By Federico Fuentes
Green Left Weekly

http://www.zcommunications.org/rafael-correa-speaks-on-citizens-revolution-by-federico-fuentes

While European governments continue to impose policies aimed at making
working people pay for a crisis they did not cause, the Ecuadorian
government of Rafael Correa has taken a different course.

“Those who are earning too much will be giving more to the poorest of
this country,” a November 1 Reuters dispatch quoted Correa as saying. He
was announcing a new measure to raise taxes on banks to help fund social
security payments.

Ecuador’s banking sector has registered US$349 million in after-tax
profits, a November 8 El Telegrafo article said.

“The time has arrived to redistribute those profits,” said Correa.

Reuters reported that by lifting the tax rate on bank holdings abroad
and applying a new tax on financial services, the government hopes to
raise between $200 million and $300 million a year.

The proceeds will fund a rise in the “human development bonus payment”
from $35 to $50 a month. About 1.2 million Ecuadorians receive the
payment, mainly single mothers and the elderly.

Such a move ? in the opposite direction to the most of the rest of the
world ? is largely explained by the fact the Correa government is a
result of the kind of protests movements now developing in Europe.

Citizen’s revolution

In “an interview published in the September/October issue of New Left
Review, Correa said the backdrop to his rise to power was “a citizens’
revolution, a revolt of indignant citizens” against bankers and
politicians destroying the country.

“In that sense we anticipated the recent indignado movement in Europe by
five or six years,” Correa said.

In 1999, a crisis engulfed Ecuador’s banking sector and the government
of the day tried to make the people carry the cost. Then-president Jamil
Mahuad was toppled by a popular uprising in 2000. The country’s
indigenous movements, spearheading opposition to neoliberalism, played a
leading role.

Ecuador’s economic crisis was soon coupled with a political crisis as
peoples’ illusions in the traditional parties of government collapsed.
“¡Que se vayan todos!” (Out with all of them!) became the rallying cry
of Ecuador’s next popular insurrection, which in 2005 toppled president
Lucio Gutierrez.

It was in this context that a relatively unknown leftist economist,
Correa, was asked to serve as the finance minister for Gutierrez’s
replacement, Alfredo Palacio.

Correa recalled: “In my short time at the Finance Ministry ? around a
hundred days ? we showed that one didn’t have to do the same as always:
submission to the IMF and World Bank, paying off the external debt
irrespective of the social debts still pending.

“This created a high level of expectations on the part of the public.”

Correa’s resignation due to differences with Palacio was greeted by
protests. Perhaps for the first time in history, the protests were not
against a finance minister, but in support.

With a group of close collaborators, Correa decided: “We couldn’t let
the expectations that had been raised, the feeling that things could be
done differently, end in disappointment.

“We travelled across the country and formed a political movement to
secure the presidency. For we saw very clearly that in order to change
Ecuador, we had to win political power.”

In 2006, Correa ran for president on a campaign that, he said, was
“proposing a revolution, understood as a radical and rapid change in the
existing structures of Ecuadorean society, in order to change the
bourgeois state into a truly popular one”.

Correa won in a second round run-off.

Make the bankers pay

One of the first big challenges his government faced was the global
economic crisis that hit in 2008.

The crisis was felt in Ecuador through the loss of foreign markets,
falling oil prices (the country’s chief export), and a sharp drop in
remittances from emigrants, which many Ecuadoreans depended.

Despite this, Ecuador’s economy suffered far less than many others.
Correa said this was due to “a combination of technical know-how and a
vision of the common good ? acting on behalf of our citizens, not
finance capital”.

“For example,” he said, “we used to have an autonomous central bank,
which is one of the great traps of neoliberalism, so that whichever
government is in power, things carry on as before”.

“Thanks to the 2008 Constitution, it is no longer autonomous.”

This meant the government could take back its national reserves that
were held in overseas banks. Together with new loans from China and
obliging private banks to return savings to Ecuador, the government was
able to ramp up public investment.

This helped lift Ecuador out of the crisis quicker than any other Latin
American country.

The government also enacted other measures to ensure peoples’ needs came
before profits. For example, new laws prohibit banks from penalising
low-income, first-time home buyers who default on their loans.

The most ambitious move however, which demonstrate how much had begun to
change in Ecuador, was the government’s decision to renegotiate its
foreign debt.

Correa told NLR: “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.

“The allocation of resources demonstrated who was in charge of the
economy: bankers, creditors, international financial institutions.”

To turn this around, the government initiated the Committee for an
Integral Audit of the Public Debt (CAIC).

“The Commission proved beyond any doubt what we already knew: the
external debt was immoral, a robbery.

“For example, the 2012 and 2030 Global Bonds were sold on the secondary
market at 30 per cent of their value, but we had to pay them at the full
100 per cent. When it looked at the contracts, the Commission also found
a lot of corruption and conflicts of interest.

“So in December 2008 the CAIC ruled that this debt was immoral, and we
declared a unilateral moratorium on those bonds.

This was at a moment when we were in a strong economic position ? oil
prices were high, exports were growing ? which was deliberate. This
meant that the value of the debt dropped, and we forced our creditors to
negotiate and sell back their bonds in a Dutch auction.

“We managed to buy back our debt at 32–33 per cent of its value, which
meant billions of dollars of savings for the Ecuadorean people, both in
capital and in interest payments.

“This freed up a lot of resources which we could dedicate to the social
sphere; now, the situation is reversed from what it was before ? we
spend three times as much on education, health, housing as on debt
service.”

Human needs over greed

Correa said: “Now we are reducing inequality, and poverty with it,
through a combination of four things.

Firstly, making the rich pay more taxes. We have instituted a much more
progressive taxation system, and people now actually pay their taxes ?
collection has doubled.

“These resources, together with oil revenues and the money saved by
reducing the debt burden, can be devoted to education, health and so on.”

The second focus is giving people opportunities by providing free
education and healthcare.

“Thirdly, governing the market and improving the labour system.”

Correa said: “The market is a reality that we cannot avoid; but
believing the market should allocate everything is a different matter.
The market needs to be governed by collective action.

“We are putting an end to forms of exploitation such as subcontracting.
We are improving real wages …

“Around 60–65 per cent of families could afford the basic basket at the
start of our mandate, now we’ve reached 93 per cent, the highest in the
country’s history.

“We’ve disproved orthodox economic theory, the idea that to generate
employment one needs to lower real wages: here the real wage has risen
substantially, and we have one of the lowest unemployment rates in the
region?just under 5 per cent.

“We’ve also paid attention to the quality of employment, making sure
businesses comply with labour laws. While raising wages for labour,
we’ve reduced the remuneration for capital.”

The fourth measure, Correa explained, is “distributing adequately our
social patrimony”.

Correa said: “We used to give away our oil: before the Palacio
government, transnational companies would take the equivalent of 85 out
of every 100 barrels and leave us with 15; now we have renegotiated the
contracts, the proportions have been reversed.

“Another example: after the economic crisis of 1999–2000, many
enterprises which were used as collateral for loans should have ended up
in state hands; it was we who finally seized them. In the case of the
Isaias Group, owned by the family of the same name, in 2008 we recovered
around 200 enterprises.”

The result of these measures has been a marked lowering of poverty and
inequality.

This helps explain why, six years after first being elected, Correa
looks set to comfortably win presidential elections next March. Recent
polls show Correa winning with between 55-60% of the vote.

In distant second is a banker, Guillermo Lasso, with about 15% support.

Federico Fuentes is a Sydney-based Socialist Alliance activist. With
Michael Fox and Roger Burbach, Fuentes is the co-author of the
forthcoming book, Latin America’s Turbulent Transitions: The Future of
Twenty-First Century Socialism.