A thousand stumbles on the same stone

Carlos Alberto Montaner

Latin America returns to the past. It returns to the entrepreneur government that makes demagogue politicians so happy and brings so much waste and backwardness to the people. The man who launched this retrotrend was Argentine Néstor Kirchner, but he was followed enthusiastically by Bolivian Evo Morales and Venezuelan Hugo Chávez. It is very likely that Ecuadorean Rafael Correa also will try it as soon as he occupies the presidential chair. I don't know what Daniel Ortega will do. He comes to power in Nicaragua in such a state of weakness that perhaps he'll be unable to follow suit, at least for a while.

The central idea behind the entrepreneur government is very simple and can be achieved by any political formation, socialist or not. Supposedly, there are some primary “strategic” activities that are too important to be left to greedy businessmen who are incapable of looking after the common good. Such is the case of electricity, communications, water supply, the extraction and commercialization of fuels such as crude oil and gas, and land, air and sea transportation of people and merchandise. In some countries, such as the very democratic Costa Rica, it was thought for a long time that banking and insurance should also be turned over to the public sector. Later, that needless blunder was corrected.

The first rational alarm sounded by this new wave of nationalization has to do with the concept of “strategic activity.” If that means everything that is vital to people's survival, why not nationalize everything that has to do with the production and sale of food, medicine and clothing, which are indispensable elements for the continued existence of human beings? Is there anything more “strategic” than the homes where we find shelter from the weather's inclemency? If that is so, why not ask the government to build and maintain our homes?

Some mistake. For many decades, Latin Americans discovered -- to the point of despair -- what a disaster entrepreneur governments really were. In the state-run Argentina founded by Perón, implacably continued after his disappearance until the late 1980s, it was easier to find a cat with two heads than a telephone line. Sometimes, 10 years would pass before the phone company would deliver one. State-run enterprises everywhere were extremely corrupt, operated clumsily, lagged in technological development, were filled with unnecessary employees hired for political reasons, regardless of personal merit, and suffered losses that had to be balanced by special allocations from the national budget. Quite simply, they were ruinous and absurd businesses that drove customers and users crazy while gradually impoverishing the whole of the population. 

Why did state enterprises fail? First, because they were conducted with political criteria guided by patronage, not with rational managerial methods. Second, because prices were set for electoral reasons, not as a function of costs. Third, because the government suppressed competition and, with it, every stimulus that could improve the quality of the goods and services offered. It's true that entrepreneurs defend their interests tooth and nail, but in an open and competitive market that means that they must constantly try to produce better products and offer them at ever-decreasing prices. That can be seen, for example, in the world of communications, where competition is free and the cost of telephones and rates is cheaper every day.

Europe -- where the state-ownership trend was born and became entrenched in the 20th Century under the leadership of England (a much older version was imposed in France in the 17th Century by Jean-Baptiste Colbert, the father of mercantilism) -- learned its lesson years ago. Today, one of the requirements to join the European Union or remain within it is to privatize public companies and encourage competition and the market, because nobody has any doubt that the entrepreneur government is the most direct way to impoverish peoples, retard their technological development, corrupt the body politic, and sour the relationship between the voters and the parties.

Why isn't Latin America capable of learning from its mistakes? The answer is very disheartening. The old definition of a idiot is someone who repeats the same experiment 20 times in the hope that sometime the results will be different. In a few months, Plinio Apuleyo Mendoza, Álvaro Vargas Llosa and I will try to explain it in a book titled The Return of the Idiot. Will it be useful? Let us hope so.

Enero 14, 2007

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