Latin American Welfare States Are Crumbling, Exposing Progressive Lies

Welfare states, especially in Latin America, do not work as a safety net but as a voter incentives program. (

EspañolIn Latin America, welfare programs like the ones instituted a decade ago with the rise of populist governments, serve primarily to attract voters.

It is no surprise that these systems are designed to keep people in poverty and make them depend on the state.

Around election time, leaders then frighten people by saying if the opposition wins, social assistance plans will come to an end. For some political parties, the poor are a means of retaining power.

Temptation is great when an exorbitant amount of money is available and nobody dares to question its use. Who could possibly be against ” solidarity”?

Evidence in this regard abounds. Just look at what is going on in Venezuela, Brazil, Argentina, Uruguay, all countries with burdensome social assistance programs.

Welfare states, especially in Latin America, are not designed to provide a life-jacket in case of emergencies. The fact that most beneficiaries would pass through hardships again without the subsidies proves it.

Social aids are usually a useful tool for Latin American governments to manipulate statistics, because the handouts are then listed as household income. Accordingly, the illusion of wealth is presented by officials as an achievement in poverty relief, but the poor are still there.

To make matters worse, they get used to living off the handouts of “benevolent” rulers, who in turn extract money to keep funding the programs from working people. It is an unfair system for everyone.

Moreover, politicians and unions often claim that because of their actions workers enjoy better lives, when what actually leads to the accumulation of capital and better wages is economic liberalism.

When the economy dives, no legislation or union strike can increase wages.

Long time ago, French intellectual Frédéric Bastiat already discovered that in economic matters there are always seen and unseen consequences. He noted that, in general, legislation that has positive effects in the short term ends up creating pernicious effects in the medium and long term.

Bastiat also emphasized that what differentiates a good economist or ruler from a harmful one, is that the first consider both “what is seen and what is unseen” when analyzing the possible outcomes of a particular decision.

Officials who ignore the ethic of individual responsibility tend to pass legislation that produce fast results because they population perceives them as positive, regardless of the disaster they may cause years later. Immediate political gain without having to deal with the consequences is what they are after.

A clear example of this is what has been happening in Uruguay since the leftist Broad Front party took power in 2005. The newly elected authorities became very “generous” with workers and gave disproportionate power to unions, their political allies.

When negotiating wage increases with business and unions, government delegates are not impartial at all. They blatantly tilt the balance toward the union side. Some Uruguayan employers even filed a complaint with the International Labour Organization.

In the same vein, they passed a large number of laws against employers, ignoring basic property rights and inventing the right of employees to “occupy” firms.

Uruguayans gradually began to feel that hiring employees — even for household cleaning — was too risky. Relations between employers and employees became tense.

Mutual distrust began to prevail. The sum of these psychological factors led employers to look for alternatives when hiring workers. At a time when technology and robotics are increasingly accessible, it is logical that machines would displace human labor.

During a decade of prosperity, due to the exceptionally high commodity prices, this situation went unnoticed. But now that Uruguay is in economic crisis, that foreign companies are leaving the country, and that national industries are going through increasing difficulties, reality is emerging.

The unemployment rate is rapidly increasing, especially among the less qualified and less educated.

This new scenario has led many workers to accept lower wages and decline some of the innumerable “labor rights” the authorities graciously granted them. However, mistrust is now installed.

It is very difficult for Uruguayan employers to hire nowadays, and many are realizing that robots can perfectly replace an employee without all the legal risks.

The cultural and psychological effects in the labor market will be very difficult to reverse. Hence, we can expect that families will fall even deeper into poverty than before this whole process started.

Uruguay already went through this deterioration during the 1940s and the 1950s. The corollary was a tremendous economic, social, and political crisis that prompted the guerrilla and the military dictatorship that began in 1973.

This is not only an Uruguayan dynamic; it’s happening in all those countries where the belief that prosperity comes by decree or union violence has taken root.

The most unfortunate effect is that, ultimately, the least advantaged members of society are left worse off.

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