There are many and varied proposals for economic reactivation. Investment in infrastructure, tax exemptions, cash transfers to the poorest, support for entrepreneurs, payroll subsidies, emergency public employment, subsidy for home sellers, technological modernization, universal basic income, etc., etc. Given that there are not enough resources for all of them, and that some are also mutually exclusive, it is necessary to have clear criteria to choose those that are the most appropriate for the country’s circumstances, and to overcome the acute economic recession that has left the management of the pandemic.
There are three main criteria that should be used for the evaluation of reactivation policies: first, who do they benefit? second, what is its impact on the causes of the recession ?; and third, are they sufficient and timely to mitigate the effects of the crisis? Today I mean the first.
Faced with a crisis like the current one that is not only economic but also social, the objective of reactivation policies cannot only be to recover GDP growth; This is only an intermediate objective, an instrument to achieve the well-being of the entire population. That is why it is not only important that it grows, but above all how that growth is distributed.
It cannot be an objective to reduce the fiscal deficit now and to clean up public finances; seeking fiscal austerity in the midst of a recession is like drawing blood from an anemic. Policies to increase the profitability of companies are even less valid; This is not the responsibility of the State, nor should it dedicate its scarce resources to that.
The best reactivation policies are those that boost growth, but at the same time help to alleviate poverty, reduce unemployment, and reduce inequality.
Some examples help to understand the importance of the distributional impact of different policies. One thing is the investment in modern roads and 5G concessions, and another is the construction of access roads in the PDET municipalities. The former are capital intensive and benefit modern sectors of the economy, while the latter generate more employment and improve the lives of populations plagued by violence and abandoned by the state.
It is one thing to give subsidies to companies, exempting them from paying VAT on the purchase of capital goods, and quite another to give subsidies to the same companies but conditional on job creation. In this sense, the intention of the PAEF was correct, but its execution was not, since it was concentrated in large companies: 1,115 with more than 500 employees kept 39% of the resources, while 90,000 micro-companies with fewer than 10 employees only received the 10%.
The Government has a wide range of policies for reactivation. It should choose those that generate the most jobs and benefit the poorest and most vulnerable, and execute them in a way that achieves this objective, and does not remain in the discourse.
*Economist.
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