Let me start with the concessions. Joe Stiglitz is one of the most brilliant economic theorists of the last thirty years. The current Bolivian distribution of wealth is drastically unfair and is a legacy of prior and indeed ongoing theft and oppression. Large enough resource confiscations, as occurred when the Saudis nationalized Western oil interests, can make a people better off.
Now let’s move to the train wreck, quoted from The New York Times Book Review, written by Alma Guillermoprieto:
Stiglitz and his wife first visited Bolivia four years ago, and returned in May. "Morales’s election was such a big thing," he said in a recent phone conversation, "that we decided to make the effort to go down there and take a look." He spent one day of the visit listening to Powerpoint presentations by members of Morales’s economic team, most of whom are academics who at some point have studied abroad. He found his interlocutors thoughtful and impressive, he said.
In May, Evo Morales decreed the nationalization of the energy industry…In July, Stiglitz, who has written about energy resources and how they are used, did not seem to find the policy startling or irrational, even though it has enraged the representatives of the companies that have invested in Bolivia’s tempting deposits of natural gas.
It should be noted that the Bolivians were receiving only 18 percent royalties on these resources, and that figure was calculated on a base lower than market prices might imply, given that the country is landlocked and does not receive market prices for its gas. So yes it is unfair.
But under the new regime, the gas yields only $820 milliion in revenue a year. That is over $100 a person a year. Lots of money for a poor Bolivian, but hardly enough to retire on or hardly enough to then stagnate. And Bolivia wrecks its credibility with foreign investors. And a renegotiation of the deal with the private companies would have been possible. And most state energy companies are very badly run. And energy and indeed natural gas shortages are already popping up in Bolivia. And many people in the wealthier, eastern part of the country (e.g., Santa Cruz) opposed nationalization; they are keen to do business with Brazil. And few poor countries — dare I say any? — have done well going down the route of economic populism. And if we are going to be populist, is anyone — read: Stiglitz — calling for that money to go directly to Bolivia’s citizens? That includes the indigenous ones who live on the barren altiplano and even now don’t control the government and probably never will. Yup, those people. (I might add that I have such a hat, which I cherish, although Natasha asks I do not wear it in the United States.)
Addendum: Here is Brad DeLong on Paul Krugman’s economic populism: "…when I read Paul’s call for "smart, bold populism," I am reminded of earlier calls a couple of decades ago by Milton Friedman, Marty Feldstein, and their ilk for smart, bold conservatism or smart, bold libertarianism. But they did not get what they ordered: on the economic policy front the policies of Reagan and of Bush II have been a horrible botch. What populist policies that we can think of would be smart? And how can we make our high politicians allergic to populist policies that are stupid?"
I don’t think you linked to the actual NY Times Book Review article, available here:
http://www.nybooks.com/articles/19210
And Bolivia wrecks its credibility with foreign investors.
Is that like, “No one will hire Terrell Owens, given history”?
How monarchy killed more than Communi9sm, in the 20th Century http://www.lonympics.co.uk/monarchyleftistsfascists.htm I know the guy who wrote this he has a iq of 190
Some time ago I read an article in which Stiglitz defended bolivian nationalization policy. His argument was that expropriation and nationalization were two different things – there were no compensations to the original owner in the first case, while in the latter case there were compensations…
Since I actually live in Brazil, I was left wondering: how come no brazilians have heard that there were compensations for the Petrobras natural gas plant that was “nationalized” by Morales? Brazilian president Lula passively remarked that “bolivians are a poor people” and nothing else happened.
Since Petrobras is a government owned enterprise, it looks like brazilian citizens will be paying for Morale’s “nationalization” policy.
As for “smart” populist policies, land reform, when done right, can be a very good thing. It has to be accompanied with a focus on strong property rights. It also has been done right in a few cases – Taiwan and S. Korea are examples. One huge problem in Latin American countries is that a few super-rich families own most of the land and end up owning most big business, so capitalism can’t work properly.
As for oil/gas, I’d probably change from a “rent” model to a “tax” model: if you’re a foreign oil company, you can own the fields, but you pay X% of the market price on the thing you dig out of the ground. This may make it tricky as government revenue would then be directly exposed to price risk, but the good thing is that the governments would want well-run oil companies to be running things so they could maximize their tax take.
“Stiglitz has undergone a pretty rapid devolution. In the past few years, his insight/platitude ratio has gone quite low.”
You could replace Stiglitz with Krugman and this would still be 100% truth.
Of course, even in the Clinton years, Stiglitz was the lone “solid left” voice in the Rubin/Sperling crowd. Still what’s happened to many of the bright center-left economists in the last few years is heartbreaking. It is heartening to see Prof. DeLong, even after his embarassing hagiographic paper on J.K. Galbraith, still maintain some skeptical distance from his rock god Krugman.
Stiglitz has cashed in on his intellectual credibility to defend common latin American populist thugs. 70 years earlier, and he’d be part of the official propaganda arm of the Kremlin, as for Krugman, he’s devolved into a third rate Huey Long.
Without wanting to sound like a kneejerking, uneducated hack, Steve Sailers, I take that whole view of colonalism-as-unforgivebale-excuse-for-all-wrongs to be a little too convenient, particularly in the case of Latin America. Yes, it’s true that there are legacies of corruption and familial control that come from those periods, but the blame for economic problems can not be blamed entirely on the foreign oppressors, nor even that strongly. It just seems to me that the problems arise from a much more complex set of causes, many of which have nothing to do with the colonial powers, and also that many of the positive aspects of the same countries would only exist with the influence of the colonial powers. But then we get into what-ifs, which are always dangerous.
[And Bolivia wrecks its credibility with foreign investors.]
gonna eat me a bowl of “credibility” for lunch today, perhaps following it up with a “participation in the global capital markets” sandwich.
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