Summary
Bolivia faces an economic collapse due to a fuel shortage, foreign currency reserves depletion, and rising inflation.
The crisis has led to protests, food shortages, and a decline in the government’s popularity.
The government’s denial of the problems and its handling of the situation have further exacerbated the situation.
“But when the commodities boom ended, prices slumped and gas production dwindled. Now, Bolivia spends an estimated $56 million a week to import most of its gasoline and diesel from Argentina, Paraguay and Russia. Economy Minister Montenegro on Tuesday pledged that the government would continue providing fuel subsidies that critics say it can’t afford.”
We should be putting taxes on fuel, not subsidies. This is insanity.
tax fuel to the point where your economy freezes/dies, & now you have civil-war on your hands…
Subsidize the stuff, & you may postpone it…
Sometimes politics enforces that you act against strategic-viability in order to protect your currently-existing “government”…
Politics isn’t strategic: it is tactical, only…
I mean, sure, we shouldn’t put a 5,000% tax on gasoline tomorrow or anything. But more reasonable taxes implemented gradually would gently incentivize us toward alternatives, while also allowing us to decrease other taxes that are regressive and harm economic efficiency.
Your insight that taxes need to be corrected gradually is right.
Technically, each economy would have its own powerlaws for correcting taxes, regulations, etc, so in 1 economy it would be something like…
The current tax on this is a%, the all-future-costs-included tax, which makes the creators-of-those-costs pay them up-front, is b%,
so this year we’re changing the tax from a% to (( 5 * a ) + ( 1 * b )) / 6
or something like that…
Always tending towards the correct rate…
That rendition would give 6y for reaching equilibrium.
The more-agile the economy, the quicker it could calibrate to truth…
The political reality, however, won’t permit that, will it?
_ /\ _
Maybe? I readily admit that voters generally don’t think very far ahead and this stuff isn’t an easy sell, but every once in a while a leader does manage to successfully make the argument that we should accept some amount of short term pain in exchange for a greater benefit in the long term.