Just to annoy the audience or more importantly, perhaps as an acknowledgment that his economic policy decisions have been a resounding failure, President López stated last week that “if the neoliberal model were applied without corruption it would not be all bad; is that it can be the most perfect economic model”. ¡Orale!, especially when his speech has always blamed neoliberalism for all the ills that afflict humanity with which, by the way, indicates that he really does not understand and even less professes liberalism.
Liberalism, as a current of thought, is based on the individual and his freedom, on the decisions he makes with the purpose of trying to maximize his level of well-being and that of his family unit. Each individual will dedicate the productive resources of his property in that activity in which he has a comparative advantage, selling the good or service that he produces in order to acquire the goods that he consumes from those individuals who also specialized according to their own advantages. comparatives. It is this entirely voluntary cooperation between individuals that the search for the maximization of individual well-being, the aspiration to improve, leads to a tendency to simultaneously maximize the well-being of society as a whole; For the latter to happen, three requirements must be met. That there is no corruption, as López says, is necessary, but not enough.
First, private property rights must be efficiently defined and must include the three rights: to the possession of goods, to their free use, always respecting the property rights of third parties, and to free transfer, rights that must be efficiently protected and guaranteed by the independent and impartial judiciary.
Second, the right to free transfer of property rights implies that all markets (goods, services and production factors) operate in competition, with very low entry and exit barriers, markets where all transactions are, consequently, entirely voluntary in exchange operations where both parties expect to win; voluntary exchange is a positive-sum game; this excludes the existence of monopolies, whether private or governmental. Finally, third, there can be no market failures: public goods, externalities and asymmetric information, and moral hazard.
Given that this ideal world does not exist, government intervention is important, which has to be designed and implemented in an intelligent and efficient way, guaranteeing the personal and patrimonial security of individuals against the acts of third parties, seeking competition in markets, pursue monopolistic practices and offer public goods (public security, national defense, parks, paved streets, public lighting, education and health services, etc.), correct negative externalities with taxes and positive ones with subsidies, and regulate those activities that can potentially generate moral hazard problems, such as the financial system.
Corruption deserves a special mention. Acts of corruption that imply the use of public power to obtain a personal benefit imply that the person who commits it appropriates a part of the national income greater than the value of what he contributes to its generation; he is a rentier. Furthermore, corruption acts as a tax that reduces the value of income below its potential, prevents markets from operating in competition and hinders/prevents the efficient provision of public goods. Society as a whole loses with corruption and the greater the corruption, the greater the cost.
Perhaps there is still time for the president to save some of his six-year term in economic matters and, instead of continuing the destruction, direct his economic policy towards what the government is effectively responsible for doing, including personal and property security, legal security and an effective fight corruption since until now this has only been part of the populist discourse and a pretext to do barbarities.
The world evidence is overwhelming: liberal countries with efficient institutions and low corruption rates are simultaneously the most developed. What is Lopez waiting for?
Twitter: @econoclasta
Economist and professor
Point of view
Knight of the National Order of Merit of the French Republic. Medal of Professional Merit, Ex-ITAM.
