The Scam of Mides, an Institution That Manages Poverty

Economist Milton Friedman famously stated that "nothing is so permanent as a temporary government measure" (Friedman, 1962). This observation is particularly relevant when analyzing the trajectory of the Ministry of Social Development (MIDES) in Uruguay. Created in 2005 during Tabaré Vázquez's first presidency as part of the Equity Plan, an initiative conceived to address the social crisis inherited from the economic collapse of 2002, MIDES was initially presented as a temporary response. However, far from disappearing once the emergency was overcome, its structure and budget have experienced sustained growth, consolidating as a central actor in Uruguayan social policy.

During the last government of the Broad Front (2015-2020), MIDES's budget doubled, going from approximately 10,000 million Uruguayan pesos in 2015 to more than 20,000 million in 2019, according to inflation-adjusted estimates (MIDES, 2020). 

This trend continued under the following administration, reflecting not only institutional inertia but also an inability to fulfill the implicit promise of its creation: to reduce dependency on social programs through the structural resolution of poverty. After fifteen years of progressive management (2005-2020), one might expect that MIDES would have lost relevance if the goals of citizen self-sufficiency had been achieved. Nevertheless, the permanence and expansion of the ministry suggest that the "emergency" has been institutionalized, transforming into a chronic state that requires, according to its defenders, an indefinite presence.

The effectiveness of any social policy must be measured by concrete results, and a key indicator in this context is the exit rate of beneficiaries from assistance programs. 

If MIDES's purpose is to promote economic autonomy, success should be reflected in a progressive decrease in the number of people dependent on its transfers and services. However, the available data paints a different picture. According to the National Institute of Statistics (INE), poverty in Uruguay prior to the 2002 crisis reached approximately 39% of the population (INE, 2003). 

After the implementation of MIDES and two decades of social policies, this indicator significantly reduced in the early years, stabilizing around 8-10% in the last decade (INE, 2023). 

Although this reduction is undeniable, the persistence of poverty levels similar to those of the pre-crisis in certain population segments, combined with the increase in beneficiaries of programs like the Uruguay Social Card or the Equity Plan, suggests that MIDES has not managed to break the cycle of dependency.

From an economic perspective, this phenomenon can be interpreted as a classic example of what welfare theorists call a "poverty trap." 

Assistance programs, lacking clear incentives for labor reintegration or social mobility, tend to perpetuate the need for their own existence. In this sense, MIDES not only represents a significant expense for the public treasury—with an annual cost exceeding 1% of Uruguay's GDP in 2023, according to projections from the Ministry of Economy and Finance (MEF, 2023)—but also a paradox: its budgetary growth doesn't translate into a proportional reduction in social vulnerability.

Milton Friedman offered an alternative solution to this type of bureaucratic inefficiency: the negative income tax (NIT). Proposed in his work Capitalism and Freedom (1962), the NIT proposes a system where individuals with incomes below a certain threshold not only are exempt from paying taxes but also receive a direct subsidy from the state proportional to the gap between their income and that threshold. 

This mechanism, successfully implemented in the United States since the 1970s in the form of the Earned Income Tax Credit (EITC), has proven to be an effective tool for incentivizing labor participation and reducing poverty without the administrative costs associated with structures like MIDES.

In the Uruguayan context, adopting an NIT could simplify the web of social programs, eliminating redundancies and reducing bureaucracy. 

For example, a study by the Inter-American Development Bank (IDB, 2019) estimates that the administrative costs of conditional transfer programs in Latin America represent between 10% and 20% of total funds, a percentage that could be minimized with an automated and universal system like the NIT. 

Additionally, by linking the subsidy to labor effort, economic reintegration is encouraged, avoiding the passive dependency that characterizes many current MIDES beneficiaries.

The case of MIDES illustrates how a measure conceived as temporary can become entrenched in the state structure, perpetuating not only its existence but also the problems it seeks to solve. The numbers are eloquent: after twenty years of intervention, structural poverty persists, and public spending on social assistance shows no signs of decreasing. 

Friedman's proposal, based on the negative income tax, offers a viable alternative that combines economic efficiency with social justice, challenging the status quo of an "eternal emergency." Ultimately, the debate should not focus on the existence of MIDES but on its ability to fulfill its original mandate: to be a bridge to self-sufficiency, not a permanent destination.