The omnipotence of the State and corruption
By: Hugo Marcelo Balderrama - 17/08/2026
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The great Argentine patriot, Juan Bautista Alberdi, in his essay "The Omnipotence of the State," exposed the great paradox of our countries: after breaking with Spain, the citizens of this side of the world ended up enslaved by their national governments. Furthermore, Alberdi, nearly a century ahead of several Nobel laureates in economics, understood that a country's wealth lies not in the size of its territory, much less in its natural resources, but in the political institutions that allow people to be free to think, believe, produce, and trade.
For his part, John Mukun Mbaku, a professor of Political Science in several African countries, explains that the omnipotence of the state creates perverse incentives for corruption. In other words, the number of corrupt officials, the amount of bribes, and corruption indices are merely indicators of a larger problem. To put it in perspective, if a municipality has two budgets for a bridge, one of 100,000 bolivars and the other of 10 million bolivars, which option are construction companies more tempted to bid on: option 1 or option 2? Obviously, option 2. Now imagine the case of a bureaucratic apparatus with an unlimited budget.
In fact, monopolies, contrary to the teachings of economics faculties, are not a product of capitalism, but rather the consequence of agreements between enormous states and businesspeople with questionable moral standards. In 1912, Ludwig von Mises, in his work *Theory of Money and Credit*, used arms manufacturers as an example to explain how certain corporate groups profit from inflation.
If, for example, paper money is issued during wartime, the new banknotes will first go into the pockets of war materiel suppliers. As a result, their demand for certain goods will increase, as will their sales and prices, especially since these are luxury items. This will improve the situation of the producers of these goods; their demand for other goods will also increase, thus perpetuating the rise in prices and sales, which will spread to a continuously increasing number of goods until it eventually affects them all. In this case, some gain and others lose from inflation. Basically, the winners are those who receive the new money at a lower price level.
In the national context, a similar phenomenon can be seen with the Financial Services Law. This law allowed all banks and cooperatives to increase their assets, while, at the same time, ordinary citizens, due to inflation and the plundering of dollar savings, silently witnessed the loss of value of their salaries and incomes. In short, the Bolivian dictatorship decided who would get rich and who would be ruined.
In her book, *Corruption and Government*, Susan Rose Ackerman explains that the more public spending a government has, the more corrupt it will be; therefore, corruption is both an economic and a political problem. To mitigate it, since eliminating it completely is impossible, Rose Ackerman proposes a series of political and economic reforms, which we will examine below:
To reduce opportunities for corruption, it would be necessary to (1) eliminate those state entities, programs, and subsidies whose costs (including the cost of embezzlement) far outweigh their benefits; (2) reform state programs deemed necessary so that public officials have less discretion in decision-making; (3) reform the bureaucracy so that its incentives are aligned with more efficient management of public resources; and (4) reform award processes by reducing the discretion of public officials in decisions to grant public contracts and concessions.
Thinking about Bolivia, this could apply to the urgent need to close all public companies and the many other offices created solely to extort money from business owners. In short, the opposite of what politicians usually offer.
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