Sunday, January 09, 2005

Argentina's Economic Experiment, Part 2

The Colombian weekly Semana (spanish)Semana picked up on last week's New York Times article on Argentina, endorsing "not listening to the IMF" as the recipe for economic success.

Much as I thought, this article is being used all over the world as proof that countries don't have to keep current on foreign debt, and in general don't have to follow conventional wisdom when it comes to economic policy. It must feel nice to have ammunition to use against the arrogance of US trained economists, but I wonder if those people who are getting excited about default realize that Argentina didn't start growing when it stopped paying its foreign debt. Indeed Argentina's GDP is only now getting back to where it was before default, and is still below the levels it reached in the 1990's. Moreover, Argentina's deepest recession in history came the year after its default.

I also wonder whether these newspapers and magazines will write articles in favor of the Washington Consensus if Argentina falls into recession in the next few years. The point is that, if the IMF's advice isn't any good (mostly agree) it doesn't mean that the opposite of the IMF's advice is good. Indeed the opposite of the IMF's advice has been tried before, and it didn't work very well.

Unfortunately, it will probably take another crisis and many years before people realize this.
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