The lesson we don't see: national industry and structural poverty

In days of less economic freedom in Uruguay, Argentina, led by the first libertarian president, continues its path toward the total liberation of its population, this time from the burden represented by the so-called national industry.

Structures originating from the old model of Import Substitution Industrialization (ISI), typical of closed economies and promoted as a response to the global crisis of the thirties, have resulted in inefficient and unnatural systems that, far from generating wealth, consolidate structural poverty.

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As I explained in the article “Uruguayan Mercantilism and Global Protectionism,” this approach remains in the socialist ideas of our politicians, who promote interventions and corporate privileges.

Ideas like those once enshrined in Article 50 of the Constitution of the Republic: “The State will guide... protecting productive activities whose purpose... replaces imported goods...”

Our “candles” lit to socialism

In Uruguay, previous Frente Amplio governments lit the most expensive candles in history, lit to socialism and praised, at another time, by the one who just departed: Funsa, Olmos, Envidrio, Pluna, Alas U, the regasification plant, Antel Arena, among others.

To these examples are added Venezuela's unpaid debts to Conaprole and the businesses with ANCAP during those same administrations. The most grotesque case is, undoubtedly, that of UPM II, which will impoverish the population until “the third and fourth generation...”

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The heist of the century: a train for UPM

What is seen today: the 7,000 jobs that some estimate will be lost in the national cell phone assembly industry, or the jobs created with the new UPM plant here.

What many do not see is the increase in the well-being of all those who will no longer be forced to pay overprices, thus having more resources to acquire other goods and satisfy a greater number of needs.

All the new jobs that will be created from the liberation of that money—whether spent or saved—will energize other sectors of the economy.

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In the case of UPM, the jobs that, due to exclusive privileges for a few, will never come to exist are not seen.

Economic theory indicates that, although it will take time for workers to find new employment, what is surprising is the speed with which, in the past, many people have reintegrated into the labor market.

The lesson exposed more clearly

When the economy is honest, jobs, like other scarce resources—natural, capital, or entrepreneurial effort—must be available to be used in their best use: where society really needs them.

This doesn't happen when they are artificially assigned by regulations that prevent the harmonious development of the population.

That orientation is only possible if the market signals—the price mechanism—are not distorted by the governmental system.

The fear of unemployment often arises because only part of the process is judged. However, jobs are quickly reassigned to areas where society demands them (not where politicians dictate).

Hazlitt, at the end of the chapter, goes to the heart of the problem: every job created by the State is a job taken from another place where the population needed it, a misallocation of resources.

Final reflection

I want to be careful because perhaps among the readers there are people or acquaintances who have suffered the loss of a job in a company that stopped producing to start importing. While it is painful, one must consider what is not seen.

Governments often protect companies in sectors with high political interest, while others must struggle with over costs due to a tangle of taxes, regulations, and expensive public services.

Again, only part of the process is judged, but the companies that fulfill the essential role of improving our quality of life—when they can freely pursue their goal of maximizing profits—must be seen in their true dimension.

It is also something that is not always seen: the human dimension of the well-understood economy, where companies, if allowed to compete freely, fulfill their role in the harmonious development of society.