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1 1, Briefly Discuss Your Country's Recent Economic Performance In ECON 3235 Some economics, some Politics what is driving Social unrest Latin America today? Fall 2019 This Thursday November 15th lets discuss what we know about the present political unrest starting at 4pm I hope but not in our class (via webex, you will get an invitation, I will be in Puebla Mexico. Sorry to miss class, but you can be wherever it is convenient if you need help with Webex ask we can arrange for a tutor, there are also very too videos to guide (will email them.0 . Is the turmoil we are seeing in Latin America during the last few months driven by economics (broadly defined to include happiness) or is it political? What is the connection between politics and economics? Have we/you ever seen anything like this before? 1, Briefly discuss your country’s recent economic performance in terms of GDP growth and inflation. For an October update see AS/COA Holly Sonneland 11/6/2019 LatAm Economic & Business Outlook and Shiter and Binetti on the never ending cycle of accelerated growth followed by a slowdown as we are witnessing now. Is this the pattern in your country. 2. Discuss your country’s history of populism (if any) and social unrest if any in the context of current unrest and sudden transitions in Bolivia, Chile, Ecuador and Haiti. Why has the DR never had a populist regime, or perhaps they have? A right populist in the 1950s? 3. Why did Evo Morales seek asylum in Mexico? Has Mexico provided asylum before? Amlo’s government leans left, and adds credibility to claims of a coup (will they help Morales return at some point, take a position against the OAS and the U.S.? On immigration and NAFTA (so far) they have avoided confrontation with U.S. so perhaps asylum will be the extent of Mexico’s intervention. The U.S. frequently intervene s, and many countries have border conflicts, but LatAm countries rarely intervene directly (in Panama, or was that just in U.S.?) 4. As sources/readings for these questions check chapter 6 of the text and Table 1 from Birdsall, Lustig and McLeod (2012), check the model answers below and the updated Table 1D also available in this spreadsheet. Any episode of popular unrest (rioting) experienced by your country (for example the 2009 Coup Honduras or the 1973 coup in Chile, see Commanding Heights on our web page, Historical parallels to Chile Ecuador and Bolivia? Ecuador Under Rafael Correa; Ecuador under Lenin Moreno; Chile under Sebastian Piñera The top 1% are the problem, OpEd Chile ; Chile under Pinochet 1973 (see Edwards 2019) Chile under Michelle Bachelet (student uprising led by Camil Vallejo). Brazil: Lula passes torch to Dilma, Dilma appears in Hans Rosling’s Washing machine video, Bolivia nationalized gas industry on May 1st 2006 (it was Brazil’s) when did Mexico nationalize standard oil? Hint: 1938. Mexico nationalized Standard oil Brazil: Right wing populism: Dilma’s victory is denied by opposition The current administration’s attitude toward Mexico and Central America (Honduras) Fidel Castro became President of Cuba in 1960 Cuban leader Che Guevera killed at 39, where? why in 1967 did he feel safe in La Higuera, Bolivia who/what is there now? Christopher Sabatini, Anar Bata (2019) Latin America’s Protests Are Likely to Fail The popular uprisings in Bolivia, Chile, Ecuador, and Haiti have many different causes and one thing in common: If history is any indicator, the outlook for genuine, lasting change is grim. BY, Foreign Policy Magazine, Nove 8th 2019. Nancy Birdsall, Nora Lustig, and Darryl McLeod (2012) Declining Inequaity in Latin Americs, Some Economics Some Politics, Routledge Handbook of Latin American Politics Chapter 11, the CGD working paper version has better graphics (color) 1 Edwards. Sebastian (2019) Edwards, S. (2019). On Latin American Populism, and Its Echoes around the World. Journal of Economic Perspectives, 33(4), 76-99. Do we need an Ibrahim leadership prize? Even in the U.S. we could find ourselves in a situation where one party does not accept the results or an election… Acemoglu, Daron, Georgy Egorov, and Konstantin Sonin. "A political theory of populism." The Quarterly Journal of Economics 128, no. 2 (2013): 771-805. Notes from Acemoglu et. al. “Populist regimes have historically tried to deal with income inequality problems through the use of overly expansive macroeconomic policies. These policies, which have relied on deficit financing, generalized controls, and a disregard for basic economic equilibria, have almost unavoidably resulted in major macroeconomic crises that have ended up hurting the poorer segments of society.” Dornbusch and Edwards (1991) quoted by Acemogly et. al (2013 p772) on the same page they discuss right wing populism in footnote 2: We focus on left-wing populism, which has been particularly prevalent in twentieth-century Latin America. In the United States, in addition to left-wing populism of the Democratic presidential candidate William Jennings Bryan or the Louisiana Senator Huey ‘‘Kingfish’’ Long, a distinctive right-wing populism has been prevalent (e.g., Norris 2005). Right-wing populism typically combines anti-elitism with some right-wing agenda (e.g., anticommunism in the case of Wisconsin Senator Joseph McCarthy or the states rights agenda of the Alabama governor and presidential candidate George Wallace, or small-government conservatism in the case of the Tea Party these days). A model combining left- and right-wing extremists and different types of populist policies is presented in Section V.A. Also please read Shifter and Binetti, 2019 on the OAS (crucial to Morales’ resignation) The Organization of American States, the world’s oldest regional organization, has been incapable of reaching a consensus to apply its Democratic Charter to cases such as Nicaragua or Venezuela, despite the vocal activism of its sec-retary general. Latin America’s growing political fragmentation, including the electoral victories of the ultra-rightist Bolsonaro in Brazil and the nationalist Andrés Manuel López Obrador in Mexico, suggests this distrust and lack of coordination will only become worse in the years to come. Page 148 Economics matters too, “Latin American countries remain trapped in a cycle where years of accelerated growth are followed inexorably by times of crisis and stagnation.” Page 146. Corruption may also be a factor in some countries (Bolivia, no, Chile yes…) see Botero, 2019 page 20 as is the strength of the Presidential elections (Botero page 22). Here are the A&L 2017 Text’s “Model Answers to Chapter 6” which is available here and in the text of course. 1. Briefly describe the distinguishing features of populist cycles in twentieth – century Latin America. Why did Peru under Alan García experience high growth rates initially, and why was such a growth spell short lived? Populist cycle: 1) expansionary fiscal and monetary policies often complemented with generalized price controls in order to prioritize redistribution over economic growth; 2) the share of GDP accruing to labor increases; 3) stagflation – low growth with high inflation, and 4) real wages revert to lower than those prevailing prior to the populist cycle. Alan García’s experience in Peru in 1995: restriction of foreign debt repayment to ten percent of exports, expansionary fiscal and monetary policies alongside the introduction of a new currency – the inti – for controlling hyperinflation. The combination of these three measures triggered an unprecedented growth rate of 9.5 percent in 1996. Lack of foreign reserves and speculation fueled by nationalization announcements triggered capital outflows, a consequential drying out of foreign reserves, and an unstoppable inflation hike to more than three digits, lowering real wages to levels prior to the García’s 1995 plan. The hike in inflation following recurrent devaluations of the inti led to a new currency swap known as the “Nuevo Sol”. In short, the García plan was short-lived because expansionary policies, monetized fiscal deficits, and a devaluation – inflation vicious circle resulting from foreign exchange shortages and capital flight, with hyperinflation lowering considerably workers’ real wages. Despite his failed experiment, Alan García was reelected President of Peru in 2005 and remained in 2 office until 2011 [dlm note: caught up in the Odebrecht scandal, President Garcia committed suicide the day before he was to be arrested…} 2. Why is price stabilization key to standard explanations to the downfall of populist regimes in the late twentieth century? Inflation and hyperinflation in the late 20th century were associated with high fiscal deficits, which were brought down considerably. Fiscal restraint in turn created unemployment and political unrest. Growth rates remained low. In an attempt to grow without suffering the perils of high inflation, late twentieth century governments relaxed fiscal and monetary constraints and engaged themselves in exchange rate stabilization policies. These price stabilization policies failed because domestic currencies eventually became overvalued leading to sharp depreciations and the return of high inflation, which lower the purchasing power of the workers whose rights the populist leaders had pledged to defend. 3. Briefly describe the upsurge of populism in Venezuela under Hugo Chávez. Is it possible to explain its roots and why such a populist regime has been maintained for over fifteen years now? Roots: • Frustrated expectations following a series of structural reforms in the 1980s, which did not yield expected returns in terms of growth rates is part of the explanation. • Social unrest triggered by a hike in domestic petrol prices in 1992 which lowered the purchasing power of urbanites leading to political turmoil in 1993 – 1998. Left-wing Hugo Chávez was democratically elected in 1998. His election is often interpreted as a sign of protest against the technocratic regimes that launched the structural reforms. Chávez ruled Venezuela from 1999 until his dead in 2013.
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