Friedman was referring to the tremendous inefficiency of institutions, state-owned enterprises (SOEs), and public offices when run by government. On the other hand, private organizations, simply by working with their own capital, prove to be much more successful enterprises in the short, medium, and long run.
Whatever the Bolivian government happens to be — left, right, blue, green, or red — the nation’s SOEs have always been corrupt and extremely bureaucratic, not to mention incredibly unprofitable. However, despite high levels of inefficiency and waste, many of these businesses have achieved an alarming rate of expansion since 2005, when the Movement Towards Socialism (MAS) Party took control of the presidency.
The current government’s socialist model demands that it produce the jobs it has promised. That’s why, since 2005, the Bolivian government has hired thousands of new employees to administrative contracts. According to data published in La Razon, the country employed 49,743 public officials in 2004. By 2013, that number had skyrocketed to 121,600, an increase of 145 percent.
In terms of public enterprises, data from a Ministry of Productive Development report shows that Yacimiento Petrolíferos Fiscales de Bolivia (YPFB), a petroleum company nationalized in 2006, went from 525 employees in 2006 to 1,621 just five years later. The number of employees has not yet been released for 2014.
Corporación Minera de Bolivia (COMIBOL), a nationalized mining company, has also experienced exaggerated employment growth. According to the same report, it went from 315 employees in 2005 to 5,732 employees in 2011. As with YPFB, the most recent employment figures have not yet been released.
Job creation is useless if it only serve to generate bureaucratic inefficiency and corruption.
Taking into account all government agencies, together with more than 40 state-run companies and administrative offices, the number of state employees in Bolivia increased from 75,290 in 2006 to 125,281 in 2012, representing a growth rate of 66 percent.
Up to this point, the state’s efforts to provide so many Bolivians with jobs may seem like a positive thing. However, job creation is useless if it only serves to generate bureaucratic inefficiency and corruption.
According to a report by the Millennium Foundation, 10 state enterprises racked up a deficit of US$329 million in 2013 alone. Moreover, the report reveals that Bolivia’s largest public companies hold a collective credit of only $1.79 billion from the Central Bank of Bolivia.
It’s quite common to see stories in the news about Bolivian businesses’ waste and loss. The latest story highlights 14,000 computers ordered by President Evo Morales for sixth grade students in the department of Santa Cruz.
There are various negative aspects to this. First, the computers are not allowed to leave school property, despite having been assigned to specific students. The most blatant downside to this is that the schools do not have internet, meaning students cannot activate essential educational programs or conduct academic investigations on the web. Many computers have also demonstrated problems being properly configured.
The Bolivian government plans to hand out another 160,000 computers to sixth grade students across the country. Although 11 million Bolivians pay taxes, only sixth grade public school students can sign up to receive the computers, which were manufactured by new state-run business Quipus upon receiving an unnecessary investment of $60 million.
In short, the computers are little more than a political ploy designed to attract the country’s youth — who seem easily enough won over — to the president. Meanwhile, Bolivians are watching their money wasted on devices that will be junk by the end of the year.
While international prices for Bolivia’s natural resource exports remain high, the country’s drunken populist rampage continues, and the hangover will be unbearable. One day, for better or worse, the state’s extravagant spending and artificial employment will have to come to an end.