MercoPress. South Atlantic News Agency

Vindication of government intervention

Economy Nobel Prize winner Joseph Stiglitz said that "free markets are important, but they don't solve problems by themselves", and criticised the International Monetary Fund for not complying with its original commitments to help countries out of deep recession.

"There's not an only prescription, each country must find its own path on its own, and that path is not decided in Washington", insisted Mr. Stiglitz during a conference this week in Montevideo, Uruguay, where he said the IMF "is not democratic".

Mr. Stiglitz, currently a Columbia University Professor who for several years was former President Clinton main economic advisor and World Bank head economist, became world famous writing about "market analysis with asymmetrical information".

"In many occasions government intervention is needed to check certain circumstances, such as contamination that destroys the environment. Governments actually many times help improve the efficiency of resources, since information can also be imperfect", stressed Professor Stiglitz.

Talking about Argentina Mr. Stiglitz said the country has been caught in a vicious circle which began in 1995 with the Russian default, foreign credit cut off, interest rates jump, debts can't be paid, plus an irrational pessimism. "I believe the current debt restructuring policy is necessary, but it's hard to see how you can move out of recession and pessimism".

Further on Mr. Stiglitz said Argentina needs fiscal policies that help generate credit at accessible rates for companies, and recalled that the IMF was created after the Second World War precisely with the purpose of stimulating an expansive fiscal policy. "But if the IMF refuses to act in accordance to its founding purposes, we'll have to think of other alternatives", stressed Mr. Stiglitz.

"I believe promoting growth and reducing inequality and poverty are paramount, and free markets are not necessarily a good mechanism to start with. Stability is important but it doesn't solve problems", pointed out Professor Stiglitz, who also underscored that a limited inflation when it helps employment "is beneficial for a society". "Developing countries must adopt a more pragmatic attitude towards business, accepting it ta