A Smaller, More Effective State for a Country That Wants to Develop

Colombia hands the public sector about half of what it produces: according to the OECD, general government spending was 49.7% of GDP in 2024, compared with an average of 42.6% across OECD countries in 2023. In return, the country lives with violence, poor roads, unequal hospitals and schools, and an level of investment that is not enough to sustain its growth. The problem is not that the State exists, but that it absorbs an enormous share of the nation's wealth to sustain itself and returns very little of it in the form of opportunity.

Every peso spent keeping an oversized public apparatus running is a peso that is not invested. While government consumption grows, productive investment lags behind, and the result is an economy that sustains payrolls and subsidies with debt and mortgages its own growth. Reducing the size of the State is not an end in itself; it is the condition for freeing resources that are consumed today and turning them into development.

A subsidy relieves the month; a university, a port, or a road changes what a family can earn over a lifetime. Transfers protect today's income, but on their own they do not change what a household will be able to earn tomorrow, and the country has multiplied the former while neglecting the latter. Helping those in need is indispensable, but making aid the centerpiece of public policy means giving up on those same households ever ceasing to need it. With limited resources, everything cannot be done at once, and the right decision is to concentrate most spending on what builds the future.

Nor is the way out to collect more, because every additional tax reduces the wellbeing of everyone, households and companies alike, of those who have little and those who have a lot. Colombia is a country of low incomes for the vast majority and of widespread informality, so an additional tax has no one to land on without hitting people who already cannot cover the basics. The reading that emerges from the distribution of income and the design of taxes is clear: the feasible tax burden already falls, almost entirely, on the highest incomes and on formal companies, which face a top personal income tax rate of 39%, among the highest in Latin America, and the highest corporate tax rate in the region. And those rates are only a visible part of an overwhelming tangle of taxes, contributions, fees, and paperwork that covers every activity in the economy and makes every step more expensive for anyone trying to produce, sell, or hire. That tangle does not only discourage those who produce: it also limits the ability to buy and to access goods and services, because it makes them more expensive for families. Asking more from those who already carry almost everything discourages investment and employment, and asking it from those who have nothing destroys wellbeing. That is why the adjustment must be made on the spending side.

The State does not exist to provide jobs; it exists to serve citizens. Behind every position there is a person with a family, and many public servants perform indispensable functions, from teachers to doctors and police officers, but when payrolls grow out of inertia, because of overlapping agencies, or out of habit, the whole of society pays the cost in taxes, in debt, and in investment that is never made. Turning the State into an employer of last resort diverts resources from what the country needs most. Its role is to facilitate and promote private sector job creation, removing the obstacles that hold it back and creating the conditions for companies to be born, grow, and hire, because the employment that sustains a country is the kind generated by the productive economy and not the kind financed by the budget.

That is why the redesign of the State must begin with a fundamental question: what it should be involved in and what it should not. A State that takes on everything ends up doing almost everything badly, and a good part of its current size comes from functions that accumulated over time without anyone asking whether they belonged to it. The task is to concentrate it on what only it can do well, such as security, justice, smart regulation, and the public goods and services that no one else will provide, and to let go of the rest. This implies a change of role: ceasing to be the engine of the economy in order to become its promoter. The engine is the people and companies that produce, invest, and hire; the State's job is to clear the way for them, not to replace them.

The intended outcome is a smaller State, one that weighs less on the economy and stops consuming it, and that achieves better results than the current one at a much lower cost. This is not a weak State but a highly productive one, which delivers better services with less structure and concentrates its resources on investment rather than on its own operation. That requires merging or eliminating agencies that do the same thing today, resolving with technology procedures that now take weeks, redesigning processes inherited from another era, reducing payrolls as far as the new structures demand, which may mean large numbers of dismissals, not filling vacancies left by retirements, and training public servants for new functions. And it requires that the effort cover all of public power, the executive, the judiciary, Congress, the oversight bodies, and the administrations of departments and municipalities, because if only one part is reduced, growth shifts to another and the bill remains the same.

The most important thing in this whole process is the destination of the resources. Reducing the State makes no sense if what is freed up is spent again on operations; it makes sense if most of it is redirected toward real investment, the kind that builds the country's development. Every peso that stops sustaining redundant structures must become infrastructure, hospitals, education, and security, that is, the foundations on which anyone can produce and create value. Understood this way, the reform is a change in the purpose of public spending: from a State that consumes to a State that builds the framework for productivity.

The ultimate goal is to create an environment where being born poor does not determine what a person can go on to do. A country with good infrastructure, nearby hospitals, quality education connected to the needs of the economy, and safe streets is a country where an idea has room to grow. A young person from a humble neighborhood does not need, above all, a monthly check; they need a university that trains them in complex technologies, a road along which their product can reach the market, a safe city, and a port that connects them to the world. When those conditions exist, a family's income level stops deciding who can found a company, try out a business, or turn an idea into reality.

That is the true measure of a State reform: how many new ideas, new companies, and new businesses manage to be born in a country that has stopped spending to sustain itself and started spending to open paths. A State that concentrates its resources on that task multiplies opportunities for everyone, and especially for those who have the least today, because they are the ones who depend most on quality public goods and services. It is the difference between a country that spends to maintain itself and one that spends to grow.

None of this happens on its own; it requires society to understand it and demand it. It falls to society to call for clear and comparable figures, so that the debate is not reduced to slogans; to accept that it is not possible to sustain all current spending and, at the same time, build the country; to make sure that whatever is saved goes to investment and that every saving has a visible destination; to protect those who depend most on assistance during the transition, so that the adjustment does not fall on the weakest; and to sustain the effort across several governments, because a reform of this magnitude takes years and collapses if each administration undoes it.

Colombia can keep financing the present with debt, with a State that is ever more expensive to maintain and leaves less room to build, or it can decide that every public peso should count. The second option demands effort now, but it opens up a country in which a smaller and more effective State serves a nation full of ideas, companies, and opportunities, regardless of the income each person was born into.