Argentina suffers from the absence of stable rules even if there are plenty of economic plans. Nobel Prize winners Frederick Hayek, Ronald Coase and Vernon Smith analyzed the effort it takes to reach consensus.
INFOBAE: The magic of progress lies in promoting the right contractual clauses for increasingly specialized transactions.
Each commercial advance opens up better deals, which are facilitated by the stability of government regulations and the general price levels.
Indeed, there is some correspondence between the best regulatory specifications, price standardization and GDP. Each imposition by the authorities, on the contrary, requires recalculating negotiations with multitudes of actors, exacerbating conflicts and wasting efforts.
The same happens with inflation and currency devaluations. The solutions are dependent on existing institutions and each regulatory variation disturbs the agreed upon remuneration. Hence, continuous regulatory, price and exchange shocks require additional efforts that impoverish a society. They upset businesses, reinstating obstacles that had been overcome.
Being the individual skills and technologies scattered among the 8,000 million humans that populate different geographies of the planet, the great gaps between the national average income are born from different cultures, agreeing on lasting regulations.
Those who have gone through the same procedures in different places confirm indigenous obstacles. Requirements abound in lagging countries, explaining the difference in national GDP from USD 300 a year per inhabitant in Burundi and South Sudan, up to USD 100,000 in Ireland and USD 90,000 in Norway and Switzerland.
To explain it clearly, private companies continually compete to agree on the most favorable conditions, persuading clients, employees and other participants.
Against this context, modifications by officials require further adaptations, hindering the agreements and cutting value. Rules that are imposed – those that do not result from voluntary transactions – devalue personal income and increase opportunity costs. The attempt to favor one sector alters the costs and income of the rest, contracting assets.
More than half of the world’s population resides in jurisdictions that lack transparent regulations; That is why they generate barely 10% of the world GDP, having the lowest incomes, lacking freedoms and with wide variations between them (an average of USD 300 to USD 6,650). Barely 10% of humans, who inhabit nations with stable and transparent rules, generate 50% of the world’s GDP and have the highest income.
Leaders alter rules to win supporters, without noticing that each imposition, favorable for some, impoverishes all. Only the voluntary transactions of those involve result in the correct valuing of goods and services, when competing to satisfy individual needs.
Argentina was one of the most prosperous nations in the world between 1890 and 1920. A century later, in 1980, when the IMF’s economic perspectives series began, per capita GDP was still three times the world average. In a sharp fall, in 2022, its per capita GDP equals the world average of USD 13,400 per year. A terrible decline, typical of a society without lasting rules where competition cannot work.
When we are asked what country do we want the answer should be emphatic: the country of our National Constitution, with transparent, lasting, equal rules, without privileges or special powers. A single currency, the dollar, preferred by Argentines, freely marketable.
State spending should generate higher benefits at the margin, similar to private spending. It is necessary to replace the unequal Federal Coparticipation of Taxes by equal payments to each inhabitant of the provinces and to privatize all companies; the persistence of loss-making societies with rich officials should not be sustained at the expense of the people.