Development Blog Post 2

Development Blog Post 2

            In the discourse of developmental economy there has often been a stark divide between those who promote a hands-off neoliberal model promoting a free market with little governmental intervention that should ideally cause a trickle-down effect of economic growth and an interventionist model that emphasizes industrial policies like ISI and subsidies for infant industries within the state while enacting state policies to distribute economic gains. Alternatively, Uruguay’s successful developmental model has demonstrated that the two are not mutually exclusive. Uruguay has created an environment ideal for foreign investment while emphasizing fair distribution of wealth and development of domestic industry and entrepreneurship.

            The Uruguayan state has made various efforts to grow the private sector of Uruguay, without resorting to isolationist policies like the ISI utilized in Argentina. Montevideo, often referred to as “the Silicon Valley of South America” has a massive presence of IT firms whose total value amounts to over $1.2 billion dollars. This is owed to, similar to the case in the actual Silicon Valley, government subsidies that promote the expansion of the industry. The most attractive subsidy is the 100% tax exempt status on IT export profits that Uruguayan firms receive. Furthermore, government investment in education, for example the fully completed one laptop per child initiative, has been wildly successful in promoting the development of the human capital required for value added industry like IT. Investment in public education and promotion of cooperative workspaces through the completely free public university system are extremely conducive to domestic entrepreneurship. All of these factors have made Uruguay extremely attractive to foreign investment and domestic industry, without creating an environment threatened by capital flight to other more economically friendly countries. Impressively, all of this has been done without resorting to policies of austerity that strip social benefits from Uruguayan citizens.

            Uruguay is one of the most successful and advanced welfare states in the world, dating back to the two terms of president Batlle in 1903 and 1911. Batlle pioneered many socially and economically progressive policies such as the legalization of abortion and divorce as well as the appropriation of many private industries including the official bank of Uruguay. Batlle believed in the equal distribution of wealth and the duty of the stake as a caretake of all social classes, this philosophy has been ingrained in Uruguayan politics and is responsible for the high level of human development present in the country to this day. Modern day Uruguay allocates 25% of its GDP and 80% of its government spending towards social welfare programs. Education, medical care, and pensions are all provided through government funded programs. Furthermore, Uruguay has made efforts in recent years to revolutionize the systems that provide these programs, utilizing advanced information technologies to link together systems of welfare provision, defying the image of the welfare state as a bogged down and aging bureaucratic beast. These programs have been extremely successfully, with Uruguay’s literacy, unemployment, education, and equality rates being among the lowest for all of Latin America and much of the world.