Picks: Cashlessness Hits a Speed Bump; The End of Privatization in the UK?; The Triumph of Uruguay; and more (8th Edition)

Date: 15 Aug 2018 | posted in: From the Desk of David Morris | 0 Facebooktwitterredditmail

One man’s perspective on stories that matter. Look for these posts on ILSR.org and the landing page for my work, From the Desk of David Morris.


Table of Contents:

The Race to Cashlessness Hits a Speed Bump

Is Britain’s Long Love Affair With Privatization Ending in Divorce?

States Try to Help People Save.  Trump Attacks.

Uruguay Shows The Way

The Race to Cashlessness Hits a Speed Bump

In 2016 digital money formally went to war against cash. Visa Europe launched its “Cashfree and Proud” campaign, the “latest step of Visa UK’s long term strategy to make cash ‘peculiar’ by 2020.” “(N)ew money doesn’t need a wallet,”  PayPal billboards proclaimed.  Its Superbowl ad declared, “New money isn’t paper, it’s progress”.  At a well-attended fintech Congress held in Amsterdam, the Italian association, CashlessWay issued a Cashless Manifesto.

To most observers, these public campaigns, although conducted by companies profiting from digital cash transactions, simply affirmed the inevitable:  Much of the world is leaving cash behind.

In 2017, only 25 percent of Swedes paid in cash at least once a week, down from 63 percent just four years before. More than a third never used cash at all, or only once or twice a year. Signs in the windows of retail stores cautioning potential customers,  “We Don’t Accept Cash” are common. Australian merchants’ cash receivables plummeted by 46 percent between 2010 and 2016, prompting one publication to ask, “Will Australia Go Cashless by 2022?” In Belgium 93 percent of consumer transactions are now cashless. In China 40 percent of the population carries around less than 100 RMB ($15).  Even in the United States, which lags far behind China or Europe in adopting contactless payments, nearly half of Americans carry less than $20 in cash. About 10 percent have entirely stopped carrying cash.

Proponents of cashlessness are happy to list its many benefits:  reduced lines, increased transactions per hour; no need to tote up the cash at the end of the day and transport it in armored vehicles; no more fear of robberies.   Scientific American offers another more exotic reason:  Eliminating cash will impede the spread of disease

To Harvard Economics Professor Kenneth Rogoff, author of the book The Curse of Cash, “Paper currency has become a major impediment to the smooth functioning of the global financial system.”  In times of economic depressions he wants central banks to set negative interest rates to deliberately diminish the value of deposits, inspiring depositors to spend that money.  Such measures would not affect paper money. Indeed negative interest rates might well encourage the conversion of digital money into analogue money.

But despite all the momentum the road to a cashless society has hit a serious speed bump: widespread popular resistance.  No one opposes cash playing an increasingly minor role.  But they want to retain the choice to use it.

They want the right to engage in commercial transactions without being monitored by governments or business. A recent extensive consumer survey by the UK-based online payments company Paysafe confirms that desire. The biggest concern consumers have with mobile payments is loss of privacy (50 percent).  A European Commission report to the European Parliament and Council issued in June told its nation members that restrictions on cash payments “is a sensitive issue for European citizens and that many of them view the possibility to pay in cash as a fundamental freedom, which should not be disproportionally restricted.”

Supporters of cash point to the inherent insecurity of digital-only money. Identity theft is common.  If the electricity goes down digital networks are unavailable.  Networks can be hacked.  Or they can simply go down, a result of mechanical error.  That’s what happened on June 1st at 2:30pm when Visa’s network malfunctioned.  Millions of people were unable to pay for goods and services. Customers left groceries at supermarket payout counters.  Long lines built up at gas stations.

Cash supporters also point to inequities created by a digital-only money system.  A not insignificant number of us do not have access to digital money.  In the United States the ratio is about one in ten, and much higher among people of color.  In Sweden, one of the countries furthest along in abandoning cash, Jan Bertoft, the secretary-general of the Swedish Consumers’ Association, a federation of twenty-four groups, including retirement, disability, and immigrant organizations, notes that looming cashlessness is one of his members’ “key frustrations that they’re very angry about.”

Ola Nilsson, a spokesperson for the Swedish National Pensioners’ Organization, which has 350,000 members insists, “As long as there is the right to use cash in Sweden, we think people should have the option to use it…” Some note that toilets in Sweden have begun to require digital payment, something that can greatly discomfort those who use bathrooms most urgently and frequently–the elderly.

Governments are responding to popular dissent.  When restaurants began to go cashless in the District of Columbia, complaints led the city council to begin debating a bill to require retailers to accept cash.  A 1978 Massachusetts law already does that but for 40 years it remained virtually invisible.  The imminent prospect of cashless stores has changed that.  SweetGreen, a New York-based salad chain began testing cashless restaurants in Massachusetts earlier this year, but stopped shortly after the Boston Globe inquired about the policy and whether it aligned with the law.  A local chain, Clover Food Lab in Cambridge attempted to go cashless at one of its stores. “When word got out, the city of Cambridge sent him a cease-and-desist letter,” Boston magazine reports.

In China, another country far along on the road to cashlessness, the issue came to a head in the summer of 2017, when Tencent and Alibaba, which together control 94 percent of China’s third party mobile payment market launched an aggressive campaign to promote the cashless economy. They distributed rewards to shops using their platforms.  Some merchants rejected cash as payment.  Customers complained.  China’s central bank (PBOC) stepped in, warning businesses and individuals not to promote the “cashless” idea and demanding that all non e-commerce businesses resume accepting cash.

Sweden’s parliament has launched a review on the impact of going cashless too quickly after fears that it dramatically excludes the financial needs of the elderly, children and tourists who rely on cash.

Another very sore point in Sweden, especially among rural small businesses is that many of its banks no longer handle cash.  At SEB, a large Swedish bank, only 7 of its 118 branches handle cash.

Wiggo Lindgren, vice-president of the Sweden’s National Small Business Association, which represents thirty thousand firms notes that in rural northern Sweden, cash-intensive businesses, like shops, have to “go to one, two, three, four, five banks until you find one” that has cash.  “What we want is some kind of status quo,” Lindgren told Nathan Heller of the New Yorker.

Stefan Ingves, Governor of Sveriges Riksbank, Sweden’s central bank, weighed in on the issue in March, maintaining, “A ban on cash goes against the public perception of what money is and what banks do.”

Sweden’s Parliament’s is currently reviewing a law that would require Sweden’s larger banks to accept and disburse cash so there would be “reasonable access to those services in all of Sweden” such that 99 percent of Swedes should not have to travel further than 16 miles to the nearest cash withdrawal.

In February, Ingyes laid out his thinking on the issue of cashless in a fascinating article on the Riksbank’s web site.  To him a national payment system is a “public good” like “the armed forces, the judicial system and official statistics. Most citizens would feel uncomfortable with handing over these public services to private companies entirely.”

“There are those who think we have nothing to fear in a world where public means of payment have been replaced completely by private alternatives. They are wrong, in my opinion. In times of crisis, the general public has always sought refuge in risk-free assets, such as cash, that are guaranteed by the state. The idea of commercial agents shouldering the responsibility to satisfy public demand for safe payments at all times is unlikely…

If the means of payment issued by the Riksbank, Swedish kronor, is not generally accepted, it will be difficult for the Riksbank to perform its task of promoting a safe and efficient payment system…. Sweden risks finding itself in the future in a situation where public governance of the payment system is no longer possible.

Ingyes note the Riksbank is exploring whether to create an e-krona.  But if it does, he firmly promises cash will continue to be widely available as a matter of national security. “If the power supply is cut it’s no longer possible to make electronic payments. For reasons based purely in preparedness we need notes and coins that work without electricity.”  Ingyes could have pointed to a recent real world example. Following Hurricane Maria last September, Puerto Rico’s electronic payment systems were down. Corporate clients of the New York Federal Reserve made urgent requests for large amounts of cash to meet payrolls.  The Fed dispatched a jet loaded with an undisclosed amount of cash to the devastated island.

Even as we carry less and less cash in our pockets and swipe or phones ever-more enthusiastically in stores, the war on cash has moved to another stage, one in which we are considering fundamental questions.  How do we balance our desire for convenience with our desire for agency and equity?  How do we protect national security and maintain a public payment system if our digital money is managed only by private interests?  Let the conversation flourish.


Is Britain’s Long Love Affair With Privatization Ending in Divorce?

On May 4, 1979 Maggie Thatcher became Britain’s Prime Minster.  A two-decade orgy of privatization ensued.  On January 15, 2018, the liquidation of one of the UK’s largest private contractors may be bringing an end to the country’s long love affair with privatization.

In one turbulent decade, the Tories sold off most of Britain’s public utilities: water systems in England and Wales in 1989; electricity utilities in 1990; the natural gas network in 1995; British Rail in 1996.

They also dramatically replaced public employees with private contractors. In 1997, when Tony Blair and the Labour Party regained power, they embraced outsourcing with surprising ardor.  Blair has no regrets.  Indeed, in 2015 he warned the Labour Party not to regress.  “So let me make my position clear: I wouldn’t want to win on an old-fashioned leftist platform. Even if I thought it was the route to victory, I wouldn’t take it.”

Both Tory and Labour insisted that virtually anything the public sector could do, the private sector could do better.  Competition would drive the private sector to improve services while competition and economies of scale reduced their prices.

By 2017 the UK was spending 13-15 percent of its annual GDP on private contractors.  Oversight diminished as regulatory budgets were slashed, technical capacity decayed and regulators became much too cozy with the regulated.

In spite of the hype, there was never much evidence the private was superior in delivering public services. Customer satisfaction with the privatized British Rail remains low.  Since 1989, English water utilities have raised their rates 40 percent above inflation.  Adding insult to injury, England’s largest water company, Thames Water, has siphoned off profits to offshore investors and paid almost no corporation tax for the past decade.

In 2013, one large government contractor, Serco, was discovered to have been overcharging the government for electronic monitoring of offenders. “Prisoners escaping from G4S supervision have become the stuff of jokes,” Bronwen Maddox, director of the Institute for Government, bluntly comments in the Financial Times.  Earlier this year the National Audit Office, the government spending watchdog, found privately financed schools and hospitals cost taxpayers billions.

When Carillion, the U K’s second largest construction company went belly up with debts of $1.7 billion and cash on hand of only $37 million, the reigning economic and political orthodoxy suffered a severe body blow.

People woke up to just how dependent the country had become on private contractors for roads and schools and hospitals and after-hours doctors and air traffic control and parking regulation and more.  When it collapsed Carillion held 420 government contracts.

Carillion’s collapse “really shakes public confidence in the ability of the private sector to deliver public services and infrastructure,” Bernard Jenkin, Conservative chairman of the Parliament’s Public Administration Committee told the BBC. “You’ve got to treat yourself much more as a branch of the public service, not as a private company just there to enrich the shareholders and the directors,”

The Economist declared, “High-profile fiascos and dwindling cost-savings are making many question whether the idea (of outsourcing) has run out of steam. The Financial Times opined, “the country that was the global frontrunner in privatisation is rethinking how to run its essential utilities. Almost three decades after they were sold off, critics — and many voters — believe that investors have run rings around the watchdogs set up by the government to regulate the industries.”

“Treasury rules require it to demonstrate that this financing route provides better value for money than conventional government procurement,” a Parliamentary investigation conducted earlier this year explained. But “after more than 25 years the Treasury still has no data on benefits to show whether the PFI model provides value for money.”

Professor Dexter Whitfeld, Director of the European Services Strategy Unit, testified that returns to investors in the PFI projects he examined were often in excess of 25 percent.  Half of the equity in these projects had been sold to offshore funds.  Between 2001 and 2017 the five largest offshore infrastructure funds made profits of $3.75 billion between 2001 and 2017 but paid less than 1 percent in taxes on these profits.

A House of Commons investigation released in June found the entire theoretical edifice justifying privatization had been built on sand.  In a blunt refutation of 30 years of ideology the Committee concluded, “the Government was unable to provide significant evidence for the basic assertion behind outsourcing: that it provides better services for less public money, or a rationale for why or how it decides to outsource a service.”

There is, however, significant evidence against this “basic assertion.” England privatized its 10 water utilities but Scotland’s remained in public hands.  Twenty-five years later one investigation found Scottish Water’s prices lower than the lowest found in England, and 20 percent lower than the average. Indeed the bill for South West water, in 2013/2014 was so astronomical the national government pays each household to reduce it by 10 percent!

Britain may be living through a watershed moment.  Indeed the tide may have turned even before the Carillion debacle.  A poll conducted last October by the UK’s Legatum Institute revealed that 83 per cent of respondents favored the nationalization of water; 77 percent the nationalization of energy.

The June elections gave us more concrete evidence of the change in the zeitgeist. Jeremy Corbyn’s Labour Party firmly embraced an “old fashioned leftist platform:” The state taking back rail, water, energy and the post office and dramatically reducing outsourcing.  And made very impressive gains.

For the moment, Brexit and the question of Britain’s relationship with Europe, has overshadowed the debate about the role of the public and the private.  But in the next election the issue may well move center stage.

States Try to Help People Save. Trump Attacks.

Half of all private businesses do not offer their employees retirement plans, leaving as many as 78 million workers without plans. And less than 10 percent of workers without plans end up contributing to an outside savings vehicle.  This contributes to the distressing fact that over 40 percent of people retire with less than $10,000 in savings.  One in seven of those have no savings at all.

When he first took office, Barack Obama proposed to address the problem head on by requiring all employers to automatically enroll their workers in a plan in which they would automatically deposit a small percentage of their paycheck, unless the worker opted out.

Republicans balked at the proposal, despite the fact that it had an impeccable pedigree: A joint proposal by J. Mark Iwry of the liberal Brookings Institution and David C. John of the conservative Heritage Foundation and endorsed by both the New York Times and the National Review.

Frustrated but undeterred Obama announced in his January 2014 State of the Union his intention to go it alone with a modified plan.  In late 2015 the government launched myRA, a plan that offered, “safety backed by the full faith and credit of the United States, no risk of decline in principal, full liquidity, medium-term Treasury bond interest rate, no minimum balance and no fees — a combination not available in the private sector,” according to Iwry, who had joined Obama’s Treasury Department.

But myRA was specifically defined not to compete with the private sector.  It was voluntary to employers. The Treasury capped accounts at $15,000, at which point it strongly encouraged account holders to roll their money over into a private-sector plan. “It’s simply a starter account,” Iwry told Investment News. “The government is not intended to be a long-term provider of the savings vehicle but merely an incubator, to fill the gap until the savings are no longer so small that the private sector is unable or unwilling to manage them.”

By the summer of 2017 30,000 people had signed up for myRA, depositing $34 million in their accounts.

Congress may have refused to act but state legislatures were more receptive.  Starting in 2012, several began to investigate the feasibility of establishing their own retirement programs.  In 2015 Illinois was the first to enact a plan.  California and Oregon soon followed.  A dozen states were poised to follow suit.  According to Iwry, several states viewed myRA as a foundation and taking off point for their own embryonic plans.  Oregon, for example, planned to use myRA as the safe principal-protected option within its three investment option menu. California’s legislation specifically required safe principal-protected investments in its first 2-3 years.

To enable state retirement initiatives, the Department of Labor formally exempted state-run plans from the onerous requirements of Employment Retirement Income Security Act (ERISA), a 1974 law created after scandals around private-sector pensions.

In early 2017 the Trump Administration overturned the ERISA exemption. “The myRA program was a financially unsustainable program that failed to meet its enrollment objectives,” a Treasury spokesperson explained. After noting that myRA had been in operation for just over a year, Iwry wryly commented,  “there are several legitimate ways to evaluate a program’s costs and benefits; prematurely is not one of them.” “By that logic, they would have canceled the 401(k) before it hit its stride,” he added.

In mid 2017 Trump terminated myRA.  So far that hasn’t stopped the states’ momentum.  Ten states and one city have established retirement programs.

Most, like California, Connecticut, Illinois, Oregon and Maryland, have an employer mandate and an automatic payroll deduction, although employees can opt out.  These have a state plan, often managed by a private firm.  Some, like Washington and New Jersey do not impose an employer mandate.  They have an online marketplace where residents can shop for private plans.

Programs may vary from state to state. Oregon’s includes all businesses with one or more employees. California and Connecticut’s cover those with five or more employees, Illinois’ only those with 25 or more.  All states set a default contribution, usually 3 percent of salary. California allows an automatic year-by-year escalation up to 8 percent unless the employee opts out or selects their own escalation percentage.

In May 2017, Oregon became the first state to launch a plan.  A year later, OregonSaves reported, 32,000 Oregonians had opened accounts. Most were first-time savers.  Collectively they had $4.6 million in their accounts. The average monthly contribution was $106.  About 30 percent of employees opted out.

In May when employers with 50 to 100 workers were brought into Oregon’s program, the number of accounts tripled. By December, when firms with 20 to 49 employees must join, the state anticipates another dramatic boost.

By May 2020, Oregon estimates roughly 730,000 workers will be signed up.

Illinois launched its first pilot 1n May. The Washington State Retirement Marketplace opened for business in March 2018. The Seattle Retirement Savings Plan will likely become operational in 2019. California and Vermont are making significant progress in hiring vendors.

Some warn that as savings build, households may exceed asset limits that make them eligible for various social assistance programs, like food stamps or Medicaid. But states have a great deal of latitude in setting asset limits.  Moreover, they can exempt certain assets, for example, IRAs or health savings accounts or education savings accounts.

Lawsuits will come, but many believe their plans will pass legal muster. “While the safe harbor was a helpful clarification, we always believed—with or without—Secure Choice is in good standing,” Jody Blaylock, a financial security policy associate with the advocacy group Illinois Asset Building Group tells Bloomberg Law. State officials note that they offer strong ERISA-like protections, such as imposing a fiduciary responsibility on the state. “Our board is a public board, and we’re public employees. Everything we do is a matter of public documentation. We see a higher level of transparency,” Katie Selenski, executive director of California’s plan explains.

Two lawsuits have already been filed.  The ERISA Industry Committee (ERIC), which represents large employers, sought an injunction to block OregonSaves’ requirement that companies that already offer retirement certify to that effect every three years.  ERIC did so even though it takes only two minutes or less for a business to do fill out a certification form and almost 300 Oregon businesses, including many large employers, already had. The lobby group argued that the compliance reporting requirement violates ERISA, which pre-empts states and cities from setting their own local requirements for employee health care and pension benefits.

In March OregonSaves and Eric settled. ERIC employers will simply have to inform the state they are part of ERIC and they will be exempt from filing certification papers.  ERIC chief executive Annette Guarisco Fildes took pains to tell the press that the trade group objected only to the reporting requirement, not the retirement program itself, which she maintained fills an “important void.”

In May the Howard Jarvis Taxpayers Association (HJTA) sued to stop California’s initiative.  Taxpayer groups in Illinois may do the same.  “In California, we already have several pension programs managed by the state that are not managed well at all,” said Susan Shelly, vice president for communication at HJTA.”  David Morse, an ERISA lawyer who has worked with states on their plans notes that these plans are not like state pension plans.  “(A) better comparison is to 529 college savings plans, which are state-administered plans with billions of dollars.” None are in financial trouble.

The battle between states trying to help workers save for retirement, and investment firms and the federal government doing all they can to stop them will go on. To stay abreast of state retirement plan initiatives I recommend AARP’s Public Policy Institute’s State Retirement Savings Resource Center, or Georgetown University’s Center for Retirement Initiatives.

Uruguay Shows The Way

I loved the final of the World Cup.  I’m happy multiracial France won.

But in my heart of hearts I wanted Uruguay to win.  It certainly had the wherewithal.  Its national team has won over 99 international titles. In 2010 it had reached the World Cup semifinals in 2010.  This year it lost to France.

I wanted Uruguay to win because more of us would learn its remarkable story, how a little country wedged between Argentina and Brazil with a population about that of Chicago and Houston has achieved one of the world’s most democratic, egalitarian, least corrupt and socially progressive societies.

Uruguay’s has a long history, but it was under the Presidency of José Batlle y Ordóñez (1903-1907, 1911, 1915) that its modern ethos was fashioned.  Batlle created state enterprises to wrest economic control from foreign investors and implemented policies to reduce inequality and improve the lot of the majority.  In a series of commentaries Batlle laid out his philosophy and his program.  For Batlle, one strategy for reducing inequality and improving the lot of the many was to make “the rich less rich so that the poor become less poor.”

“When he was elected president in 1903, Uruguay still had an underdeveloped central state,” Eve Fairbanks wrote in 2015 in the New Republic, “Within a few years, Batlle had built perhaps the most perfectly rendered socialist society the world has ever seen. He taxed big landowners to boost worker’s pensions and championed unions. He made health care a universal right and university education free; the country’s literacy rate soared to 95 percent.”

Batlle also took on a very strong Catholic Church to demand a strict separation of church and state.  He banned religious teaching in the public schools.  A century later Uruguay might be the most secular country in the world. Over 40 percent of Uruguayans have no religious affiliation.  Holy Week is officially called “the Week of Tourism,” while Christmas is officially the “Day of the Family.”  Take that Bill O’Reilly.

Uruguay legalized divorce in 1907.  Shortly thereafter it legalized homosexuality.  In 1932 it became the first South American state to give women the right to vote.

In the 1960s Uruguay’s firm commitment to democratic governance was tested.  A long economic recession generated labor protests and an urban guerilla group, the Tupamaros (National Liberation Movement).  As tensions escalated, the government declared a state of emergency and invited the military in to combat unrest. The military successfully decimated the Tupamaros and then in 1973 seized power, part of a wave of military coups throughout South America—Brazil, Bolivia, Argentina, Chile, Peru. Uruguay soon had the highest per capita percentage of political prisoners in the world. Torture was widely used.

In 1980, to legitimize and solidify its control, the military proposed to change the constitution. More than 57 percent of the voters rejected the change. A major economic recession then led to massive protests. In 1984, after a 24-hour general strike the army agreed to step down. In 1985, a newly elected Congress extended amnesty to both the military and the Tupumaros.

The Tupamaros and other left-wing organisations abandoned violence and created a political party, the Movement of Popular Participation (MPP). The MPP was accepted by the Broad Front (Frente Amplio) a coalition of leftist parties formed in 1971 and banned along with all political parties and trade unions by the military in 1973.

By the late 1990s the MPP had become the largest party in the Broad Front.

In the 1990s, Uruguayans demonstrated their continued adherence to the philosophy of President Batlle y Ordonez. The 1980s and 1990s were decades during which governments all over the world began to privatize public assets.  In 1991 the Uruguayan government decided to join them.  Its General Assembly passed a bill to sell off the state’s telephone and telecommunications, airlines and electric power companies.

Back in 1966 Uruguayans had won the right to overturn a federal law through referendum.  In 1992, they exercised that right to overturn the privatization law by a vote of three to one. In 2004, when countries and cities around the world began selling their water utilities, Uruguayans again made their position clear.  Almost two thirds voted in favor of a constitutional amendment that makes water a public good indefinitely.

For most of its nearly two centuries, two political parties had dominated Uruguayan political life. That domination ended in 2004 when the Broad Front coalition swept to power, winning the Presidency and both houses of Congress. They’ve held power ever since.

Tabaré Vázquez, a former mayor of Montevideo, was elected President.  In its first five-year term, his administration compiled an enviable record:  raising taxes on the rich while lowering sales taxes; cutting unemployment in half; adding over one million to the government pension system, replacing private pensions; enrolling 350,000 children in government health care; establishing an 8-hour day for agricultural workers; giving a free laptop to every primary public school student.

Since 2005, the government has passed over 30 labor laws that promote and protect labor unions and collective bargaining.   Unionization rose fourfold.  Today one-fourth of workers are in unions.

An ocologist by profession and a former nicotine addict, Vázquez made it his personal mission to reduce cigarette smoking.  A 2008 law required at least 80 percent of a cigarette pack covered with gruesome images and blunt text warning of the risks of smoking.   Philip Morris complained to an international tribunal that the law devalued its cigarette trademarks and sued for compensation. In 2016, the tribunal ruled in Uruguay’s favor. Philip Morris was forced to pay 7 million dollars for judicial expenses.

Uruguayan presidents cannot succeed themselves.  In 2009, José Alberto “Pepe” Mujica Cordano was elected president.  A former Tupumaro, Mujica had been shot six times, captured and recaptured several times and ultimately spent before  13 years in prison, much of it in isolation.  He was one of the Tupamaro leaders who advocated the creation of the MPP. In 1994 he was elected Deputy and in 1999, Senator.  Under Vazquez he served as Minister of Livestock, Agriculture and Fisheries.

World famous for his simple lifestyle and social empathy, Mujica declined to live in the presidential palace or use its staff.  He lived on a farm where he and his wife,  Lucía Topolanksy, a fellow former Tupamaro and member Senator who in 2017 became Uruguay’s first female Vice President, cultivated chrysanthemums for sale. Mujica donated about 90 percent of his monthly salary to charity, bringing his salary roughly in line with that of the average Uruguayan.  “I can live well with what I have,” he insisted.

Mujica continued the economic reforms of Tazquez.  From 2006 to 2015, Paul Pugh notes, Uruguay’s economy grew at almost 5 percent a year.  Poverty plummeted by 70 percent.  Net external debt dropped by 75 percent, allowing it to get out from under IMF restrictions and achieve “investor” status, which allows it to borrow on better terms.

But Mujica’s legacy may be the social legislation passed during his term in office.

In 2012, against ferocious opposition, Uruguay’s General Assembly legalized abortions, although only in cases of rape or incest.  In 2013 it legalized same sex marriage. “(N)ot to legalize it would be unnecessary torture for some people,” Mujica explained. LGBTQ+ citizens now have the legal right not to be discriminated against in the workplace; and may serve in the military.  In 2013, Uruguay legalized marijuana. “Consumption of cannabis is not the most worrying thing, drug-dealing is the real problem,” Mujica observed.  Sales began in 2017.

Only citizens — not foreign tourists — can purchase the drug. Uruguayans who register are digitally identified by their fingerprints at points of sale. They can buy up to one third of an ounce once a week at a price of about $14. They can also register as an authorized home grower.  That allows them to grow a maximum of six plants.  Or they can join a cannabis collective, which can have up to 45 members and 99 plants.  Through these three mechanisms, roughly half of Uruguay’s 150,000 cannabis consumers have been brought into the legal system.

About one third of the marijuana consumed in the country is produced legally.  Diego Olivera, the head of the Uruguay National Drugs Council promises to do better. “(T)he demand is greater than our productive capacity. We have to address that challenge,” he told the Associated Press in July.

In 2008 the government launched an aggressive program to expand renewable energy. By 2013 wind energy had a 1 percent toehold in the country’s electricity system.  Vázquez, who returned to the Presidency in 2015, continued the aggressive program and by 2017 it was supplying 33 percent of its electricity.  That year solar gained the 1 percent toehold.  In January 2018 wind and solar generation comprised 44 percent of total generation. Together with hydro, renewable energy accounts for over 90 percent of its electricity.  Industry – mostly agricultural processing – is now predominantly powered by biomass cogeneration plants.

At the same time the government launched its renewable energy program it also aggressively moved to increase broadband access.  In 2008, barely 41 percent of Uruguayans had access.  By 2017 over 80 percent did.  A third were connected to high-speed fiber. The government expects that to increase to two-thirds over the next three years.

All in all, an astonishing record that would have become much more visible if Uruguay had managed to make it into the World Cup finals let alone won it all.

God knows Uruguay isn’t perfect.

Economic depressions in neighboring Brazil and Argentina, two of Uruguay’s main trading partners have dragged its economy down. Uruguay remains one of South America’s safest countries, but the crime rate is rising and insecurity remains a top concern.   A below-replacement birth rate is leading to an aging population, which burdens the nation’s health care system. Uruguayan public school students still do poorly on international tests.

But we shouldn’t let the perfect be the enemy of the remarkable.  When I think of Uruguay’s extraordinary achievements one word comes to mind.


Sign-up for our monthly David’s Picks Newsletter and follow ILSR on Twitter and Facebook.

Avatar photo
Follow David Morris:
David Morris

David Morris is co-founder of the Institute for Local Self-Reliance and currently ILSR's distinguished fellow. His five non-fiction books range from an analysis of Chilean development to the future of electric power to the transformation of cities and neighborhoods.  For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays on public policy have appeared in the New York TimesWall Street Journal, Washington PostSalonAlternetCommon Dreams, and the Huffington Post.