Wednesday, April 29, 2009

Oppenheimer on the "post crisis world", Latin America, and Capitalism

Andres Oppenheimer centers on a couple of key issues in his last column....Post-economic crisis world will be harder for Latin America

He talks about the "conventional wisdom" among some in the "developing world" that the world will be less capitalist, and less Washington-centered, once the economic crisis is over." He cites the more exreme holders of this position, notably Chavez who at the ALBA meeting before the Trinidad Summit held that the "recent U.S. moves toward greater state regulation of the economy proves that capitalism is on its way out." Not to mention the kind of statements Evo has been making about the "end of capitalism".

Oppenheimer makes the point that "The post-crisis world will be less U.S.-centered, but not necessarily less capitalist." In other words the same kind of market-centered rules on production and exports will apply whether the ultimate consumer is in the US, Europe or China. If anything it will be more competitive.

He cites Harvard Economic Professor Enrique Hausman

'Disciplined, market-friendly countries like Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay will recover,''......``Neo-populist countries with high taxes on exports and no access to credit markets, like Argentina, Ecuador, Nicaragua and Venezuela, will do poorly.''

It seems reasonable to conclude that countries that adopted and institutionalized many of the key tenets of the so-called and much-maligned "Washington Consensus" (macroeconomic stability, fiscal responsibility, export-oriented policies), will be in better shape to confront the crisis than those that adopted he "Caracas Consensus" - which in the end has left places like Venezuela even more vulnerable to outside crisis. A point that rarely is made by even centrist pundits and academics.

Sure, populist leaders are right in stating there will be a U.S. shift toward greater state regulation to prevent financial bubbles. But they forgot that it was precisely this financial bubble that caused the artificial world expansion that allowed their countries to grow rapidly without becoming more competitive.

Populism is the offspring of good times. Now that the pie has shrunk for everybody, Latin American countries will need to become more competitive in a more frugal world.

Bingo, again, a point that is left out of many discussions of the "financial bubble" n- at least when it comes to its international effects. Fact is the "bubble" not only enriched Wall Street financiers and gave a financial, boost to homeowners in the US. It accelerated growth in China and India among other places and placed an enormous demand on the resources of Latin American countries. In many ways it pulled 100's of millions of people out of poverty worldwide - as well as enabled irresponsibility in many quarters whether Wall Street or Caracas. But those countries that used the "boom" intelligently to "crisis-proof" themselves will be the ones that best weather the bad times ahead.

1 comment:

Anonymous said...

Interesting turn of the pen...Argentina is conveniently lumped in with the Caracas group in spite of the fact that it was the "Washington Consensus" policies that led the country off a cliff economically. In business school we used to hear about Argentina's amazing economic miracle; Argentina's collapse because of these very policies cannot be forgotten. These policies WERE tried and they failed a great many of these Latin American countries. Your historical understanding is incredibly lacking. But this hardly surprising coming as it does from a true ideologue.