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?"