. Fences. A road. Puzzling.

How has Peru changed over the years?

One man who could offer a credible explanation spoke to Arizona State’s Executive MBA class during a visit to ESAN University in Lima.

Pedro Pablo Kuczynski, a former prime minister and economic minister for the nation, has seen it all in his 71 years.

The son of a German émigré, Kuczynski studied in Peru before heading to Oxford University in England. He put his economics background to use with the World Bank in the 1960s, on Wall Street and in Washington in the 1970s, and then as the minister of energy and mines in Peru in the early 1980s. Then it was back to Wall Street and investment banking, along with foundation work, until 2000.

That was the year a professor friend at ESAN, Alejandro Toledo, ran for president of Peru, won, and made Kuczynski his minister of the economy. He held that post and the position of prime minister at different times during Toledo’s six-year term. Since then he has contributed to non-profit work in Peru, lectured and continues to write on national issues.

What is Peru’s biggest challenge?

“Poverty,” he told the class.

Of Peru’s 29 million citizens, one-third live in poverty. It creates a problem like a three-wheeled ice cream cart with one flat tire, he said. “It’s a drag on the others.”

Poverty in the country has never been a secret. From the military coup in 1968 to 1988, Peru was a state-run enterprise. Land was confiscated, industries taken over, promises made. There was no progress.

“Locust years,” Kuczynski said. “Per-capita income fell.”

1990 brought a radical change, with the democratic election of Alberto Fujimori. There was privatization, 300 separate taxes were eliminated and the economy bounced back.

But the administration was corrupt and Fujimori was eventually jailed.

When Toledo was elected, the poverty rate in Peru was 55%.

President Toledo and Mr. Kuczynski reduced import tariffs to boost trade and sought to simply the tax structure, to bring more businesses into the “formal” economy, and away from the black market.

They also cut Peru’s debt, from 55% of GDP to 25-30%. (Kuczynski chided the U.S. government for the spending binge it’s been on since 2008; the country is getting dangerously close to the edge, when the debt equals 100% of GDP. Like it or not, the U.S. has to cut entitlements, increase but simply tax rates, and raise interest rates.)

Kuczynski would like the government, now led by Alan Garcia, to keep its eye on reducing poverty. He believes it starts with education (holding students to higher standards and paying teachers more), encouraging investment and growth, and addressing the country’s infrastructure.

“The water systems don’t work,” he said. “No one pays, there are no bills, and pipes break.”

He wants to see the water system privatized, like the country did with the phone system and electricity.

“(Private managers) oversee things better,” he said. “The (Lima) airport was privatized. Ten years ago it was a slum.”

Kuczynski said formalizing the economy will make a big difference. Without it, people pay in cash and there is no tax revenue.

“We need to give incentives to companies to become formal and play by the rules,” he said. “For employees this will mean social security and pension funds.”

If government stays focused on limited spending and encouraging free enterprise, Peru should grow at 7-8% a year for the next 20 years, he said.

“One, there’s a demographic bonus,” he said. “We have few old people, not too many kids, a rapidly growing workforce, and fewer births.”

“Second, China is our second-biggest market after the U.S., and it is growing.”

The one threat, however, is social unrest.

“Peru is potentially unstable because of poverty,” he said. “It’s not the distribution of wealth. It’s the poor population.”

A self-proclaimed libertarian, Professor Boyes projects a “free market” paradigm on every issue, asking students to consider “what if” the usual “solutions” — i.e. government involvement — weren’t in place. One can list items like national defense, environmental protection, support for the elderly and less fortunate, roads and traffic, and health care.

His point was to challenge the thinking that government can solve every issue, that a central authority knows best and can be fair and judicious in determining who gets what and who doesn’t (i.e. declare winners and losers). Many citizens look to the government because of the idea it will be “fair.” The alternative is to rely on free-market solutions, which of course can be seen as “unfair” because some people get ahead, and some fall behind.

Yet, as the professor pointed out, relying on government is to perpetuate the status quo. Nothing changes over time. Departments aren’t eliminated, subsidies aren’t lowered, services aren’t amended, even if progress calls for it. Monthly support payments only allow the poor stay poor, while the rich remain rich. Encouragement of and opportunities for advancement are limited.

The alternative — the free market — allows for “creative destruction,” in which new products and services can be introduced, often at the expense of another individual’s or company’s products and services. Think Kodak film getting wiped out by digital photography. Government — and some companies — resist change because it will create victims and hardship, yet those will occur regardless.

Among Professor Boyes’ many insights was another timely one: that capital doesn’t like uncertainty. Capital is money, trade, investment, spending. Those who have it — from the richest Americans to the poorest — are less inclined to put it to productive use if they are unsure of the future. So they wait, in a holding pattern, for some optimism.

This is key to understanding why the country seems to still be in a rut. Those with capital — not the government — just don’t know what the rules will be. Businesses can’t hire, or invest, or confidently launch new services when they don’t know what the government will do to their bottom line.

Will there be new taxes or fees for offering or not offering health care to employees? Will there be “cap and trade” taxes for the business’s contribution to global warming? Will there be higher business taxes to “make the rich pay their fair share”? Will businesses be expected to contribute more to unemployment funds? Given this situation, one can understand why commerce isn’t picking up. Would you invest right now? Or would you wait?

The answer’s pretty apparent, which is why the leaders in Washington need to end the uncertainty and stop exploring “actions” to take.