I hear a lot of people say, “I hope the next government spends more to get the economy going.” And here comes two questions. First, could it be that this government has spent a little? Second, is it simply a matter of spending more “to move the activity”? For me, the answer is a reasonable no in both cases.

1. Government spending as a whole (SPNF, non-financial public sector) in 2022: 45,221 million (look at the enormity of this figure: 125 million per day!), 5,000 million more than in 2021 (12% more). And the central government went from 21,918 to 24,858 million (13% more). Very clear: spend more. Within this global increase, what has decreased is investment (more precisely, non-permanent consumption), which has fallen (15% in the broad country, 30% in the central country). Is it possible to think about investments only when you want the state to spend more, because only in that area is a decline certain?

And if we want to take a closer look, let’s compare the first quarter of 2023 to the same period in 2022. NFPS consumption increased by 15%, reaching 10,590 million in the first quarter alone, which is otherwise the lowest of the year. But yes, central government expenditure was reduced from 7,109 to 5,864 million, which corresponds to only one item: less procurement of goods and services by 1,700 million (the question is obvious what this corresponds to? Is it a real and permanent decrease or just something indirect)?) .

With these figures, it can be said that the Government spent more.

One of the biggest absurdities is to think that higher public spending stimulates the economy.

Two. One of the biggest absurdities is to think that higher public spending stimulates the economy. Absurdly? Of course, because although consumption in itself certainly drives the economy, it has to extract resources from people’s pockets through taxes or debt, and this “discourages” it, because people would spend on other things if they didn’t have to. funds to the government. Result: zero. But there is something more important: any expenditure, public or private, is important not because it drives the economy, but because it improves by increasing productivity or increasing satisfaction. Household spending always succeeds because, as it is a matter of free exchange, consumers (“right or wrong”) when they decide to buy do so because they feel more satisfied, and companies increase productivity when they spend or invest. On the other hand, only part of state spending is in accordance with this premise, because we pay taxes compulsorily, and then the government “imposes” what it spends on; in certain cases it apparently creates productivity through health, safety or justice, but in many other cases there is neither satisfaction nor productivity. An example is hundreds of state procedures or controls: how does society improve? Even in the mentioned “positive” cases, the Government does so with low efficiency and effectiveness: abusing resources and failing to meet objectives well. Thus, private consumption is higher than government consumption (which is undoubtedly important when it helps to improve productivity, whether economic, social or institutional).

Bottom line, the correct phrase in front of the Ecuadorian government should be: spend much less and spend much better, taking less from the people through taxes or debt. (OR)