Correa Takes Ecuador back to the Dark Ages
Ecuadorian President Rafael Correa has made himself very clear: our economy has run out of ammo on the battlefield of global trade. Our most ardent “enemies,” Colombia and Peru, have their arsenal ready, and they are firing on us with their most effective weapon: currency devaluation.
Every dollar that is spent on cheaper, foreign products is a bullet fired right at us. Our country is under siege, our economy is at war, and we will lose unless our politicians prepare our army of businessmen for a counterattack.
This is all nonsense, of course. We are not at war with Peru and Colombia; the products that Ecuadorians import are not bullets; and the economy is not a zero-sum game where one’s gain is another’s loss.
Yet, Ecuadorian authorities speak as if we have a war economy, a legacy from the past that has infected the minds of technocrats at the expense of everyone else.
In the Middle Ages, kings ruled over their lands and subjects under the constant threat of war. Before the Industrial Revolution (division of labor, mass production, and trade), the only way to collect revenue for the crown was through conquest and plunder.
But wars are long and costly, and all kings had to rule based on this reality.
Two policies to address these conditions arose in those times: high taxes and trade barriers. They made sense at the time; taxes enabled the government to buy weapons and armies for eventual battles.
Barriers to international trade emerged since nations grew more dependent on one another, specializing in certain goods and importing the rest. But a ruler, under the constant threat of war, could not risk putting his kingdom in danger by relying on foreign goods, since this would make him an easy target for sieges and blockades.
In other words, self-sufficiency was a war-time strategy — a forceful imposition. From that perspective, every import could be considered a “bullet,” or some kind of shackle to other countries. On the other hand, a high number of exports makes other nations your hostages.
Under this rationale, it’s clear why kings would restrict imports and promote exports. Economic war was the prelude for true warfare, and winning the former meant getting a head start on the latter.
But such thinking has no place in modern Ecuador, or any other country for that matter. In the 19th century, the Western world decidedly moved toward capitalism and free enterprise, leaving behind feudalism and absolute monarchies.
Division of labor created countless opportunities to produce more and relieve poverty. It was an incentive for peace, since war always comes at a high cost in both resources and human lives.
Managing the economy as if we are constantly at war with our neighbors throws us 500 years into the past, risking the same poverty and sickness of those times.
President Correa’s economic plan, as well as many of his statements, resemble those of the Sun King more than a responsible statesman.
Esteban Pérez is a lawyer pursuing a master’s degree in Austrian economics at the King Juan Carlos University and holds an LL.M. from the University of Chicago. Follow @estebanperezm.