How has a country of under five million people become a world leader in developing holistic policies that promote democratic, sustainable, and inclusive economic growth? The answer lies in its people's belief that focusing on the welfare of all citizens not only enhances wellbeing, but also increases productivity.Project Syndicate
How Costa Rica Gets It Right
Joseph E. Stiglitz | Nobel laureate in economics, University Professor at Columbia University, and Chief Economist at the Roosevelt Institute
17 comments:
How do they get it right? They don't have any oil.
PART 1 of 2
I generally agree with Sitglitz. At least pretends to be an economic progressive, unlike Paul Krugman, who is a neoliberal elitist that calls himself a “liberal.”
Stiglitz does not understand MMT, but I can overlook that. (Paul Krugman fully rejects MMT.)
In this article, however, Stiglitz hits a sour note by equating social leftism with economic leftism. He spends his first three paragraphs celebrating Costa Rica’s “progressivism.” Does this mean that Costa Rica is committed to financial equality for everyone? Does it mean that Costa Rica is not owned and ruled by rich oligarchs?
No. Sitglitz admits that Costa Rica has inequality, but at the end of the third paragraph we read that, for Sitglitz, Costa Rica’s “progressivism” means that president Quesada is committed to supporting gay marriage.
Huh? What does "gay rights" have to do with oligarch tyranny? Nothing. Paul Elliott Singer in New York City is a billionaire neoliberal oligarch, and a flaming homosexual.
I complain when right-wingers falsely equate economic populists (like me) with militant feminists, militant gays, militant “trans-rights” people, and so on -- but here Stiglitz does it from the left. His “gay rights” rhetoric is like chomping into a piece of meat and having a hidden bone suddenly jammed into your gums. Ouch.
For Stiglitz, “enlightenment values” (as he calls it) means supporting militant liberal intolerance (e.g. the #MeToo gold diggers). Spare us please.
On a different note, Stiglitz says that “authoritarianism and proto-fascism are on the rise in so many corners of the world.” On the rise? They have already reached the summit. Neoliberalism is ultra-fascist, since it aligns every aspect of society toward financial profit, and toward widening the gap between the rich and the rest.
Authoritarianism? The USA a brutal police-and-surveillance state. In most of Europe you will be thrown into prison if you question the “holocaust.”™ (In the USA you will simply be fired and blackballed, although some people say that “holocaust deniers” should be registered in the same way as sex offenders.)
Incidentally many Costa Rican people are racists. If you meet one for the first time, and you casually ask in English or Spanish, “Are you from Mexico?” he or she will act offended. “No, I’m a Costa Rican!”
Yeah? In the words of comedian Steve Martin, “Well ExCUUUUUUUUUSE ME!!!” Racist Costa Ricans think that all Mexicans are dark skinned, when in reality some Mexicans are blonde. Many Mexicans have skin whiter than mine, and I am Scotch-Irish. I’ve never seen a Mexican with blue eyes (like mine) but I’m sure that some exist in the larger cities. The point is that many Mexicans look exactly like Costa Ricans, yet Costa Ricans think they are “better.”
All this nonsense aside, Stiglitz mercifully spends the rest of his article discussing the economic aspects of Costa Rica’s progressivism, and they sound great. Free education and health care? I’m down with that.
Unfortunately Costa Rica is in very serious economic trouble (but Stiglitz does not understand why). Because of a huge and chronic trade deficit, Costa Rica is falling farther and farther into external debt. This means that severe austerity and privatization are just around the corner, whether Costa Rica’s government wants it or not. Costa Rica's forest are watered by the drool from IMF and hedge fund vultures (like Paul Singer) circling overhead. Costa Rica faces a choice between the vultures and severe inflation.
Continued below…
PART 2 of 2
Further on, Stiglitz comes out as a neoliberal: “But for all of its successes, Costa Rica faces two critical problems: a persistent, structural fiscal deficit and a gridlocked political system.”
Here Stiglitz supports the neoliberal lie that federal deficits are always bad, everywhere. In the USA, federal deficits are good things. Deficits stimulate the economy. And since the U.S. government creates its spending dollars out of thin air, and since those dollars are accepted worldwide, deficits are not a problem for the U.S. government.
Costa Rica is different, since Costa Rica’s currency is not widely accepted outside its borders. For Costa Rica, which has a whopping trade deficit, economic stimulus-via-deficit-spending makes consumers buy more imports, which makes Costa Rica’s external debt go higher, which makes austerity more imminent.
As I said above, I call Stiglitz a neoliberal because neoliberals pretend that all deficit spending is bad, everywhere. Neoliberals tell this lie so they can falsely claim that the US and UK governments are “bankrupt” when it comes to social programs that help average people. (Strangely, the U.S. government can always afford to increase its military spending every year.)
Costa Rica will soon become another neoliberal hellhole like Honduras. This is why the USA hasn’t mounted a neoliberal coup in Costa Rica, like it did in Honduras in 2009. Costa Rica will have neoliberalism inevitably, without a coup.
But at least Costa Rica will have “gay rights.”
“Neoliberals tell this lie so they can falsely claim that the US and UK governments are “bankrupt” when it comes to social programs”
Oh yes the dreaded “bro liberal conspiracy!” LOL...
Hey here: “Deficits stimulate the economy”
Do you also think that if you eat and shit in the same day that you are starving?????
You're cute when you babble.
Now crawl back to your crib.
The adults are talking.
Deficits represent a transfer to savings ...
So us deficit so far this year is 400b on outlays of 2.4t so you’re saying if it were higher that would be “stimulative”?
So if govt implemented a tax holiday and slashed outlays by 1.5t then that would be “stimulative” as the deficit would be 500b higher?
Keep listening to economists...
U.S. federal deficit spending adds money to the U.S. economy. More money in circulation means stimulation.
By contrast, federal deficit reduction (i.e. austerity) removes money from the economy, and is often recessionary.
These are facts, not opinions.
Anyone who denies these facts (in the context of the USA) is a liar or a fool.
In my hypo, there would be more “money” in the economy... and we would be Mad Max Beyond Thunderdome...
You are not maintaining stock-flow consistency....
“Money supply” is a stock not a flow (measured per unit time)...
You’re making the same mistake as the Peterson morons who say “the national debt will soon equal GDP!”
Do you also never take any trips over 55 miles because the speed limit is only 55? You just always stay close to home due to this?
Once money is created by either the government or banks crediting accounts (flow), the stock of money (saving) stays constant, cet. par.
However, there are outflows as well as inflows as money is withdrawn by paying down loans and meeting obligations imposed by government.
In a monetary transaction there is necessarily a party willing to accept money, so the saver of the amount just shifts around.
The important figure economically is velocity or turnover of money. Were the turnover to be zero, then all money would be saved and the economy would soon grind to a screeching halt.
The level of velocity determines the economic "temperature" in a monetary production economy.
The takeaway is that saving desire is as important as spending desire, and the spending/saving desire ratio fluctuates, influencing velocity of exchange (transactions).
These relationships show up in MV ≡ PQ (aka PT) as an accounting identity.
K,
So this from the Fed last Friday must make you bearish:
"The figure illustrates that the Fed's securities holdings are projected to decline about $400 billion this year and another $460 billion next year as Treasury and agency securities continue to roll off gradually from the Fed's portfolio."
This represents almost $1T of "money" taken out of as you say "More money in circulation means stimulation."
This will be "less money in circulation"... so are you hugely bearish on this from the Fed?
"The important figure economically is velocity or turnover of money. "
Well tell it to the MMT elites.... That is NOT what the deficit is a measure of... sure deficit is a flow but not the flow that you are talking about here...
BTW Tom all the MMT elites are on the record as saying we are going to have a $1T deficit this FY in criticism of Trump tax cuts... .... as of end April just reported we are at $385B (+50b over last year same time) so we need another 600B in the next 5 months to hit the $1T.... $120b/mo average... people better start saving huge amounts pronto or we are not going to make their big predictions...
And theyre going to be looking pretty stupid if the deficit ends up actually being the same or even reduced YoY...
Matt, a major aim of MMT is achieving and maintaining full employment (FE). That means running a "FE budget," where "budget" means fiscal balance. The tools are SFC modeling, functional finance (FF) including automatic stabilization and the MMT JG to mop us the residual unemployment (UE). Doing this requires employing the fiscal space a floating rate system affords by using economic policy.
If the domestic private sector saves more on balance than it spends and the difference is not made up by either government or the external sector, then there will be a shortfall in spending that results in all output at capacity not being sold. There result is not price reduction but quantity cutbacks that result in UE.
So government needs to offset the shortfall by increasing its contribution, which means running the appropriate deficit. The automatic stabilizers and MMT JG should suffice ideally, but if that is not the case, e.g, in case of shock, then the government should step up and increase its contribution ad hoc based on SFC modeling and FF.
The fine-tuning of the economy from the side of government should be aimed FE and optimal capacity without excessive inflation, "moderate" inflation being acceptable.
And theyre going to be looking pretty stupid if the deficit ends up actually being the same or even reduced YoY...
Tell me about it when the country has achieved FE at optimal capacity, having eliminated waste or reduced it to a bare minimum, which is the objective and key metric.
“If the domestic private sector saves more on balance than it spends“
LOL well what if it doesn’t?????
Then deficit will be very negligible...
Trumps policy discourages savings by multinational firms ... who would previously save offshore in order to avoid tax liabilities...
Deficit might go down....
LOL well what if it doesn’t?????
Then deficit will be very negligible..
Right, if the economy is approaching FE and optimal use of capacity, which there is good reason to think it is not in the US.
This is where it gets tricky. Then the economic policy has to be targeted to achieve FE, if automatic stabilization is not doing the job fully and there is no MMT JG in place to mop up the residual.
Much simpler to tweak stabilization and introduce a JG, but that is not going to happen with this administration.
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