Neoliberalism Defied? The Argentine "Miracle"

Defying conventional expectations (including my own quite frankly), Argentina has experienced significant economic and employment growth in the last few years while defying the IMF and and the pressures of foreign investors. Larry Rohter of the NYT presents both sides of the argument:

Three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs - all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.

Argentina's recovery has been undeniable, and it has been achieved at least in part by ignoring and even defying economic and political orthodoxy. Rather than moving to immediately satisfy bondholders, private banks and the I.M.F., as other developing countries have done in less severe crises, the Peronist-led government chose to stimulate internal consumption first and told creditors to get in line with everyone else.

"This is a remarkable historical event, one that challenges 25 years of failed policies," said Mark Weisbrot, an economist at the Center for Economic and Policy Research, a liberal research group in Washington. "While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they've done it without having to make any concessions to get foreign capital inflows."

Inevitably, there are naysayers:

Traditional free-market economists remain skeptical of the government's approach. While acknowledging there has been a recovery, they attribute it mainly to external factors rather than the policies of President Néstor Kirchner, who has been in office since May 2003. Increasingly, they also maintain that the comeback is beginning to lose steam.

"We've been lucky," said Juan Luis Bour, chief economist at the Latin American Foundation for Economic Research here. "We've had high prices for commodities and low interest rates. But if we want to grow in 2005, we're going to have to settle the debt question and have foreign capital come in."

The I.M.F., which Argentine officials blame for inducing the crisis in the first place, argues that the current government is acting at least in part as the I.M.F. has always recommended. It has limited spending and moved to increase revenues, a classic prescription when an economy is ailing, and has built up a surplus twice the size of what the fund had asked before negotiations were put on hold several months ago.

My schooling and inclination is with the naysayers. But results are results. And as Keynes taught us, in the long run, we're dead anyway.

On the flip I'll talk a little about how Argentina may provide evidence for the fair traders, such as kossack TocquedeVille (sp).

Some of that record budget surplus has come from a pair of levies on exports and financial transactions that orthodox economists at the I.M.F. and elsewhere want to see repealed. About a third of government revenues are now raised by those taxes, which have surged.

"These are slogans that people repeat without thinking, as if they were parrots," Roberto Lavagna, the minister of the economy, said when asked about the predictions that investment would disappear. "In 2001 and the beginning of 2002, all kinds of contracts were destroyed," he said. "So why are they investing? Because today clearly they can get a very good rate of return." . . .

Asian countries, with China and South Korea in the lead, have begun to move in. During a state visit last month, the Chinese president, Hu Jintao, announced that his country plans to invest $20 billion in Argentina over the next decade.

But the bulk of the new investment comes from Argentines who are beginning to spend their money at home, either bringing their savings back from abroad or from under their mattresses. For the first time in three years, more money is coming into the country than is leaving it.

That has given Mr. Kirchner the luxury of taking a hard line with the monetary fund and with foreign creditors clamoring for repayment.

"The thing is that Argentina has a current account surplus, so they don't really need so much foreign investment," said Claudio Loser, an Argentine economist and the former Western Hemisphere director for the I.M.F. "Domestic investment is taking place because there are opportunities in agriculture, oil and gas."

Just this week, the government announced that reserves of foreign currency have climbed back to $19.5 billion, their highest level since the crash and more than double the low recorded in the middle of 2002, a year with a net outflow of $12.7 billion. "The peak of investment in the 1990's was 19.9 percent" of gross domestic product annually "and today it is at 19.1 percent, having risen from a low of 10 percent," Mr. Lavagna said.

Boosting domestic demand and investment through tariffs? Can it work? Well, it's working. Now, the question is when and if there will be retaliation. I think that is the fatal stumbling block. But, for now, score one for fair trade.

•  I think its real

  Have you read "Globalization and its Discontents"?

  by Descrates on Sat Dec 25, 2004 at 10:07:20 PM PDT

  •  Nope

    But what do you think is real?  The Argentine economic performance? Of course it's real. I don't think anyone is saying otherwise.

    by Armando on Sat Dec 25, 2004 at 10:09:18 PM PDT

    •  Sorry. that's not what I meant

      I mean I think the naysayers are wrong.  

      by Descrates on Sat Dec 25, 2004 at 10:48:01 PM PDT

      •  Time will tell n/t

        by Armando on Sat Dec 25, 2004 at 10:50:07 PM PDT

        •  Time has told

          Benjamin Franklin said that the real cause of the American Revolution was the British passing the Currency Act of 1764. This outlawed the paper money the colonists had started using, Colonial Script. Colonial Script was fiat money in that it had no backing like gold or silver. But its use created a booming economy that was completely depressed by the new Currency Act. Franklin said that in one year, a depression set in that filled the streets with unemployed.

          What the Currency Act actually did was force the colonies onto a gold standard which immediatly sucked the money supply back to the Bank of England.

          The Bank of England was the first centralized bank. Economic hardship, inflation, and inequitible distribution of wealth has followed centralized banks wherever they are allowed to exist. The World Bank is the final implementation of that process.

          In the context of Argentina, it is inaccurate to just lump the IMF=World Bank with "free trade". In fact, while many IMF policies are pro free trade, many of their policies have nothing to do with trade. At least not in the conventional sense.

          Greg Palast, who many don't know was a member of the little elitist group of students who were allowed to study under Milton Friedman at the U. Chicago in the late 60s, has done a great job of accumulating the cold, hard facts about the effects of IMF/World Bank loans and their consequent requirements on developing countries.

          The record is clear: get money from IMFWB and follow their little four step plan to prosperity and watch you country implode.

          Reduced spending is really lower wages and contraction of the money supply. Foreign investment is really the privatization of utilities like Water!!! only to be sold to monster transnats like Enron.

          And then there's the really good one, Step 3, something like civil control. This is where they bring in the army to stand down the inevitable riots that follow such prosperity like water rates going up somewhere around 1000%. Peasants die of dehydration while transnats reek profits and pepsi uses up all the fresh water for 50 square miles. Desease spreads from people drinking free water.

          The whole process results in international banks owning these countries and their most prized assets like damns, power stations and national banks (not to mention presidents, sound familiar? Check W's top contributors). Exactly what our centralized, privately owned bank, the Federal Reserve, did to us in the late 20s and 30s. Contract the money supply, foreclose on the bankrupters and own the entire country.

          People talk about the some 40 billion 1930 dollars being lost during the Depression. It wasn't lost. It was transfered to banks. Through foreclosures.

          Did you know if you pull a dollar out of your wallet on the top it reads, 'Federal Reserve Note'. That seems normal till you know that the Federal Reserve is a privately owned corporation. Our national currency is issued by a private corporation, the Federal Reserve Bank.

          All this doesn't make the news much here in the US. Surprise. But the evidence, just like in Argentina and Venezuela, is that if you don't want your country to fall into economic slavery to giant transnational corporations and foreign banks, stay the fuck away from the IMFWB. This is why many up and coming countries, like India, are telling the IMFWB to piss off.

          Now, much of what I've just discussed has very little to do with tariffs. Or the usual shit we talk about free trade. But it's all entangled under the term globalization. But opponents of glabalization often miss one of, if not its most, evil components: international banks.

          Andrew Jackson's successful killing of the centralized bank is one of the most relevant in US history. Ever heard of it? Surprise.

          Ever wonder why the dollar continues to buy less and less. It's been happening so long we see it as a force of nature. It's not. It's the result of a continuing descent into abysmal indebtedness to the bank. Not just our national dept. Consumer dept, family dept, business dept.

          The banks have slowly gained ownership over our entire country. How much? Subtract American's meager equity from everything we think we own, property, cars, student loans, businesses, and what's left is owned by banks. I havewn't seen those figures, but I would guess it exceeds 90%. Its not a study you see floating around much. Surprise.

          It wasn't always this way. And it doesn't have to be this way forever. Banks planted their tentacles into our currency and economy through corruption and subversion. The Federal Reserve Act of 1913 was passed on Christmas Eve by three senators. Everyone else was home for the holiday.

          Since we still resemble a democracy, the banks here are heavily regulated robber barons. In Bolivia they are not. Nor in Brazil. Argentina is only defying economic expectation to those who either don't know about the effects of IMFWB's failed policies, or those who have a vested interest in those failed policies.

          Failed policies like our current trade policies (sm).

          PS I have no idea what (sm) stands for.

          Cheers.

          by TocqueDeville on Sun Dec 26, 2004 at 02:54:08 AM PDT

          •  Uh, I forgot oil wells

            results in international banks owning these countries and their most prized assets like damns

            And oil wells.

            by TocqueDeville on Sun Dec 26, 2004 at 02:58:01 AM PDT

          •  (sm)

            possibly Service mark

            by puppet10 on Sun Dec 26, 2004 at 05:25:12 AM PDT

          •  about the Currency Act

            you can find some info here or simply google "Currency Act} along with 1764 and you will get a variety of interesting references.

            Since I am teaching American History [this year only - we are changing our sequence of courses] I thought I would do my usual and check the textbooks [NOTE-  I am teaching 2nd half, so I had not examined the books for this previously].

            The book used for lower ability students at least mentions Grenville and the Sugar Tax of 1764.  It does not mention the Currency Act of 1764.   The book for the higher level students does mention the Currency Act,  but let's look at the description it gives:

            "This act banned the use of paper money in the colonies because it tended to lose its value very quickly. Colonial farmers and artisans and artisans liked paper money for precisely that reason.  They could take out loans and easily repay them later with paper money that was worth less than when they originally borrowed,"

            While the statement quoted is accurate as far as it goes, it is also such an incomplete statement as to give a totally distorted view of the effects.   There was insufficient species in the colonies for appropriate business development to begin with.  Much of what was available was not British, but was the coinage of other nations.  When this act was combined with the Sugar Tax and the Sugar Act, with an insistence that the tax be paid in British coinage for British sugar only, I believe it caused a major contraction of the economy.   Thus it was not just the working classes who were upset, but also the investing classes.  I believe that is made clear in the link I provided.

            BTW -- I agree with the post by TocqueDeville about the overinfluence of banks.   Howeve, I there is a point that should be added to his remarks.  The fact that states have bid for the credit card business of banks by raising or even removing the limits on interest, such as occurred in SD among other states, has led to an even greater shift of wealth to the banking class.  When this is combined with things like the savings and loan bailout, in which is really was not the depositers who were aided by the billions appropriated by the Congress but rather those banks in position to move in and scoop up depressed banks, this process was accelerated.

            That was not the only banking bailout, but we won't go there, shall we.   Nor  is it considered appropriate to talk about things like Silverado (one Neil Bush on the board of directors) to the tune of a billion dollars (compare that to Whitewater, which was the wedge used to start the investigations and attacks on Bill Clinton).

            By the way, if one wants to understand more about international economics,  certainly the book by Stiglitz is mandatory reading.  I would also suggest  the book by Amartya Sen, 1998 Nobel Laureate, entitled  Development and Freedom.   And of course, much of what Paul Krugman has written is also relevant.  A good selection of his viewpoints can be found in his book The Great Unraveling.

            by teacherken on Sun Dec 26, 2004 at 05:32:51 AM PDT

          •  Tocque

            Good post, but always offputting in some respect - yes I know all about Jackson's battles over a National Bank. And his battles with South Carolina over enforcement of a tariff. And a whole host of things that maybe YOU don't know about.

            Arrogance is fine - assumption of ignorance by the other person is not. You really need to cool that.  

            by Armando on Sun Dec 26, 2004 at 12:51:17 PM PDT

            •  I almost

              posted a line about knowing you knew about a lot of this stuff (if not all) and how I was posting to the whole group who may not know some of this stuff. Now I wish I had.

              The whole surprise thing was just being a smart ass.

              My apologies for giving you the impression I thought you were clueless.

              by TocqueDeville on Sun Dec 26, 2004 at 08:29:50 PM PDT

              •  I Should have ignored it

                My bad. No apology necessary.  sorry for even bringing it up.  It was stupid of me.

                by Armando on Sun Dec 26, 2004 at 08:53:00 PM PDT

            •  I read that line

              as a note to the 98%, including myself, who didn't know that.  I didn't see anything personal.  

              If we were in a town hall meeting, he would have taken the podium and addressed the town after you had finished.  The surprise was aimed at, and shared with, the people in the hall.

              by hardleft on Mon Dec 27, 2004 at 08:00:10 AM PDT

              •  I know

                it was stupid of me.

                by Armando on Mon Dec 27, 2004 at 08:22:20 AM PDT

                •  I don't think it was stupid Armando

                  I posted a reply to you and then proceeded to write a diary. You had every reason to think that I assumed you didn't know what I was tlking about. Why? Because I'm a lazy bastard.

                  As I was proofreading my post, I realized that I had strayed outside the reply zone into a monologue to an ubspecified reader. And I was just too tired, or lazy to add a qualifier.

                  So not to turn this into a apology contest, but you were absolutely right in my opinion.

                  by TocqueDeville on Mon Dec 27, 2004 at 04:04:52 PM PDT

                •  Oh yeah

                  And the "ever heard of it? Surprise." bit was actually a commentary on how the MSM and even history books often whitewash the the real American history. I went most of my adult life never knowing of the alleged plot to overthrow FDR's government by a bunch of robber barons and bankers. Or how the Fed is really private.

                  by TocqueDeville on Mon Dec 27, 2004 at 04:15:29 PM PDT

      •  It's a good book

        Its by Joseph Stiglitz.  He won the Nobel Prize in Economics in 2001, I believe.  He did work in developemental economics focusing on information or the lack thereof's effect on the economy.  I didn't read that.  But I read his book on Globalization and found it fascinating.  He was the World Bank economist during the Asian currency crisis and spends most of the book discussing it.  Its kind of the anti-Lexus and the Tea Tree.

        by Descrates on Sat Dec 25, 2004 at 10:56:13 PM PDT

        •  Yes,

          This is a must read.

          by TocqueDeville on Sun Dec 26, 2004 at 02:59:00 AM PDT

          •  Another must read

            The Crisis of Global Capitalism: Open Society Endangered
            by George Soros

            by Jeff Simpson on Sun Dec 26, 2004 at 11:05:49 AM PDT

        •  He Totally Exposed the IMF

          Stiglitz's book is a devastating critique as to how the IMF lost sight of its original mission as it got overrun during the Reagan/Thatcher era by those who "champion market supremacy with ideological fervor" (his words).  

          But after reading this article, I wouldn't say Argentina is out of the woods yet.  The last passage was somewhat ominous: "the turnabout here has inspired such a sense of confidence that the government is not only talking about cutting its last ties to the I.M.F. but also insisting that any payback to bondholders be linked to Argentina's continued good economic health."

          I don't think the credit markets are going to like that attitude too much.

          by emobile on Sun Dec 26, 2004 at 08:58:36 AM PDT

        •  Faith Based Big Boys

          Before he the won the Nobel Prize, the World Bank fired Stiglitz because he woke up and refused to drink the neo-liberal kool aid anymore.  Laugh all you want at the Bush Administration (they deserve it), but that constellation of international economics -- globalization and neoliberalism -- was the original faith-based community.  

          Like people in the Bush Administration, many (though not all) neo-liberal economists ridicule and snark at academics who conduct behaviorial research to test assumptions about how people act -- assumptioms that are the foundations of neo-liberalism.  Do people lose their incentive to work and invest if they can't pass all their accumulated wealth to their heirs?  You better not try to find out.

          by kaleidescope on Sun Dec 26, 2004 at 10:53:52 AM PDT

  •  Indeed...

    So far, they've been doing alright.  We'll see how things go.

    But eventually, they're going to need foreign capital back into their country, and that'll be a whole 'nother hurdle for them to jump.

    I find the Argentina situation to be incredibly interesting.

    I think, however, it challenges the following things:

    1.  The wisdom of current IMF conditionality agreements

    2.  Where a govenment's priorities should lie in the aftermath of a financial crisis

    I don't think it challenges the following things:

    1.  The overall wisdom of globalization and moving towards liberalizing the financial account of a nation.

    2.  That free trade should be the ultimate goal -- with protectionism as a temporary measure to grow industries domestically, rather than a "fair trade" regime.

    3.  That responsibility for maintanance of a standard of living relies not on corporate charity (fair trade), but on a government.

    by PersonalResponsibilityReloaded on Sat Dec 25, 2004 at 11:27:08 PM PDT

    •  it challenges the wisdom of IMF policies?

      I think IMF policies accomplish exactly what they're intended to: keeping the third world in its place. If they were actually trying to give a hand up, they could have figured out long ago that their policies weren't doing that.

      We'll never have real "free trade" because that would involve the unfettered flow of people, as well as capital, across borders. We have a system that affords money more rights than people; it's immoral and can only be sustained by violence and oppression. Fortunately, our fearless leaders have those in abundance.

      I expect the destabilization of Argentina to manifest before too long. Like Cuba and Venezuela, it sets a bad example.

      by catastrophile on Sun Dec 26, 2004 at 03:50:47 AM PDT

      •  Economic Base Meet the Superstructure

        There is no such thing as free trade, only a series of government imposed restraints on free trade -- restraints that favor one group of economic actors over another.

        Nothing is more sacred to "free traders" than property and contract, but both property and (government enforced) contract restrain free trade.  Real "free trade" means anybody can sell anything anytime to anybody for anything they can get.  I like "your" toaster; I think I'll sell it to Jake.

        So-called "free trade agreements" invariably contain clauses that protect intellectual property and investment.  Why shouldn't Chinese mom and pop companies be able to copy Microsoft software and sell it for less?  Isn't that free trade?

        So-called "free trade agreements" also outlaw certain kinds of government subsidies -- like tax preferences for exports, but encourage other kinds of subsidies -- like allowing polluters to externalize the costs of their pollution or to have governments look the other way as companies (or the governments themselves) organize death squads to kill labor organizers.

        "Free trade" as practiced today means strict requirements that governments enforce the intellectual property rights of Microsoft but no requirement that governments prosecute death squads that kill workers' leaders.

        "Free trade" as practiced is a great example of how you can frame an issue to make it look noble for one set (or, to use and unfashionable term, class) of people to exploit another set of people.

        I think these guys learned that before George Lakoff was even born.

        by kaleidescope on Sun Dec 26, 2004 at 11:23:33 AM PDT

        •  I like to put it this way:

          "Opening up a third-world economy to unrestricted foreign investment is like dropping a shark in a fishtank."

          Paints a nice simple picture for people to, uh, chew on.

          by catastrophile on Sun Dec 26, 2004 at 01:25:24 PM PDT

    •  Some questions

      1. WHY do they "need to attract foreign investment"? Other than to fulfill the desires of economic evangelists?

      2. Why is "globalisation" a good thing? So far our "globalisation" experiments have lead to the empowerment of the most totalitarian regimes on earth, the destruction of labor throughout the world, with rewarding the most anti-human and anti-environmental governments.

      3. Why should free trade be the ultimate goal. Or even A goal. The ultimate goal of economic systems should be to serve those people living under them. Not to promote a new economic theology.

      Just questioning some of your more basic premises.
      

      by cdreid on Sun Dec 26, 2004 at 03:54:32 AM PDT

      •  Because

        Why do they need to attract foreign investment? Just as you say, you only need investment if you want to grow the economy.

        Why is globalization a good thing? Thomas Barnett says that globalization is good because it connects a country with the rest of the world economy. His studies indicate that war is an issue in the non-integrated gap, but has almost disappeared in the connected, globalized economy. So, globalization reduces violence and leads to peace.

        Why should free trade be the ultimate goal? Because it leads to the greatest efficiency of production. In other words, it makes things cheap for the consumer. Of course, it also brings down labor rates. That's bad for producers.

        In the end, globalization and free trade are probably inevitable. What's not inevitable is how fast we get there. There's no reason why we in the U.S. have to export jobs as fast as we've been doing it.

        What's also not inevitable is that free trade has to be unfair. We can band together to set the rules for trade, even in a free market. It's difficult, but not undoable. A good first step would be to get corporate money out of the Democratic Party to the extent possible.
        

        Think, liberally.

        by Liberal Thinking on Sun Dec 26, 2004 at 11:44:12 AM PDT

        •  I like that Hugo Chavez can defy Bush

          and the world bank and persue government programs to help the poor in his country.  That is what freetraders like Tom Friedman want to put an end to.  He wants to impose a peace based on free market fundyism. He really loses sleep when people like me get health insurance. He is a twat.

          by NoAlternative on Sun Dec 26, 2004 at 06:22:35 PM PDT

        •  Except that :

          Why is globalization a good thing? Thomas Barnett says that globalization is good because it connects a country with the rest of the world economy. His studies indicate that war is an issue in the non-integrated gap, but has almost disappeared in the connected, globalized economy. So, globalization reduces violence and leads to peace

          the facts seem to strongly disagree with that contention. In fact its pretty easy to argue just the opposite. The power barons of the world are quite happily funding,starting, or fighting wars around the world in order to keep populations as supplies of cheap labor, or to control a resource etc etc. Iraq, Indonesia, Africa...

          Why should free trade be the ultimate goal? Because it leads to the greatest efficiency of production. In other words, it makes things cheap for the consumer. Of course, it also brings down labor rates. That's bad for producers

          Free trade as we speak is enriching the largest and most repressive tyranny on earth as we speak. China. It is rewarding India and pakistan for the abuse of their people and massive population problems. It is punishing americans for being efficient, having labor and environmental standards , etc etc. The reality is quite a bit different than the theology.

          I agree with both of your final two paragraphs completely. But you're calling for Fair, not free, trade.

          by cdreid on Sun Dec 26, 2004 at 09:22:55 PM PDT

    •  China is investing heavily in Latin America

      It is my understanding that China is investing heavily in Latin America and that other countries besides Argentina are taking control of their economies in some very profound ways..

      It is further my understanding that Argentinian workers took control of factories and that the propertied class joined them.  

      Bolivia ousted its president for attempting to allow water to be privatized in that country.  Venezuela with Hugo Chavez, now takes a larger royalty for their oil in order to provide hospitals and schools for the country's poor who turned out in record numbers for Chavez in the orchestrated recall saying they had waited for someone like Chavez for a long long time and were not giving him up.
      

      by boycottgop on Sun Dec 26, 2004 at 09:09:09 AM PDT

  •  So tell me...

    When has the Friedman economica of the IMF and World Bank ever worked?

    They keep doing the same thing, and result is speculative capital flows that gut the economy and destroy the middle classes, further impoverish the poor, and enrich international bankers.

    Give me one success story.

    Just one.

    by msaroff on Sun Dec 26, 2004 at 05:22:05 PM PDT

•  An Economy ALWAYS BOOMS without debt

  Especially if the debt is hold by other countries.

  And to the argument that foreing investment will be scared away with a default?

  Well, when would foreiner invest in a country?

  TO MAKE A PROFIT. If they stay away, then the people in the country could invest in their own country themselves, and the profit goes to them instead, and stays in the country instead of being drained out.

  by ilok on Sat Dec 25, 2004 at 10:17:36 PM PDT

  •  foreign investment

    The Argentines seem to need foreign capital to grow their economy, so not taking out loans from foreigners will limit their ability to create and expand businesses. Sure, the foreigners will not make money off the Argentines if they do not loan money to the Argentines, but the Argentines will not be able to expand their businesses as much as they could have either.  

    by Eric Novinson on Sat Dec 25, 2004 at 10:53:35 PM PDT

    •  I'm not certain foreign capital

      is needed for economic growth, but if so, capital need not be limited to debt instruments. Equity investment in going concerns, venture capital and/or direct investment in new construction are a few sources that come to mind. Not to mention the potential in the new trading agreements among Brasil, Uruguay, Paraguay and Argentina; Mercsur I think it's called.

      by cavanaghjam on Sat Dec 25, 2004 at 11:54:11 PM PDT

      •  Think about it...

        Obviously more capital means more growth, so foreign capital will increase growth unless externalities created by the capital cause problems (which is more in the realm of government policy, such as a Chilean-style Tobin Tax to discourage short-term capital mobility, than a problem with foreign capital itself).

        ...As for that venture capital you speak of -- if those venture capitalists don't see previous debtors being promptly paid off, you know what it tells them?

        It's less likely they will get paid off.

        Which means their risk-adjusted ROI goes down.

        Which means they'll demand higher interest rates, sparking worries about inflation and all sorts of other issues which may hurt Argentina's economy.

        The number one component of good economic growth is stability.  Argentina's looking good for the most part in that area, but if it becomes a dicey proposition that debtors will be repaid, that hurts expectations and makes it harder for stabiliziation policy to be effective.

        by PersonalResponsibilityReloaded on Sun Dec 26, 2004 at 12:08:27 AM PDT

        •  Of course more capital,

          used wisely and efficiently, means more growth; but I was speaking of growth as opposed to shrinking. A growth rate of two percent in real terms is just fine, indeed makes for greater stability than, say, six percent.

          And investors are generally less risk-averse than lenders. Because one's debts are not paid today, yet are being allowed for, will not be so great an impediment to an investor if the nation's policies seem sound, and if future earnings are seen as expanding enough to cover them.

          If the new trade alliance mentioned above is seen as increasing demand for a widget not currently in supply, some smart cookie's going to invest in building a widget-maker.

          A lotta ifs, I know, but not everyone bets the favorite.

          by cavanaghjam on Sun Dec 26, 2004 at 01:12:14 AM PDT

        •  This is flat out myth

          Obviously more capital means more growth

          It's flat out untrue and straight out of the supply side theology handbook.

          Supply does not create economic growth. It never, ever has. Demand creates the opportunity for economic growth that supply is then pressured to fill.

          by cdreid on Sun Dec 26, 2004 at 03:56:45 AM PDT

          •  Unless you can *force* people to buy your supplied

            goods at the point of a gun - like the Opium War - or the point of a law - just like the funeral industry, where even if you're cremated you're still supposed to buy one so the poor coffinmakers and embalmers won't go out of business.

            This also is not something they teach you about in schools...I wonder why?

            by bellatrys on Sun Dec 26, 2004 at 05:17:35 AM PDT

        •  More Capital More Growth? It Ain't Necessarily So

          If there's a dearth of demand (because of hyper-exploitation of the working class) then the capital accumulated via this exploitation will not result in growth.  Though it might be useful if it flees the country and is spent on U.S. treasuries so the U.S. can maintain its current account defecit.

          Even Henry Ford (fascist admirer of Hitler) understood that if you don't pay your workers they won't buy your cars.  And if no one will buy your cars why build factories?  It takes a lot of education to un-learn this rather obvious truth.

          by kaleidescope on Sun Dec 26, 2004 at 11:43:10 AM PDT

  •  Deafult and future investment

    As long as foreign country has two things:
    

    1.  Rule of law, no expropriation of property by private persons or governmetn confiscations.
       
    2.  Property rights for foreigners.
       

    The country will be able to attract foreign capital.  Why- because if I buy a 50% share of an orange tree or a laudromat, I get 50% of the productive output.  Debt "crises" only matter to the extent that they impact currency valuations and most "good investments" have value that stays more constant than the currencies in which they are denominated.  Thus, if assets in country X are relatively liquid and the outlook for confiscatory policies (i.e. sudden high taxes a la an austerity program) is kept down (i.e Argentina saying bite us to their foreign creditors) then foreign capital will come on in.  Capital flees illiquidity and risk of loss.
    The IMF is no better than those consumer credit councelors paid for by the credit card industry that have people restructure their finances to continue paying interest forever, as opposed to taking all that effort and converting it to income to pay off the debt or get a new start in the first place (i.e. B'rupcy).

    by Myrkury on Sun Dec 26, 2004 at 12:28:52 PM PDT

•  Something for nothing

  Argentina once again took out many loans and defaulted on many of them, as has happened before.  This means they got to use all the money of other countries' investors to buy things and paid back less than the original principal.  With what are effectively negative interest payments it doesn't seem hard to make profits back.  They effectively nationalized the capital of other countries.  I guess it's fair trade in the sense that they aren't paying usurious interest rates to first world traders, but defaulting on loans isn't fair to the lender.  The Chinese will get burned just like all the others who have bought Argentine junk bonds in the past.

  by Eric Novinson on Sat Dec 25, 2004 at 10:29:21 PM PDT

  •  Defaulting on loans

    but defaulting on loans isn't fair to the lender.

    I disagree -- the Argentines paid and continue to pay high interest rates because of the risk of default.  You enjoy the reward, you take on the risk.
    

    by Kimmitt on Sat Dec 25, 2004 at 10:34:13 PM PDT

    •  you're right

      the higher interest rates should make up for the risk, so you're right Kimmitt, it is fair to default.

      by Eric Novinson on Sat Dec 25, 2004 at 10:48:12 PM PDT

      •  but...

        I always thought that only worked in the aggregate.  Argentina is a loss so the rates for lending to...let's say Colombia and Brazil are much higher to make up for it.  If you only count lending to one person then the only way to mitigate risk is, what, charge 100% interest payable immediately?

        by metaldark on Sat Dec 25, 2004 at 11:12:32 PM PDT

        •  Credit histories.

          That's what they're for.  Argentina had and retains a credit history where if their currency collapses, they default on their debt.  Anyone lending to Argentina must take into account the possibility of a currency collapse.

          by Kimmitt on Sun Dec 26, 2004 at 12:32:05 AM PDT

  •  A little history of Argentine debt

    World Bank and WTO rules have forced nations such as Argentina to sell off their state-owned and locally owned banks and insurance
    companies to foreign financial giants such as America's Citibank and Spain's Banco Santander. These banks vacuumed up the country's hard
    currency reserves.

    Slicing government spending in the midst of a recession is economic suicide, killing demand
    when it's most needed. These policies are pushed by foreign banks - Citibank, Chase Manhattan Bank, Bank of America, Credit Suisse, and Lloyds Bank - who, having bled the nation of
    capital, lent Argentina back its own money at rates that can only be called usury. Foreign banks working with the IMF had demanded that
    Argentina pay a whopping 16-per-cent risk premium above US Treasury lending rates.

    Argentina's economic crisis was caused by following IMF and WTO recommendations.
    

    by JollyBuddah on Sun Dec 26, 2004 at 12:25:44 AM PDT

    •  Unrestrained,

      unregulated capitalism is very destructive.  Argentina is our latest object lesson.  I agree, we listen uncritically to the IMF, WTO and World Bank at our peril.

      by baba durag on Sun Dec 26, 2004 at 02:08:10 AM PDT

  •  The free market in action

    The IMF wants lenders to get a free ride. They got high rates theoretically due to the risk, but the IMF insists on repayment. The fact is that foreign lenders wanted to get the high rates and didn't care that they were lending to thieves and idiots who stole the money or spent it on fancy military gear they used to kill their own people. I have zero sympathy for those clowns. When you lend money to a kleptocracy or a military dictatorship, you are a fool and a criminal. When you insist that the victims of such a government need to go into penury to pay you back when they get free, you are a bloodsucker. Fuck them. Argentina should be able to sue the bondholders for racketeering and being accessories to a criminal enterprise. At the very least, they can eat their own debt. Note that in the US, the banks expect to be able to lend to Enrons and Deltas and then recover from the pension holders. Same idea of Rich People Socialism.

    by citizen k on Sun Dec 26, 2004 at 10:23:55 AM PDT

    •  Ever Thus the Deadbeats Lebowski

      What you describe sounds very familiar -- kind of like what the credit card companies are doing here.  I know this guy who is a framing carpenter.  In California -- with a California cost of living -- he makes about fifteen bucks an hour.  He's got two kids.  He has a gambling addiction (I'm helping my friend, his soon to be ex-wife, with her divorce settlement that's how I know these things).  Our carpenter got twelve credit card companies to give him credit cards, each of which he charged up to the limit.  No way this guy could pay his rent, support his kids and pay off $60k in credit card debt.  So he declared bankruptcy.

      Now MBNA (Working Assets Visa), et al. want to "reform" the bankruptcy code so that it's effectively impossible for people like this carpenter to discharge their debts in bankruptcy. These banks want their irresponsibly lent "assets" to have the same priority in bankruptcy as the carpenter's child support payments.  

      These are the people who really rule the country.  People like Bush and Clinton only get to act like they do.

      by kaleidescope on Sun Dec 26, 2004 at 11:58:48 AM PDT

•  Tariffs are often misunderstood

  as a binary postulate, i.e., they're either a boon or an evil, without regard to the size of the levy or to the type of products taxed or to the results of such tariffs on the vigor of the domestic labor market.

  Chase Manhattan use to be the big financial player in the southern Americas. They controlled (if not installed) the petty dictators with purse strings, all to the good of Chase. Senor Kirchner appears to have put Argentina first. Would that the U.S. do the same.

  A labor market with collective bargaining rights should not be in competition with what in effect is slave labor. To trade with China where the Communist Party sets wages, or others where wage bargaining is either prohibited or discouraged via physical intimidation, does little but lower or keep low the standards for all involved. Trade with nations whose workers are not free is not free trade, it is labor exploitation. When tariffs are set to ensure democracy in the workforce, or encourage environmentally sound policies, or as a temporary device to restart an economy, and set at a punishing but not prohibitive rate, they make good sense. They may diminish international trade a bit, but they should raise the standard of living for both the lesser and more developed markets.

  by cavanaghjam on Sat Dec 25, 2004 at 10:41:02 PM PDT

  •  Misunderstood tariffs

    as a binary postulate, i.e., they're either a boon or an evil, without regard to the size of the levy or to the type of products taxed or to the results of such tariffs on the vigor of the domestic labor market.

    Ah, yes, I remeber my high-school Amrican History class where we discussed the tariff issue.  We were taugh about the difference between "revenue" tariffs amd "protective" tariffs.  Before the income tax, revenue tariffs were the main way Uncle Sam raised money, so it seems reasonable that the Argentinians might be doing something similar.  If their exports are otherwise competitive in the world market, a modest tariff could raise money for the government without hurting sales too much.  The foreign customers are the ones actually forking over the cash.  

    It's kind of like resort communities in the states taxing second homes owned by people who don't vote in the community.  Example: Worcester County, Maryland, where the local ijncome tax is only 30% of the state income tox.  In most other Maryland counties, the local income tax is 50% of the state tax.  But Worcester county makes out like a bandit on propert taxes on beachfront condos and other second homes, whose owners can't complain at the local polls.

    by Menachem Mavet on Sat Dec 25, 2004 at 11:02:47 PM PDT

    •  Good example/analogy.

      Also, international trade used to be, by its nature, expensive due to transport costs; therefore most imports were goods not made domestically. The transportation revolution has put in peril local artisans and factory workers. This is not always a bad thing, e.g., when the item manufactured entails drudge work, but we risk being at the mercy of foreign governments when much of our skilled workers and their facilities are no more.

      ps - you had a better HS AH class than I. I had to learn on my own.

      by cavanaghjam on Sat Dec 25, 2004 at 11:26:56 PM PDT

•  Economics of the same schooling

  http://www.latimes.com/news/opinion/commentary/la-oe-chait17dec17,1,1171854.column

  by ray z on Sat Dec 25, 2004 at 10:46:42 PM PDT

•  Screw "free trade"!

  "Free Trade Agreements" - at least those negotiate4d by Korporate Amerika - are about as "free" as a kick in the ass (and a lot more painful).

  Most recently, as a result of the "free trade agreement" imposed on Iraq by the Bushites, the Iraqi farmers who are the direct descendants of the first farmers on the planet to domesticate wheat now cannot keep their seed, because to do so would be a "conspiracy in restraint of trade."

  They have to buy their wheat seed every year from Monsanto, which has the "patent" on wheat!!  And of course, in that "free trade agreement" is a requirement that all the parties involved fairly enforce the "intellectual property laws" of the countries involved.  Which means that Iraq has to recognize the "intellectual property" of Monsant and the rest of the American corporate scum under the Digital Millenium Copyright Act to the "full and fair" use of their intellectual property.

  It used to be a patent was about "inventing" something - creating something where nothing used to exist.  This is hardly the case with the so-called "patents" on plants that have existed and been used around the world since before there was recorded history!!

  Personally, Armando, you and the rest of the pinstriped corporate scum enforcing "free trade" to the detriment of the well-being of everyone on the planet but your corporate selves ("free trade" destroyed Mexican agriculture, which is why so many former Mexican farmers are now here in Los Angeles and everywhere else as "illegal immigrants" because their way of making a living was destroyed by you bastards) need to be put against a wall and "air conditioned" with .30 caliber holes.  

  Viva Argentina!!!  Death to the IMF!

  by HollywierdLiberal on Sat Dec 25, 2004 at 10:48:08 PM PDT

  •  Speaking for the pinstriped scum

    I just gotta say - - - Huh?

    by Armando on Sat Dec 25, 2004 at 11:33:40 PM PDT

    •  Gee, 'mando,

      I didn't know you were one of "them". I must say, you hide such floating traits quite well. And here I thought you were a reg'lar Joe - curious, earnest, somewhat quixotic, certain you did not know it all. Great disguise.

      by cavanaghjam on Sat Dec 25, 2004 at 11:43:20 PM PDT

      •  Yeah, that's the ticket

        Armando is really the Capitalist Pig. Your secret is out Armando! No more need to hide your secret identity.

        by JollyBuddah on Sun Dec 26, 2004 at 12:14:27 AM PDT

      •  Armando is how we'd like them to be...

        open minded and willing to listen. He still rarely changes his stripes, but at least he listens.

        by wegerje on Sun Dec 26, 2004 at 08:31:08 AM PDT

      •  Armando performs...

        amazing head-fake...says "look at the grouse, look at the grouse!".

        News at 11.

        by rgilly on Mon Dec 27, 2004 at 02:15:32 AM PDT

    •  Indeed.

      By the way - is finance your profession?  You alluded earlier to having a background inclining you to free trade.

      by PersonalResponsibilityReloaded on Sat Dec 25, 2004 at 11:50:54 PM PDT

  •  "Free" Trade

    Certainly doesn't seem to apply to softwood lumber, for sure...

    by doug r on Sun Dec 26, 2004 at 09:24:14 AM PDT

•  This reminds me...

  ...of an old "dialog" I had with a Freeper troll during the primaries.  My response is here:

  http://sciencepolitics.blogspot.com/2004/08/free-market.html

  The goal of IMF is not to help a country become a strong self-sustained economy, but to open its economy to the US big business to enter and destroy.  Every country that followed IMF advice got bankrupt.  Every country that tried its own "third way" got invaded by our military.  Tough choice....

  by coturnix on Sat Dec 25, 2004 at 10:50:05 PM PDT

  •  Uh.... no?

    Talk what you may about the IMF's results, but the IMF itself is not a 'loot and pillage' organization but a body inherently meant to stabilize the world markets.

    They're offering voluntary loans, representing a wide body of nations.  The people who work there are some of the most compassionate, dedicated economists around hoping to help the developing nations evolve into prosperity.

    by PersonalResponsibilityReloaded on Sat Dec 25, 2004 at 11:52:16 PM PDT

    •  I agree,

      but why the unarguably poor results? Is it too unwieldy because of its size and approach, or does it lack the perspective of what is unique to each country, or something else entirely.

      I was struck years ago by the success of the micro-loan programs in the Asian subcontinent. I wonder if such is the more efficacious method.

      by cavanaghjam on Sun Dec 26, 2004 at 12:07:22 AM PDT

      •  Good point.

        My guess?  I think that where we're really behind is in crisis modelling.  The IMF simply isn't thinking through the consequences of imperfect information in writing its loan conditionality agreements.

        The second-generation crisis model which we're working with right now is still somewhat in its infancy; simply put, speculation's a bitch.

        We're simply not there yet on understanding all the factors for what trade policies the IMF should push; free trade is overly simplistic, and the virtue of temporary tariffs to grow domestic industries is being brought to bear.

        A lot of the current growth we're seeing in areas such as China is unsustainable growth in exports, where their domestic demand simply isn't keeping up with it, and speculation is going to force them into problems down the road.

        Orthodox free-trade policies are great for encouraging growth in export industries, but that, I think, is a major cause of financial crises down the road.

        Quite simply, we need more game theorists who are interested in working out the kinks of an interconnected global marketplace.

        by PersonalResponsibilityReloaded on Sun Dec 26, 2004 at 12:16:22 AM PDT

        •  Thanks for the answer.

          What occurs to me immediately is that perhaps the variables are so great, predictive models are doomed to be inaccurate. Game theorists I have known have often been immune to the suggestion that the game is unwinnable. I hope this is not the case but see no way to know.

          by cavanaghjam on Sun Dec 26, 2004 at 12:44:09 AM PDT

        •  So let me get this straight...

          They've got an inadequate crisis model, which any competent observer, even supporters, can see doesn't work. But they keep applying it inflexibly like it's the direct Word of God.

          Good intentions wouldn't make it better, they make it worse. The only possible explanation that fits your assertion in light of the evidence is that they're sweet, awww how cute, but dumb as toast when it counts. Because with continued bad results, malice and stupidity are the only possible explanations for continuing along as before. Gee, let's manage everything like that and see how it works. Oh wait...

          The possibility that so many economists could be dumb as toast, used as willing dupes for the nefarious ends of the first world economic players... Well, considering the economic arguments I've heard in favor of pollution, and suggesting that social inequality can't compete in a free economy, I can buy that.

          Economics will never gain the respect of being a real science until some bright bulb declares that henceforth, theories have to either work or be discarded. That these jokers get put in charge of policy and real scientists get ignored is a travesty. But then, the money has always been in telling lies that make people feel good about doing the wrong thing.

          "Are ye a human being and not a cabbage or something?" - Principia Discordia, first question asked of prospective initiates to the POEE.

          by natasha on Sun Dec 26, 2004 at 03:11:07 PM PDT

    •  The people....

      ...working there may be compassionate, but they got their erroneous economics at Harvard, and are scratching their heads when their advice leads to economic catastrophe in country after country.  Their big bosses, though, know very well what is IMF all about and whose interests it serves.

      by coturnix on Sun Dec 26, 2004 at 12:26:16 AM PDT

    •  The I.M.F. is misguided and they know it

      Greg Palast On Globalization

      Joe Stiglitz, was the chief economist for the World Bank and he began to raise a couple questions about how the world bank was operating, because he knows that every where the World Bank imposed policy to reorganize a nation's economy the nation very quickly fell to it's knees and collapsed, gasping. And so he said, look we tried to help Bolivia, it went under. We tried to help Brazil, it exploded. We tried to help Indonesia, it was burning in riots. He said maybe there's a pattern here. And as chief economist he asked that some studies be conducted so that the neo-liberals, the privatizers, the proponents of the new global order could prove that their theories actually are producing economic miracles as they claim. They refused to do the studies because their own information was painting a clear picture. The only economies that seemed to be doing well were China, Vietnam, Botswana, Venezuela and the United States. What did all five of those economies have in common? All five told the IMF to go to hell and that includes the United States who does not listen to the IMF dictates at all. So Stiglitz said maybe we ought to change our methodology in dealing with the third world, in dealing with developing nations or even dealing with nations like Brazil. That our systems for eliminating barriers, eliminating unions, that cause pain, but not pain that which leads to gain, it's the pain that leads to collapse, failure and economic death. And for suggesting, simply suggesting that they reevaluate their positions, the World Bank fired him. He wasn't even allowed to resign, he was banished from the entire World Bank community. It was as if they cut off his head and stuck it on a pike and placed it outside the World Bank. But he may have had the last laugh as a couple of months ago he won the Nobel Prize for economics.

      by JollyBuddah on Sun Dec 26, 2004 at 12:35:00 AM PDT

      •  IMF/World Bank stink

        A couple of years ago Brazil seemed to be going the same way as Argentina. Then the Brazilian government stopped following the advice of IMF/World Bank and since then, the Brazilian economy has become much stronger.

        Argentina, sadly, learned the lesson of not following IMF advice to late - and the colapse of their economy was total. Now they have no where else to go but up.

        by Zagatzz on Mon Dec 27, 2004 at 12:58:28 AM PDT

      •  The flaw in the World Bank's reasoning

        The IWF was designed from the start as a flawed instrument, due to the premise that the "givers" had a bigger lever than the "receivers", and thus conceeded to everything the "givers" wanted. They assumed that if the "givers" didn't get their way they would pull out, and it was better to have a flawed system than none at all.

        The end result is one we all seem to agree on: the "givers" won so many concessions that the system wasn't just flawed, but it actually is worse than having none at all.

        by Saint Fnordius on Mon Dec 27, 2004 at 02:48:03 AM PDT

    •  When Bad Things are Done by Good People

      That's practically the definition of capitalism.

      by kaleidescope on Sun Dec 26, 2004 at 12:05:07 PM PDT

    •  there is such a thing known as a "lie"

      Just because they claim to be "a body inherently meant to stabilize the world markets", that does not mean that they are such. If they cause claim to do A, but do B instead, on a consistent basis, they they are B-doers, and not A-doers.
      

      Got AntiPropaganda?

      by cryofan on Sun Dec 26, 2004 at 11:21:39 PM PDT

•  What is really Free Market?

  GOLDBERG'S HOMERUN - The True Cause of "Moral Decline"
  http://lawandpolitics.blogspot.com/2004_12_01_lawandpolitics_archive.html#110196456238796666

  Well, Publius states in the beginning that he has thought this way since college. He's pretty young so this was not that long ago, but still, I grant him primacy. He's definitely written it in a much more clear way than I ever did. He's taking to task the common wisdom that "free market" is a conservative idea, while top-down governmental control is a liberal idea. His argument that the free market is antithetical to conservativism, as it is a direct cause of "moral decline" (which he also questions, quite rightly) is on the mark.

  I've been saying (e.g., http://sciencepolitics.blogspot.com/2004/08/free-market.html, http://sciencepolitics.blogspot.com/2004/08/conservative-america.html, and elsewhere - this blog is getting too big for me to remember what I said in which post!) the mirror argument to this, i.e., that a well-regulated free market is a liberal idea. Actually, the last chapter of Stuart Kauffman's "At the Edge of the Universe" applies his computer models (used to explain constrains to "what is possible" in biological evolution) to economics, with a conclusion that "order for free" arises as an emergent property of a complex system, "complex" here meaning that many players interact, without any single player having any primacy. So, Publius argues that free-market works against conservative values, while I argue that free market is a liberal value while top-down control (by an unholly alliance of Government and monopolistic Big Business) is more in tune with the conservative hierarchical view of the world (http://sciencepolitics.blogspot.com/2004/09/moral-order.html).

  See for instance what Lakoff and his students discussed in class last week:
  http://www.zephoria.org/lakoff/2004/12/class-13-notes.html

  Conservative frame requires that some people are wealthier
  than others. Yet, rising tide argument is used on both sides. And then there's
  trickle down economics. Rising standard of living. Right: if the wealthier get
  wealthier, they'll give jobs to other people and make those people wealthier...
  the wealthy won't sit on their money. In fact, for example, they invest in
  stocks which aren't used to hire more people. Or the money that they spend is
  outside of this country. KEY: The frame of trickle down economics works because
  most people have a frame of getting and spending money and so they translate
  that to the wealthy - what they would spend it on. Big corporations are
  universally perceived as bad. They lay people off, the ship off jobs, they
  control what is going on, they don't provide security. But small business is the
  answer - personal liberation. They are the only way that people can have
  security and certainty. And if the estate tax is coming in an destroying it,
  it's destroying the american dream.

  Why is free-market thought to be a conservative idea, while top-down governmental control is supposed to be a liberal idea? When, where, how and why did this switcheroo take place? First, when: 19th century anyone? Adam Smith and Karl Marx. The "invisible hand" of the market was such a perfect excuse for people of common breeding to displace the hierarchy of nobility, and to displace the aristocrats as rulers of the country. Of course, once the most unscrupulous mobsters rose to the top and became super-rich, i.e., became Robber Barons, their incentive was to keep the new hierarchy intact, but they had to stick to the story that brought them to the top in the first place. In other words, a hirarchical top-down control by the nobility and their estates was replaced by the hierarchical top-down control by the filthy rich and their factories. Only a single round of "free market" economics ever happened. No real change in worldview occured, just the players switched, and the winners found the Myth of "rags-to-riches" useful to keep the masses from lynching them on the market square.

  Do you remember when the Pope came to the States and gave a speech in Central Park a couple of years ago? He lambasted the "barbaric capitalism". All the US journalists took that to mean "banana republic capitalism", but no, Pope was talking about the US-style capitalism, barbaric in the way the big fish, by the sheer virtue of their size, clog the system and prevent free market from operating. He was decrying the monopolistic type of capitalism - the type our military is busy spreading around the world, punishing every country that ever showed an inkling of success with any other economic system, either socialist or "third way". Look at the list of the countries US attacked during the 20th and 21st century, and it is pretty much the list of countries that attempted, with some success, to implement a non-monopolistic capitalism or a non-capitalistic economic system. That is a big no-no for the US government and such transgressors have to be punished as soon as possible. From all those Latin American countries, through Serbia to Iraq, those are all the examples in which alternative economic models showed some success. Do you know that the USA (and 13 other Western countries) attacked Soviet Union in 1918? I bet not - that is not taught in schools. The goal was to displace the new Bolshevick government as its ideas were threatening to the ruling classes in the capitalist world. Nobody asked the people, though - the State/Business alliances made the decision to attack and went there anyway. The attempt was, obviously, not successful.

  If you don't remember the 19th century that well, you are in luck, as the same experiment was done again, in 1990s in ex-communist countries. With the break-up of the Soviet Union, all those newly-independent countries needed to fill the vacuum left by the expulsion of communism. It was natural that they would tend to try to escape one type of extreme for the opposite extreme. They got all those IMF and Rand Co. "economists" to advise them how to set up a capitalist economy. And all those advisors were salivating at the prospect of filling a tabula rasa with the tests of their own theories. Result was a disaster, as non-regulated "free-market" economies quickly moved to a huge segmentation of the population into rich and poor. Who became rich, i.e., the "capitalist elite"? Ex-mafiosi, gangsters, drug-dealers and smugglers - the unscrupulous shady characters that had no qualms about stepping over other people in order to attain their goals. Everyone with a modicum of honesty fell into poverty. The 18-19th century England, France and America repeated themselves in Estonia, Poland and Ukraine, at a much faster rate. The worst of the scum rose to the top and left the crumbs to the people with character. Is it any wonder why the renamed ex-communists won back the elections just a few years later in most of those countries? At least they promised some stability, some market regulation and some protection of people from the greedy ex-criminals.

  How about the other view, that liberals like governmental top-down control? Dr.Munger, a libertarian (thus a conservative) Head of the Duke's poli-sci department (the only conservative I link to, and for some reason he also links to me - perhaps we should have coffee one day as we live so close) has an interesting post that assumes this CW:

  http://mungowitzend.blogspot.com/2004/12/thing-itself-iii.html

  Can government do anything to better people's lives? Should
  government do anything? These questions don't get asked very much. We all just
  assume that government should do SOMETHING, and then argue about what that
  is....

  On one hand, he is right. The notion of "consumers" is a big factor in decline of education, for instance - probably the direct cause of grade inflation. On the other hand, he puts up a straw man, as conservatives like to do. Modern American liberals (except some in sociology departments, perhaps - those favourite targets of conservative disdain, see, for instance: http://sciencepolitics.blogspot.com/2004/11/why-is-academia-liberal.html, http://www.juancole.com/2004/11/shock-of-week-liberals-in-liberal-arts.html, http://leiterreports.typepad.com/blog/2004/11/black_is_white.html) are NOT enamored with governmental top-down control and do not think of constituents as consumers whose wishes the government needs to attend to. All ten Democratic candidates for President this year are fully free-market believers. What happened? How did that get started?

  Well, there is not much similarity between modern American liberalism and 19th century communist ideas. Marx and company, no matter how smart observers they were, lived in a pre-Darwinian world. That was a hierarchical world. The idea of order arising in complex systems in which many small elements interact was not a part of anyone's mental toolbox. Movement without a Mover, or Design without a Designer were not deemed possible yet. Darwin was still writing the "Origin" at the time. The only way they could fathom an alternative to the feudal aristocratic hierarchy or the capitalist robber-baron hierarchy was to replace it with another hierarchy - a government of the people, by the people and for the people, the elected represenatives of which, trusted by the masses, would design the economy from scratch and control it from the top. That was 150 years ago. That horse has been dead and rotten for a very long time so stop beating it, please. The real-world experiments have failed, observe the Soviet Union. However, do not think in dichotomies. Just because the Soviet system did not work and the governmental top-down control should not work in theory or practice, does not mean that the only remaining option is another top-down hierarchical control, the old unholly alliance between Big Business and Big Government, the kind of economic system that Republicans really like, yet misleadingly call it "free-market". There is nothing free-markety about it.

  Perhaps this is why they don't want kids to learn about Darwin. The idea that the order of a system depends not on who is controlling it but on the rules of interactions between all the millions of players of the game comes straight out of Darwin's theory. The need for a Controller was abolished by Darwin. He eliminated a need for a hierarchy. He has shown how a system with many small players and simple (but strongly enforced) rules can evolve beautiful complexity and order out of nothing. That is why he is so dangerous. That is also why crude genocentrism undermines Darwin and aids conservative need for top-down control of people by rich bastards (http://sciencepolitics.blogspot.com/2004/10/god-genes-and-conservatives.html).

  To reiterate, until early to mid-20th century, a non-hierarchical worldview was unimaginable. Thus, capitalists replaced the aristocratic hierarchy with a capitalist hierarchy. Socialists, a few decades later, replaced the capitalist hiererachy with a socialist hierarchy. Socialists did their switch by revolution. Capitalists, on the other hand, used a single round, single cycle, single iteration of the free-market model to make their switch. A hierarchical model does not work and cannot work in theory or practice, as neither feudal (Dark Ages in Europe), nor capitalist (modern West), nor socialist (Soviet Union 1917-1989) economic system provides the greatest good for the greatest number of people (not to mention the effects on the environment).

  The word "free" in free market is a misnomer. Unregulated free market is anarchy. If more than one cycle of such free market relations occurs, the society gets sharply separated into very rich and very poor. Once the poor get too poor to buy products, the whole system collapses.

  So, is the natural re-alignment finally happening? Liberals have long ago abandoned state-run economics as an idea and have been very open about this switch for decades. Modern liberals have adopted an interactionist complex system, a well-regulated free-market system in which many interacting parts engage in activity that provides the most good for most people. There is no need for or role for a Ruler. The idea that liberals want a Big Government and a governmental control is a strawman put up by conservatives. On the other hand, conservatives, as usual, say one thing and do another. They love to talk about the wonders of free market while simultaneously undermining it with legislation and with business practices. Are they ever going to come clean on this and admit they are really into ruling us top-down?

  by coturnix on Sat Dec 25, 2004 at 11:00:00 PM PDT

  •  The problem...

    ...Was liberal sympathy for communist and socialist movements 50 years ago.

    Was it all liberals?  Of course not.  Was it a big problem in our movement?  I don't think so.

    ..But it cast us as being in line with those ideologies, which are ones which support a top-down method.

    At the same time, battles over segregation brought Conservatives to champion federalism, which made them the party of "less government" for 50 years.

    I think we're now seeing a re-alignment -- and I agree with your assessment of how these issues should be seen (and framed).

    But I think right now this is a case of history having bitten us in the ass, and we're just now overcoming it.

    by PersonalResponsibilityReloaded on Sat Dec 25, 2004 at 11:35:02 PM PDT

    •  50 Years Ago

      Socialism was highly thought of in many many countries for the first half of the 20th century.  Some explorations of the reasons for this sympathy would add significantly to anyone's understanding of modern history.

      US conservatives, properly so called have always been the party of balanced budgets and small government.

      Both socialist and neo-liberal ideologies can be used as a cover to loot entire societies.

      by outside observer on Sun Dec 26, 2004 at 09:12:41 AM PDT

      •  socialism still is highly thought of

        not the totalitarian variety Soviet variety, of course, but rather the european social democratic variety.  

        by challah on Sun Dec 26, 2004 at 11:13:53 AM PDT

  •  would chaos theory apply?

    as I read your remarks about Darwin and his applicability, I began to wodner is the rules of fractal mathematics and the observable effects of  chaotic systems might not be a better explanation, whether this woud meet your standard of a few rules rigrously enforced?

    Then again, follow some vague thoughts by a non-economist.   Classical economics presumes that market forces will make all necessary adjustments.  But this presumes (a) perfect information by all palyers, and (b) no outside intervention(eg, byt the government) in the markt process.

    But the second we begin to issue patents and copyrights we have left a pure market system and have established a principle of government intervention.

    All outside (government) actions have impact, but lacking perfect foreknowledge we can never be certain of all effects.  Further, many actions are taken in response ot political pressures, and may well be contradictory at some points within the macroeconomic system.  

    Far too often econommic decisions are made on the basis of theory and/or political philosophy without regard to the observalbe reulsts, both present and past.    It seems to me that this is common acorss the political and economic spectrum, but is far more common on the supply side spectrum.  A pure supply side approach would seem to believe that if you make it it will be sold.   But there must be demand, and even in caalssical economics there is a balance between supply and demand that many puire supply-siders seem to ignore when it is inconvenient for them.

    Also, one weakeness of most economic analysis is its unwillingness to account for things to which a purely economic valuation cannot be assigned.  Thus a society or a subsection of society might well rationally decide not to follow the most efficient (in the economic sense) model in favor of some other approach that is more highly valued, perhpas preservation of an aspecdt of traditional culture.   Is it not possible that some of the resentment form the other parts of the world about the approaches of things like IMF and Wolrd Bank is that they presume a hierarchy of values derived from an Anglo-British capitalistic approach?  That they feel they have values which are ignored or even attacked in such an approach?  Is it possible that some of the criticism offered rom other nations [and also by some in our] is the fundamental amorality of such an approach?  Forgive the radical thought, but does not part of the appeal of attacks by some fundamentalists, including Bin Laden, rsonate because of the observable fact that it seems impossible to get invovled with a capitalist system such as that advocated by itnerntaionl financial organizations without also seeing an imposition of many values of the societies from which those institutions derived and which are alien and even hostile to the values of the societies on which they ae imposted?   Does the economic therefore have the right to override any other concern?

    I claim no answers on this.l  Methinks that few of our political leaders truly have a full understanding of the implications of the econocmi decisions they make.  I think that the questioning that Stiglitz did and the reactions he got shows this clearly.  

    Thus  -- we brag about a higher standard of living, but what we are measuring is only a higher level of consumption.  if we look at other things, such as literacy, live expectancy, infant mortality, etc, our society dos not do as well as some with a somewhat different approach to many economic issues.  Further, we often do not fully account for all costs -- what is the cost of air pollution, of the destruction of natural environment by cutting down trees, of the loss of traditional elements of culture that have provided stability?  

    What first got me questioning was to read and to suddenly udnerstand that we in the modern industrial age have far less "free time" than did many so-called primitive people, who may hae been only hunter-gatherers.  Yes, our life expetancy is longer, as we understand certaint hings about disease.   Now we live to die of diseases and conditions that were not possible before  --  our level of stress alone is ridiculous, and seems to be a concomitant effect of our economic system.

    I'm rambling, I know.  And I apologize for the lack of focus of my remarks. But I think if our nation does not have a far more meaningful discussion of economics ad related issues than we have seen in the past several decades, we will continue down an path that will soon be irreversible, and totally destructive.   I don't hold out much hope that we will see any change in the public discussion.

    by teacherken on Sun Dec 26, 2004 at 05:54:51 AM PDT

    •  Speaking in Darwinian terms,

      it is useful to have some real competition between economical models. The drawback of a single global free market is that if something goes wrong there, everyone is doomed. Especially when it is strongly controlled by such influencial organizations as IMF or WB. Say, if IMF makes a few unfortunate decisions, or keeps pushing wrong policies, there is a high risk for many.

      Economics is a science with ambitious theories and little testing. It does not look very reasonable to cling all 100% on the neoliberal ideology. There may be some wisdom in letting countries decide which markets to join and to what degree of freedom. Then we would know better what really works.

      by ray z on Sun Dec 26, 2004 at 06:41:49 PM PDT

  •  First impressions. Very Very nice...

    I didn't click on any of your links yet, but I am about to. I liked what you had to say and the ways you presented your views.

    Modern liberals have adopted an interactionist complex system, a well-regulated free-market system in which many interacting parts engage in activity that provides the most good for most people.

    I look forward to realizing the other formulations of that kind of thinking.

    Now if I could recommend a couple stylistic changes to your otherwise excellent presentation.

    • More shorter paragraphs. It's a newspaper trick. I'm not suggesting that you "dumb down" your writing style, it just makes it easier to read.
      
    • Quit using naked links. Auto-format tags make it easy to eliminate naked links.

    Othewise, thanks for a good read.

    by wegerje on Sun Dec 26, 2004 at 09:13:15 AM PDT

•  Help Me Get Into Politics

  I'm fifteen years old, and all I know is politics.  I know every US Senator, about 3/4ths of the house, almost every governor, and every democratic candidate for senate from the '04 races.  My life revolves around house, senate, gubernatorial, and presidential races, from '04-'10.  I made a website back in 2003 devoted to spreading John Kerry's message and increasing his name ID (If you want to check it out its www.kerry4pres.com).  I know that my only career prospects are going to be in politics but I have no clue how I am going to do it.  I know I want to be involved in the inner workers of a campaign or involved with recruitment for the DSCC, or DCCC.  If anyone has any ideas about what I need to do to get into these fields feel free to post.

  by jkfp2004 on Sat Dec 25, 2004 at 11:00:48 PM PDT

  •  Sure.

    Broaden your horizons.  Increase your options.

    ...Oh, and memorization is trumped by incisive analysis.

    Politics is generally a field people end up in - not one where they start there.

    Unless you have an immense love of alcohol.  Then you'd mak a great Hill staffer.

    by PersonalResponsibilityReloaded on Sat Dec 25, 2004 at 11:29:59 PM PDT

  •  Local politics

    I suggest following local and state issues and advocating on some issue that is of immediate concern to you. There are 10,000 mini-Carvilles and mini-Roves on this site (myself included). It's better to stuff envelopes for a local campaign then plot grand DCCC strategy. The big suprise in the last Presidential election was GOP turnout efforts. They were local, personal and effective. Lots of effort on behalf of a mediocre strategy beats a modest effort on behalf of brilliance. The GOP did a good job with legwork in 2004.

    Average people in my community have thwarted beachfront condominium development at the expense of public access, raised the state minimum wage, and maintained an ocean inlet on behalf of surfers and environmentalists, all by speaking out, organizing and being resilient. What issues concern you locally? I think working with local council members and/or state legislators and attending a public hearing and speaking out is the best way to start. You'll meet other politically active people and you can take it from there...

    by joejoejoe on Sat Dec 25, 2004 at 11:54:18 PM PDT

    •  Re: Local politics

      It's better to stuff envelopes for a local campaign then plot grand DCCC strategy.

      Setting aside the normative debate on this question and speaking solely in terms of career advice, this is usually poor advice for launching a career in politics.  In politics, as in other endeavors, the key is getting noticed.  

      Stuffing envelopes doesn't necessarily get you noticed (although with respect to the original poster, it may if you're still in high school).

      by He Who Must Not Be Named on Sun Dec 26, 2004 at 05:58:22 AM PDT

  •  How to get into politics

    Pursue activities (interests, jobs, relationships) that have nothing to with politics. Study things that aren't related to politics, science, literature. Read the great poets. Keep up with technological advances.

    In short, pursue anything you find even remotely intersting that has absolutely nothing to do with politics, because politics is about life. It's how we decide what kind of lives we want to live. Even down to tax policy. And the only way to truly understand politics, and to have anything of value to offer in politics, is to understand life. For students, Walmart employees, bankers, artists, and other politicians.

    Al Gore, one of the most talented and capable politicians of the last century. He got that way by having an immensely diverse knowledge in everything from computers and philosophy to matriarchical mythology and basketball.

    Of course history is the most valuable lesson. If you read the Founders, the first thing you should notice is how completely the same their battles were to the ones were having now.

    Oh yeah, and watch Election starring Matthew Broderick and Reese Witherspoon about five times. Hint, Reese Witherspoon plays a young Karl Rove. Exactly what the world doesn't need another of.

    In total, have a life and have heart cause without heart, you'll just be making things worse.

    by TocqueDeville on Sun Dec 26, 2004 at 01:21:25 AM PDT

  •  Wow

    We need more people with your interest and resourcefulness. Very few Adults even know who their senators or congressman are. Most americans dont actually understand either our legal or our political systems.

    You'll make it dont worry. Spend your time formulating your ideas. Studying philosophy,politics, economics etc. Find out what you really believe in to your core. Then when you are 17 or 18 go start volunteering. Trust that finding someone self motivated and intelligent s a precious enough thing that you'll be prized and sought after.

    by cdreid on Sun Dec 26, 2004 at 04:18:31 AM PDT

  •  Wow!

    What everyone else said and work like a dog in school. Go to the best college you can and try to get a political internship for at least one semester. Doesn't hurt to polish your logic and speaking skills along the way. The whole of politics is to persuade people with differing points of view to think you have the right idea.

    Good luck!

    utahgirl

    by nio on Sun Dec 26, 2004 at 05:49:55 AM PDT

•  Do as I say, not as I have done.

  Am