Ecuador’s Lessons for Europe’s Corridors of Power

Government after government across Europe has been thrown out since the great recession began to drive back living standards. Whether on the centre-left, such as Gordon Brown and Zapatero, or on the right with Berlusconi and Sarkozy, political rejection has started to look inevitable. 

But Rafael Correa’s massive re-election win in Ecuador yesterday was a reminder to his European counterparts that political defeat is no iron law of politics. Correa’s first term in office began just as the global economic crisis kicked in. Yet he has just been re-elected with nearly 60% of the vote and a 30 point lead over his main rival, a margin any European leader can only dream of.

So what lessons should politicians in Europe draw from this development in South America?

Firstly, Correa’s growing popularity has been driven by his rejection of austerity. Posed as the only option in Europe, Correa has dismissed this ‘suicide pact’ in favour of economic stimulus favoured by Nobel Prize winning economist Joseph Stiglitz and Paul Krugman. The outcome is clear: stagnation in Europe and strong economic growth in Ecuador, averaging 4.35% over the past five years.

The boost to the economy has been based on massive investment in the country’s long neglected infrastructure. Public investment increased six-fold between 2006 and 2012 and is now Latin America’s highest. The logic will be obvious to those travelling to work on Britain’s packed and delayed trains or unable to even get onto a housing waiting list.

But how did Ecuador find the money? Again, Rafael Correa challenged the consensus approach so dominating Europe. Instead of kowtowing, Correa stood up to the international financiers by renegotiating the country’s stifling national debt. As Correa himself explained: “The cost of the external debt was one of the greatest obstacles to Ecuador’s development. At one time, servicing the debt consumed 40 per cent of the budget, three times what was spent on the social sphere–education, health and so on”.

Today the opposite is true. There are clear lessons for politicians in Greece, Spain and Ireland.

Whilst the coalition government in Britain talks, but rarely acts, about tax avoidance by Starbucks and Amazon, in Ecuador taxes are now actually being collected from the banana magnates and other major companies who long believed that such payments were simply not their responsibility. The introduction of a more progressive tax system, based on the simple principle that those who have more pay more, has enabled Ecuador to double its tax revenue in the past five years.

A second key lesson from Ecuador is that economic growth is not enough – its benefits must be shared. The shocking revelation that, in the US, the top 1% captured as much as 93 percent of the nation’s current economic recovery is only an extreme version of a thirty year pattern in Western economies, where the ‘haves’ become the ‘have mores’.

The Occupy Movements that brought the issue of the top 1% to international prominence undoubtedly have a soul mate in Rafael Correa. Growth in Ecuador has created a much more equal wealth distribution. The ratio between the richest and the poorest households has shrunk. One million Ecuadorian households have escaped the grind of daily poverty and 450,000 children have been taken out of child labour. Free education, including at university level, and free healthcare are now guaranteed and are strengthening social integration.

An important policy in achieving greater equality has been a restriction on companies paying dividends until workers receive a living wage. Is there any reason why Ed Miliband’s stated support for a state living wage could not replicate this success?

Ecuador also demonstrates that the environmental and social crisis many countries face do not have to be put on the back burner until the economic crisis is resolved. Cameron’s recent remarks that: “There are series of areas – social legislation, employment legislation, environmental legislation – where Europe has gone far too far” underlines how the recession is being used as a cloak to drive back long fought for rights.

Rafael Correa has taken a different approach based on the totally sensible view that enhancing social inclusion is popular with the majority of voters.

Correa’s first major change was a new constitution, approved by referendum, which emphasised human rights and social inclusion. The constitution outlawed discrimination against LGBT communities including through recognition of same-sex unions and associated rights on taxation, social security and inheritance. Disability rights have shot up the political agenda, led by a wheelchair-using vice president, with radical measures including a law that compels companies to set aside 4 per cent of jobs for people with disabilities. Multi-culturalism is celebrated and gender-sensitive budgeting is being used to narrow inequality gaps.

Ecuador has broke new ground too in genuinely prioritizing sustainable development. It is the first country in the world to guarantee rights to nature in its constitution. Ambitious environmental policies are seeking to turn this into a reality, with the Yasuni Initiative perhaps the most significant attempt. Through this, Ecuador will waive its right to exploit large oil deposits in one of the world’s most biologically rich areas of rainforest. In return it is seeking contributions from the international community, of less than half the market value of the oil, to invest in renewable energy projects that will transform the energy mix whilst respecting the rights of the indigenous people in this precious area.

Anyone challenging Europe’s current policy consensus with the ideas that saw Rafael Correa re-elected so convincingly would be told that this is unrealistic as, in the words of Liam Byrne, the money has run out. But given that Rafael Correa has overseen all of this in South America’s third poorest country, it’s clear that there is something missing in Europe its not economic resources but political will.

First published on the Huffington Post blogsite. Republished here with permission.

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