Poisoned riches

Carlos Alberto Montaner*

Nations, like people, can die of obesity. Panama runs that risk: it might be killed by abundance. The Canal, admirably managed by the Panamanians and today in the midst of a timely process of expansion, in the next few years could bring the nation an uncontrollable stream of tens of billions of dollars generated by the tolls paid by the large transport ships.

How can such an economic blessing affect Panamanians negatively? In several ways. Because the Canal is public property, so far under a responsible autonomous management, it could become the desired booty of any government with a populist vocation. That's what happened to PDVSA, the major Venezuelan oil company. It was an excellent public enterprise while it stayed away from the control of politicians, until Hugo Chávez seized it, placed it at his disposal and turned it into his private coffer, to finance the expansionist fantasies of his 21st-Century socialism.

A Canal that generates multibillion-dollar revenues would be for the Panamanians something similar to what crude oil was for the desert sheiks: a temptation to develop a rent-dependent state where the income produced by those vital maritime services is used to subsidize ruinous enterprises that are generally exploited by dishonest courtiers in collusion with corrupt politicians, to pay for extravagant expenses, to exponentially increase the number of unneeded public employees and to bankroll a multitude of political clients who fear work more than they fear the Devil and are used to living extravagantly at the expense of the state.

Generally, rich states maintain the societies they allegedly serve in a condition of misery. Such is the case of Nigeria, Iraq, Libya, Iran; such was the case of the Soviet Union and its satellites while the communist nightmare existed in the West. And the reason is very simple: the wealthy state -- more so if it's an entrepreneur state -- is usually kidnapped by the power elites that place it at their service. In some measure, that phenomenon happened in Venezuela prior to the advent of Hugo Chávez, although later the lieutenant colonel multiplied one-hundred-fold the stupidities and abuses committed in that hapless country during the 40 years of Venezuelan democracy.

How can a nation utilize an unexpected deluge of resources to best advantage? The answer is quite clear: by investing in anything that propitiates the creation of healthy enterprises capable of surviving and prospering without artificial respiration. The only lasting wealth in any society is the wealth derived from labor. To invest in education and health, for example, is always wise. The better the people's education and wealth, the more wealth they can create with their work. To invest in infrastructures (highways, ports and airports, communications) and in security is also convenient: it attracts investment. To pay debts and balance accounts keeps inflation under control and upholds the value of currency, indispensable elements for a reliable economic environment.

This does not mean that we should forget the so-called social expenditure; it means that we have to understand that poverty is eliminated only when society is capable of segregating a dense and sophisticated entrepreneurial fabric, as happens in the world's 30 most prosperous nations, according to the United Nations' Human Development Index. All of them, of course, are democracies with open, highly globalized economies that protect private property and the market. True, in these societies the state has developed public policies aimed at helping the neediest, but it can do so thanks to the support of successful enterprises, thanks to the jobs such enterprises create, and, naturally, thanks to the taxes their activities generate.

The sensible and productive approach is to have not a strong state but a strong society that can feed an efficient state, control it, watch it and put it through constant audits. The sensible state is one that receives, in terms of taxes, let's say 20 percent of the profits of a huge business park, not a state stubbornly insistent on developing activities that go counter to its essence and functions. If the Panamanians make the wrong move, they'll experience the same fate of the Venezuelans: they will dump into the sea the manna that will soon drop from the sky into their hands. [©FIRMAS PRESS]

March 22, 2007

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