The Gordian knot of public spending
The enormous weight of public spending is the most serious problem in the country and the main cause of its decline. Readers may think that poverty, school dropouts or child malnutrition are more serious problems. Like the chronic persistence of very high inflation rates. However, these problems are not the cause but rather the consequence of having levels of public spending incompatible with the creation of wealth and quality employment. Along these lines, it is often said that the macroeconomic priority is to eliminate the budget deficit. But this is not enough. It is not about achieving budget balance, drowning the private sector with unsustainable tax pressure, but about reducing public spending.
In 2015, Consolidated public spending by the national State, provinces and municipalities represented 45% GDP, some 17 points above the country’s historical average. In 2019, this number was 40.4% of GDP. Such levels of public spending are not sustainable and only their reduction to figures close to the historical average will allow sustained growth in the country. Public spending is the Gordian knot that ties the country to decline.
In the year 333 a. C., while Alexander the Great was on his way to invade the Persian empire, he came to a temple in the city of Gordio, in Asia Minor, in which he found a cart and its yoke tied to a column by an extremely intricate knot. It was said that whoever unleashed it would conquer the entire East. Without thinking twice, he drew his sword and sliced through the knot. Since then, cutting the Gordian knot has meant solving a problem sharply and unceremoniously. Is it possible to repeat this experience in Argentine society and root out our endemic problem of excess public spending?
In his book A complex theory of democracy, the Basque thinker Daniel Innerarity argues that, due to the increasing complexity of political problems, a democracy of negotiation is required, with institutions and habits that facilitate agreements.
On current politicsIt is no coincidence, he reflects, that the results are so close to a draw: the sovereign people rarely grant a single party the ability to do what it wants. If any significant modification of the conditions of our coexistence is intended, he adds, this initiative cannot be carried out by one half of society against the other, but through broader agreements. Democracy is not the kingdom of votes or the kingdom of vetoes.
I quote a paragraph that seems written to Argentina: “From the point of view of a transformative democracy, the agreements are important because there is no other procedure to generate a deep and lasting social change. Democratic politics cannot produce changes in social reality without some kind of mutual cession. If agreements are important, it is because the costs of non-agreement are very high, especially in a world whose serious problems get worse when they are left to inertia. Disagreements are more conservative than agreements; the more polarized a society is, the less capable it is of transforming itself. Today we can afford less than ever the stoppage because the costs of delaying the opportune decisions are very high ”.
For their part, Steven Levitsky and Daniel Ziblatt study in their work How Democracies Die four parameters that indicate the risk of a democracy falling into the hands of populism and, in its direct consequence, authoritarianism. The first parameter is a rejection or weak commitment to democratic rules and republican institutions. The second is to deny the legitimacy of the adversaries. Authoritarian politicians sell the view that their opponents are unpatriotic or that they constitute a threat to the popular majorities. The third is tolerance or the encouragement of violence to intimidate political opponents. The fourth parameter is predisposition to use power to persecute those people, whether from the opposition, the media or civil society, who criticize them. When one or more of these parameters are present, they constitute an insurmountable barrier to a negotiating democracy.
One conclusion emerges from both books: If managing a complex democracy requires consensus, but these are impossible With those who do not wish to negotiate and only seek to accumulate power, how is this essential political contradiction resolved? In particular, if the problem is to reduce public spending and important sectors of politics do not agree to discuss it, what alternative does Argentine society have to achieve it and get out of the present vicious circle of decadence? A born leader like Alexander the Great would not have doubted: being impossible to untie the Gordian knot of public spending for a negotiating democracy, he would cut it off.
In Argentine history there have been a handful of presidents whose leadership allowed us to carry out deep reforms. Deprived of resources and with formidable obstacles, Miter and Sarmiento established in their founding presidencies the course that would lead Argentina to prosperity. Roca consolidated those achievements by completing the occupation of the desert and the federalization of Buenos Aires. Roque Sáenz Peña inaugurated a new political era with his universal and secret suffrage law. Frondizi developed the automotive industry and achieved oil self-sufficiency in a few years. Alfonsín was the father of democracy and carried out the trial of the military junta. Menem promoted privatizations and the defeat of inflation. They all had in common a political leadership capable of producing profound transformations. However, with the charisma he would not have achieved: the key to his success was that they knew how to interpret the demands of society; it was society that had matured and allowed them, and in a way required them, to carry out their reforms.
Therefore, reduction of public spending It requires the conjunction of a political leadership that interprets the demands of society for change. An example justat it proves it. Towards the end of last year, the education unions were reluctant to reopen schools: when polls indicated that more than 70% of the population supported it, the resistance suddenly disappeared.
Is there today a vast majority of society willing to endorse a political leader to cut the knot Gordian of public spending?
After decades of decline, Argentine society is prepared to the extent that the leader politician knows how to convey that the effort will be worth it, that there is no other way to regain the path of progress, personal and collective, and that reducing public spending is the essential prerequisite for launching other reforms that promote economic development.
The reader will think that a project of this type is not exciting and has no epic overtones. I would answer him with the words of Alberdi: “The age of heroes has passed; Today we are entering the age of good sense ”. Our children also give their answer: because their future is not clear, they leave the country. The dilemma is iron: either we cut the Gordian knot of public spending or we will continue trying for decades to untie it without success.