Friday, April 29, 2011

The State and Social responsibility: Moving away from traditional models

It is well known that the welfare State notion was imported from Europe, to allow massively to others, what it was granted for just a few. Did this notion fit properly with some sense of social responsibility ?.As long as Social Responsibility, deals with taking into account the interest of stakeholders (not just shareholders), probably it did so.
In this case ,shareholders were those who finance the State with their taxes, but stakeholders were those who share with the State the importance of social stability, and self esteem of being considered part of a community and their needs. Wherever these needs were not matched, it was not up to the dignity of the State, and the community which it belongs .-
Thus, the notion of welfare State is the first attempt to include social responsibility on State actions. However, further developments distorted the compromise to make the State Socially responsible, as long as the whole efficiency of the state intervention was below desirable standards.
But how do we understand a socially responsible State these days?. Latin America in the fifties, made the State the engine for economic development. Later in the eighties, it realizes how difficult is to fix what the state could not .There are limits to the actions based on the State resources.
Economic development, is a matter of private sector decisions about investment opportunities .Therefore, the State becomes rather socially irresponsible when it interferes in such a process through regulation above optimal level, inappropriate economic policies, or corruption practices which distort the price signal to allocate resources, making inequality an even more complex problem to solve. In such a situation, the State actions are far away from what is desirable in terms of its social responsible expected behaviour .-
These days of global trade and markets integration, most of the economies needs higher level of competitiveness which depends upon better public policies ,as much as efficient management private firms models.
Actually, a Social responsible State and its public policies, include a different approach which is based on helping citizens to take advantage of new opportunities no matter whether it deals with entrepreneurs, productive infrastructure needs, or regional economies and its potentialities . Besides, global citizens demand more space for freedom , self realization and wider options to fulfil each one expectations concerning their own future. The State deals in a more active way with its stakeholders and their demands, which imply that the State can not become an entry barrier for business opportunities, education facilities and better quality of services, and quality of life improvement .The Sate should move to a new condition to become a source of social responsibility, which requires deep and against the clock reforms .
In Latin America it take more time to begin a new business, than elsewhere (Asia and the USA). The justice system, work with fewer resources than what it needs, which make the law enforcement less effective than otherwise The quality of public health is far from appropriate .In Chile, even though it opened up the access to public health, there are 500.000 people on the waiting line for medical surgery in the public system . than otherwise. Public education in Latin America do not qualify among the best in the world, which affects future competitiveness gains due to lack of human capital. Besides, there are still more Psychology than enginery students. Poverty rate although decreasing in the latest years, is still a source of non traditional exports to the rest of the world. These facts do not fix with the purpose of a Social responsible State.

Friday, April 08, 2011

The political side of Latin America economics prospect

There has been wide spread positive evaluation of Latin America economies, specially considering its relatively faster recovery than the rest of the economies ,after the big financial crash of 2008.
Some analysts have divided the continent in two blocs: the one leading by Mexico which include Central America, and the other one leading by Brazil which include some of the southern countries of the continent but exclude others .Besides, the later group have on average higher rate of economic growth , than the former. Besides there is also a third group which supposedly follow Venezuela .
Whether this classification is useful or not is a different matter. But it allows to make comparison among them, taking into account its economic performance. Let take a quick look at it with some data which might be revisited either upward or downward.
Projected Inflation rate 2011 : Venezuela 50%,Brazil 4.5%.Mexico 3.8%
Projected Economic growth 2011:Venezuela -5%, Brazil 4,5% Mexico 3.2%
It is clear that the first two groups are in a better shape in its long run perspective. Which are the causes ?.-
The preliminary approach suggest that there is a wider gap between politics and economics in the third group, than in the other two groups.
Politics and economics, get along with one another in a smooth way when they are complementary. Politics support economics, when it creates friendly environment for investment, but it might be a constraint for economics, when it distort the key price signals which investment is based on .As a result, in this later case economic growth is lower than in the former caser. In such a situation, politics get into a conflict with economics because it make more complex the dilemma between the social requirements and needs, which requires more fiscal expenditures ultimately leading to more inflation, and the implications for private sector which have access to fewer resources to foster growth .Social needs end up being solved ,at expenses of economic growth.
What about the implications?
The experience in Latin America since the nineties, indicates that social needs ,are better solved with stable economic growth. In fact ,poverty reduction is possible to be sustainable when it is supported by increasing new opportunities arising from growth. Current available data shows that poverty in Latin America has decreased ( roughly 42%) after several years of efficient matching between politics and economics .
The State on its own is more limited to offer new opportunities to make sustainable poverty reduction programs , because it has no way to finance them at a cheaper cost than the private sector.
Greeks philosopher ,used to say that politics instead of economics, should be the one to lead society .However, as long as politics might be contaminated with ideology, it goes in collision course with economics. Were wrong the Greeks philosopher ?. Not necessarily so. These days the real meaning of politics, deals with the ethics of freedom and welfare as much as the ethic of justice. It is because of freedom ,that people might have the chance to improve its quality of life and standard of living, just because each one decides on their own to pursue what it is suitable and better for it, and not because some else try to do so, like a paternalist guide. Thus , although it seems that there is more than one way to get Latin America on its feet as a global partner, a more realistic orientation suggest that choices are more restricted, unless we want to move backward history clock.-