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ENTREPRENEURSHIP
IN PERU: HOW DOES THE IDEOLOGY AFFECT IT? POR
JOSE
LUIS TAPIA ROCHA
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“If
we want to defend Capitalism and save the free enterprise system, it has to be
by means of morals and philosophy. In one word, economics are not enough”. R.A.Childs,
Jr. [i] Do
socially prevalent concepts and values promote or jeopardize entrepreneurship,
productivity, competition and the creation of wealth? The economic results of
national businesses depend on finding an answer to this question.
It should not be surprising that continued efforts to give
entrepreneurship a greater freedom in the market have found opposition in values
and ideologies contrary to free enterprise. Moreover, these values and
ideologies are quite ancient, they remain in our midst and seemingly, day after
day they find greater acceptance in Peru. If they were harmless we should not
worry much, but what we face is actually more serious than what we imagine with
respect to the attempt to permanently attack our moral right to attain to
benefits from entrepreneurial activity as the mean to productively live in a
civilized society. This work purposes to spotlight the role of ideology in the
exercise of entrepreneurship in Peru. 1.-
Values Values
are guiding principles which function as premises for human behavior.[ii]
As Ayn Rand would say “it is that for
which one acts, to obtain it and/or to preserve it”.[iii]
Values
appear to be implied in norms and patterns of conduct and they crystallize in
institutions, and even in laws and constitutions. The best known, most popular,
more spread out and most practiced values are accepted by the majority of the
population. For the economic success or failure depend from laws and judicial
and administrative decisions, but all these in turn depend on the correlation of
political trends. And likewise, politics critically depend on values and
ideological influences prevailing in schools, research institutes, universities
and press titles, on the comments of political analysts, who finally dominate in
the global society. Collective
Values In
a small society, the authority or tribal chief rules on the basis of implicit
rules or its equivalent: obedience to what he says. Anyone who pretended to
disturb the peace ofothers by a different behavior was expelled. It is a
scarcely tolerant society with a few different customs. In exchange, an open
society or extended order –as Friedrich Hayek calls it- is not like the tribe
where everyone knows each other, but better, being conformed by millions of
individuals the place where it is difficult to efficiently articulate the
millions of needs and preferences without obviating its individualities. Some type of a harsh and chasing state-control would be
needed to keep the cohesion like in a tribal society. Of course, that would
negatively affect the members of the society as it would hinder the development
and exposure of its individual talents –including the entrepreneurial- to the
best bidder with no permission from the state authority (paternal) and the
subsequent benefit for the progress of civilization. As Hayek says in his book
“Fatal Arrogance”: “If we would
pretend
to apply the rigid norms of conduct of the microcosmos (meaning the characteristic order of community living in the small
gang, or even of the family unit) to the macrocosmos (meaning the order proper
to a civilized society in all its complexity and extension) – as so repeatedly
recommend to us our deep inclinations-, we would endanger this second type of
order” [iv] Chart
1 shows
a summary of the main values
which distinguish tribal societies
from extended or open societies. Collective
values are attractive to any individual who favors safety, estability, and what
is known, and it is comprehensible that small communities will oppose to the
change of an open society, as the Ashaninkas would, and so would oppose change
other Andean and Amazonic communities of
Peru. Precisely,
as part of the cultural involution, the greater Peruvian enterprises today lift
up collectivist concepts such as “social responsability” that stands against
the spirit with which was created by the shreholders. Milton Friedman and Tibor
Machan have afformed that it is enough for a company to be profitable to be
morally recognized as a contributor to the individuals in a society.[v]
But
some proffesional altruists pretend to blame enterpreneurs[vi]
if they do not work for their community in areas of health, environment,
education, culture, indigenous peoples, democracy and other issues as a sort of
enterpreneurial paternalism meant to replace estate paternalism. Chart
2 shows
collectives and their corresponding ideologies, although there are more updated
versions of modern times, like eco-feminism-indigenism, new age, postmodern
thinking, among others.[vii] Values
and Ideologies
Values
are rooted in our customs and ways of reasoning, some of
them are inherited and others are learned from our culture
[viii].
Values can also be found in ideologies which are – as Douglas North explains-
those subjective concepts individuals structure on the basis of values
culturally inherited which explain what the world is and how it should be. If it
is true that scientific knowledge can change people’s perceptions of the
world, this is not enough as people always grab certain myths[ix],
beliefs, religion, whatever sort of cultural inheritance that may explain what
the world is and how it should be.[x] Graphic
1 shows the
interrelation in between ideologies and the efficiency of Economics. The process
starts with ideologies influencing the political sphere through public debate of
ideas, arguments and opinions. But the world of Politics is the world of
opinions, subjectivism and values. As Constitutionalist
Dr. Jorge Astete Virhuez points: “It
is the world of personal emotion, of ideologies, and also of individual
prejudice. It is the flame of passion and also of action; as such, if it is true
that it feeds on reason, its sphere is more the world of estetics and of the
irrational.” [xi] The
third step is about the laws flowing from political power. The pretension is to
enhance reality through laws, but the results are precisely the opposite. They
are the cause to conflicts between entrepreneurs and workers, informal and
formal entrepreneurs, it turns into legal action the plunder of wealth generated
by productive individuals and the whole of society is harmed with more violence,
poverty and injustice. In this respect Dr. Virhuez points: “It
is true however, that every new law is an obstacle to economic and civil freedom
of the citizens. Laws do not enhance reality, they worsen it. They mean one more
procedure, an obstacle to display my freedom, a new obstacle, more and more
thorns in the way, a deceitful shortcut. The only ones who obtain a benefit from
more and more laws and rules are the estate bureaucracy, regional and local and
those professionals in confusion, lawyers, architects, engineers, accountants,
etc. who live either legally or illegally thanks
to those obstacles.” [xii]
Hayek manifested that for an extended order to evolve, very abstract and general norms inspired in non-tribal societies are needed, so that individuals can pursue concrete purposes. As it comes out, the “law” of societies where collective values prevails becomes an instrument of power to plunder the profits of productive individuals, business companies among them. Frederic Bastiat wrote in 1850 the following: “Thus,
when plunder is organized by law for the benefit of those who dictate it, all
those plundered aspire to partake in the making of those laws, by means of
pacific or revolutionary.”
[xiii] Pioneer
works became interested in researching how state laws [xiv]
affected entrepreneurial performance in Peru creating behind it a whole illegal
or “underground” economic system[xv],
far from the moral purpose every law must, according to Bastiat, uphold, and
which must irganize collectively the individual right of legitimate defense
against the plunder of a collective.[xvi]
But the truth is that in Peru, laws are born from political power with
value content (jusnatural), and from there, all kind of consequences can
be observed, as Dr. Astete describes it: “As
every right is born from the political womb, the whole of society is pending on
politics: whether in permanent anxiety with respect of their individual or
commercial rights, whether to obtain an advantage. It is not known whether they
will be preserved, violated or diminished for such or such ideological faction
assuming political power. When what worries citizens is not anxiety, but any
labor, trade or corporate issue, they also know that running to the estate
(political power) they can get their laws” [xvii]
As
Socialism invades the political arena, it starts producing the unwanted
consequences which can be proved by the existent corruption, informal economics,
social, economic, technological and cultural underdevelopment, and moreover,
moral perversion of the law.[xviii] In
this respect, it is accurate to point at the reason of the agression of the
State to entrepreneurship. According to the estatement of Spanish economist
Jorge Valin, it is the axiom of unilateral agression of the State itself which
produces those unwanted consequences: “Thus,
the State acts in a condition of anarchy where it does not explain anything to
anybody, not even to its sociaslists partisans (pressure groups), therefore, it
can act as it pleases.”[xix] The
State is not like the entrepreneur, who needs the decisions of the customers to
act. By the contrary the State can continue acting with no political nor
ideological counterbalance until it becomes a tyrant political regime.
It is not enough, not even pertinent that democratic mechansms will take
care of coming to an end with this despotic tyranny through elections. The
Republican History of Peru shows the opposite. Peruvians have rather elected
socialist and populist regimes which ended up assaulting entrepreneurship, as we
will see later, but I doubt it that people will be able to elect another
different reality if there is no massive spreading of values and ideology
opposite to estatism, and which
will be carried out by citizens that will get organized to produce that cultural
change. Institutionalists
sustain the valid criteria that it is enough to modify the incentives behind the
political structure of the state so that authorities, one installed in the
government, will become discouraged in
their desire to plunder entrepreneurship. Here, the issue is not only choosing
an institutional or cultural change. Both can be carried out by means of the
proposal we expose further on. But
what is important is to spotlight the great economic lesson left by statism of
the Iron Curtain. As Canadian Philosopher Pierre Lemieux estates: “The
study of economics teaches a lesson, maybe the only lesson: That individual
liberty serves efficiently individual designs and that it functions alone (it
regulatess itself by its efficiency)” [xx]
It
is amazing that Austrian economist Ludwig von Mises foreviewed the fall of the
socialist regime 69 years before and that humankind would not beware of it[xxi]
. Nobody understood that free market was an expression of individual liberty[xxii].
But alter this great
historic lesson we should ask, what kind of political ideology incorporates
values opposite to collectivism and at the same time allows the spontaneous and
efficient rise of the market and institutions of free enterprise? Doubtlessly
that ideology is Liberalism, whose conception
of government and economics is the one which guaranties individual rights to
freedom and private property, among them entrepreneurial freedom. As Lemieux
estates: “Thus,
the spontaneous order or freedom, by one hand, and individual rights by the
other, constitute both, the pillars of contemporary Liberalism.” [xxiii] It
is necessary to point that liberalism is in agreement with the individual and
free nature of man. It allows every man the search of personal fulfillment by
means of responsible action within the limits required by respect to life,
property and the freedom of others. Liberalism is the political conception of
freedom for government and economics. In a liberal context, individuals can
structure trade relations of cooperation to enhance their standards of living by
means of creation of wealth.[xxiv]
Free enterprise capitalism leads to the improvement of
the living standard of the people[xxv]. However,
according to the principle of unilateral
agression, the state pretends
to institutionally constrain individuals for the sake of a collective and so as
to plan economics according to the judgements, ideas, feelings, emotions and
values determined by estate authorities. Being
Socialism a popular ideology, vindicated and accepted by majorities in our
society,[xxvi]
the
state is used to impose by force values determined by a few enlightened
socialists. In this respect, the Spanish professor Jesús Huerta de Soto defines
socialism this way: “.....a
system of institutional aggression to
the free exercise of the entrepreneurial role. By aggression or constraint, we
may understand any physical force or threat initiated and executed upon the
actor by other human being or group of them.” [xxvii]
Once
an institution, aggression affects all entrepreneurial performance via commands
[xxviii]
which make unviable the the self-regulating market efficiency. [xxix]
It must be clear then, that every “command” is an instruction
issued from the political power in any judicial form which commands, prohibits
and orders the execution of certain specific actions against the free exercise
of the entrepreeneurial function. 2.-
Ideology and Entrepreneurship
Ideology
expresses itself through the conduction of the estate. Statism is the political
expression of collectivism. Statism is contrary to liberalism.[xxx]
Its
values are governments unlimited in functions and expenses; repressed of the
market and free initiatives suffocated under taxes and limitations; a mixture of
private institutions with political power. In legal matters it is the opposite
of the law. As Friedrich Hayek suggests, laws should not inhibit the creative
processes which naturally and spontaneously unchain in liberty; for society to
benefit plentifully from its fruits, people must submit more to covenant than to
legal relationships.[xxxi]
With
the statist mode however, norms are more rules than laws, and the Estate
monopolizes the creation of compulsory rules. Today, all rights, benefits and
obligations must be established by law, not by private contract. And also, they
must be supervised by regulating institutions not by ordinary judges. But that
is an open way to the granting on unjust benefits and legal privileges. That
perverted process by which certain special interests are established is called
“concertation”, and they enjoy the following benefits: ·
Subsidies
or aids with specific names on account of the fiscal cash-flow; Under
the statist pattern laws get to be numerous and oriented not by a justice
criteria for all but to satisfy special interests, at the expense of
public resources or the consumer’s wallet, or some other opposite
interests. For that reason, they are not clear but complicated, costly and
obscure. And they are not stable, permanent nor foreseeable, but very unstable
and very difficult to anticipate, as they cannot bear with the pressures and
counter-pressures that bring continued change. They are rewritten once and
again, at the rhythm of the political moves.[xxxii] Ideology,
Politics and Entrepreneurship
In
Graphic 2 we can see how the politic-economic climate makes impact on the
entrepreneurial function. The equation shows that the entrepreneur creates
wealth and employment (W,E) in conditions where he can combine the following
factors: Natural resources (Nr), intelligent working force (Iw), capital (K) and
liberty (L). We must point,
however, that this last factor is in great manner necessary for the
entrepreneur, so that it is granted enough priority. On what does liberty
depend? It depends on respect to private property (PP), and in turn, private
property depends on favorable ideological influences (II), or
those in opposition (OI) to the free market. If in the political-ideological II
is greater than OI, then the results are higher than one, that meaning that
evident respect for right to property maximizes N times the creation of wealth
and employment. Likewise, if socialism prevails, then OI is greater than II,
thus there will not be respect for rights to property, and in consequence, the
lack of freedom will put to risk competitiveness and wealth created by
entrepreneurs. In
what way are entrepreneurs and economics in general affected by collective
values opposite to free market? Graphic
3 explains how a
political-ideological climate, hostile to free enterprise makes use of taxes (T)
and regulations (R). If that climate is in opposition to private initiative, we
will soon see how that negative environment will affect savings (S) and private
Investment (I). The same thing happens when institutions and parties defend
liberal values. In this way, in order to guarantee the creation of wealth it is
necessary to promote internal savings with the purpose of creating enough offer
of money to supply national investors with capital. Unless the private sector
finds foreign credit, long term growth will no be possible if we are depending
on foreign investment only. Also, these kind of investment is more sensitive
that local investments to the increase of risk in the country. We should just
observe that in spite of the diversity of economic experiments, from
state-corporation to neo-liberal reforms, the national entrepreneurship has been
contributing with small but valuable investments. But as Peru is conformed by
millions of poor citizens, it is difficult for consumption (C) to be important
enough to reactivate the economy without recurring to state Keynesian
experiments. And this will be even more evident if we think
that the exceeding results of the enterprise (E) will serve to add capital and
grow continually in the medium term. We
think it is pertinent to point that the state is the only sector which benefits
from the climate against free enterprise, and that it monopolizes a good portion
of capital and freedom unjustly taken from the private sector. Unfortunately,
taxes and regulations de-capitalize small and micro-enterprises in such a way
that they cannot grow. Graphic
4
shows the three sectors of economics: State, formal and informal. While the
formal sector is deprived of freedom because of state regulations, high taxes,
by the other hand, it inhibits investment decisions. Likewise, the informal
sector does not have any other way than fleeing from regulations, and thus, it
enjoys freedom but lacks capital resources as they must bear with the greater
costs of state aggression in the form of taxes. The effective tributary burdens
of all taxes are carried down as prices, throughout productive channels, and
this process affects those who are at the bottom in the social pyramid. Those at
the bottom do not have a place to transfer costs, and for that reason, consumers
and companies in the informal sector continue in poverty. In this way, socialism
incarnated in statism manifests itself in regulations and excessive taxes which
hinder the creation of wealth of the entrepreneurial class. 3.-
Liberalism and Entrepreneurship
The
Austrian school of Economics is catalogued as one of the schools which has
confronted socialism with success. It has also contributed to deepen the study
of free makrket with unconventional mental tools as methodological
individualism.[xxxiii]
The School has provided foundations for an understanding of market proccesses
which neo-classic paradigm could not introduce, limiting itself to an
understanding of entrepreneurship within a productive role.[xxxiv]
It also demonstrated to socialists like Oskar Lange that finding competitive
prices was not enough to make a socialist viable and that this needed
private property as Mises demonstrated. However, and beyond the
epistemological problem that could arise and be an issue to those who pursue a
legitimate interest to estate certain scientific considerations about the Black
Box[xxxv],
we have to stress the fact that the real magnitude of the problem does
not lay in methodologies, but in a proper and realistic perspective, consistent
with the ideological defense of the entrepreneurial role. Some authors [xxxvi]
sustain that the Austrian School vindicates the market against the centralized
socialist planning. But Professor Raimondo Cubeddu goes beyond that and estates
the following: “About
this issue, we measure not only the significance of the Austrian School in the
realm of political philosophy and classical neo-liberalism, but also its
contribution to solve the problem of constraint and holding of power.” [xxxvii] Professor
Krizner, a disciple of Mises, points also that those who hold the Austrian
School as the intelectual backing of liberalism make no mistake: “And
it is precisely because of the perception of this intelectual backing that those
committed to the cause of free market are completely right to be interested in
the position and progress of Austrian radition in economics.”
[xxxviii] Entrepreneurship “.....is
present an element that, although crucial to the economic activity, cannot be
analyzed in terms of economics, maximization or efficiency. I will entitle this
element, because of reasons that I will describe, as the entrepreneurial
element”.[xl]
The
competitive theory of entrepreneurial function elaborated from these concepts
served and serves now to explain the coordinating trend of disproportions
originated in the free market, and that can only be understood by the economist
and finally can be anticipated in the market by the entrepreneur. The Austrian
Focus perceives the free market as a process promoted by entrepreneurs who
discover profitable opportunities. Once they discover means and goals they
change the guide to action they previously had.[xli]
It s good to point that this kind of knowledge is of the subjective kind,
not articulate, created from nothing and transferable through repetitive
behavior, and it is learned and copied by other entrepreneurs, and that the
state cannot formalize it and even less will the state be able to coordinate it
by means of regulations and interventions. This entrepreneurial dynamics makes
of the collectivist plan of redistribution of wealth a failure in its attempt to
enhance the living standards of people.[xlii] When
this pattern of behavior of entrepreneurs is kept free throughout the time and
they are fed by complex and irresistible circumstances experimented by other
actors in the market, they become customs, traditions, rights, institutions, and
judicial norms which make it possible to build a free and productive order known
as Capitalism. [xliii]
Liberalism
Capitalism
is the economic face of liberalism, and as such, it functions based in the
freedom of individuals, so much in his consumer’s role as in his productive
role. Economic liberalism is equivalent to free market, but this is also a
consequence of a state limited in functions, power, resources and expenses. As
it was said, the Austrian School teaches classical liberalism, stressing the
role of free markets and of entrepreneurship in the spontaneous coordination of
productive factors, and of private property in the fixation of prices, within a
natural economic order. According
to Marx and Engels, communism combines Classical English Economics, French Socialism and the German Idealist Philosophy.
Likewise, classical liberalism combines The Austrian School of Economics, the
School of Natural Law and Realistic Philosophy, all of them in a political
doctrine, of whose most brilliant exponent has been the French Frederic Bastiat
(XIXth century). In
his volume “The Law”, Bastiat –maybe the Marx of classical liberalism-,
presented a summary of is most important lessons. He focused on the concept that
the law can be an instrument for civilization and a lever for wellbeing, or it
can become an instrument for plunder, the “legalized plunder”. It is in this
way that all respect for laws, including the good ones is lost. Around the same
time, Englishmen Cobden and Bright promoted in their country the
Anti-corn League, with the purpose of allowing the importation of cheap food
from the European continent. That League initiated the liberal era
that made England stronger going the way of free trade. Another
volume written by Bastiat is entitled “Economic
Harmonies”, and stresses the natural order of economics. “Paris come!”,
writes Bastiat, and it is no government that commands that to farmers, transport
business, street-vendors, restaurant-owners and many other who intervene in the
productive chain. Legislators cannot enhance natural processes by laws, rather,
that attempt can hinder them. Classical Liberalism should no be confused with
Classic English Economics, (Adam Smith, David Ricardo, Mill), which so clearly
differs from the Austrian School. The first does not trust markets and it is
oriented to state interventions. The second is originated in French Fisiocracy,
and the first one from the Spanish School of Salamanca, and it is thus called
“continental” (European), the line that sticks towards free markets and free
entrepreneurship. The
jusnaturalist doctrine describes a concept of natural order which laws must not
harm. It opposes judicial positivism (Kelsen), for which there is no more law
than the positive or sanctioned by the state. Realistic
Philosophy teaches that realities have their own nature, as specific as the
operations possible for it, meant to fulfill the functions required for the
achievement of its goals. 4.- Socialism and entrepreneurship Labor
does not make a difference between left nor right, but between aggression or no
aggression, thus in between socialism and liberalism, as the right can use the
state for its trading objectives, where a entrepreneurial collective can plunder
other entrepreneurs not connected with political power, as the millions of small
informal entrepreneurs in Peru could be. Virgina
Postrel has pointed that socialism is dead as ideal and also as political
practice[xliv]
but we sustain that such affirmation is true until certain point in the standard
clssification of the political spectrum. However, our work takes that which is
substantial in their concern which considers as the new attack of the
“estatics” opposing to all market dynamics melting the unifying criteria
about the future of a society. Therefore, in its terms, the “estatic”
-control and estability- is what this work has endorsed in its first part, as
collective values bring a predictable future in a small community and about this
Hayek anticipated saying that individuals always prefer what is known, safe and
estable. Then, when we worry about the “estatic” expoliation of taxes and
regulations upon entrepreneurship, we are actually agreeing that the dynamics prompted by entrepreneurs are what
causes the “greatest ideological opposition today”. [xlv] In
this sense, socialism seeks to benefit from the law to legally plunder
enterprises and confiscate the benefits of their private ownership.[xlvi]
It
does not matter if the one who legislates is the Congress or a commission, what
matters is to never miss the fact that socialism uses the law for its
redistribution purposes. As it was pointed, there is no way to battle socialism
without liberalism.[xlvii]
It
is usual that socialism generates an overflowing of the functions of the estate
which is the cause for statism. Statism assumes non natural functions which go
beyond security,
justice and works of public infrastructure. When the estate takes false roles
its performance is illegitimate, and so are illegitimate the taxes to finance
its Works and the norms issued to interfere, prohibit and constrain the action
of enterprise. It
is no accident that until today the opinion of entrepreneurs constitutes the
opinion of the minority against the public opinion which sanctions as just the
legal plundering carried by socialism. Frederic
Bastiat wrote in 1850: “All
of us have the strong inclination to consider that which is legal as legitimate,
to the point that there are many who falsely consider that every just act flows
from the law. It is enough for the law to command and consecrate plundering, for
this late one to appear just and sacred to many consciences...”[xlviii].
Socialism
turned into political action requires of a legal monopoly of the estate to
achieve its redistributive goals of wealth. It wants to plunder some,
to benefit others violating the rights to private property. As
it is known, taxes confiscate wealth while regulations confiscate the
entrepreneurs’ right to property. In his essay, David Kelley, “Altruism
and Capitalism” pointed the altruist argument that every “need
creates a right”, which attempts to legitimize the violation of the right
to obtain profits by law.[xlix]
In this respect, Argentinian economist Alberto Benegas-Lynch (h) points: “A
right that requires that the rights of others be violated cannot exist”.[l] Socialism
can not justly claim for taxes to distribute wealth to the needy. It is unmoral
to use entrepreneurs as “means” to supply for the needs of others. The
values of socialism always place others over the entrepreneurs. And the altruist
ethics of socialism dictates that entrepreneurs must be taken to the altar of
sacrifice for the well being of others. And from that perspective, to be
concerned for oneself before being concerned by others is the same as saying “the
rights are theirs, yours is the obligation.”
Kelley affirms the following about the “Estate of well-being”: “...those
who are successful creating wealth, must do it with the only condition that
others may make use of it. The objective is not as much to benefit the needy as
to tie the capable. The implicit assumption is that a person’s ability and
initiative are social advantages, to be exercised with the only condition that
they may be to the service of others.”
[li] True
entrepreneurial ethics consist in recognizing that thinking and working
productively for oneself is a virtue. An entrepreneur must get profits from his
achievements, not from his mistakes, “he wins what he receives and he does not take it undeservedly.”
[lii]
If some individuals wantonly take by force the wealth of entrepreneurs by
plundering or stealing, they are destroying those who are capable of living for
themselves, and they are using methods used by animals according to the need in
the moment.[liii]
Socialism teaches that certain individuals have a right to live at the
expense of others, without working productively, in dependence of what
entrepreneurs do, and it grants them a moral status over the entrepreneur,
pretending to qualify all human action for the benefits of others as “good”
and all human action for one’s own benefit as “bad”. However, socialist
shortsightedness does not get to see that the entrepreneur Works like any other
to survive serving others and pursuing a profit. As Catholic priest Robert
Sirico says, the entrepreneurs’ act of creating wealth is like God’s
creating act. Both are of benefit to humankind.[liv]
It
is important to point that socialism reduces its ideology to a re-distribution
theory; as as Mises affirms: “Socialism
isn’t but a “just” distribution theory, and the socialist movement does
not have but that objective of the realization of an ideal (...) For Socialism,
the problem of distribution is in itself the economic.” [lv] The
fact that such socialism, obsessed about plundering the wealth of those “alien
to the tribe” may exist, can be understood as a psychological issue. From
there, Mises qualifies as pathological the anti-liberal roots of socialists: “The
root of anti-liberalism cannot be comprehended by pure reason, for that is not
the nature of such opposition; it is rather a fruit of a mental attitude flowing
from resentment, a neurotic condition, that could be called the Fourier complex,
in memory of the well known French.”
[lvi] This
socialist mentality originates from tribal values by means of which many
philosophers, politicians, ideologists and even intellectuals denigrate profit
to the point of turning private enterprise in a pitcher.[lvii]
5.-Agressions
against Entrepreneurship in Perú
In
the recent republican history, socialism has achieved the institutionalization
of state aggression against entrepreneurship via the issuing of laws, decrees
and other norms which prohibit, obligate and command to execute economic
actions. In itself, all that legislation is an instrument to legally suppress
and plunder all the wealth produced by private enterprise. These acts of statism
are not recent. We have similar
acts of even greater political connotation in the two periods of military
dictatorship from 1968 to 1979, and five governments in democracy from 1980 to
2004, where deprivation, regulation and prohibition and the issuing of all kind
of state decrees have exercised constraint; from socialism corresponding to the
velascato to the moderated socialism of the 90s and the beginning of the
century. If there is something at which to point of the decade of the 90s is
that, in the best case we had a mercantilism responsible for the balanced
management of finances, but nothing proximate to a liberal government.[lviii]
As
we can see, some aggressions have been already institutionalized under the form
of rights, social interest, public and national, and always referred to
collectivist values which interfere with the freedom to run enterprises and
distribute wealth through taxes and other payments. Let us look at some of the
aggressions that have been carried out and continue being carried out in on
behalf of community values and the socialist ideology.
Tributary,
Labor and Local Government legislation Legislation
is the manifestation of prevailing statism, which is in turn, the aggressor to
all entrepreneurial exercise with the purpose of redistribution, thus twisting
the structures of entrepreneurial population and negatively affecting the local
competitiveness of enterprises. In the majority of cases it discourages the
initiative to carry new private investments. In
Graphic
5 the
structures of the normal and distorted entrepreneurial population in Peru are
represented. The normal pattern responds to an economy with no statism but with
and Estate where the Great Enterprise (GE) is the locomotive to entrepreneurial
progress and modernity. Likewise, the GE is connected to all the other medium
enterprises (ME) and the small (SE) through outsourcing. To go from one size to
other is part of the normal entrepreneurial cycle, they can go up and down with
no difficulty. However, in the distorted structure, big companies are a few, the
medium size companies are not many, and
micro and small enterprises (SE) are a characteristic. While in the normal
pattern the GE is about a 5% of the entrepreneurial population, the ME and SE
reach about 15% and 70% respectively. But what the graphic is saying is that
Peruvian Economy suffers of an illness that could be called “entrepreneurial
dwarfism”, as three million one hundred 100 thousand of economic unities[lix]
conform 98% of the total of companies which provide jobs to 70% of the
Economically Active Population. This critical condition is a civilized response
from individuals who chose to be entrepreneurs not because of a vocation as it
would happen in a free economy, but by the “necessity” created in an economy
hindered by high taxes and regulations. But what is real is that these companies
never grow, they keep that size and the cases that reach other scales are very
rare. False myths have been built around this distortion, among them, the
affirmation that a country can successfully develop on the basis of Pymes, and
for that reason Latin American governments hold credit and estate purchasing
credit programs. The Mype are in essence poor. At the lowest decrease of state
purchase operations, thousands of them disappear. Following
are some of the laws and norms that affected and continue to affect
competitiveness, freedom and specially the structure of entrepreneurial: ·
Organic
Law of Municipalities - Law 27972.
Date: 27 of May, 2003 ·
Municipal
tax law – Legislativo Decree. 776. Date: 31st of December, 1993 ·
Tributary
Code – Supreme decree. 135-99-EF. Date: 19 of August, 1999 ·
Income
tax law – Legislative Decree 774. ·
Law
of Promotion and Formalization of Micro and Small Enterprise – Law 28015.
Date:
3rd of July, 2003 ·
Law
of General Administrative Procedure – Law 27444. date: 11 of April, 2001. ·
Modifier
to the Law of Collective Work Relations –Law
27912. Date: 6 of January, 2004 ·
Law
of Ordinary and Extraordinary journal. – Decree 26136. Date: 29 of December,
1992 ·
Procedure
Law of Labor – Law 26636. date: 21 of June, 1996 ·
Law
of Replacement of work shares for investment shares – Law 27028. date: 29 of
December, 1998. ·
Law
of delegation of faculties to the Executive Power so as to legislate on
Inspections on behalf of the laborers. - Law 27426. Date:
16 of February, 2001. ·
Law
of Nurse work – Law 27669. Date: 15 of February, 2002. ·
Modifier
of Law of journal, schedule and extra time– Law 27671. Date: 20 of February,
2002 ·
Law
of midwives labor – Law 27853. Date: 22 of October, 2002 ·
Law
of harbour labor – Law 27866. Date: 14 of November, 2002 ·
Law
of Odontist work – Law 27878. Date: 13 of December, 2002
Law
of the Chemist/Pharmacist work -Law 28173. Date: 16 of February, 2004 Competitiveness,
Entrepreneurial and Economic Freedom
The
World Economic Forum elaborates the business rates of competitiveness for each
nation every year. In chart
3 we
can observe how Peru has gone down in the Word rank on the basis of a sample of
80 countries. It is no surprise that Peru is placed in position 71 in year 2003,
when it was placed in position 46 in1999. The lack of economic and
entrepreneurial freedom explains the causes for the low competitiveness in the
area of business. The
explanation sustains that estate regulations are becoming costs –some of them
hidden- and they are transferred to the final prices to consumers. That can be
observed in two levels: one is the macro level, where economic freedom[lx]
is not a characteristic of our market, and the other level is at “doing
business” (“Doing Business” as the World Bank calls it) where specific
regulations which discourage productivity, investment and growth of businesses
can be observed. Graphic
6 shows
the case of economic freedom for Peru. It shows how freedom has decreased in
Peru since year 2000, after having positively evolved since 1,995. The indicator
shows that the index 5 is the one responding to repressed economics like Cuba,
Libya, and North Korea and index 1 shows free economics like Singapore, Hong
Kong, and the USA, among others. What this indicator tries to say is that we are
for the most part a free country. The greater the economic freedom the more we
have growth and countries are prosperous. In other words, if a country wants to
be poor and economically stagnant, the only thing needed is the repression of
economic freedom for businesses. One
of the ways to repress business is by taxes, labor regulations and local
government regulations. The web page “Doing Business” of the World Bank
Group, estimates several indicators showing the reality of doing business in
different countries. On the basis of this information, the “Ciudadanos Al
Dia”[lxi]
organization has elaborated a chart comparing Peru and other countries of the
same region: Chart 4 shows the number of procedures to open up a business, the length of the procedure and the cost in US dollars. The data shows that Peru has some of the highest costs, still lower that in Argentina, Brasil and Chile, but over Venezuela. In the same web page “Doing Business” it is pointed that for year 2003, the Peruvian labor market is highly rigid. In
order to analyze it, an Index of Labor Legislation was elaborated. The
conditions covered were availability of part time contracts, contract
requirements, minimum wage salaries, and minimum employment conditions. Chart
5 spots
the social burdens the entrepreneur must assume to hire a stable worker. Going
back to the Index, the measure is a scale from 1 to 100 where high values
represent rigid labor regulations. Peru bears 74, compared to the regional index
which reaches 61 and that of developed countries where the average is 45. One
of the regulations which directly affect business is that about functioning
permits. A research in the local Municipalities of the several districts shows
that these permits are for the most part expensive, the procedure to obtain them
is too long and they are economically harmful, an assailment to the free
enterprise function. Permits are another state tool seeking that any individual
asks for permission to a bureaucrat so as to exercise his right to make it for a
living as a businessman. According to “Ciudadanos al Día” permits seek to “....defend
the rights of the citizens to have legal and safe businesses in their
districts....”.[lxii]
Why not taking this measure to the extreme and ask that every worker of a
district, including domestic employees get their permits to work from the
municipality officers? For nobody would oppose a measure for a district to count
with legal workers so as to be safe from dishonest acts. Functioning permits are
a pernicious way to impose a requirement which is obviously unmoral, for it
harms the right to self-supporting by exercising entrepreneurship. A graphic within of the report elaborated by “Ciudadanos Al Día” [lxiii] |