Nobel Laureate in Economics Joseph Stiglitz assured that “the IMF agreement with Argentina could change the rules of the game“, and maintained that the new understanding “has avoided austerity”.
In a column published in the independent portal Project SyndicateStiglitz affirmed that “although it is still pending the approval of the Argentine Congress and the IMF board, it will allow the Argentine economy to grow while the Government continues with its actions aimed at reducing poverty and gradually lowering inflation.”
It is well known that the old model of austerity does not work,” he said, ratifying his opposition to the adjustment plans usually promoted by the multilateral organization.
“Not only does it cause the economy to contract and inflict excessive suffering on the population, it also fails to meet even the very specific objectives of reducing deficits and increasing a country’s ability to pay its creditors,” he stressed.
In addition, he argued that Argentina “has demonstrated the benefits of an alternative strategy, focused on growth.” “When the economy is allowed to expand, tax revenues can rise rapidly,” she said.
Lazy and unreliable
In relation to “some critical comments suggesting that there is something in the blood of Argentines that makes their country unreliable, as if it were a nation of bums”, he stated that “he could not be further from the truth”.
“When the most recent center-right president, Mauricio Macri, took office in late 2015, Argentina’s external public debt was relatively small, at 35% of GDP, due to governments’ growth and debt restructuring policies. Macri then launched into borrowing. By 2019, Argentina’s external public debt had risen to 69% of GDP,” he remarked.
Likewise, rHe recalled that the IMF granted its “largest loan” to the Macri government in 2018 “without even imposing conditions to prohibit the money from being used to finance capital outflows or pay unsustainable debts to private creditors.”
“There will always be those who yearn for the old IMF, with its contractionary conditionalities. These policies would be a disaster for Argentina and the world”
“What happened next is not surprising: capital flight, economic contraction and skyrocketing inflation, which reached 53.8% in 2019,” he said. Regarding inflation of 50.9% in 2021 and the call by some for a recessionary program to control prices, he warned that “even if renewed austerity achieved this goal, the cure would be worse than the disease.”
The new IMF versus the old
“In a country where 40% of the population already lives below the poverty line, no program that raises unemployment enough to rapidly reduce inflation would be sustainable or justifiable,” he said.
Finally, he pointed out thatArgentina’s new agreement with the IMF is “just the beginning” and he stated that “there will always be those who yearn for the old IMF, with its contractionary, often harsh or procyclical conditionalities.”
“These policies would be a disaster for Argentina and the world. They would deepen the gap between advanced economies and developing and emerging market countries, further undermining the credibility of the IMF, which is tasked with ensuring global financial stability.” , at a time when measures are urgently needed to improve this stability,” he concluded.
The Chronicler-RIPE
