Throughout Latin America, it is clear that the support base for home-grown populism lies in the state sector—state-owned companies created and maintained by successive governments. As a general rule, they have proved to be deficient and unproductive, and their final product is invariably a string of failures and poor economic results.
By the same token, these companies are run by state bureaucrats who essentially fear competition and strongly reject anything related to innovation and progress.
The spirit of innovation and entrepreneurs is fundamental to the growth of any country, provided an atmosphere of absolute labor freedom is assured. Those men who make a career out of overcoming state regulation are generators of competition and the engines of growth. They improve the lives of ordinary people. They are the real heroes, and plenty of them can be found all over the world.
The figure standing opposite the enterprising spirit is the self-proclaimed and god-like leader who, while claiming to do everything in the name of the people, in reality plunders and disregards them.
Convinced by populist politicians, Latin Americans have come to believe that businessmen, who earn profits, are engaged in immoral activity by definition. This has given rise to the idea that all profit must always be redistributed and placed in the hands of government and the collective, which in turn has led to ever more destructive regulation of the market.
The end result has invariably been declines in industrial productivity, rises in the price of poor-quality goods, and abrupt drops in real wages.
Latin America needs an urgent and permanent revitalization of its entrepreneurship culture, which can only be achieved through the elimination of protectionism and tax systems that are lethal to production and innovation. Protectionism, contrary to what the populists claim, does nothing but harm to consumers.
Private companies should be free to compete, the same way as consumers should be free to choose their purchases.
Wasted resources, cronyism, and endemic corruption are just some of the other direct consequences of a corporate state, which has shown us the most destructive results of its very nature. Politicians know nothing about incentives and competition, except when it comes to getting elected. Unfortunately, the corporate state seeks to solve the deficits of state-run industries, which it operates with your money through taxation.
For Latin-American political leaders, it continues to be very difficult to admit that the only real process of wealth creation rests in the private sector and never in the state. It is still a challenge to recognize that prosperity will flourish only when these expropriator governments cease their destructive behavior and stop playing the role of corporate state.
The state only manages what it gets through its collection of taxes—but in the long run, the state produces nothing but scarcity, misery, and hunger. However, unlike the insolvency of a private company, where only the owner is principally affected, the misfortunes of a corporate state and its consequences are paid by you.
Latin America should abandon, once and for all, the erroneous populist conviction that state property belongs to everyone. If this were true, we would all be sharing in the profits generated by state enterprises. Is it not significant that the opposite always proves true: only those in political power and their cronies get to enjoy it? The idea of property also becomes nonsensical—nothing more than a cynical expression—when we talk about “state property” or “everyone’s property.”
However, the economy has many ways to free its strength. Among them are a totally independent central bank, a ban on nationalist protectionism, the creation of conditions for true economic openness, the introduction of fiscal discipline, and the privatization of state-owned enterprises.
As previously noted, the role of the state should be to facilitate the creation of new enterprises and deregulate economic activity—not to expropriate businesses and finance their deficits with sudden increases in taxes and trade barriers.
Change will be possible in Latin America once the true meaning of progress and economic growth is understood, and when we can be rid of the populist scourge.