Thanks Hugo for this very interesting interview with Joseph Stiglitz appearing in The International Herald Tribune. He talks about almost everything: housing, international trade, Latam politics, international political economy... very up-to-date.
I really like these two answers to these other two interesting questions (about the new left in Latam and about housing):
Q. I would like to hear your analyses of Latin America’s leftists. What do you make of Venezuela’s economics? Are Venezuelan policies sustainable over the long term? Is Chile truly the holy grail of development economics?
Paul Escobar
Canada
A. Chile has had impressive success over the past 15 years, after a major recession brought on by excessive faith in free market economics under Pinochet through insufficiently regulated banking. But there are alternative interpretations/explanations of that success. Chile did not follow many key elements of the Washington Consensus during its most successful years. It imposed capital controls. It only privatized part of its copper mines, and the privatized mines arguably did not perform better than the nationalized ones, though the profits were sent abroad, while the profits of the nationalized mines could be used in the nation’s efforts to develop. Government and foundations lay behind many of its successful development projects (such as its fisheries) - the kind of industrial policies that the Washington Consensus railed against. And unlike the Washington Consensus, Chile put considerable emphasis on social policies.
Chile did two things that were part of the Washington consensus - it liberalized trade and it limited its government deficits. The lesson is similar to that of the successful countries of East Asia: Globalization can help bring prosperity, but countries have to manage globalization on their own terms, in their own way. Chile did this. The countries that followed the Washington Consensus mantra have, by and large, not done so well.
It is the failures of these policies that have provided the impetus for the new movements in Latin America. Venezuela is the country in Latin America with the richest resources, but it is a rich country with poor people; before Chavez came to power, between two thirds and 80 percent of the people were in poverty. The riches of the country went to the rich, who did not want to share them with the vast majority of the citizens. Countries like Ecuador, Bolivia and Venezuela signed agreements with foreign oil, gas and mining companies that were generous to the foreign companies but cheated the country out of what was rightfully theirs.
There is an ongoing debate about whether it was the result of corruption or incompetence of previous Administrations, or the consequence of pressure to privatize these resources quickly. But for the impoverished people of these countries, these distinctions may matter little. All they know is that their country is getting less than it should. The new governments have been able in many cases to cut a better deal. They know that they need the expertise of the foreign oil companies. They have been explicit in saying that these companies should get a fair return on their investment. Indeed, these companies are getting a very, very high return on their investment. These countries are only asking that they get a larger share.
In many cases, these countries have put into place health and education policies that are already working, bringing health and education to the poor barrios for the first time. It is these successes that partly account for the popular support of these governments. Some critics label such policies as populist, but if populism results in the poor getting education and health services for the first time, isn’t that what democracy is supposed to produce?
The countries are also putting into place longer-run growth policies.
Some of these policies and projects make enormous sense. But how successful these policies and projects will be will depend partly on how they are implemented. It is too soon to make a clear verdict.
Q. Inflated and imperfect real estate markets, driven by speculation, have emerged as a defining characteristic of globalization. Is it time for a global housing regulator, or something approaching a transparent global housing regime? Who will stem the speculative tide?
Hasan Jafri
Hong Kong
A. Throughout history, capitalist economies have been marked by booms and busts. At this juncture, it is hard to conceive of how a global regulator could work, but there is much that regulators within each country can do, for instance by adjusting requirements on downpayments of housing and other terms of mortgages, and increasing capital gains taxes. Regulators can dampen these fluctuations, even if they do not eliminate them.
What the international community can do, though, is to stabilize the flow of speculative money that helps feed these bubbles. Most importantly, the international community should give countries enough “policy space” to allow them to undertake stabilizing actions, for instance, the imposition of Chilean-style taxes on capital inflows, or the imposition of stabilizing prudential regulations.
Have a look to the rest of the interview here. It's worth a quick reading at bed before falling asleep...
I really like these two answers to these other two interesting questions (about the new left in Latam and about housing):
Q. I would like to hear your analyses of Latin America’s leftists. What do you make of Venezuela’s economics? Are Venezuelan policies sustainable over the long term? Is Chile truly the holy grail of development economics?
Paul Escobar
Canada
A. Chile has had impressive success over the past 15 years, after a major recession brought on by excessive faith in free market economics under Pinochet through insufficiently regulated banking. But there are alternative interpretations/explanations of that success. Chile did not follow many key elements of the Washington Consensus during its most successful years. It imposed capital controls. It only privatized part of its copper mines, and the privatized mines arguably did not perform better than the nationalized ones, though the profits were sent abroad, while the profits of the nationalized mines could be used in the nation’s efforts to develop. Government and foundations lay behind many of its successful development projects (such as its fisheries) - the kind of industrial policies that the Washington Consensus railed against. And unlike the Washington Consensus, Chile put considerable emphasis on social policies.
Chile did two things that were part of the Washington consensus - it liberalized trade and it limited its government deficits. The lesson is similar to that of the successful countries of East Asia: Globalization can help bring prosperity, but countries have to manage globalization on their own terms, in their own way. Chile did this. The countries that followed the Washington Consensus mantra have, by and large, not done so well.
It is the failures of these policies that have provided the impetus for the new movements in Latin America. Venezuela is the country in Latin America with the richest resources, but it is a rich country with poor people; before Chavez came to power, between two thirds and 80 percent of the people were in poverty. The riches of the country went to the rich, who did not want to share them with the vast majority of the citizens. Countries like Ecuador, Bolivia and Venezuela signed agreements with foreign oil, gas and mining companies that were generous to the foreign companies but cheated the country out of what was rightfully theirs.
There is an ongoing debate about whether it was the result of corruption or incompetence of previous Administrations, or the consequence of pressure to privatize these resources quickly. But for the impoverished people of these countries, these distinctions may matter little. All they know is that their country is getting less than it should. The new governments have been able in many cases to cut a better deal. They know that they need the expertise of the foreign oil companies. They have been explicit in saying that these companies should get a fair return on their investment. Indeed, these companies are getting a very, very high return on their investment. These countries are only asking that they get a larger share.
In many cases, these countries have put into place health and education policies that are already working, bringing health and education to the poor barrios for the first time. It is these successes that partly account for the popular support of these governments. Some critics label such policies as populist, but if populism results in the poor getting education and health services for the first time, isn’t that what democracy is supposed to produce?
The countries are also putting into place longer-run growth policies.
Some of these policies and projects make enormous sense. But how successful these policies and projects will be will depend partly on how they are implemented. It is too soon to make a clear verdict.
Q. Inflated and imperfect real estate markets, driven by speculation, have emerged as a defining characteristic of globalization. Is it time for a global housing regulator, or something approaching a transparent global housing regime? Who will stem the speculative tide?
Hasan Jafri
Hong Kong
A. Throughout history, capitalist economies have been marked by booms and busts. At this juncture, it is hard to conceive of how a global regulator could work, but there is much that regulators within each country can do, for instance by adjusting requirements on downpayments of housing and other terms of mortgages, and increasing capital gains taxes. Regulators can dampen these fluctuations, even if they do not eliminate them.
What the international community can do, though, is to stabilize the flow of speculative money that helps feed these bubbles. Most importantly, the international community should give countries enough “policy space” to allow them to undertake stabilizing actions, for instance, the imposition of Chilean-style taxes on capital inflows, or the imposition of stabilizing prudential regulations.
Have a look to the rest of the interview here. It's worth a quick reading at bed before falling asleep...
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