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Business / Archive
30 September, 2009 11:00:58 | in General
Joseph Stiglitz: “Latin America should avoid market fundamentalism”
By Rafael Mathus
For El Comercio
The bankruptcy of Lehman Brothers, on September 15th, 2008, marked the end of the USA’s economic supremacy, according to the Nobel Prize winner of economics, Joseph Stiglitz. He believes that the crisis is not over, and that Latin America has to avoid certain types of fundamentalism. He says that the economy of the United States is in the shape of a “U,” but that certain precautions need to be taken in order to prevent the shape from transforming into a “W.” Read his recommendations in the following interview.
What factors will influence economic recovery?
The crisis isn’t over yet?
What problems continue?
When will the “developed” economies begin to grow again?
So the global economy will continue to be weak for the next three years?
Will social problems, such as poverty, get worse?
Will the gap between rich and poor widen?
Will this happen throughout the world?
Unemployment will go up almost everywhere, except in East Asia.
What do you think will happen in Latin America?
Well, a lot of markets have emerged due to links with China.
What other effects do you see in Latin America?
A lot of countries had adopted the US economic model?
So, you think that this type of focus is the correct one.
And how do you see Peru amidst the crisis?
Will Latin America grow again?
Translated by Katrina Heimark
tags : peru, latin america, global economic crisis
For El Comercio
The bankruptcy of Lehman Brothers, on September 15th, 2008, marked the end of the USA’s economic supremacy, according to the Nobel Prize winner of economics, Joseph Stiglitz. He believes that the crisis is not over, and that Latin America has to avoid certain types of fundamentalism. He says that the economy of the United States is in the shape of a “U,” but that certain precautions need to be taken in order to prevent the shape from transforming into a “W.” Read his recommendations in the following interview.What factors will influence economic recovery?
The reason why I don’t believe that recovery will be robust is that there is a problem with demand: consumption in the US is weak, and will probably stay that way. The “W” is linked to risks, which include the end of the stimulus package, problems with real estate, and the fragility of regional governments. If unemployment goes up, more mortgages won’t be paid, and this will weaken the system, making it more difficult that banks continue to lend money.
The crisis isn’t over yet?
No. It hasn’t finished for the majority of Americans, because even the optimists don’t believe that unemployment will go down from 10%.
What problems continue?
The problem with mortgages, which have extended from the residential sector to the commercial sector. There are houses, whose value has been destroyed, and this means that there is weak consumption. And, over the long term, increasing debt will have a negative impact.
When will the “developed” economies begin to grow again?
Technically, they are growing again, because “developed” economies includes countries such as China, which may perhaps grow 10%. The developed world depends on the policies that will be implemented by their governments. But, if I have to guess, I would say that the economic problems will persist until 2012 or 2013.
So the global economy will continue to be weak for the next three years?
That is what I see as most probable. 2011 will be a difficult year, as the economic stimulus package will reach its end, as well as the fact that all of these problems won’t be resolved.
Will social problems, such as poverty, get worse?
Yes, they will. Some countries have adopted methods to avoid it as much as possible. In the US, we have increased our unemployment insurance, and for the first time, we have given a large part of the stimulus package to heath insurers. However, heath insurance has become so expensive, that despite the government’s payment, people still have to pay a lot on their own.
Will the gap between rich and poor widen?
Yes, probably. The recessions and depressions are bad for both the rich and the poor. The poor lose their employment. The rich lose part of their wealth. It is difficult to say which of these effects is most important, but I think that for the workers who lose their jobs, the recession is devastating.
Will this happen throughout the world?
Unemployment will go up almost everywhere, except in East Asia.
What do you think will happen in Latin America?
Well, a lot of markets have emerged due to links with China.
What other effects do you see in Latin America?
Well, there is a higher level of questioning the economic model of the US. I think that this will be one of the biggest effects. The second is that the US is going to cut off its help to the region, and as China will most likely take their role over, their influence in the region will be much greater.
A lot of countries had adopted the US economic model?
Exactly. I think that they have received a big shock. I think that now the majority believe that you can’t find anyone who will export market fundamentalism. The US is capable of paying a couple of trillion dollars to help it get out of the crisis. However, Latin America can’t. So, if they want to avoid the US’ mistake, they will have to avoid market fundamentalism.
So, you think that this type of focus is the correct one.
What I think is going to happen is that critical focuses are going to be reinforced. You can’t define oneself by describing what you are not. It isn’t that Latin America doesn’t take part in market fundamentalism. They do. But that means, that the role of the government must be developed to be efficient, honest, democratic, and must focus on equality. Governments may be honest, but it doesn’t mean that they have adequate political policies.
And how do you see Peru amidst the crisis?
I have to confess that I don’t know the various details to be able to comment on where I see the Peruvian economy in the next few years. Peru, like other countries in Latin America, has a large base of natural resources. This will make the country very dependent on what will occur with the Chinese economy, for example.
Will Latin America grow again?
No. This is due, in part, to the benefits the region received from the high rates of growth in China and the US. This era is over. China may return to a higher level of growth and benefit some countries, but there is (with Latin America) a very obvious connection to the US, and a weak US will more than likely drain Latin America a bit.
Translated by Katrina Heimark
tags : peru, latin america, global economic crisis
2 Comments
# Emmett Diaz says :
1 October, 2009 [ 12:15 ]
23 October, 2009 [ 02:11 ]
# Emmett Diaz says :
1 October, 2009 [ 12:15 ]
# David N says :
What does Mr. Stiglitz mean by fundamentalism.
Does he mean Capitalism?
What are the alternatives for Latin America?
23 October, 2009 [ 02:11 ]
This guy is nothing but a George Soros parrot. "Market fundamentalism"?? Yeah right...George Soros coined that term and he's a socialist that thinks the United Nations or equivalent should make global economic policy.
This guy winning the Nobel is meaningless. The Nobel has lost all credibility ever since they nominated do-nothing Obama for the peace prize two weeks after taking office. No, we don't need the government, or the United Nations to run the economy. These guys want to go back to the days when companies were owned and operated by the government. No thanks, Obama has done enough with his dabbling in banking, car manufacturing, etc.
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