16 November 2012 ~ 0 Comentarios

The bubble makers

by Carlos Alberto Montaner

rafael correa

(FIRMASPRESS) Very soon, the Ecuadoreans will have to select their leaders once again. They should look very carefully at what’s happening in Europe and reach their own conclusions.

In half of Europe, the streets are full of people angry at the cutbacks in public funds. Public spending is killing them, but – like all other addicts – they don’t want to reduce it, don’t know how to, or cannot.

In Spain and Greece, especially in Greece, the protests are violent and massive. Nobody wants to hear about austerity, much less being fired and joining the huge mass of the unemployed. It is understandable but sad.

The labor unions threaten with a clenched fist and vow that they’ll not be stripped of their“social achievements” or allow the dismantling of “the welfare state.” The fact that there’s no money to pay for it is irrelevant. In these situations, common sense is tossed aside. It’s much too uncomfortable.

The spectacle is not new. Every so often, a bubble bursts, millions of jobs are destroyed, the economy hits bottom, society goes into convulsion, the state – severely questioned – plunges into a crisis, the governments come and go, and the whole of society grows poor.

If the crisis cannot be avoided, it is possible to limit it and save the State from the delegitimizing effects of those brutal contractions. How? By maintaining the public sector small, agile and affordable, distant from economic commitments that become unsustainable during the lean years.

That’s almost the opposite formula of what Mr. Rafael Correa is doing in his country. In time, Correa will provoke one of those crises. He is a born maker of public bubbles. We can see it coming.

You cannot indefinitely maintain high public spending along with a deficient productive apparatus and expect no consequences. That’s what happened in parts of Europe, and in Argentina some years ago – even today.

What’s amazing is that, to learn to govern, Mr. Correa doesn’t have to look outside the borders of Ecuador. All he has to do is examine what happens in Guayaquil, the country’s largest and most populated city.

While President Correa insists, for all Ecuador, on the populist road of statism and patronage, which is a kind of bubble set aside by the government to get votes, the nation’s most economically important city and major port, Guayaquil, moves in the opposite way, led by a very popular mayor, lawyer Jaime Nebot, who does not aspire to the nation’s presidency but to continue to be an effective functionary at the service of his fellow citizens.

For the past 12 years, Nebot has spent no more than 15 percent of the budget in wages and fixed expenses. The remaining 80 percent he devotes to investments in works and services, paying special attention to the needs of the ordinary people. No more than 5 percent of the budget is set aside to pay off a minuscule debt.

Today, Guayaquil has fewer employees than it did 12 years ago: only 3,900 for a city of more than 3.5 million people. Barely one per 1,000 residents. Nevertheless, Nebot has given it water and sewage, a brand-new airport, public transportation, parkes, resorts, and hospitals. He has built a beautiful seaside pier, has repaired all schools and supplied them with books and computers. Guayaquil, once an ugly, dirty and backward city, today is pleasant, modern and clean.

Of course, it has problems, such as a growing insecurity, but it is light years away from Caracas or San Pedro Sula.

This resurrection was possible through a mechanism that the State should use on a national scale: concession. Guayaquil City Hall describes what it needs and private enterprises compete to supply the goods or services up for bids. If a concessionaire loses money, it’s his problem. If the company does not perform well or fails to fulfill its agreement, it is replaced.

The employees the State needs are hired by private enterprises to provide the goods and services everyone requires. But they must be productive and profitable in order to survive in a world ruled by competition.

The State is not a good entrepreneur, everybody knows that. Public service is usually a source of corruption and bad administration. In addition, politicians avoid any conflict with labor. Because they pay with other people’s money, they’re not demanding. They seek votes and popularity, not efficiency or good service. That is why they squander astronomical figures.

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