The Invisible Hand

Today and yesterday I am in San Salvador, attending the 2nd of 7 workshops that make up the MPR-12 School of Political Formation, which is attended by leaders of NGOs and communities all around the country.  The training is meant to provide a broad understanding of the current social/political/economic situation in the country, and guide participants through questions that lead to each individual developing his/her critiques and ideas for the country.

This month’s topic: Tax reform and Pubic-Private associations.

The public-private association law is one that the United States has been pressuring El Salvador to approve, using development funds (through the millennium fund) as leverage, basically saying “if you don’t pass this law, we won’t be very inclined to give you money through this fund.”

What the law does is opens the door for currently state-run entities to be transferred over to private operation.  Things like water, healthcare, the port, highways, and the national university.  The argument of the right wing (in El Salvador and in USA) is that private-run companies are more efficient and provide better service/products.  But our critique is that privatization means expanding opportunities for the rich to continue getting richer, while putting vulnerable populations at risk.

Let’s take the national university for example.  As a state-run entity, its goal is to provide affordable, quality education.  The monthly dues at this university are around $4, and it is highly competitive with demanding but quality professors.  If it were privatized, chances are the cost would go up, and any profit from the university would go to build up the riches of the owner of the university (who most certainly is already very rich, to be able to afford to have bought the university) But if the university was having problems, wasn’t being managed well, or needed investment, that would fall on the state.

In short, privatization does the following:

  1. Limit accessibility for the poor
  2. Bring more riches to the already rich
  3. Require investment from the state without providing profit to the state

We talk about privatization in the US and here in El Salvador as the answer to inefficiently run state entities.  This kind of thinking comes from a deeply rooted faith in the ‘invisible hand’ of capitalism – that within the capitalist business model, natural occurrences like competitiveness and supply and demand will regulate costs and demand quality service from the entity providing the service or product.  But time has shown that this ‘invisible hand’ plays favorites, and is being well manicured by the rich oligarchy.

So why does the US want so badly for El Salvador to pass this law?  Because it opens the door for foreign entities to come in and provide these services.  The deeper that US companies and institutions have their hands into El Salvador’s pocket, the more the US can control the country.   The US is a big fan of putting at risk the sovereignty of smaller, weaker countries like El Salvador.

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