Widespread protests in Ecuador have reached new levels of severity, with the government struggling to maintain order in the capital of Quito, reports suggest. The protests, which have far-reaching implications for the continent of Latin America and for the entire developing world, have resulted in a violent police crackdown on demonstrators that has led to hundreds of arrests and at least four deaths, according to the BBC.
The protests originally began over cuts to petroleum subsidies by the government of president Lenin Moreno, who since has declared a state of emergency. The repeal of these subsidies, in place since the 1970’s, caused diesel prices to double and gasoline prices to rise by 30% almost overnight. Needless to say, transportation unions were less than enthused by this development, and organized protests which have since erupted into Ecuador’s largest bout of civil unrest in a decade.
The scope of the protests has since expanded, and the protesters are now rallying against a series of unpopular reforms implemented as part of austerity deal with the International Monetary Fund. The deal, which provided the government of Ecuador with a $4.2 billion loan, also mandated numerous belt-tightening reforms, including a 20% decrease in wages for new contracts in public sector jobs, a requirement that public sector workers donate a day’s wages to the government each month, and a 50% reduction in vacation days.
These protests are not an isolated incident. As the major international monetary organizations impose austerity measures across the globe, concerned citizens have taken to the streets in many countries, leading to widespread civil unrest in places like Greece, Spain, and even the United States. Many feel as though the cuts to the public sector imposed by austerity put undue pressure on workers and the poor.
Perhaps the most notable of these protest movements is Occupy Wall Street, which united a variety of groups towards its anti-globalist cause, ranging union workers concerned about being replaced by foreign labor to students to environmentalists. The movement eventually grew to a global scale, and though its influence has waned in recent years, at its peak it was a force to be reckoned with.
Distrust of austerity measures is not only limited to Molotov-hurling protesters, however. Nobel Prize-winning economist Paul Krugman asserts that austerity is not as necessary as some would have us believe, saying it “has been sold on false pretenses…Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.”
In light of the worsening situation in Ecuador, it is time to consider the possibility that the way forward (and the way out of debt) for the developing world may not lie in taking huge loans and devaluing public sector labor. Indeed, the solution may lie in the private sector. Direct foreign investment is a much more consistent path to economic growth than austerity, which can slow growth, and, as was the case in Greece, even induce recession. By strategically targeting industries in the developing world, investors can stimulate growth and increase government revenues, without causing civil unrest on a massive scale.
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