Fareed Zakaria presented what he called “another installment of ‘How to Ruin Your Economy in Five Easy Steps'” on his GPS show on CNN (1/12/14): “Last time, Venezuela ticked off all the boxes, but we found another country that is following the same sad path.”
That country was Argentina, which Zakaria criticized for following Venezuela’s lead in “attacking big business,” allowing “restrictions on global trade” and so forth–the basic neoliberal critique of developing economies. Zakaria ends with the moral:
Argentina’s attempt to mirror a failed state like Venezuela tells a larger story. Look at this map of Latin America from a great article in the Wall Street Journal this week. On the left in green, you have the countries that are facing the Pacific. Mexico, Peru, Chile and Colombia are among the countries opening up their economies to great success. On the right, in red, you see the opposite. Countries that face the Atlantic, Brazil, Argentina, Venezuela, are closing their economies and resorting to populism. The countries in green are projected to grow nearly twice as fast in 2014 as the countries in red.
So the countries that are following Zakaria’s advice are doing great, and the countries that aren’t listening to him are doing worse–in the future. The great thing about the future, of course, is that it hasn’t happened yet. What if we look, instead, at how those countries have actually done in the recent past? Here’s the percentage change from 2003-13 in these nation’s inflation-adjusted GDP, in their own currency, based on IMF data (with per capita GDP growth in parentheses):
Mexico: 28.8 (11.1)
Peru: 89.7 (61.8)
Chile: 59.2 (44.4)
Colombia: 58.3 (40.5)
Argentina: 89.0 (69.0)
Brazil: 44.1 (30.9)
Venezuela: 74.0 (48.0)
So the “great success” countries have grown by an average of 39.5 percent per capita over the past 10 years, while the “sad path” countries have grown by 49.3 percent per capita over the same time period. Maybe Argentina’s efforts to “mirror a failed state” aren’t so mysterious after all.
Of course, past performance is not a guarantee of future results. But US corporate media’s past performance in identifying economic policies that will lead to faster economic growth is pretty pathetic. Eight years ago, the New York Times ran a largish op-ed called “Globalizing Good Government” (4/10/06), in which Federal Reserve Bank officials Richard Fisher and W. Michael Cox attempted to sort the world into countires that “pursue policies that achieve faster economic growth” and those whose policies “lead to stagnation.”
Really, it was sorting countries by how pro-corporate their economic policies were, and as I pointed out at the time (Extra!, 5/06), the “faster economic growth countries” were growing about half as fast as the “stagnation” countries. To a startling degree, when you see discussions about the economic policies of other countries in the US press, you’re reading fantasy stories about imaginary lands where peoples are rewarded or punishment according to their adherence to the free market faith.
Thanks to Mark Weisbrot and Jake Johnston of CEPR for crunching the IMF numbers for me.
UPDATE: Years of growth covered in the calculations above corrected–they go to 2013, not 2012. I also meant to mention that the Argentina numbers are a little shaky–the country has been credibly accused of understating its inflation ratae–but its actual growth rate is probably still higher than all of Zakaria’s favored nations except Peru.