Structural reforms do not attract politicians because most of their visible and positive effects are long-term and politicians have to show something before the next election.

Consider the example of Social Security. We know that this is an unsustainable pyramid scheme and that it has a certain fate if it is not fundamentally changed: bankruptcy. There are powerful organized interests that prevent any real change in its structure. Today’s users fear taking responsibility for their savings because over the years the coverage population and fees have increased as the funds have flowed. But there is no such thing as a free lunch, it was only about deepening the crisis.

Democracy without a Republic

Ecuador, last call

The reform, which includes a radical change in the social security system, removing multiple opportunities for committing acts of corruption — limiting the intervention and discretion of public officials to a minimum and increasing the freedom of choice among associates — is yielding immediate positive results. which are positive for the whole country: the bleeding is stopped and the construction of a large national savings fund is started, which is managed decentralized by companies regulated by the state, but chosen by the contributors, according to their preferences.

The benefits of structural reforms are real, but more visible in the long term…

A la carte dictatorship

Demonstrations and criminal strikes

But it also has immediate negative results that could endanger the politician before the next election. A politician leading such a change would lose the support of the bureaucracy and other pressure groups that benefit from the current system. In countries like ours, a government that attempts a reform of this caliber might even be overthrown: as almost happened to Lenin Moreno for trying to end the fuel subsidy. Jamil Mahuad is another example, he tried to save his government with dollarization and although he failed to finish his term, he left a strong shield for the Ecuadorian economy. This reform was practically the only limitation on the power of the so-called Civil Revolution, which would have been much more destructive if it had controlled the value of money used by Ecuadorians.

People tend to underestimate the costs and risks of doing nothing. Ignored or unresolved problems persist and worsen until one day they explode and only then does reform not only become politically viable, but even considered necessary.

Good governance in times of crisis should light the way by highlighting the dangers and costs of maintenance the status quo. What is the long-term cost of not making the labor market more flexible? How much time have we wasted getting involved in global supply chains? How much did financial isolation cost us? How many companies would become viable if there was greater access to capital from the rest of the world and at lower rates? How much investment has the tax regime designed to keep the obese state in awe? How much does it cost us to maintain public companies?

The benefits of structural reforms are real, but more visible in the long run, when they are no longer news. This can be said about the dollarization and reforms of the 1990s in various parts of Latin America. (OR)