Much ado about politics and economics

Okay, so this is a post I've been meaning to write for awhile. Let me warn you: this post deals with the political and economic nature of Ecuador. After seeing many people's eyes glaze over at this subject in the past, I feel it's only fair to warn you upfront. Okay, here goes...

Economically, Ecuador has a lot of problems. The country is rife with poverty and crime, beggars in the streets, and doctors driving cabs. To explain how Ecuador reached this state would require information regarding its history that I do not know, and would probably require a study reaching as far back as it's colonization by the Spanish. But I can give an account as to how this economic state is maintained in the present, and what the country could do to improve itself.

The very first thing the government needs is a major crackdown on all crime. Counterfeiting and robbery are such huge problems, that vendors don't accept anything bigger than a twenty, and people carry as little money with them as possible. This is stunts Ecuador's economic growth severely because if people aren't spending money, the money is not circulating, business is bad, and the people remain poor. If people feel safe spending their money, and vendors and banks feel safe accepting it, it would work wonders for the country.

The second thing the government needs to do is cut out its oil subsidies. The country subsidizes gasoline, but while this is popular, it is a horrible policy. To begin, traffic and pollution are a problem here. Cutting the subsidy and letting the price of gas rise would cut back on traffic. A portion of those subsidies could be diverted to the bus companies, to maintain their low prices, and the legitimate cab drivers. Ecuador has a problem with false cab drivers who aren't registered, and they wouldn't be able to compete if they were competing against legitimate, and subsidized, cabs. This would make cabs safer as well. Here's the thing, Quito's streets are already brimming with buses and cabs, and a cut in the subsidy would drive more people to public transportation. The city simply doesn't have room for more buses and cabs. What Quito at least (and probably the other cities) needs is an underground subway system to transport people all over the city and keep space freer on the surface. This would be a massive government undertaking and would require it to assume large amounts of debt. Some of it could be financed with diverted oil subsidies, and a cut in the country's many social welfare programs, which really don't contribute to growth either. The project would instead create hundreds of new jobs for the Ecuadorian people, which is exactly what they need.

This project would give them the opportunity to change their public transportation to electric-power, rather than gas-power. By using the hydropower and solar power that the country has available to it, it could wean itself off of oil. That is good for the country because oil is its absolutely most precious resource. Its economy is built on the exportation of oil to other countries. There is no reason it should be consuming its own oil so copiously, especially when it does not have Saudi-level reserves. This is the lesson Ecuador needs to learn from the world. The United States continues to stubbornly refuse to diversify its energy profile. Growing demand in India and China, who are also foolishly building their economies on oil, will drive the price of oil up. This will be murderous to a government that subsidizes oil, but is an opportunity for economic prosperity for an oil-exporting country like Ecuador.

And finally, Ecuador needs to improve its trade relationship with the United States. Because of differing ideology, this Socialist government has raised import taxes so high that the U.S. is trading very little with Ecuador. If the U.S. is foolish for thinking that trade embargoes will affect Cuba, North Korea, or Iran, Ecuador is ten times as foolish for thinking that robbing the United States of trade will change U.S. policies one little bit. I suspect, though can't be certain, that cutting the import taxes would have a laffer curve effect, and the government would fill its coffers with increased U.S. trade. Moreover it would bring jobs to Ecuador and allow some U.S. wealth to flow into this country.

Further study would yield more, I'm sure, but these are preliminary observations I have made in the month I have been here. They seem obvious, but as in the U.S., and all countries, the politics is getting in the way of the economics.