I was over at Greg Weeks' decent site last weekend when I saw a link he'd put up on his "what am i reading" list entitled Bolivia's Election: A quick postmortem. The subject interested me, but to my dismay when I clicked through it turns out it was written by Miguel Centellas at his blog, pronto. "Whatevs" I thought, and read it through. By way of context, this Centellas dude is a dust-dry humourless rightie. His field is Bolivia, so it's a natch to note he can never find a good thing to say about Evo's impressive achievements that don't come equipped with a grudging "yes, but..." and so you have to filter his clearly biased views when reading the political bits.
But then at the end of the article it all got much, much funnier. Centellas decided he's an expert of economics and stated that Bolivia's economic performance "isn't all it's cracked up to be". What followed was total, utter, uninformed balderdash and bullshit. With his academic airs and graces he grasps at straws and tries to find a few decontextualized statistics to match his prejudice. The end result may impress his fellow political scientists, but anyone with a scrap of economics background would laugh him off stage. Here below is the passage as written by Centellas (inset bold italics) along with my own comments (interspersed).
8. It's the economy, stupid
Finally, Bolivia's economy has some troubling signs as the global recession continues to take its toll. Yes, the economy has grown (as many Evo supporters are often quick to point out).
As if it were a sin to mention a fact in public.
But that growth isn't all it's cracked up to be.
First, because that growth has been primarily based on raw material exports, continuing a tradition that goes back centuries (and one highly susceptible to boom/bust cycles).
Just like those nasty commies in Venezuela with their devil's excrement, hey Mikey? And those hardcore pinkoes in....errr...Chile. And then there's Peru. And Brazil. And Argentina. And Ecuador. So what's the point here, that Bolivia's growth due to raw materials exports is bad, but the rest of South America's growth, that is wholly dependent on those same exports of raw materials can be conveniently ignored? Is that it? Sure Bolivia exports tin and gas and stuff, but why this should be a negative in a whole region that does the same? Mikey, you'd be better off explaining to the world that South America is done for because of this, not just Bolivia.
Second, because that growth isn't that much better than in the early 1990s. From 1993 to 1998, economic growth was consistently between 4-5% per year (see chart).Rather petulant no? Because a previous government got good growth figures out of Bolivia, the current good growth figures don't count.
It was only in 1999 that the economy entered recession. But throughout that period, GDP growth was outstripped by inflation (see data). Last year, inflation hit 14%, far outstripping the 6.1% GDP growth rate. The 2009 growth rate is currently pegged at only 2.8%.
A neat trick! If you get inflation under control, you're still judged by those past inflation figures! Talk about damned if you do and damned if you don't! But his omissions speak louder than his cherrypicked stats, as Bolivian 2009 growth is pegged at 3.5% (by CEPAL, latest figures which I think will be easily beaten FWIW, because just the first three quarters of 2009 have seen a 3.2% growth rate, quite simply the best in the whole of Latin America) and inflation is currently under 1%. But you can't mention that, because those up to date facts don't fit into the world of prejudice he's trying to create. Jeesh what an asshole this guy is!
If the economy begins to falter, that will put strains on Evo's government, which has already used bank reserves to doll out payments to children, mothers, and pensioners.And if it doesn't falter, it won't. But hey, again why bother with this pap and nonsense, you could add any old name in here. After all, if the economy begins to falter, that will put strains on Evo's/Alan's/Michelle's/Obama's/Harper's/Brown's/Sarkozy's/EtcAdInfinitum's economy, won't it?
These are all valuable, worthwhile programs.No shit Sherlock
But they're expensive.With this one simple sentence, Centellas lays bare his ignorance of economics. We'll come back to this one in a minute.
And now they're viewed as entitlements, which means any incumbent government will be punished if it's unable to continue to deliver (or even expand) them.
Always a mistake to help the poor, isn't it? Darwinism, I say! Let them starve for the greater good! Survival of the fittest, goddamit!
Moreover, the longer the recession continues in the US & Europe—and the Dubai financial mess is a troubling sign of things to come—the less money will be available for both critically needed donor aid & foreign investment.Banal.
For all his symbolic rhetoric, Evo is still actively courting foreign investors.On his terms, and what's more the deals are getting done. Do some freakin' homework and find out the most recent hard rock/hydrocarbons deals, Centellas. And when you do, note that the foreign mining companies and oil&gas giants are perfectly happy with the terms of the deals.
If the economy makes them increasingly risk-averse, we may see a recession hit Bolivia. Of course, rising economies (Brazil, Russia, India, China) may pick up the slack. But that's always a gamble. It would be better to have a larger number of options, not fewer.
WTF does that mean??? I've read it three times and still can't work it out! The only line of reasoning I can see here is that the national decisions of the Bolivian economic team are bad because other sovereign states might decide that they don't want to invest in Bolivia any longer due to circumstances beyond everyone's control! What IS this, the 'Waiting For Godot' economic policy?
The bottom line, however, is that Bolivia is not really charting a new “socialist” course, per se.No, the bottom line is that you are a dumbass.
It's following the 1952 MNR playbook, pursuing a political strategy of multi-class alliance & an economic strategy of “state capitalism.” It's banking on a state-driven economic sector to grow, keeping the middle class happy while also securing better standards of living for the poor.
It was the failure of the state capitalism model to deliver that led to an experiment w/ neoliberalism. Another failure of state capitalism could leave Bolivia primed, yet again, for another neoliberal episode.And then again, it might not, eh? But let's just go back to that "but it's expensive" line used by this pseudo-economist earlier. The point he tries to make is that you can't use state revenues (taxes etc) or International Currency Reserves (ICR) to fund social programs because they put a strain on things. Well, point one is that Bolivia's ICR is currently at all time record levels, as this chart ripped from the Bolivian Central Bank site shows:
Before Evo came along, nationalized the natgas industry and diverted the enormous profits being made away from the multinational oil companies and into state coffers, Bolivia had little or nothing in the way of reserves. Nowadays, it has U$8.7Bn tucked away, which is an enormous amount for a country so small and represents 9.6% of country GDP, according to CEPAL. The point here is that Bolivia could keep adding and adding to those reserves if it wanted to, but there comes a point when the opportunity cost of holding reserves (they just sit there and don't make you any economic/monetary difference) becomes too great. So the government has (or at least seems to have) made the decision to spend the ongoing, regular and predictable bonanza that the state is enjoying on the population, via school meals programs (that have seen attendances shoot up) maternity benefits, the first ever formal senior citizens retirement pension etc etc.
The second thing to mention here is whether these program really are "expensive". By this, we mean whether they "cost" Bolivia anything. In a previous post I marvelled at a chart created from Central Bank figures. Here it is again....
...but why is it so important? Well, what it shows is that at first, when Evo took over, the Central Bank quickly added to those reserves via the hydrocarbon revenues. We can see that as the ratio of local currency in circulation (M2) to reserves dropped. But since around the beginning of 2008 (when not coincidentally, the bulk of those "expensive" programs kicked off) the amount of money that is in the central bank reserves has been steady against the amount of local currency circulating inside Bolivia.
What does this mean? It means that Evo's government is not spending money that it doesn't have. These social programs that trouble our pseudoeconomist so much have not taken away dollars from the reserves. But not only that (and this is key), the government, via a very sound and prudent fiscal and monetary policy, has made sure it hasn't created money out of thin air. For every new Peso Boliviano that has been created, there's the equivalent amount of dollars added to those central bank reserves first.
In other words, these programs are not "expensive" at all. For one thing, they are avoiding the opportunity cost of overweighting central bank reserves (yes Miguel, this may come as a shock to you but if you'd bothered to learn about macroeconomics before shooting your mouth off you'd know that it actually costs money, a decent wedge of money at that, to hold currency reserves in your central bank). For another, they are only spending the extra new money that's coming in (thus educating the population, providing better healthcare, spending money for the elderly etc that will add to GDP) in a monetarially neutral manner. Or put simply, the cost to the state is a net zero and the result is a net benefit to growth (bottom-up growth at that, not the Reaganesque trickledown bullshit).
This is good housekeeping. This is just one example of why, when people like Centellas spout off about Bolivia's economy not being "all it's cracked up to be" they fly in the face of serious economics bodies that have recently lauded the country's economy. Y'know, people like the Interamerican Development Bank, The World Bank and the IMF.
Miguel, you win, hands down, this week's coveted award. Enjoy, dumbass.