Nobel laureate economist Joseph Stiglitz is facing a wave of criticism from peers after he claimed crisis-prone Argentina is witnessing “an economic miracle.”
Stiglitz penned a Project Syndicate column arguing that President Alberto Fernández’s government has implemented pro-growth policies that spearheaded a recovery against the backdrop of the pandemic. As a consequence, the economy expanded an estimated 10 percent last year, almost double the rate expected for the United States, he said.
“Given the mess that Argentine President Alberto Fernández’s government inherited in late 2019, it appears to have achieved an economic miracle,” Stiglitz, a professor at Columbia University in New York, wrote last week.
Economists, including a colleague at Columbia, sharply rebuked Stiglitz’s op-ed, saying he missed the mark on the South American nation. While activity is indeed recovering fast, it’s doing so from a depressed base. And much of that rebound is merely the result of the reopening of some sectors of the economy that had been shuttered when the pandemic hit.
Stiglitz also didn’t delve into other parts of the real economy. Inflation is above 50 percent, poverty and off-the-books labour have both shot up, foreign reserves are dwindling, the government imposes stiff capital controls and doesn’t have access to international debt markets.
“In our view, the country is heading for another economic disaster,” Willem Buiter, an economist and visiting professor at Columbia, wrote together with Anne Sibert from Birkbeck, University of London, in an essay attempting to debunk Stiglitz’s column. “Its recovery has hardly been strong enough to offset other deficiencies.”
Some local economists and analysts echoed their comments.
“We’ve read with bewilderment your article,” Federico Sturzenegger, former Central Bank president in the previous business-friendly government of President Mauricio Macri, tweeted in a lengthy thread Wednesday, saying Stiglitz’s “phony arguments” don’t help.
Andres Velasco and Eduardo Levy Yeyati, two top Latin American economists, added to the chorus of critique on Friday with a co-authored response also in Project Syndicate.
“Argentina’s social indicators are anything but miraculous,” they wrote. “With just one in five workers formally employed by the private sector, good jobs are scarce.
Reached by phone late Thursday, Stiglitz said using the word miracle may have triggered the controversy around his comments. He helped coin the term the “East Asian Miracle” in the 1990s, referring to booming economic growth in that region, and recalled the criticism he received back then.
“Maybe that was too strong,” Stiglitz said when asked about his description of Argentina’s economic performance. “If you use that word you’re inviting a critique.”
Stiglitz pushed back on Sturzenegger’s comments in particular, referring to his policy mistakes at Argentina’s Central Bank under Macri. Sturzenegger resigned in 2018 at the onset of a currency crisis as he lost credibility among investors who saw politics seeping too much into monetary policy.
The Nobel laureate, a frequent critic of the International Monetary Fund, also said he didn’t make a reference to Argentina’s inflation problem in the article because he was limited on space and wanted to focus on the real economy.
Argentina is facing a crucial moment in its negotiations with the IMF to reschedule payments on about US$40 billion from a loan given to Macri’s government in 2018 that failed to lift the country out of recession.
Stiglitz said he was worried about the credibility of the US Treasury as part of Argentina’s talks with the Fund and expected the Biden administration to do more to support the country.
He also said he didn’t see it necessary to mention in the op-ed his friendship with Economy Minister Martín Guzmán, whom he mentored for years at Columbia and is now in charge of the negotiations from the Argentine side.
“It’s not like it’s a secret – I’m not going to disclose every friendship I have,” Stiglitz said. “It would take up the whole article.”
by Patrick Gillespie, Bloomberg