The multiplication of care plans is the most visible link in a vicious circle. It all starts with the stagnation and low productivity of the Argentine economy. This leads to the lack of creation of formal salaried jobs in private companies. The jobs that are created are in public employment and informal self-employment. Specifically, in the last decade formal salaried employment in private companies was stuck at 6 million people. yesHowever, total employment increased by 3 million people, except that half of the increase was in public employment and the other half in self-employmenteither.
To enter public employment, in general, it is required to have some studies such as completed high school or incomplete higher education. People with low levels of education (incomplete secondary education) are self-employed in informal self-employment where income is low and intermittent precisely due to the stagnation and low productivity of the economy.
This is the group where social organizations recruit people to ask for assistance plans. In this way, these people develop informal employment and look for the assistance plan as a complement. Many times it is not the person himself who accesses the plan, but rather a member of his household who is generally an adult woman who is not working (that is, she does not work or look for work). This is how humble households combine income from informal employment with assistance plans. And they are surviving.
The State, in short, sees the need to maintain care plans and even multiply them in the face of the pressing social situation. The neuralgic point is that what causes the need to multiply assistance plans is the terrible intervention of the State itself.
The low productivity of the economy is what leads people to have to live on public employment (the most educated) or welfare plans (the least educated). The low productivity is due to the fact that the State does not create conditions for private investment, nor for the private sector to be more efficient.
The investment rate in the last decade of the Argentine economy was 16% of GDP. This is a very low rate that is barely enough to replace the capital consumed. To develop, an emerging country needs to invest at least at a rate of 25% of GDP per year and sustained over time.
When one wonders why there are such low levels of investment, deficient State interventions appear. The tax structure is highly distorted by the accumulation of taxes from the three levels of the State (national, provincial and municipal) and is especially burdensome for productive investment. The level of public spending far exceeds what the State collects, so the chronic fiscal deficit generated a history of successive public debt defaults and a history of high inflation due to spurious monetary issuance. This led –in addition to the impoverishment of the population– to the absence of medium and long-term private credit for the productive sectors. Without a domestic market for private capital, Argentine savers have no choice but to invest in residential real estate developments (which do not improve productivity) or save abroad (where there are opportunities for productive investment and legal certainty).
Labor regulations are extremely old with a Labor Contract Law and sectoral collective agreements dating from the ’70s and ’80s and also very distorted by labor justice that is unpredictable. It is safe to say that currently labor regulations are useful only to union leaders and labor lawyers, because they do not provide anything positive for an employer, an entrepreneur and not even for workers, as evidenced by the fact that in the last decade there was no creation of formal salaried employment in private companies.
The increase in private investment and economic productivity depend decisively on investment in infrastructure. The conditions of the national and provincial routes are deplorable due to the lack of maintenance. The most important river channel, which is the Hidrovía, is lacking in maintenance and a prisoner of internal politics within the State. Commercial air flights are reduced by a protection policy for the state flag carrier that harms private commercial air investment. The electricity system is not in a position to support increased demand from the productive sectors due to lack of investment due to a policy of indiscriminate subsidies for electricity consumption. The Vaca Muerta basin, which knew how to generate euphoria and hope for its possible energy potential, is totally wasted because a decade has passed and there is still no gas pipeline that takes the gas to the productive sectors (there is the name of the gas pipeline: “Néstor Kirchner”; but not the pipeline).
In this framework of a State that collects very bad taxes and is chronically in deficit, that with its inflationary policies eliminated long-term private credit, that preserves atavistic labor rules and that only favors rent-seeking based on conflict and labor judiciality, without investment in productive infrastructure, for all this, it is not uncommon for the country to be in a sustained process of economic decline.
The fate of economic decline is none other than the impoverishment of the population. Here it appears then the principle of the “present State” giving public employment and assistance plans to combat poverty; poverty created by the deficient public interventions of the State.
For this reason, in order to get out of economic decline, the State must be redesigned so that it functions with political responsibility, economic rationality and technical professionalism. It is impossible for society if it does not have a balanced State that functions with reasonable levels of excellence in its management.
*Jorge Colina is the author of the book “A Vaccine against Decadence: Questioning Consensus on the Functioning of the Argentine Public Sector” together with Osvaldo Giordano and Carlos Seggiaro.
by Jorge Colina*
