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I don't know how to title this post
Via Mark Thoma, Joseph Stiglitz makes lots of claims. Here is one of them:
For a quarter-century, there has been a contest among developing countries, and the losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top.
He does not name the countries. Is Chile supposed to be a loser? Or does he have the more corrupt Latin American states in mind? How about Ireland or for that matter the economic policies of Mrs. Thatcher? Was it a mistake for so many states to drop communism? How many African nations -- the real losers -- have adopted neo-liberal policies? Do Singapore and Hong Kong count?
Presumably China counts as a winner and of course it has a relatively strong state. Oddly some of the communists saw capitalism as building the economic superstructure for socialism and then communism. In reality the nominally socialist and communist government of China built the public sector superstructure to support a later capitalism.
Here's another claim Stiglitz makes:
One senior Chinese official was quoted as saying that the problem was that the US government should have done more to help low-income Americans with their housing. I agree.
In my view, while the private sector is largely to blame for what happened, the U.S. government has, over the years, done far too much to encourage the housing sector. I guess Stiglitz thinks it should have done even more.
I find the content of his essay difficult to understand, on a number of levels.
Posted by Tyler Cowen on July 9, 2008 at 06:59 AM in Economics | Permalink
Comments
Chile would be mid table at best since 1970 if it was in the Far East. Slightly behind Thailand I think. The rest of Latin America has been dire and, as a generalisation, far more well behaved according to Washington Consensus rules. Singapore is pretty much socialist. This is a point made with names by Dani Rodrik and others so not really out on a limb.
Communist and neo-liberal is not an exhaustive list of economic policies so there is little reason to think that Stiglitz is suggesting anyone should have remained communist.
It also seems odd to compare "the housing sector", at least as helped by the government, with housing for the poor.
He may however have missed a trick by failing to point out that since 1970, just about the best development trick you can pull has been joining the EU. Give it your battered old fascist and communist dictatorships and in 10 years they look good as new.
Posted by: bunbury at Jul 9, 2008 8:42:12 AM
Really, does anybody with half a clue listen to Stiglitz anymore? Once he cravely reupidated his own textbook to please his political masters, his transition from expert to babbling crony was complete.
Posted by: Keith at Jul 9, 2008 9:37:23 AM
bunbury, please support your conclusions. For one thing, just because Temasek and GIC own parts of many companies does not make Singapore a socialist country. Socialist economies aren't exactly havens for free trade or complex financial systems (such as Singapore's).
So the same "Washington Consensus" that told Argentina to peg the peso to the dollar also told it to continue making massive cash transfusions (essentially graft/buying votes) to the provinces/their governors, thus running a deficit, right?
Oh, and what about matching up the U.S. against the Far East since 1970? Or France, for that matter. How extensively have you traveled around Latin America and talked to businesspeople (and ordinary citizens there)? I have done this in Chile (as well as some other countries) and in my opinion its institutions are much, much more capable of promoting growth in the long run compared to its peers (yes, even many of the "Asian tigers"). It has taken few shortcuts thus far and at present doesn't have a screaming-high growth rate, but I am very bullish on Chile for 30 years down the road.
Posted by: Sean at Jul 9, 2008 9:45:26 AM
I'm glad TC mentioned Mrs Thatcher.
I call this book -
Seeking a premier economy - by David Card et al.
http://books.google.co.uk/books?hl=en&id=XUGqOHKOWP4C&dq=richard+freeman+economy+&printsec=frontcover&source=web&ots=URSatX8t-q&sig=wvApP9WaiS1eP4-7Qd6HbEGvVnM&sa=X&oi=book_result&resnum=2&ct=result#PPA3,M1
- the 'best kept secret' in the UK.
It describes how Mrs Thatcher's policies reversed _decades_ of relentless British economic decline in a developed (the first developed) economy.
This strikes me as an amazing, inspiring, unprecedented story - so why is nobody interested in it?
Posted by: BGC at Jul 9, 2008 9:54:55 AM
Great to see American liberals using their fame to spread good ideas to countries that need it, like Egypt.
This article is misguided on so many levels that one wonders why we even bother. This guy has a Nobel prize?
Posted by: paleohawk at Jul 9, 2008 9:59:10 AM
I hate to say it of a Nobelist, but does anyone else think that Stiglitz has gone slightly senile in his old age?
Posted by: Timothy at Jul 9, 2008 10:29:18 AM
I'm not sure Chile is shinning example of successes of free markets. Despite having liberalized its economy over 30 years ago, and benefiting significantly from substantial mineral resources, particularly copper, its per capita GDP is still slightly below Eastern Europe average. Also having one of the highest income inequalities in the world is nothing to be proud of.
Posted by: MS at Jul 9, 2008 10:39:43 AM
What would Stigitz make of New Zealand's policies over the last 25 years. Not exactly most people's idea of a developing country but as of 1980 it did have lower per-capita GDP than Argentina. One of these two countries did go on to agressively follow the Wellington-sorry..."Washington Consensus", the other did not.
Posted by: stubydoo at Jul 9, 2008 10:46:06 AM
New Zealand is a good example, Ireland is an even better one. Also, Chile is the richest country in Latin America. Argentina is an example of a country making almost every possible mistake at one point or another, and paying the price for doing so.
Posted by: Timothy at Jul 9, 2008 11:03:04 AM
Also, Chile is the richest country in Latin America.
True but it is not especially impressive achievement if you ask me.
Posted by: MS at Jul 9, 2008 11:12:45 AM
I'm not the one raising vague and tangential points so don't know why the fact checking is directed this way. The short answer is go play with GapMinder for a bit.
I don't think anything I've said is controversial. Chile is the best case scenario when it comes to neo-liberal development and it would still look like a laggard if it were in the Far East. It's on a par with the Philipines and behind Thailand, let alone South Korea.
As for Singapore, I don't know what your checklist is but it has a very comprehensive welfare state, highly interventionist industrial and social policy and extensive state or quasi state ownership. It even has a minister for procreation. Democracy is special.
Stubydoo, NZ didn't have a lower GDP than Argentina in 1980. NZ did a bit better but wasn't really a developing economy.
Posted by: bunbury at Jul 9, 2008 11:50:25 AM
What countries are "neo-liberal" and what countries are not? I always though "neo-liberal" was a pejorative, not a real term that economists use to classify countries? Normally, when I here the term "neo-liberal", I think "political rant".
Posted by: Rex Rhino at Jul 9, 2008 11:56:17 AM
Estonia. It isn't even a very unequal country (Gini index of .34, according to Wikipedia).
Posted by: Juan at Jul 9, 2008 12:45:57 PM
Bunbury,
I got my data from here
http://www.imf.org/external/pubs/ft/weo/2008/01/weodata/index.aspx
"NZ did a bit better" is a glorious understatement. "Wasn't really a developing country" - sure (since I'm from there I know), but I'd still insist that the comparison is informative vis a vis Stiglitz's point about the effects of neo-liberal policies.
Posted by: stubydoo at Jul 9, 2008 1:01:57 PM
It describes how Mrs Thatcher's policies reversed _decades_ of relentless British economic decline in a developed (the first developed) economy. This strikes me as an amazing, inspiring, unprecedented story - so why is nobody interested in it?
Probably because of the association with the non-economic aspects of conservatism. That's why I can't easily get past my dislike of Reagan. And to an American like me, Thatcher=Reagan.
Posted by: Mike at Jul 9, 2008 1:19:13 PM
I was reading some stuff on Dani Rodrik's blog for a while after posting, and a little light bulb went on my head. Could it be that the most successful "neo-liberal" countries were those whose policies were mostly "homegrown"?
Posted by: Juan at Jul 9, 2008 1:38:57 PM
Depends on your units I guess. In PPP terms, according to your source, they've roughly kept track growthwise and NZ started well ahead:
http://www.imf.org/external/pubs/ft/weo/2008/01/weodata/weorept.aspx?pr.x=43&pr.y=9&sy=1980&ey=2013&scsm=1&ssd=1&sort=country&ds=.&br=1&c=213%2C196&s=NGDPDPC%2CPPPPC&grp=0&a=
It's still missing the point.
The Far Eastern countries were and often are terrible in Washington consensus terms but have lapped the better behaved countries in Latin America. China has not been a model of Washington consensus rectitude and now look at it. Sure it's a special case but so are Ireland and New Zealand.
If you put up a league table of economic growth over the last 25 years the top would be dominated by dirigiste East Asian countries, more liberal Latin America would be mid table and African countries would be propping things up. In terms of levels the far east has leapt from the bottom of the table to banging on the door of the G7.
So, there's a prescription. Some very poor countries didn't take it with diverse results, mostly good in Asia, mostly bad in Africa. Some not so rich countries did take it (they did other stuff too but the doctor didn't say much about that) and got results that range from mediocre to terrible. Pointing out the Mrs. Thatcher might also have taken the medicine doesn't really detract from the point that what is supposed to be the medicine for lack of growth is no better than placebo. We don't know what the Asian economies did right in any transferable way. Lots of stuff they did can go badly wrong.
I maintain the currently the most reliable route to rapid development is trying to join the EU.
Posted by: bunbury at Jul 9, 2008 1:39:18 PM
Oh Really Mr Stiglitz. I suppose you haven't lived in India. bribing the state monopoly cooking gas provider for an extra cylinder, bribing 10 levels of bureacratic heirarchy to get a simple phone landline, want me to go on Mr. Stiglitz? Want to come to India now and claim that the grand socialist experiment of India has succeeded in 50 years? I suppose "neo liberalism" hasnt helped any of those poor vegetable vendors and rickshaw drivers who tote cell phones sold for pittance these days to deliver groceries, pick up customers and what not. Oh noezzz, the Godly STATE will help us all with deficit spending!
How can these people get away with saying nonsense of this sort? Shouldn't Brad De Long devote a 3000 word post on why this is so horribly wrong on so many levels?
Posted by: Tushar Saxena at Jul 9, 2008 2:55:49 PM
Eastern Europe benefits from being right next to Western Europe. If it's neighbours had been in better shape, Chile's GDP per capital would probably be significantly higher.
Posted by: Ali Choudhury at Jul 9, 2008 4:08:57 PM
Igues sVenezuela is a winner . Under Hugo Chavez rule:
15 % inflation since january.
Since he established price control some good s have disaappear others have been once week and not another. Including milk, corn , sugar, salt, poultry, meat , cheese, bathroon tissue, Coca cola( because of a savage strike by ex concesionaries or workers),corn oil , oat, ketchup, mayonaise, tuna, . Of course in the strreet you see the cars running 1 mile an hour, you need the max5 to sort the traffic. The car of chocie among american haters government official: .... HUMMER. Beside Audi. I even see a Testarossa .
My printer have been iddle by 2 months because i can not find the yellow catridge, because of exchange control.
Yes , socialism of the xxi century is the true winner.
To the morons backin stiglitz come live here
Posted by: k at Jul 9, 2008 4:52:30 PM
a good title , non original, Experts talk
or The philosopher king in his ivory tower
Posted by: k at Jul 9, 2008 4:54:03 PM
Ali, you mean like Mexico?
Posted by: bunbury at Jul 9, 2008 6:51:13 PM
Tushar, where does it suggest that Stiglitz is corrupt and incompetent telephone companies? And no, neo-liberalism is not the same thing as Nokia or RMC and Stiglitz does not appear to be against them.
The major point in the article is the your phone is more likely to be Korean than Chilean despite the best endeavours of neo-liberalism. The mnor one is that the dot com and housing bubbles are efficient in pretty obscure ways if they are efficient at all. Neither point seems arguable even if they do leave Tyler nonplussed.
Posted by: bunbury at Jul 9, 2008 6:58:58 PM
I don't know how to title this post
You can't spell "dishonest"?
Posted by: Sinclair Davidson at Jul 9, 2008 7:05:51 PM
But for every South Korea there is at least one Peronist Argentina. Can the proponents of more interventionist development strategies tell ex-ante which is which? I wonder to what level were the East Asian economies spared from public choice concerns thanks to benevolent dictatorships.
Posted by: Juan at Jul 9, 2008 7:13:13 PM
