Petro is offering a “trojan horse” to Colombia, says economist Daniel Lacalle

"It happened in Venezuela and it will happen in Colombia", says Lacalle, about Petro's threat to put in place a 'constituent assembly'.

Economist Daniel Lacalle warns about the dangerous economic policies of Colombia’s current front-runner Gustavo Petro (PanAm Post).

PanAm Post interviewed Spanish economist, columnist, and author, Daniel Lacalle regarding his perspective on Colombia’s upcoming presidential election and the rise of left-wing populist Gustavo Petro.

Lacalle is president of the Instituto Mises, the Spanish language counterpart to the Mises Institute.

What are the perils of expropriation and redistribution of land in general, and of Gustavo Petro’s plan in particular?

The idea that the state is going to make land more productive, and make better use of it than private owners is simply debunked by reality.

The state uses expropriation to perpetuate its inefficient model and impose politicians to manage the land. The examples from Venezuela and other socialist regimes such as Cuba have shown how disastrous it is. Production collapses, productivity worsens, and costs soar.

Gustavo Petro’s model is precisely the Castro and Chavez model. Land in Colombia is not less productive due to private ownership, but due to the enormous bureaucratic and fiscal burdens that agriculture and farming suffer, as well as the lack of security. If the state does not do what it should, which is to protect private property and guarantee security, it cannot expect productivity to improve.

Gustavo Petro wants to impose political management of the industry: expropriations at state-dictated prices and interventionism of the highest magnitude. The danger of this is that it will amount to exactly the same failed model that we’ve seen in Ecuador, Venezuela, and Cuba among others. It has never worked. The productive sector is not “given to the people”; it is given to the political power that decides what and when should be produced. They hide the wolf the in sheep´s clothing of populism. And what happens is that investment, both foreign and domestic, leave the country when faced with the evidence of arbitrary and imposed expropriations and political meddling.

Why has Gustavo Petro been leading in the polls in Colombia for the past few months, despite his checkered past as mayor of Bogota and an ex-guerrilla in M-19?

One thing that is puzzling, and it happens all over the world, is how easily the media and the people whitewash the disasters of communism.

Communism presents itself as the savior of the ones it hurts the most: the poor and the weak. It is outrageous that people with such obviously dangerous ideas and motives are whitewashed as if they were “well-intentioned, slightly misguided people.”

Communism and socialism have such an atrocious track record globally that their adherents need to present themselves as “social democrats” to win elections, and then they do, as Chavez did, what they always do. Wreck the economy. Some forgive these checkered pasts and ideas under the fallacy of “it was not real socialism.” It is always real socialism; that is why it fails.

Given last weekend’s primaries, what do you make of the prospects of a Duque/Ramirez ticket to defeat a left-wing Petro or Sergio Fajardo candidacy?

It is absolutely essential. The extreme left always appears divided but when it comes to seizing power they always find common ground. The mistake of the center-right is not to view these elections as a critical moment for Colombia where the country can find itself on the path to prosperity or the path to Venezuela.

Commodity-dependent economies like Colombia and Brazil have had a hard time of late, and Petro has tried to deflect his association with Maduro by railing against the oil industry, which he claims has been the master of both Uribe and Chavez/Maduro. What do you make of Petro’s harsh criticism of the mining and oil industries?

It is ironic. The state-owned oil companies, when managed by populists such as Maduro and Chavez, always end up in bankruptcy because, apart from being atrociously managed, they have squandered millions to finance and support extreme left-wing movements around the world such as Podemos, Syriza, or Frente Amplio and Colombia Humana. The entirety of the political careers, foundations, and ideas of these radical socialists and Communists has been supported, doctored, and financed by oil money from socialist countries.

It is funny that Petro rails against the oil industry in Brazil, which is majority state-owned and has suffered from politicized management and endemic corruption, yet he fails to mention that in all the oil countries the state owns their assets, they were nationalized, and only the state oil companies receive the concessions.

What argument would you make to someone like a Gustavo Petro or Pablo Iglesias regarding the need for labor market flexibility?

The labor market rigidity which they want to impose has never worked. Unemployment is never reduced, making the cost of hiring more expensive.

What can we expect if Petro is elected and he convenes a Constitutional Assembly, as he has promised?

The Constitutional Assembly is always the “Trojan Horse” of communist populists to destroy democratic institutions and seize total power using allegedly democratic means. It is again a wolf in sheep’s clothes strategy. Claim in a populist way that institutions do not work, and instead of working democratically, impose changes designed by his political allies to impose totalitarianism. It happened in Venezuela and it will happen in Colombia. Look at what is happening in Bolivia these days.

You are an outspoken critic of state banks. What are some of the worst examples of their abuses in recent times?

The savings banks in Europe, the Italian “casse di prestiti”, the Landesbanks, have been an absolute ticking time bomb that has exploded under the inept management of politicians; they are loaded with debt and non-performing loans provided with political motives. China is also suffering from this. The government has had to inject more than USD $180 billion and we have no transparency with regard to the reality of non-performing loans or the risks accumulated.

The Brazilian examples are also similar. The evidence is overwhelming. Private banks can also make mistakes, but public banks always have an incentive to make politically motivated loans, with much lower efficiency, solvency and liquidity ratios than private banks. In the end, public banks are riskier because they lend ignoring risk and real return under the pretext of “social spending.” The taxpayer has occasionally bailed out private banks, but taxpayers are always on the hook for bailing out the public sector. Always.

Why are politicians so adept at using supposedly “socialist” Scandinavia as a pretext for their economic policies?

Because they would never win elections if the public knew about their real economic model. They use Scandinavia because it appears to be socialist, when in fact these countries are leaders in economic freedom, respect of private property, private banking, and free enterprise. They have larger welfare states because they are prosperous and rich, not the other way round.

You’ve probably seen in Ecuador that its new president, Lenín Moreno, has very publicly broken with the economic policy of his predecessor Rafael Correa. Has he had a genuine change of heart or is this more about political expediency?

Ecuador urgently needs to attract investment and have access to the credit market after Lenin Moreno discovered that the real debt of Ecuador was more then twice what Correa had said. So Mr. Moreno, who understands basic economics, knows that the country could spiral into depression if it does not embrace basic investment security and fiscal principles aimed at attracting foreign investment and capital. It might have been a forced change of heart, but remember the words of Margaret Thatcher: “socialism works for a while until you run out of other people’s money.”

What do Scandinavian center-left parties think about the efforts of Latin American socialists to use their governments as a model to emulate?

They laugh. I had dinner with the finance minister of Finland and he could not believe that extreme left-wing populists used Finland, a capitalist country where private property and private savings are guaranteed by law, as their example to emulate.

In Norway, I spoke with members of the center-right and left and they were amused. These are countries that have made massive pro-market reforms, have extremely flexible labor markets, have privatized inefficient public sectors and driven their economies to prosperity thanks to private initiative. Nothing to do with extreme-left populist magic ideas.

{Editor's Note: edits were made for clarity and style}
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