Re: Argentina and the IMF

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Gunnar,

I agree.  Hence the McNamara comparison.  Michsel Hudson's post on Peter Bauer
was along the same thread.  The World Bank changed its mission from one of
helping the poor to one of creating "friendly" conditions for private enterprise
in poor countries.

Had Bauer lived for a few more years, he migh see how his theories of economic
development delivery the world into the hands of neo-fascism.

Henry

Subject:  Re: [gang8] Another bastard bites the dust
Date:     Tue, 14 May 2002 21:24:16 -0400
From:   "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
 To:  gang8@xxxxxxxxxxxxxxx

The evil that men do lives after them - Shakespeare.

Neo-liberal market fundamentalism, after 2 decades of running amok all over the
world, has destroyed
not only the economies of the developing world, but the advanced economies as
well.  All the
economies that followed neo-liberal policy advice, Hong Kong, Singapore,
Argentina, Turkey, Russia,
are all in emergency wards waiting for intensive care. Neo-liberal globalization
has unleashed global
terrorism that forces all societies to suspend civil libery in the name of
national security. The US
economy is heading for a collapse that makes the Great Depression of 1929 look
like a minor upheaval.
The self destruction of financial capitalism may well originate from its
fountainhead - the US, in the
form ofneo-protectionism and neo-state interventionism.  Just look at steel and
agriculture, not to
mention high tech.

Henry


Hudsonmi@xxxxxxx wrote:

   "Peter Bauer, British Economist, Is Dead at 86," NYT, May 14, 2002.
  In 1982 Mrs. Thatcher made him a life peer for his belief in free markets
rather than government planning. "Lord Bauer challenged the widely accepted
belief that development required extensive government involvement in  economic
life and large infusions of foreign aid, since so-called developing countries
were trapped in a vicious circle  of poverty, lacking the income needed to
produce savings and investment capital. He argued that if these  assumptions
were true, the Western world would still be living in the Stone Age.
Opportunities for private profit, not  planning and aid, held the key to
economic growth, he said, and the duty of government was merely to ensure
individual freedom, safeguard private property and enforce contracts."
  But this was precisely what Mesopotamia did not do, at least in the sense that
it annulled debt contracts and
  subordinated the idea of private gain to the long-term survival of the social
community. (But then Mrs. Thatcher said  that there is no such thing as society.
If she and Bauer had there way we would not be living in the Stone Age, to be
sure; we wouldn't be living at all.)   He accused government planning of
providing "'preferential treatment of the incompetent, the improvident and the
dishonest' and tends to promote the 'politicization of economic life,'
encouraging central planning and diverting a  country's energy from economic to
political ends."   "Lord Bauer's true intellectual affinity was with the
Austrian economist Friedrich Hayek and the American Milton  Friedman, who helped
inspire the economic policies introduced by Mrs. Thatcher and Ronald Reagan
that  emphasized the importance of giving free play to market forces and
rejecting the centralized planning and demand  management associated with the
Keynesian school of economics."
  Bauer died on May 2, 2002. "The Cato Institute, a conservative research
institution [the New York Times here uses a  euphemism for lobbying effort for
financial raiders and tax-cutters] in Washington was scheduled to give him the
first  Milton Friedman Prize for Advancing Liberty last Thursday [May 9], a week
after his death. The $500,000 prize has  now gone to his estate."   "He
elaborated on these ideas in publications that included Economic Analysis and
Policy in Underdeveloped  Countries (Duke, 1957); The Economics of
Underdeveloped Countries (Nisbet, 1957); Markets, Market Control and  Market
Reform (Weidenfeld & Nicholson, 1968), and Two Views of Aid to Developing
Countries (Institute of Economic  Affairs, 1966)."
  "Critics called his views extreme and exaggerated. But over the years Lord
Bauer and his allies brought about a shift  in the priorities of aid-giving
institutions [sic; they should have said aid-lending, or better yet, anti-aid
lending] like the  World Bank. Financing dams and other large development
projects went out of fashion, replaced by a new emphasis  on making developing
countries [sic, he means non-developing ones] more friendly toward private
entrepreneurs by  helping them foster an educated, healthy work force, provide
basic infrastructure and, above all, ensure individual  freedom, good governance
and the rule of law." Ie, the king of rule of law that will block and distort
education, cut  back health care of the work cost and loot the basic
infrastructure by turning it all into a Railtrack.
 Good riddance.

  The Wall Street Journal (Claudia Rosett, "A Toast to Liberty," also May 14)
gives some more details about the Cato  affair. "At one table of dignitaries,
the Nobel laureate and free-market economist Gary Becker noted: 'Twenty-five
years ago it would have been hard to believe that free-market ideas could
triumph so much.' Nearby, another Nobel  laureate, James Buchanan, observed,
'We're not the back of the bus anymore.'"
  This reference to blacks obliged to ride in the back of busses led the WSJ to
note that an Uncle Tom libertarian,  Walter Williams, was there, "one of the
first black intellectuals who years ago chose to turn against conventional
thinking and promote the invisible hand, not welfare, as the way to a better
life for all, blacks included."
  But the key guest was Milton Friedman, who had just come from the White House
where Pres. Bush proclaimed him 'a  hero of freedom' in anticipation of his 90th
birthday. 'We've moved from an era of galloping socialism to an era of  creeping
socialism,' "but what we now need is an era of "'declining socialism.'"
  The right-wing comedian P.J. O'Rourke concluded: 'The ugliest strip-mall
shopping development is better than the  most beautiful gulag.' He then
suggested that 'we all get drunk.'
  So much for the libertarian caricature of government's role!

  Michael


Gunnar Tomasson wrote:

> Henry:
>
> I don't know Stiglitz from Adam - but I do know that he would never have
> been appointed as Chief Economist of the World Bank unless the powers that
> be had reason to regard him as "reliable".  That is to say, someone who
> would not rock the boat.
>
> Galbraith wrote something to the effect that an astute scholar in economics
> knows when to break with the past - that when the parade passing down the
> street is set to pass him by, he will step out smartly and take up the
> banner of whatever the parade is about and march up front.
>
> All of which leaves me with but one question:
>
> Where the hell was Stiglitz when it counted?
>
> Gunnar
>
> ----- Original Message -----
> From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> To: <pkt@xxxxxxxxxxxxxxxx>
> Sent: Tuesday, May 14, 2002 6:57 PM
> Subject: Re: Argentina and the IMF
>
> > Stiglitz parallels Robert McNamara as part and parcel of the establishment
> > that got the world in a mess and late in life repented.  Stiglitz was on
> the
> > faculty of MIT, Yale and Stanford, joined the Clinton administration in
> 1993
> > as member of the Council of Economic Advisors, later was named the
> Council's
> > Chairman. In 1997 he took the post of Senior Vice President and Chief
> > Economist at the World Bank, the same year of the Asian financial crises.
> > Though a consummate political insider, and up to 1997 a card carrying
> memeber
> > of neo-liberal market fundamtalism and globalization, Stiglitz grew
> > increasingly disillusioned with the failures of neo-liberal policy and
> began
> > to voice his thinking in public speeches. He was ousted from his World
> Bank
> > post, allegedly on orders from US Treasury Secretary Larry Summers.  His
> > current policy
> >
> > Responding to Economic Crises:
> >       Policy Alternatives for Equitable Recovery and Development
> >
> >                            Remarks at the North-South Institute Seminar
> >                                       Recovery from Crisis
> >
> >                                                by
> >                                         Joseph Stiglitz
> >                         Senior Vice President and Chief Economist
> >                                        The World Bank
> >
> >                                Ottawa, Canada, September 29, 1998
> >
> > The most important policy for socially equitable development is full
> > employment.
> >
> > In approaching the challenges of globalization, we must eschew ideology
> and
> > over-simplified models.
> > Today, with the continuing decline in economic activity in East Asia, with
> the
> > new crisis in Russia, with
> > the contagion threatening economies elsewhere, faith in the market economy
> is
> > eroding in many parts of
> > the world. It is now clear that the emphasis on privatization,
> liberalization,
> > and macroeconomic stability
> > that dominated thinking about developing economies, represented neither
> fully
> > captured the essentials of a
> > market economy, nor provided a recipe for growth and stability, let alone
> for
> > the broader goals of
> > democratic, sustainable, and equitable development.
> >
> > Our challenge today is to prevent the pendulum from swinging too far to
> the
> > other side. A sound market
> > economy integrated into the global system is the key to economic success.
> But
> > this requires sound
> > institutional infrastructure, which in turn requires an effective and
> > efficient government focusing on the
> > essential functions of the public sector. We have a huge task in
> redesigning
> > the international architecture.
> > But if we set our sights high, if we keep our objectives broad, if we keep
> our
> > instruments wide, if we
> > eschew ideology but use all of the limited knowledge that we have
> effectively,
> > we can make progress.
> >
> > We must not let the perfect be the enemy of the good. In a downpour, it is
> > better to have a leaky umbrella
> > than no umbrella at all. There are reforms to the international economic
> > architecture that can bring the
> > advantages of globalization, including global capital markets, while
> > mitigating their risks. We are beginning
> > to see a new consensus forming around ways to restrain the risk of "hot
> money"
> > and the goal of
> > developing procedures for orderly workouts. Hopefully the continuing
> > international dialogue on these and
> > other issues will continue to make progress in these and other areas.
> >
> >
> > dkostzer@xxxxxxxxxx wrote:
> >
> > > Dear PKTrs:
> > > A very interesting article by Stiglitz on Argentina was published last
> > > sunday in the Washington Post.
> > > http://www.washingtonpost.com/wp-dyn/articles/A3893-2002May10.html
> > > I think it is worth taking a look at it.
> > > The world press highlights the role of corruption on the Argentinean
> > > crisis, something that it is fully true, but nobodies says that
> corruption
> > > is a bilateral crime. Look to whom were the beneficiaries of the
> > > corruption and you will have the other side of the coin.
> > > Stiglitz highlights the role of the privatization of the pension fund
> > > schema on the fiscal deficit, that reduced state revenues and enlarged
> its
> > > obligations, but at the same time there was a reduction by half of the
> > > contributions by employers, what enlarged the deficit, not to account
> the
> > > debt servicing, and all that under the pressure of the IMF.
> > > The privatization of the pension funds implied an enormous transfer to
> the
> > > private sector of 5 billion dollars per year. The reduction of the
> > > contributions is of the same amount and benefits mainly the service
> > > sector, not the tradables.
> > > Since the beginning of 2001 the banks, mainly international ones, flew
> the
> > > money taking advantage of the currency board. 83% of the reduction of
> > > deposits was explained by the private banks, while 59% by the first 10
> > > banks. The IMF encouraged the internationalization of the banking system
> > > under the argument that the local branches will require funds from their
> > > centrals in Spain, England or USA. None of that happened.
> > > Didn愒 know the IMF that silently banks were inducing capital flights?
> It
> > > is almost funny to see that public banks saw a reduction of 4.9% in
> their
> > > balance sheets of  the item "other credits" and "other liabilities"
> while
> > > private banks presented reductions of 48.5%. Something was happening
> there
> > > and the IMF and the Central Bank looked to the side.
> > > To have the silent and ordered withdrawal of reserves from Argentina,
> > > banks had the complicity of the IMF auditors and the Central bank. Is it
> a
> > > mere coincidence that the IMF was pushing to abolish the laws that made
> > > the heads of the central bank liable for their acts? Is it to adhere to
> > > conspiracies theories to think that there are second intentions in the
> > > abolishment of the white collar crime law or the reform of the
> bankruptcy
> > > law are a requirement in order to achieve IMF support? One of the
> bankers
> > > in jail is the partner of David Mulford . Their bank is accused of major
> > > capital flights after the December crisis.
> > > On top of that, there is the suggestion of major  orthodox adjustments
> in
> > > the economy.
> > > Dear PKTers, there should be an alternative for us Argentineans. Perhaps
> > > many of you had thought on that. Will be nice to discuss ideas and
> > > alternatives.
> > >
> > > Daniel Kostzer
> >
> >