-OpEd-

BUENOS AIRES — In her delectable and very original book Who Cooked Adam Smith's Dinner?, Swedish author Katrine Marçal highlights the ways (both paid and unpaid) that women contribute to the economy. She also makes the case that homo economicus — the so-called economic or rational man — is oblivious to the moral, emotional and cultural considerations that have contributed so much to growth and economic development, and that his conduct jeopardizes, in the long-term, the things that are most valuable and precious.

Likewise, the recent Nobel economics laureate Richard Thaler argues that when we buy into the idea that people behave rationally, the forecasts we make based on that assumption are at odds with reality.

I welcome these new lines of thinking, which understand economics to be a social science and expand its analysis to include cultural, historical, political and ethical dimensions. The functioning of the economy depends on millions of decisions motivated by interest and greed, but also fear, a sense of duty or solidarity, or transcendental aspirations.

No economic system can function without an underlying scale of values

Furthermore, it should be clear that a country's wealth and the welfare of its inhabitants do not depend exclusively on natural resources or interest or exchange rates, but also on the ability to create consensus, and build and administer the right institutions while respecting rules, generating certainty and applying an adequate system of rewards and penalties.

The economy is closely linked to society's values. Indeed, it's safe to say that no economic system can function without an underlying scale of values. A sustainable program that seeks to reduce structural poverty using education and job creation follows different axes from one that merely seeks to keep poverty in check. And it is diametrically opposed to a clientelist system that creates even more needy people. Political rhetoric has at times made people believe that handouts that enslave them are actually a great help.

The OECD reports that inflation in Argentina will touch 34% this year — Photo: Steve Johnson/Unsplash

Argentina is a nation blessed with so many natural resources. It also managed, at one stage, to stand out for its public education standards (a prerequisite for generating human capital) and the quality of its scientists. And yet, it has so far been unable to move on from the types of economic problems — like inflation and extreme poverty — that so many other countries have long overcome.

Are we cursed? What are we doing wrong? The answer is not purely and exclusively one of economic variables. It lies, rather, in our inability to generate, agree on and sustain a long-term project that defines the country's productive and trading profile (goods and services) and levels of integration with the world, while considering geopolitics, demography and a range of limitations.

It's also crucial that we go beyond just words: Decisions need to be made to match the rhetoric

One must also define the precise kinds of policies that can be implemented to gradually reduce structural poverty. This will never happen through magic or trickle-down, but with long-term programs that not only distribute resources but also, specifically help youngsters insert themselves in some productive, work scheme. If we blame our current economic problems on bad monetary, fiscal or exchange decisions, we shall never be able to get back on track toward creating a system that benefits everyone.

It's also crucial that we go beyond just words: Decisions need to be made to match the rhetoric. Part of that too is recognizing that everything will pass, including power. We should turn to the most suitable people in each area. And that means choosing not just the most intelligent people, but those with experience and specialization.

There can be no economic development (defined as growth plus human promotion) without a prior institutional reconstruction. And that, in turn, requires a profound ethical dimension — in all areas, from politics to business to law. Even in sports.

Lastly, an element of crucial importance is the moral and technical quality of our leadership (politicians, businesspeople, trade unionists and intellectuals). Just as it is difficult for rude parents to raise a respectful child, one can expect little from incapable and immoral rulers.

Not only that, but we must hold them to an even higher standard than that of ordinary folk, as their actions affect the lives and welfare of so many. This may all seem abstract, but it becomes dramatically real when — through a mix of negligence and shared immorality — an entire city is flooded or a train cannot break on time.

*Caballero heads the Economics Faculty at Argentina's Pontifical Catholic University.


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