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Why Colombia Needs a Reaganite Revolution

By: Guest Contributor - May 4, 2017, 10:41 am
Why Colombia Needs a Reaganite Revolution
Last week, the Bank of the Republic lowered its growth prospects once again to 1.8% (in 2016 growth was 2 %, in 2015 it was 3.1 %, in 2014 it was 4.3 % and in 2013 it was 4.8 %). (Calicultural)

By Jorge Enrique Gomez Pardo

EspañolNear the end of the 1970s, the United States went through one of the most difficult moments in its history: a very delicate economic situation with no clear solution and wavering global leadership amid confrontations with the Soviet Union. Much of the problem has been called a crisis of self-confidence, as the world considered that, perhaps, the US had reached a time of “inevitable decline.”

The US economy was going through a stagflation phase, meaning the country did not grow but inflation increased. Citizens and businesses alike were suffocated by high taxes and excessive regulations.

Meanwhile, they were doubting the strength of their peace and security, as it appeared the Soviets were winning the Cold War and introducing communism to more and more of the world. The Soviet Union seemed invincible at that time, and was on the political, ideological and military offensive.

Under such circumstances, Ronald Reagan became president. He was a man of strong convictions rooted in freedom, common sense and personal and intellectual value. He also balanced ideology with pragmatism. He entered the presidency with clear principles, a vision and a road map for implementing simple and effective proposals that moved the country forward.

“They say the world has become too complex for simple answers,” Reagan once famously said. “They are wrong. There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.”

It was this line of thinking that brought about Reagan’s Revolution.

In economic terms, he carried out the heaviest tax cuts in the nation’s history, cut public spending unrelated to military and social security, eliminated numerous regulations and supported the painful anti-inflationary monetary policy of the FED — all of which became known as Reaganomics.

He sent a clear message to Communists that he was not afraid of them. He proclaimed the superiority of liberty over oppression that had, under the pretense of equality, imposed itself on many parts of the world.

Meanwhile, he initiated an unprecedented rearmament known as the Military Buildup that restored confidence in the Armed Forces. He was able to implement his successful policy of “peace through strength” that led many to call Reagan a warrior.

After eight years, the results were impressive.

Economically, he achieved unprecedented prosperity. According to a recent article published in The Wall Street Journal, between 1974 and 1980, GDP growth averaged 2.5 percent. During Reagan’s presidency, the average growth was 4.6 percent. Likewise, state revenue grew at double digit rates during four of the last six years of his presidency. Inflation went from 13.9 percent to four percent.

He also left a freer, safer, more peaceful and respectful world in terms of human rights and democracy. According to his Secretary of State, George Shultz, upon leaving the presidency, the Cold War had basically ended. He also reached an agreement with the Soviets on the largest reduction of nuclear weapons in history and created the conditions for its definitive fall a few years later. And as Dinesh D’Souza recalls, Latin America benefited during his administration because several dictatorships took steps toward democracy.

Reagan’s successes help us understand why markets have responded favorably to Donald Trump’s presidency. As reporter Trish Regan stated, “lowering taxes works.” Reagan proved it.

How does this apply to Colombia?

Last week, the Bank of the Republic lowered its growth prospects to 1.8 percent (in 2016 growth was 2 percent; in 2015 it was 3.1 percent; in 2014 it was 4.3 percent and in 2013 it was 4.8 percent).

According to the World Economic Forum, the country has the sixth-highest taxes in the world, which is the main obstacle to conducting business there.

Likewise, complaints from citizens and employers have become permanent in the face of safety and regulatory instability.

The deficit of security forces in big cities is noticeable, as it is in farming areas for narcotics — the source of much of Colombia’s violence. It quadrupled, with FARC and ELN guerrillas continuing to commit crimes.

And, to make matters worse, we have the FARC peace deal, arbitrarily imposed by President Santos, its allies and FARC, that ties any policy of the next administration.

Therefore, Colombia must, at the same time, strengthen its capacity to provide security, lower taxes, stabilize investment and cut public spending while eliminating unnecessary regulations.

Former President Alvaro Uribe Vélez, whose government successfully implemented multiple measures in this spirit, presented new economic proposals this week.

“Colombia needs to support the worker and the entrepreneur,” he said. “Both are held back from their potential by high taxes, waste and corruption. We will fight for a substantial drop in taxes and a significant increase in wages. ”

But for this to happen, we must also repeal the FARC peace deal. It’s the only way that Colombian will fully recover their freedom. They must be able to choose the policies they consider most beneficial to them and not special interest groups.