January 01, 2002
From the desk of Mindles H. Dreck:Must be our fault
Paul Krugman makes an ad Afghanistan argument about Argentina today in order to take a swipe at "neo-liberals":
It's just another disaster in a small, faraway country of which we know nothing — a country as remote and unlikely to affect our lives as, say, Afghanistan.....Here's how the story looks to Latin Americans: Argentina, more than any other developing country, bought into the promises of U.S.-promoted "neoliberalism" (that's liberal as in free markets, not as in Ted Kennedy). Tariffs were slashed, state enterprises were privatized, multinational corporations were welcomed, and the peso was pegged to the dollar. Wall Street cheered, and money poured in; for a while, free-market economics seemed vindicated, and its advocates weren't shy about claiming credit.
I'm with Paul on the "neo-liberalism" comment until he got to the part about the peso pegged to the dollar. Government intervention to maintain a hard rate on the currency is hardly "free markets". Still, I'm sure it will be blamed on us. As a matter of fact, Krugman seems to be giving us only the faintest excuse as it is:
I could explain at length the causes of Argentina's slump: it had more to do with monetary policy than with free markets. But Argentines, understandably, can't be bothered with such fine distinctions — especially because Wall Street and Washington told them that free markets and hard money were inseparable.
So free markets avoid judgement, but Wall Street approves of freezing citizens' bank accounts? And that's "neo-liberal"?
What happens next? The best hope for an Argentine turnaround was an orderly devaluation, in which the government reduced the dollar value of the peso and at the same time converted many dollar debts into pesos. But that now seems a remote prospect.Back in April, George W. Bush touted the proposed Free Trade Area of the Americas as a major foreign policy goal, one that would "build an age of prosperity in a hemisphere of liberty." If that goal really was important, we have just suffered a major setback. Don't cry for Argentina; cry with it.
How, exactly, does one manage an orderly devaluation? At any rate, apart from this being "a disaster for American foreign policy" and a "major setback" for Bush's free trade program ("if that was really important"), what, other than shedding tears, should our policy makers be doing?
Liberalism is not about frozen bank accounts and managing foreign exchange rates. Krugman, of all people, should know this.
Why is it that the entire argument from the Op-Ed regulars in the Times is "this is embarrassing for Bush" or "this will be a disaster" or "shameful consumers/politicians/rich people/:neo-liberals", without any actual opinion or recommendation?
Posted by Mindles H. Dreck at January 1, 2002 09:39 PM | Technorati inbound links