Tuesday, November 22, 2011

Austerity and populism

I know Juan Manuel Santos and every other Latin American president tingle with the irony of Europe facing severe debt problems yet not wanting to impose austerity measures. From Reuters:


Santos, who is visiting London to boost trade and investment in Latin America's third most populous country, said his biggest worry was "that the industrialised countries are not capable of taking the correct decisions and showing the world they can get out of their crisis". 
Asked what those decisions were, Santos said: "The same decisions that those same countries told us in Latin America to take a few years ago. Exactly the same ones."


OK, but also remember that Latin American populism did not come of an economic vacuum, which is something no one seems to be discussing when they call for politically insulated technocrats to run economies and do "what's necessary." Those who call for structural adjustment in Europe should keep that in mind.

Imagine a scenario where a government that used to be flush imposes severe austerity measures, thus prompting riots. It even decides to bring in the army. Then it turns out factions of the army aren't so happy with fat cat government officials enacting policies under international pressure that increase poverty. Some of those officers in turn try to overthrow the government. When they fail, one in particular decides to go ahead and run for president on a revolutionary platform. The ruling class is in such disarray and so delegitimized that it can't do much more than watch as he wins. In the absence of shock therapy, that sequence of events would not have occurred.

2 comments:

Vicente Duque 11:14 AM  

Juan Manuel Santos is a good president and a good guy, but he is imprudent and naive giving advice to European Economies.

His words are extremely unfortunate and he should abstain from such arrogant and boastful speech.

What happened in Latin America was extremely different of what happens now in Europe.

The words of Santos show only his ignorance of European Matters, Traditions, Politics, etc ...

Santos is an economist, that is reason for a stronger condemnation of his words.

We should not pontificate to others that are under very different conditions. For example : We can not understand the past elections in Spain with the mentality of any Western Hemisphere nation.

Very sad !

......

Edgar Gonzalez,  3:19 PM  

I don't know Mr. Duque you must be from Spain… and you must be in denial. It must be painful to hear some truths from a South American.

Perhaps you care to explain how things are so different. In L.A. we got in trouble because we borrowed more than we could afford. When we couldn't pay we were told to implement some pretty draconian austerity measures that, in the end, only made matters worse.

It's a simple story really and I don't see how it’s any different, in essence, from what is happening in Europe (and in the US for that matter). You guys borrowed too much and can't pay. Now you are seeing, first hand, that austerity measures aren't so great now that they aren’t being forced upon some far away country. You are probably wondering, correctly, what is the responsibility of those that lent the money why millions have to pay for the irresponsibility of a few.

Yeah, we understand. Sucks to be you.

ECG

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