A sailboat heading for the storm, by José Távara

In an open letter to President Castillo, published on 12/3/2021 in Management, my esteemed colleague Waldo Mendoza reflects on the progress of countries and the political crisis we are facing today, using the metaphor of a sailboat in the middle of the sea. The sailboat is the economic model, the pilot is President Castillo, the climate and winds are the international markets.

Waldo asks what it depends on if the sailboat moves in the desired direction and speed, but he does not tell us what the direction, the speed, or the quality of the trip should be. Perhaps because the direction depends on the decisions that the pilot makes, regardless of the wishes of his crew and his passengers? Or perhaps because it considers that the direction is decided by “market forces”. Would it be then the passengers with the fattest wallets who decide the course and speed of the trip? Who are the owners of the sailboat?

It defines the goodness of the economic model – the type of sailboat, its design, whether it is safe or fragile, fast or slow – in terms of how attractive it is to the business climate and private investment. Investment is no longer an instrument at the service of society, and becomes an objective. It does not matter the type of investment, its impact on employment and quality of life, neither does global warming and the destruction of our biodiversity and ecosystems. Equity and solidarity do not matter. No mention of the sustainable development goals. Except for the GDP, everything is illusion.

His conviction that GDP per capita “is the determinant of economic development” is alien to the new approaches that are being discussed today in the governments of the main powers, in multilateral organizations, in the main business schools and in the world forum. of Davos. Even the Financial Times highlights the need to put on the table radical reforms – including a more active role for governments and taxes on wealth – that reverse the direction of public policies of the last forty years.

For Waldo, the sailboat pilot is the president, who chooses his crew. It seems to be solely responsible for what happens. He is not interested in us wondering how and why he became president, nor how and why the congressmen we have today were elected, nor why we go back and forth vacating presidents every two years. It does not seem to have understood that “Peru cannot be among the first in macroeconomics and the last in quality of public services”, as stated by Toni Alva, his predecessor at the MEF. Perhaps he considers that understanding the functioning of our political system, explaining the precariousness of public services and the fragility of our democracy is not the task of economists, but rather of sociologists, anthropologists and political scientists. Abba Lerner said well that economics has earned the title of “queen of the social sciences” by choosing solved political problems as its domain.

For Waldo, the fate of the sailboat and its occupants also depends on the weather, on the direction of the wind, largely on the prices of exports. If they go up, good luck; if they go down, too bad. There is no doubt that these variables are beyond our control, but his approach leaves aside the policies of trade integration and free trade agreements, the disruption in value chains caused by the pandemic, the new spaces and the growing importance that today have diversification and productive development policies. In his approach there is no conceptual space for the analysis of global governance, regional alliances and geopolitics do not matter. The sailboat has been delivered “turnkey”, so neither technology nor innovation matter. It seems to be the only sailboat that crosses the seas, there are no pirate ships or any interaction with other ships in the middle of the sea. Just like in the Robinson Crusoe economy.

Waldo notices that today our sailboat has headwinds, but the pilot fails. He affirms that “the quality of public management is at its worst level in contemporary history” and rightly questions appointments of high officials who do not measure up. But the deterioration of public management comes from far back, it has not happened suddenly in these last four months of government. It is also a by-product of the model that Waldo advocates. It is as if the sailboat produced its own crew and its own pilots, as if it had a predetermined heading, straight into the storm. There will be no way around it if we do not discuss the underlying issues, which my colleague often calls “a footnote.” What should be the direction of the ship? What type of ship do we need? How do we organize ourselves to build and conduct it? ❖