So-called heterodox economists, assembly members and presidential candidates have spoken about the Universal Basic Income in the country. That is, give an amount of money, in the Ecuadorian case, to vulnerable people. One of the ideas is to do it with electronic money. The issue came into debate in the country due to the proposal of a group of parliamentarians in the Assembly, as a measure to alleviate the crisis.
Correístas propose a universal basic income paid with electronic money backed by Central Bank securities
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From his home in California (USA), Professor Sebastián Edwards, considered one of the most prestigious in the region, spoke with EXPRESO about this possibility in Latin America and its economic recovery.
Edwards is the Henry Ford II Professor of International Economics at the University of California, Los Angeles (UCLA). The Chilean academic was also chief economist for Latin America at the World Bank, between 1993 and 1996.
– Has the worst of the crisis passed?
– It depends on the bug and the bug is capricious. We see it backward and forward and we are seeing new infections in countries of the world and the region. That, of course, has a very negative effect on the economy and, in particular, on certain sectors. The impact has been very uneven. It has especially affected the accommodation sectors and initially construction and everything that has to do with the informal sector. The hope is that the vaccine is already there and there are at least three vaccines that have been tested in Western countries. In Latin America there is a logistical problem of how to get it.
– Is it going to cost Latin America to get out of this crisis? Many speak of a new ‘lost decade’.
– It will be difficult, but I think less complicated than the true lost decade, from 1981 to 1990. Once the vaccine starts to work, I believe that the world economy will recover quite quickly. And once the economy recovers, there will be a significant increase in exports from Latin America. There are already in a number of areas. For example, mining has gone very well. The price of metals has risen a lot. The analysis cannot be solely by country, it must be by country and industry (…) The banking system is doing well in Latin America in general. Inflation is low and that makes a lot of difference from the current situation of the lost decade. In the lost decade the banks went bankrupt, and if there are no banks there is no credit, and if there is no credit it is like trying to run an engine without lubricants.
Will there be a V-shaped recovery, that is, fast?
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It wasn’t V-shaped anymore. That conversation is over. And those who in March said that the recovery will be in the shape of a V were thinking that in June or July of this year in the northern hemisphere there was going to be a recovery and there was not even a hint of a strong recovery. I believe that we are in a U now with vaccines, which have been faster and more successful than expected. The truth is that we don’t know. Only 62% of the population in the world is willing to be vaccinated. Everything is very diffuse (…) I see a rapid recovery in the next eight to ten months, but that leaves a very damaged economy. This is like someone who recovers from an accident but leaves the hospital and is skinny, with atrophied muscles and deranged in the head from the ‘shock’ of the accident.
– Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) recommends countries in the region to have a Universal Basic Income. Is that possible?
– It’s complicated. It is expensive and not only in Latin America, but in all parts of the world. The experiments that have been done in Canada and Finland have ended up being canceled precisely because they are extraordinarily expensive. Having said that, I think there is a movement in that direction. Where I think you have to be smart is universally and there are fellow citizens who are doing well financially. It should not be forgotten that income distribution in Latin America is the most unequal in the world. We must work towards universality (…) We must give it to the informal worker. What this crisis has most reminded us of is informality in Latin America and it is horrible. The politicians had forgotten her. The universal is complicated.
What this crisis has most reminded us of is informality in Latin America and it is horrible.
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– Where can the Universal Basic Income initiative in Latin America be financed? Bárcena mentioned that with more debt.
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– Good luck, do well. The only thing I recommend is that you walk through the little hat and wear an Ecuadorian hat so that you do not get sunburned. That’s silly. International organizations do not have the capacity, really, to help at the level that needs to be done. And they don’t want to do it either. So it is a dream of the bureaucrats who want the IMF to issue three, four, five trillion dollars in Special Drawing Rights, it is silly and a distraction. It’s not going to happen, period. The big difference between the lost decade and this one is that the lost decade was exclusively Latin American and therefore there was the possibility of help from those countries of the world that were not affected by the crisis (…) Here you have to scratch with your own nails. This essentially means raising taxes in Latin America significantly, and that is complicated because it must be done in a way that does not complicate economic activity or investment. If we want to make a quasi Universal Basic Income, money will have to come from taxes, essentially. Ecuador is fried because it got a lot in debt, as it was dollarized, even making a bit of a trap, with oil pre-sales to China.
Here you have to scratch with your own nails. That means raising taxes in Latin America.
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What other measures should be taken besides a tax reform to face the crisis?
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We go by sequences. If there is a reform, which is delayed, it is not doing a reform tomorrow either. A well-done tax reform is very complicated because, among other things, you have to avoid evasion and avoidance, but what a well-done tax reform does is that it increases disposable income and the next step is to spend it well. Spending them well means, firstly, spending them without corruption and secondly not embarking on superfluous projects, which are illusory and grandiose like white elephants. In parallel, try to set up an office in the government sector, very technical, with tennis imported from Finland or some place where there are geniuses and that they are managing the expense, that is clean, productive and effective.
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