Friday, February 29, 2008

Politics and Economics In Latin America:The 2000 years experience (II)

It seemed like everything changed, to keep everything as usual. The State is still considered to be the champion of social welfare and protection. It has kept for itself the monopoly of such values, applying high entry barriers to private sector in case they want to go into those areas. Let take some examples, Public health infrastructure, public transportation (subways),and Education are considered as the “natural“ business of the State .The nature of public goods of such services however, reinforce such notion, given the wrong impression that there is a first best alternative(the state), for good institutional framework, to let markets and the private firms works properly. Chilean experience shows that it is not necessarily the case. Huge amount of money poured since early nineties, into education and public health, have not improved the system, or even worse have not improved its quality at all.
It fallows that to correct market failures, does not imply that public sector by itself will do the job better. At least, not within its current institutional format.
Thus, the reforms done in the nineties, did not ventured deep enough into the roots of most of economic and social problem in Latin America: State intervention in the economy, and those who carried them out, which were also in charge of running the State: politicians, bureaucracy managers, and special interest groups(Labor unions). They protected their own business with a self constrained reform!.Business man, intermediate business associations, regional leaders, intellectuals ,were left out of the process.
Why they did so?. One Hypothesis could be that because they believe their own values, are better that those arising from individual preferences and freedom of choice. A second hypothesis, could be that they depend upon the State protection and privileges, specially the political parties , such that they no longer could afford any substantial self reinforce reform of the State based on decentralization, as part of such process.