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Stiglitz backs strong government intervention

Wednesday, August 24th 2005 - 21:00 UTC
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Government proactive policies are a central element of industrial development policies and markets by themselves are not enough to promote economic growth, said Joseph Stiglitz, 2001 Economy Nobel Prize during a conference in Buenos Aires.

"The successful countries are those with integral technology development policies, including education, research and financing by governments", underlined Mr. Stiglitz who is participating in a round of debates on public policies in the framework of what has been described as the "Buenos Aires consensus, a new agenda for Latinamerica".

"The world is rapidly changing and this makes industrial policies even more difficult and challenging. A well designed globalization can favour industrial development, but it can't be left only to markets' initiative", he added.

Economist Stiglitz shared the panel with United Nations Secretary General for Economic and Social Affairs, Jose Antonio Ocampo and Bernardo Kosacoff head of the Buenos Aires office for the United Nations Latinamerica and Caribbean Economic Commission.

Further on Mr. Sitglitz empathically supported government promotion policies and mentioned as current strong development examples, India, China and Brazil, recalling that the most dynamic sectors of any capitalist economy were born out of government investment.

"In developing countries research financing continues to be a problem and that's why governments must intervene. Telecommunications from the very beginning, such as telephone lines all the way to internet were developed by the US government", recalled the Nobel Prize and former World Bank chief economist.

"In spite of these successes industrial policies have a bad name, originated in ideologies that support free markets. It's true there have been problems deciding when a project is not good, and even with corruption circumstances, but government industrial policies have proved successful in promoting development".

Mr. Stiglitz also backed the implementation of capital control measures which help to reduce the volatility of money and financial markets, as well as preventing or limiting the access of speculative funds which are not geared to genuine investment.

"Generally capital movement liberalization is associated with a greater degree of volatility, which is pernicious for investment. However I believe capital control measures compatible with investment attraction decisions can be designed".

The economist was also critical of situations when the banking system of a country becomes mostly foreign since this seriously limits credit access for small and medium corporations which are "the heart of a country's production texture and growth engine".

Regarding relations with the International Monetary Fund, Mr. Stiglitz said Argentina should fight for a discharge and payments to the multilateral institution "must remain at a minimum so as to avoid having to send resources to Washington".

"The IMF always wants to be paid, but the question for a country is, is it convenient?" therefore it's not a matter of fighting or breaking with the IMF but rather getting involved in a tough bargaining", highlighted Mr. Sitglitz.

Earlier in the day the Nobel Prize praised the current Argentine economic policy and criticized the initiatives that were preponderant during the nineties.

"Argentina is on the right track. Argentina did the right thing with its foreign debt, a tough renegotiation, acting strongly and ignoring IMF pressures", he said. "No program can be worse than those promoted by IMF which always recommends repaying IMF and creditors" added Stiglitz who criticized Brazil for "following orthodox instructions and depositing trust in foreign capital with exorbitant interest rates to control inflation".

Categories: Mercosur.

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