Friday, July 13, 2012

Fantasy Economies

since you aren't reading this stuff anyway,. I thought I would post this piece from the Fairness and Accuracy in Reporting (Fair) Blog

Extra! July 2012

Fantasy Economies

Enforcing neoliberalism through myth

By Steve Rendall

When reality fails to confirm the “truths” held by the international financial establishment, the corporate media can be relied on to concoct more cooperative scenarios.

In the real world, Argentina’s economy has been one of the most robust in the world for the past decade. But in the world of corporate journalism, Argentina is an economic rogue on the road to ruin. When its economy is discussed in U.S. corporate media, it’s largely to portray it as an example of national leaders making bad economic choices, a model of what not to do. This is what happened when Argentina recently bucked neoliberal nostrums and renationalized its major oil company, YPF, which had been acquired by the Spanish firm Repsol in a 1999 privatization.

In the New York Times (4/19/12), Latin American correspondent Simon Romero framed the “expropriation” in negative terms, larding his report with critics like the anonymous Latin American “financial experts” who

greeted [Argentine President Cristina Fernández de] Kirchner’s abrupt decision with dismay, saying the nationalization and other economic policies were making Argentina more of a hemispheric outlier than a leader in a bold new economic era.

Mexican President Felipe Calderón, whose own country’s oil industry is nationalized along similar lines as Argentina’s, was quoted saying the YPF nationalization “did no one any good.” Romero also quoted one Brazilian newspaper columnist who wrote that “Argentina’s capacity to err seems unlimited,” and another who referred to Kirchner as a “Crazy Queen.”

Support for Argentina’s move was briefly noted and ominously framed. Cheer-leaders included Venezuela—“where President Chávez has exerted control over dozens of companies, including huge oil projects”—and Uruguayan President José Mujica, “a former member of the Tupamaros guerrilla group.”

Perhaps the most telling comment in the lopsided account was Chilean Economic Minister Pablo Longueira’s claim that Argentina’s action made Latin America a “less trustworthy region.” Longueira was clear about whose trust matters: “Capital flows exit to those places where there is more investor confidence.”

There was the obligatory Washington Post editorial (4/19/12), headlined “Argen-tina’s President Rejects Stepping Into the Future,” which said Kirchner is “continuing to pursue the autocratic populism she practiced before the election.” As NACLA (5/2/12) noted ironically, Post editors find Kirchner autocratic because she “was reelected in an historic landslide, and had the temerity to continue the policies that gave her such strong approval in the first place.” In fact, YPF nationalization is even more popular than Kirchner in Argentina, garnering a 62 percent approval rating (MercoPress, 4/23/12).

Business Week (4/19/12) published a critical story about the nationalization and the recent trade restrictions Argentina has put in place to help bolster exports and protect its workers’ jobs. The piece claimed Kirchner was pursuing “ever more insular economic policies,” under the instructive headline: “Argentina Goes Rogue Again.”

Argentina has been
declared a economic rogue many times over, beginning in 2002 when it refused to continue under an IMF austerity regime and purposely defaulted on its debt. For its temerity, IMF official Anne Krueger reportedly dubbed Argentina “the ‘A’ word” (International Herald Tribune, 9/23/05).

Corporate media reporting on Argentina takes its cues from U.S. and global economic elites, whose remarks about Argentina’s economy are routinely critical.

In 2009, then–CIA director Leon Panetta enraged Argentine officials when he suggested that their economy might be unstable (BBC News, 2/27/09). The same year, CATO senior economist Daniel Mitchell attacked U.S. economic policy by equating it to “reckless” Argentina (Washington Times, 5/28/09): “The U.S. has become the Argentina of the industrialized world, with our reckless monetary policy and irresponsible fiscal policy.”

The U.S. should be so lucky.

Since defaulting on its debt in 2002 and extracting itself from an economic regime dictated by the International Monetary Fund (IMF), Argentina’s economy has grown more rapidly than any in the Western Hemisphere (Guardian, 10/23/11). While developing countries are expected to grow more rapidly than developed ones, the gap between Argentine growth since 2002 (a 7.4 percent per year average) is still impressive next to the U.S.’s almost flat 1.7 percent per annum growth rate (IMF World Economic Outlook Database, 4/12). (Some private estimates, such as those of Orlando J. Fererres & Asociados, put Argentina's average annual growth over this period at about 1 percentage point less than the government/IMF data.)

And while Argentina has its share of economic issues—a persistent problem with inflation, to name one—this year the IMF estimates the country’s unemployment rate will fall to 6.7 percent, its lowest point since 1992.

Last year, economics blogger Yves Smith (Naked Capitalism, 10/23/11) noted how Argentina gets little credit in the U.S. media: “Ever notice nothing is ever said in the mainstream media about Argentina’s economy, save that it had a big default?” She pointed out that the country’s economy had grown “nearly twice as fast” as Brazil’s—which is often cited as a positive model in U.S. media—while increasing social spending “from 10.3 percent of GDP to 14.2 percent of GDP,” and decreasing inequality: “Poverty and extreme poverty have fallen by roughly two-thirds.”

The lesson here is that how well you do by your people has little value next to how well you do by bankers. Never mind that its economy has outperformed its better-behaved neighbors; Argentina is a bad example because it flouts international financial interests.

By the same skewed reasoning that finds Argentina’s high-performing economy wanting, the U.S. corporate press presents Ireland’s stagnant economy as a positive model. “Madness in Spain Lingers as Ireland Chases Recovery,” was a Bloomberg headline (5/2/12) over a piece that quoted one European expert, “Ireland faced up to its problems faster than others and we expect growth there rather soon.”

In a Wall Street Journal op-ed (10/10/11), “Lessons of the Irish Come-back,” U.S. bond trader Michael Hasenstab was even more explicit, touting Ireland’s severe austerity measures, including harsh cuts in jobs, wages and spending, along with sharp tax hikes, measures that supposedly made Ireland more competitive. The bond trader’s bullishness on the Irish economy earned him a glowing profile in the New York Times (2/8/12), headlined “A Contrarian Bets Ireland and Hungary Will Rebound”; the report explained that “Mr. Hasenstab has been an evangelist for Ireland’s stoic response to the crisis.”

NPR interviewed European editor of the Economist John Peet (4/30/12), who praised Ireland and recommended its austerity agenda:

And of the countries that were in trouble, I would say Ireland looks as if it’s the best at the moment, because Ireland has implemented very heavy austerity programs, but is now beginning to grow again. So there are some examples, but when you look at countries like France, Spain, Italy, there’s an awful long way to go.

Responding to a question about how austerity seems to be forcing some Euro nations into deeper recession, Peet told NPR’s Steve Inskeep:

Well, I think the professional economists, what they want to see is much faster implementation of reforms to the labor market, deregulation, liberalization of product markets across Europe, to make the European economies more competitive.

While acknowledging that some economies didn’t seem to react well to austerity, Peet failed to respond to Inskeep’s question: “I mean, you’re saying that hardly anyone seems to be proposing seriously another way out?”

Do “professional economists” really agree that austerity measures should be more rapidly implemented; that there are no real alternatives; and, most fundamentally, that Ireland’s economy is on the rebound as austerity boosters insist?

The answer on all three counts is no.

New York Times columnist Paul Krugman is one of many well-known economists who say treating recessed or demand-starved economies with austerity is counterproductive. Krugman is fond of quoting John Maynard Keynes, a giant in economic theory, who said, “The boom, not the slump, is the right time for austerity at the Treasury.” Keynes said this just as FDR briefly embraced austerity and brought on the Recession of 1937.

Contrary to the shiny happy media accounts, Ireland is no model of the benefits of austerity. In his New York Times blog (4/30/12), Krugman responded to Peet’s claim that Ireland was “beginning to grow again” with a graph demonstrating an Irish economy still stuck in a prolonged slump.

Wrote Krugman: “To be fair, Peet isn’t alone. The legend of Irish recovery has somehow set in, and nobody on the pro-austerity side seems to feel any need to look at the data, even for a minute, to check whether the legend is true.”

The last quarter of 2011, according to the Irish Central Statistics Office (12/12/11), marked the largest quarterly fall in employment in two years, leaving Ireland with unemployment hovering above 14 percent.

The jobs picture is so dire that large numbers of young Irish workers are leaving the country to seek work abroad. According to the Guardian (3/8/12), unemployment has driven emigration to its highest level in two decades:

Young people, particularly men in their late teens and early 20s, are turning to other European countries, Australia and the Middle East for work. There are now 356,000 Irish nationals living in the UK, latest Office for National Statistics figures show, with the number of arrivals second only to Polish immigrants.

Argentina and Ireland are just the most recent examples of corporate media distorting the picture of various national economies to reinforce austerity and neoliberalism. There is no shortage of corporate media stories about how Greece, which is balking at the imposition of ever-harsher IMF/EU austerity measures, should follow the example of Latvia, which has begun to show growth after undergoing a harsh IMF/EU austerity regime (e.g., Wall Street Journal, 5/21/12).

In their quest to dissuade Greece from, say, taking the Argentine path and defaulting on its debt, corporate media usually obscure the fuller picture of Latvia, which has paid enormous economic and social costs for its alleged salvation. According to the Latvian census, from 2001 to 2011, the country’s population has receded from roughly 2.4 million to 2.1 million—losing one of every eight residents—according to the Latvian national statistics office (Baltic News Service, 1/18/12).

Despite recent growth, the country’s GDP is still more than 15 percent below its 2007 peak (Conscience of a Liberal, 3/26/12). And, after all this pain and dislocation, as academics Jeffrey Sommers, Arunas Juska and Michael Hudson point out (Naked Capitalism, 12/6/11), Latvia and its neighbor Lithuania remain in a deep financial hole, even as they are celebrated as models of success:

But one hears only celebratory praise from the neoliberal lobbyists whose policies have deindustrialized and stripped the Baltic economies of Lithuania and Latvia, leaving them debt-ridden and uncompetitive. It is as if their real estate collapse from bubble-level debt leveraging, that left their basic infrastructure in the hands of kleptocrats, is a free-market success story.

When corporate media report on other countries, the stories they tell have little to do with the actual functioning of their economies; they serve rather as morality tales that illustrate how those who follow neoliberal prescriptions are rewarded and those who deviate are punished. Reality conveys a quite different message.

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1 comment:

  1. I read it.

    I understood it.

    I liked it --- and I LOVE the concept of fantasy economics. What an incredibly apt term!