Sunday, May 14, 2006

Stiglitz on Latin American populism

If you look at Venezuela’s example, it is that by bargaining tough and hard with the oil companies you can get a better deal. Across the world, many developing countries have gotten a rotten deal. The fraction of value of the resources they’ve been recovering for their people has been relatively low.

Malaysia brought people in to help Malaysians learn how to manage an oil company, but they owned it completely. Now, and the evidence supports it, they get much better value from their resources than if those resources were foreign-owned.

Bolivia has gotten a pretty bad deal on its natural gas. It can do better, as Evo Morales has said he intends to do.

If Argentina had caved into the IMF, it would have gotten a much worse deal in the debt negotiations. If it had hired the IMF as its negotiator, it would have been really screwed. So, what is wrong with bargaining?

Now, if by populism one means worrying about how the bottom two-thirds of the population fares, then populism is not a bad thing. Two-thirds of Venezuelans were living in poverty under the old system. They gained nothing from the old economics. The GNP might have been going up, but they didn’t see any of it.

Obviously, it is of concern if these new leaders of the left in Latin America pretend there are no laws of economics. If they say, “I can deliver the goods” without the resources, that is a problem. But the question is whether the IMF strictures are the only ones consistent with good economics. The answer to that is a resounding no.


troutsky said...

I am no economist but I do not understand the laws of economics as being similar to the laws of engineering ,say, where there is only one set and they work everywhere.

helmut said...

I think there are a lot of people, including a spattering of economists, who are starting to get this. The economics is one variable among others. Public policy, in general, is a matter of challenging and tweaking economic institutions based on considerations - norms, desired outcomes, etc. - that are external to the sphere of concern of orthodox neoclassical economics. Those considerations are always going to be contextual to a large extent, based in past considerations and desired outcomes, present needs, and future-oriented ideals about how to resolve problems and needs.