Ecuadorian President Rafael Correa, a leftist U.S.-trained economist, recently imposed hundreds of restrictions and outright bans on imported goods in an effort to restrict the outflow of dollars from the national economy. But this desperate move will not work. Alarmed by slumping demand for oil – his country’s largest export – Correa’s protectionist measures are leading Ecuador back to the same failed policies of the past that have condemned so many Latin American countries to mediocrity and poverty.
Correa is a member of the small club of Latin American leaders who are advancing what they call “socialism of the twenty-first century.” This group includes Hugo Chavez of Venezuela, Evo Morales of Bolivia, Fernando Lugo of Paraguay, and Daniel Ortega of Nicaragua. But whether they call their policies the New Socialism or the New Left, or whatever label strikes a populist tone, the results will be painfully familiar. The ruinous consequences of collectivism, restrictions on individual liberty, and huge increases in public spending are easily imagined. As someone once said, these socialists love the poor so much, they do all they can to multiply them.
Under Correa, the Ecuadorian government has established a long list of prohibited products for import and placed punitive tariffs on other goods – such as chocolates and perfume – of up to 500 percent. This closed door policy on trade in a globalized world not only violates commercial agreements between countries, but also causes various consequences that are not taken into account by those implementing them.
First of all, Correa and his administration start with the erroneous assumption that protectionism is the way to help local industry. But they fail to see that this really promotes inefficiency because national industries are no longer required to compete on a global scale. As a result, their first objective is not achieved and the remedy ends up being worse than the disease.
The rise of corruption is the second overlooked consequence. These new trade restrictions will encourage smuggling across Ecuador’s remote borders and through its seaports and airports. Smugglers’ money will corrupt local authorities with bribes, as they turn a blind eye to this black market activity. In this way, the corruption will snowball and many prohibited or restricted products will continue to flow into the country.
And how will trading partners respond? Many nations will reciprocate and impose their own trade restrictions. This will hit the already fragile exporting industry that has suffered more than any other in the current global crisis. Besides affecting local consumers by restricting all imports, the local exporters will take the worse part and many Ecuadorians will lose their jobs.
At the end, we go back to the beginning. Correa once again shows us that the constant attempt to limit the liberty of individuals by telling them what they can and cannot buy with their hard earned money exposes a terrible idea. The Correas of the world don’t really trust their fellow human beings to make the correct decisions when they are investing or spending their money. These 21st Century Socialists believe they are “the chosen ones” inspired to lead the masses with their delirious ideas. They deny the fact that we are all children of God, with virtues and defects, but deserving by our human nature the liberty to make decisions and be responsible for them.
There is another way. Let us work for an open door policy, one that promotes individual liberty, limited government, rule of law, the respect for private property and a great trust in human beings and their capacity to do good. Let us pray that Latin America will have new leaders, and soon, who are capable of understanding this. Until then, may God have mercy on our souls.