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Lawrence of Arabia
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of the Gulag Archipelago
Apr 2001
time: 06:23
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here is what stiglitz had to say about argentina
quote:
INTERVIEWER: [So in Bolivia], the overall results might not have been as good as people originally thought. Tell me what you saw.
JOSEPH STIGLITZ: I saw a country that was facing recession. I saw a country that was asking questions like, why is it that when the United States faces an economic downturn, everybody says you ought to have a stimulus? But in Latin America, when they have an economic downturn, they're told to tighten their belts, [to] go back to the kinds of policies that were used -- we call them Hooverite in the United States -- policies that were rejected by the new economics, Keynesian economics, several years ago. The policies that they were taught in their graduate schools and undergraduate standard textbooks, every textbook says that when you have a recession, you're supposed to have expansionary fiscal policy. [But] they're told no, that's not right; you have to cut back your expenditures. And when that happens, the economy goes down.
But more broadly, what we see in countries like Bolivia, they're asking: "Okay, now we felt the pain; we've felt the pain of contraction and austerity. When do we start getting the fruits?" And in retrospect they say: "Well, yes, we had a few years of growth, but those few years of growth exposed us to an enormous amount of volatility. And now we have four, five years of stagnation, recession, depression." And looking at the statistics, if we look at a longer span, our growth record now in this decade doesn't appear particularly impressive.
And, in fact, what growth we had could largely be interpreted as a catch-up from the lost decade of the '80s, a lost decade caused by mismanagement of the last economic crises by the IMF. And they look around, and they say, "Look at the star pupil -- Argentina." [In] '91, '92, '93, '94, everybody described it as the best performing economy. They followed the IMF prescriptions; they got rid of hyperinflation. They did succeed, but they didn't get the kind of sustained economic growth that is going to bring benefits to all the people. The result, since 1995: double-digit unemployment. An economic framework that originally worked to bring down inflation became a shackle that did not allow the economy to grow. The wonder in Argentina is not that there were eventual riots; the wonder is that it took so long for them to occur. At the time they occurred, unemployment was approaching 20 percent; open unemployment and disguised unemployment was another 10 or 15 percent. What kind of democracy can sustain that kind of failure of economic policy? And some people will say it's the problem of the Argentineans, [but] the IMF and the policies they imposed have a high degree of culpability. They exposed it to disturbances, interest rate rises around the world, that were not caused by its misperformance, but by a global failure, global problems. They couldn't adjust quickly enough to these, but I'm not sure any country could have, any democratic country could.
INTERVIEWER: But in the case of the Argentinean people, some people would argue they just didn't do enough. What would you say to people who say that?
JOSEPH STIGLITZ: Well, what I say is they went very far towards reform. Prices were not only flexible; they were falling. Wages were falling. People were seeing their incomes decline. Maybe, you know, critics say, "Well, they should have declined faster; they should have gone into poverty quicker." That was what the prescription was saying. But the fact is, you know, I don't want to say that they did everything right, because clearly there were mistakes made all around, but the economic straitjacket of being pegged to the dollar made their life impossible, particularly in an environment where the dollar was overvalued. Their neighbor Brazil devalued enormously; the euro was weak. They were in an impossible situation. And then, with the IMF giving them a good report card for so long, they borrowed too much from the international markets, which just kept pushing more money on them, [saying], "Fine, take it if you want it," until they all of a sudden change their minds, saying, "Oh, no, I'm sorry -- now you have to pay us high interest rates." The debt GDP ratio in Argentina was only around 45 percent. In Japan it's around 130 percent. So even in terms of their indebtedness, it was not outrageous. But they were put in this economic straitjacket which the markets rightly recognized would be very difficult for them to get out of. |
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chegitz guevara
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Ft. Lauderdale, FL Communist Party of Apolyton
Jun 2000
time: 00:23
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quote:
Originally posted by Lawrence of Arabia
where is the loot? since everything bought by multinationals needs to be paid, either in credit, or cash, theres a transfer in both directions. |
But because they had been public property, they were generally sold to foreign corporations at much less than market value. This reults in a short inflow of cash, but because high interest rates have to be guaranteed under the IMF plan, that money quickly is sucked back to the 1st world. Back in the old days, the formula was that for each dollar that the 1st world put into a developing nation, it removed a dollar seventy. These days, it removes much more.
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lord of the mark
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FUKCOV - Former United Kingdom Colony of Virginia
Dec 2000
time: 00:23
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quote:
Originally posted by chegitz guevara
But because they had been public property, they were generally sold to foreign corporations at much less than market value. This reults in a short inflow of cash, but because high interest rates have to be guaranteed under the IMF plan, that money quickly is sucked back to the 1st world. Back in the old days, the formula was that for each dollar that the 1st world put into a developing nation, it removed a dollar seventy. These days, it removes much more. |
1. Most foreign direct investment is in new capital, not just sold public property. Many LDC never had that much public property. In particular the east asian tigers you cite never had as much public property as the Latin Americans did.
2. Why would they be sold at less than market value? In some cases there is corruption, but thats hardly the IMFs fault. A fair auction should get market value.
3. Does IMF set interest rates? They lend at market interest rates (correct me here, LOA) If no IMF, states would have to borrow directly from banks, or default - a strategy some advocate, but not the path taken by the asian tigers.
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Oerdin
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of Internet Music.
Sep 2001
time: 21:23
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The IMF most certainly did not cause Argentina's problems. Argentina's problem was that they borrowed far more then they could repay. The IMF is simply the lender of last resort who loans money to countries who's credit is so screwed up that private investors won't loan to them.
Naturally, the IMF doesn't want to throw good money after bad so they insist budgets be cut so that income and expenses are balanced. Other wise another debt crisis will occur.
Last edited by Oerdin on 19-02-2005 at 02:48
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lord of the mark
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FUKCOV - Former United Kingdom Colony of Virginia
Dec 2000
time: 00:23
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quote:
Originally posted by Oerdin
The IMF most certainly did cause Argentina's problems. Argentina's problem was that they borrowed far more then they could repay. The IMF is simply the lender of last resort who loans money to countries who's credit is so screwed up that private investors won't loan to them.
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which theyve admitted:
"The crisis resulted from the failure of Argentine
policymakers to take necessary corrective measures
sufficiently early, particularly in the consistency of
fiscal policy with their choice of exchange rate
regime. The IMF on its part erred in the precrisis period
by supporting the country’s weak policies too
long, even after it had become evident in the late
1990s that the political ability to deliver the necessary
fiscal discipline and structural reforms was lacking.
By the time the crisis hit Argentina in late 2000, there
were grave concerns about the country’s exchange
rate and debt sustainability, but there was no easy solution.
Given the extensive dollarization of the economy,
the costs of exiting the convertibility regime
were already very large. The IMF supported Argentina’s
efforts to preserve the exchange rate regime
with a substantial commitment of resources, which
was subsequently augmented on two occasions. This
support was justifiable initially, but the IMF continued
to provide support through 2001 despite repeated
policy inadequacies. In retrospect, the resources used
in an attempt to preserve the existing policy regime
during 2001 could have been better used to mitigate
at least some of the inevitable costs of exit, if the IMF
had called an earlier halt to support for a strategy that,
as implemented, was not sustainable and had pushed
instead for an alternative approach."
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chegitz guevara
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Ft. Lauderdale, FL Communist Party of Apolyton
Jun 2000
time: 00:23
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quote:
Originally posted by lord of the mark
1. Most foreign direct investment is in new capital, not just sold public property. Many LDC never had that much public property. In particular the east asian tigers you cite never had as much public property as the Latin Americans did. |
No, but their governments worked hand in glove with local oligarchs, guaranteeing their loans, backing them in which ever way the corporations needed to accumulate capital.
quote:
2 Why would they be sold at less than market value? In some cases there is corruption, but thats hardly the IMFs fault. A fair auction should get market value. |
What auctions?
quote:
3. Does IMF set interest rates? |
In a way. Part of the deal getting the loan is requiring high intrest rates in the receiving nation's banks. Initially this wouold mean a large inflow of capital, which would be available to loan in country, but when those loans fail to be repaid, the system collapses quickly and depositers pull their money out overnight.
As for Argentina, one also needs to remember that the country is being forced to pay back loans that were taken out by the dictators, and not a democratic government. That's pretty much the case of most of Latin America.
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19-02-2005 01:26
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