Aftershocks in the Andes is a Chicago Tribune about Bolivia's swing to the Left. The new president has ties with Evo Chavez the Leftist leader of Venezuela. The editorial attributes these developments to growing unrest over unsucessful attmepts at reforms. There are similar movments in other parts of South America.
The benefits of Bolivia's reforms have never trickled down to the poor. They haven't gone deep enough into the economy. Bolivia privatized banks, got rid of price controls and trade barriers and cut government spending--all good ideas. It opened its energy sector to outside investment 10 years ago. But many of the reforms were co-opted by special interests. The nation never tackled land reforms that would give poor Bolivians an ownership stake in their nation. Nor did it take on the difficult top-to-bottom institutional changes that would encourage Bolivians to move out of the underground economy and pay taxes on honest gains.
It is not very easy to do business in Bolivia, according to the World Bank's annual survey. Entrepreneurs must go through 15 steps to start a business, a process that takes an average of 50 days and costs the equivalent of almost $2,400--much more than most people make in a year. Hiring workers there is more cumbersome than it is elsewhere in the region. Firing them costs an average of 98 weeks of wages. Employers expect to pay 64 percent of their gross profits in taxes. And if they decide that's too much trouble, closing the business will take nearly two years.
Though it had steady economic growth in the 1990s, Bolivia's per capita gross domestic product trails far, far behind all of its neighbors. No wonder Morales won.
To me this an example of how half-way reforms often end up making things worse. There was an effort toward free markets but it appears that improved property rights and tax reform were never introduced. I am sure many of the laws about hiring and firing were passed with the intention of justice for the little guy. Instead, business left or never formed and the little guy ends up worse off than before.