Mobility and economic growth

I still remember going through MAD Magazine at least thirty-five years ago and seeing one particular cartoon strip in which the North American population slowly lost their lower extremities due to atrophy as a result of using their cars to cover even the shortest of distances. They all ended up looking like bowling pins. In the last frame, a Chinese army easily bowled over these odd looking pins.

Evidently, none of this happened. On the contrary, in Kosovo, the United States and its allies have shown without a doubt that you don’t need your lower extremities even to wage war.

I have recently published several articles in which I write about the exorbitant taxes that are imposed on gasoline around the world the effect of which I consider to be like discriminatory commercial taxes or duties, which keep the oil producers from receiving what is rightly due.

In this sense, there is a marked difference between the United States and Europe. In the United States, gasoline is sold for 25 cents per liter while in Europe the final consumer must pay about US$ 1 per liter. This fourfold increase is due exclusively to these “taxes”.

I have also had the opportunity of writing about the growth in unemployment and have made some similar comparisons between the United States and Europe. In both cases the generation of jobs in traditional sectors such as agriculture and industry are basically the same, 2.5% and 17.5% respectively.

The United States, however, is today a miracle of job generation while Europe is submerged in a crisis of high unemployment that is close to being structural in character. The difference lies basically with the service sector. In 1997, the service sector in the United States represented 54% of the total population of working age while in Europe; this sector employed only 39%, a whopping 15% less.

The observed difference between the level of taxes on gasoline and the generation of jobs in the service sector allows me to suggest the thesis that the only way Europe can solve the problem of unemployment is by drastically reducing the tax charge per liter of gasoline consumed. Once this has been done, the European consumer will most certainly venture out of his home more often rather that staying in. This means more trips to the restaurant, the movie theaters, etc., all of which generate jobs.

Some European countries have already announced a plan that will increase taxes on gasoline annually by about 6% over inflation. If so, by the year 2006, consumers should be paying about US$ 2.50 per liter. Since the oil producer would only obtain about 12.5 cents of said price; we are in the presence of a great commercial injustice. Additionally, if Europe insists on levying such taxes on gasoline, they are not only contributing to unemployment on their own continent, but will also be guilty of putting the brakes on economic development worldwide.

I clearly remember when the world in general accused the oil producing countries of pushing them into global recession during the oil boom of 1974. As a remedy, these countries were obliged to recycle their petrodollars, which they did with such enthusiasm that they went overboard and ended up with immense public external debt. Today Europe as well as many others keeps the price of gasoline higher than ever even though most of the final selling price is tax, causing recession and unemployment. The difference is, however, that today nobody accuses them of anything.

I think the world should seriously rethink its energy policy and study the elimination of these duties. This is the only way to get out of the vicious circle which, aggravated by the development of the Internet, cable TV and other such technological progress, conspires to increasingly isolate consumer within his home, where he simply restructures his purchase habits, mostly to the detriment of job creation.

In the Venezuela of today, submerged as it is in a profound recession, we must certainly not forget when it comes time to consider increases in the price of gasoline that many jobs still exist only because the cost of mobilization has been kept low.

Likewise, I consider the revision of our fiscal policies to be an absolute necessity. I simply cannot accept that the basic Income Tax with its definite advantages as far as redistribution of wealth is concerned is subrogated to VAT or taxes on gasoline which only punish consumption and therefore economic activity per se.

Finally, we must remember that only healthy global economic growth will make resources available to develop technology that will make gasoline a cleaner burning fuel.