U.S. Nobel laureate Joseph Stiglitz has become a sort of rock star in left-of-center Latin American countries for his vocal criticism of free-for-all capitalism. But in a wide-ranging interview, he offered some advice that many of his fans in the region may not want to hear.

Stiglitz, who won the Nobel prize in economics in 2001 and a year later wrote Globalization and its Discontents, is not backtracking from his earlier assertions that the International Monetary Fund (IMF) and U.S.-backed free market policies are to blame for much of world poverty, and for the current global crisis.

"I'm a critic of the way certain versions of capitalism have been developed,'' the Columbia University professor said. "I think that the unfettered capitalism, the deregulation that was central to American-style capitalism since the beginning of President Reagan's years, that's over.''

He added that many Americans are having second thoughts about the U.S. economic model, and that there are growing concerns that "special interests are having a great deal of influence in stopping reforms that are needed.''

'CORPORATE WELFARE'

"The United States doesn't really have what you might call a pure capitalist system: we have been socializing the losses as we've been privatizing the gains,'' he said. "We have government intervention in all varieties, but, unfortunately, it's for the most part intervention to help the banking sector, to help the drug companies, to help various special interests.

"It's a kind of corporate welfare ,'' he added. "So what I've actually been arguing is for a purer form of market economy, but one which focuses protection not on corporations, but on people.''

But Stiglitz, who has been given red-carpet welcomes by Venezuelan President Hugo Chávez, Argentine President Cristina Fernández de Kirchner and other leaders who applaud his criticisms of the IMF, seems to have mellowed his criticism of the Washington-based lending institution.

"The IMF is much better than it was in the past, absolutely. It has changed in many ways, and I think everybody needs to recognize it,'' he told me. "It has said that it's going to give money to certain countries, at good rates, without the kind of conditionality that turned recessions into depressions.''

When I asked him what Latin American countries should do to grow and reduce poverty faster, he said that they have to become more competitive in the global economy.

And contrary to many of his fans in the hard left, he seems to think that globalization is here to stay.

"One hidden aspect of this crisis is that while it is a financial crisis, it is an economic crisis: it marks a point in the transformation of the global economy, a shift in comparative advantages,'' he said. "If Latin America is going to prosper, it has to upgrade its skills, improve its technology to become more competitive in the global economy.''

SHRINKING PIE

Why? Because the pie of the world economy is shrinking as a result of the crisis, and there will be greater competition among developing countries to sell their goods to the wealthiest markets, he said.

"The pie is shrinking, and people are competing fiercely for market share,'' he said. "We are moving now from manufacturing into a service economy, and this crisis may be a global demarcation point. And that means that countries really have to prepare for globalization have the skills with which to compete in a global marketplace.''

Citing the case of Mexico, he said that many of its problems "can be traced back to its failure to invest enough in education, infrastructure.''

He added, "China does not have free trade access to the United States, but China directed its energies to investments in education, technology, infrastructure, and it more than overcame the competitive disadvantage of not having free access to the United States.''

My opinion: Stiglitz is often taken out of context by Chávez, Kirchner and other populists who make him sound as if he were anti-globalization. Judging from what I heard from him, he's not.

He knows that world poverty has come down from 40 to 19 percent of the planet's population over the past two decades, since China, India and other countries inserted themselves in the global economy. Still, it would be great if he made that point clearer when he talks with his anti-globalization fans: he may take it for granted that they know that, too, but they often don't.

 

Childhood Tragedy May Affect President Rafael Correa's Policies
by Andres Oppenheimer

I'm not a great fan of using psychological profiles to explain people's political leanings, but a report on Ecuador's rabidly anti-U.S. President Rafael Correa, which I read during a visit to Colombia last week, left me wondering.

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