Focusing on controlling inflation and honoring debt has diverted the focus from priority objectives, such as better employment and growth with better distribution of wealth. This approach helps to understand the reasons behind the current social outbreak in the country.
In the last 20 years, it has been proudly repeated in the country’s economics faculties that the main macroeconomic achievements of Colombia are highly controlled inflation and the payment of debt, two things that have earned us a great reputation in the markets. financial
This story, adopted and replicated in different settings, often forgets the debts that the traditional approach has left in macroeconomic matters. Today, the circles that benefit the most from this story are usually associated with 0.1% of the population who, in the worst crisis in history since there is data, want to maintain a status quo with traditional measures.
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On the other hand, the victims of conventional policies are increasingly difficult to make invisible and add in complex ways to the claims of traditional organized social sectors, such as unions and student movements. It is not strange to see in the marches that began on April 28, young webcam models, precarious workers of transport platforms and homes, young people from barra bravas and, in general, diverse groups that accumulate dissatisfaction in the face of the flexible labor scenarios of the 21st century .
While inflation and the payment of debt are pride, employment and the distribution of income and wealth are macroeconomic debts, and are closely related to the deep social discontent that has reawakened, and that has already been experienced since the mobilizations of 2019.
From this perspective, last week a diverse group of academics in economics and other disciplines have circulated an open letter entitled “For a new macroeconomic policy in Colombia.” This text can easily be found on the networks, since its dissemination has created controversies and spaces for debate in those same networks and even open classes with dialogue between Colombian economists of different currents.
Some elements of this letter collect the debts of the macro policy and at the same time suggest alternative proposals to think within the framework of the social and economic crisis, which is not only the result of the pandemic, but also of an accumulation of disagreements, in which the new generations get the worst of it.
In this sense, one of the main debts lies in the distributional field, since the increasing concentration of property and wealth has been favored by a monetary policy obsessed with inflation and an austere fiscal policy, blinded by the myth of the deficit and that neglects the distributional issue. Although the variation in prices has been very well controlled in the last two decades, official unemployment has rarely been below double digits, and that is not to mention its quality, since we are a tremendously informal country, among other peculiarities. Even today many central banks devoutly calculate the optimal unemployment rate that does not accelerate inflation, known as NAIRU, for its acronym in English, and the question arises: is it ethical to think of an optimal unemployment rate? With a depressed economy, today more than ever the leading indicator must be full employment.
Follow the news of El Espectador on Google NewsIn this regard, the aforementioned letter proposes guaranteed public work as an income alternative in the midst of this crisis and that, given the drop in effective demand, the only agent with stabilizing power is precisely the State with employment programs public.
Using data from DANE, it is suggested that in a four-year window it is possible to reduce unemployment to close to 5% with a guaranteed public employment program, focused on caring for “heads of household”. Starting with approximately 547,997 people in the program in the first year to 2,191,989 in the fourth year, it seeks to attack unemployment with this temporary buffer mechanism. With a salary below the minimum wage of $ 800,000 per month, the cost would go from 0.49% of GDP in the first year to spending 1.5% of GDP in the fourth year, but with positive effects, since the buffer multiplier (positive feedback effect on the economy of the jobs created) would lead to a growth of 1.5% of GDP and tax revenues of about 0.24% of GDP. Thus, taxes are not paid at first, but rather jobs are created first at public expense and then taxes are collected. It is about understanding the monetary circuit of the income-expenditure flow of textbooks in another way.
Returning to macroeconomic debts, in the field of public finances the discourse of healthy finances, together with the fiscal rule, have forgotten the distributive role of taxes and it seems that their priority is the payment of obligations to creditors, for above debts on social rights and environmental issues.
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Many times when progressive tax elements are raised, the lobby of financial actors in the Legislature knocks down any attempt at progressivity in the local system. In the end, the failed tax reform project slightly touched the distributional point and issues such as the wealth tax were immediately repudiated by the tax experts who advise the large local financial groups.
If there is a point in which macroeconomic policy must be more active, it is in the control of financial income, in which Colombian bank intermediation margins are among the highest in the world, with oligopolically concentrated actors and with great power of market. It is necessary to tax large profits and dividends from shareholders and institutional funds if the distribution of after-tax income is to be improved.
Macroeconomics and its traditional theories have a social debt with thousands of citizens, not only in Colombia, but in many emerging countries, where debt repayment and inflation control have been prioritized over unemployment and income. growth with distribution. This is where unemployment and the demands of its promoters are connected with the world of macroeconomics, which, although it seems abstract and mathematical, ends up having repercussions on the lives of millions of people.
* Professor at the School of Economics of the National University of Colombia.
