Rafael Correa’s Dirty Little Secret Behind Ecuador GDP Growth
But the country is not better off than it was before, no matter what Correa says.
The truth is that the GDP does not determine whether a country is thriving or not. The number of people without formal employment remains the same as it was 10 years ago, for example. Those kinds of figures aren’t represented in the GDP.
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Ecuador has the highest inflation rate for dolarized countries. More and more people are laid off every day, and businesses are increasingly failing to survive amid an economic crisis. Correa’s adminstration becomes suddenly quiet when these problems are brought up.
The country’s growth rate between 2000 and 2006 was virtually the same as it was between 2007 and 2013, revealing that the measures taken by the current government are not much better than those taken in earlier administrations, though apparently Correa’s “citizen revolution” has helped public works quite a bit.
Correa’s administration is very proud to say that over the last 10 years, it has managed to double Ecuador’s GDP. What they do not say is how they have generated this increase — irresponsible spending that has damaged the economy.
Correa mismanaged the highest oil revenues in Ecuadorian history. And what is worse, oil was not Ecuador’s highest income; taxes were.
Taxes in Ecuador
Correa’s adminstration has imposed so many taxes that Ecuadorians now have to pay about 30 different fees.
Ordinary citizens have less money in their pockets to invest in projects that could have met the needs of others in a more beneficial way. As public spending increased, private investment declined and drove private enterprises out of the country.
All of this originates in one of the fundamental principles of Correa’s management — redistribution of wealth — that many socialists love but which is really only a “redistribution of poverty” in disguise. Even if the government did redistribute the wealth of the richest people in Ecaudor, the rest of the population would receive less than US $5 each. Not much of a difference-maker.
The only mechanism that has been proven as an effective mechanism for eliminating poverty is creation of wealth. It would make Ecuador more attractive to private investment, allow more trade and therefore, more products, services and opportunities for everyone.