Columbia, the prestigious university in northern Manhattan, is fulfilling the mandate of its name. He is discovering America. A network of economists linked to that house of studies has become a protagonist in the public life of the region in this stage of history. The sun of that system is Nobel laureate Joseph Stiglitz. The links extend to the Secretary of the Treasury of the United States and, crossing the Atlantic, they reach the Holy See, in Rome.
The most outstanding of the Latin American economists that make up this network is the most observed: José Antonio Ocampo, appointed Minister of Finance by Gustavo Petro in Colombia. Ocampo returns to the position he held during the presidency of Ernesto Samper, former secretary and, if you will, gravedigger of Unasur, an entity that in the most active times of Bolivarianism wanted to replace the OAS. Or constitute a renamed OAS, in which the expulsion does not fall on Cuba but on the United States.
Ocampo has several biographies. That of a Colombian official also took him to the Ministry of Agriculture in the presidency of César Gaviria. He later continued in international organizations: he was secretary general of ECLAC and, later, deputy secretary of the UN for social and economic issues. He has also developed a brilliant academic career. Educated in the United States, at the University of Notre Dame and Yale, Ocampo is a professor at the Columbia School of Public and International Affairs. But perhaps more important for his insertion in the circuits of power is that, in the same house, he serves as co-chair of the Initiative for Political Dialogue (IPD). The other co-chair is Stiglitz.
If you put the magnifying glass on that institution, you can see details that illuminate the regional scene very well. The director of the Financial Planning program is Stephany Griffith-Jones, born in Prague as Stepanka Novy Kafka. This great-niece of Franz Kafka spent almost her entire life in Chile. She accompanied Gabriel Boric on his march to power, which is why Sebastián Piñera nominated her, before leaving La Moneda, as a Central Bank advisor. There Griffith-Jones lives with Rosanna Costa Costa, the first woman to chair that Bank. Costa Costa was also nominated by Piñera when the previous head of the entity, Mario Marcel, was summoned by Boric to become Chile’s Minister of Finance.
The same staff Martin Guzmán belongs to the IPD. He is the director of the Debt Restructuring Program. Nine days ago Guzmán resigned from his position as Minister of Economy of Argentina. The irony is that one of the main factors in his exit has been a debt crisis. Stiglitz was, with statements and academic articles, the international godfather of Guzmán’s administration.
As is often the case, these professionals who coexist in the same institutional and academic environment are also related by the bibliography. Stiglitz and Ocampo published several books together. One is Stability with Growth: Macroeconomics, Liberalization and Development. In that work also appears the pen of Ricardo Ffrench-Davis, a Chilean who is a regular interlocutor of Boric and who, for this reason, gave rise to speculation about a candidacy for Minister of Finance of his country.
Stiglitz and Ocampo also wrote Time for a Visible Hand: Lessons from the 2008 World Financial Crisis. Chile appears here again, because Griffith-Jones is a co-author of the book. This academic club is more numerous. Stiglitz won the Nobel Prize alongside George Akerlof, the husband of current US Treasury Secretary Janet Yellen.
The connections between them reach as far as the Vatican. Benedict XVI appointed Stiglitz a member of the Pontifical Academy of Sciences. Last year the Argentine Jorge Bergoglio, Francisco, incorporated his compatriot Guzmán into that same institution. In a dissertation at that Academy during the peak of the 2008 banking crisis, Stiglitz seduced Bishop Marcelo Sánchez Sorondo, chancellor of the institution, with this phrase: “The bankers transgressed not one, but two commandments: they lied and stole.” Bergoglio’s phobia of the most liberal version of capitalism, the one that governs the financial business, explains well his fascination with intellectuals like Stiglitz.
If you go through the titles of the bibliography of these professors, their orientation becomes very clear. There must be a “visible” hand, that of the State, which corrects the imperfections of the “invisible” hand of the market, which excited Adam Smith. Furthermore, the market can only fulfill its promises of efficiency within a framework of clear regulations managed by the public sector. This is the core of the theory of development to which these researchers led by Stiglitz devote their efforts. An article by the Colombian Ocampo and the adoptive Chilean Griffith-Jones expresses this perspective well: Why the world needs national development banks. They posted it on Project Syndicate in May 2019.
The projection of these ideas on Latin American politics faces great challenges. These economists place themselves in a different camp from the Bolivarian one, which prevailed at the beginning of the century, under the reign of Chávez, Kirchner, Correa or Evo Morales. They are not populists, that is, they do not profess the belief that society should be organized from the State, obeying the enlightened tutelage of the caudillo. But they believe that there is no development without public sector intervention. They are not statists, but they are interventionists. This position inspires their militancy, more or less strident, against the adjustment plans drawn up by the International Monetary Fund.
The current that raises these slogans is called, as Ocampo explained in the excellent interview with Juan Diego Quesada for EL PAÍS, neostructuralism. It has exponents in Europe, such as the Italian Mariana Mazzucato, who teaches in London, or Thomas Piketty, who teaches in Paris. All of them greeted the arrival of Boric to the presidency of Chile with a document and blessed his program.
The most complex problem is the weight assigned to the balance of public accounts in the general equation of an economic policy. It is a conceptual unknown, which becomes urgent due to the historical moment. Petro, in Colombia, and Boric, in Chile, have to govern during a countercyclical period. The boom that began in 2002, associated with the Asian expansion that pushed up the price of raw materials, ended at some point in 2013. Since then, the region’s most pressing dilemma has been to maintain welfare levels of that wave of prosperity, without counting on the resources derived from exports. The pandemic, Russia’s attack on Ukraine and the anti-inflation policy of the United States Federal Reserve, which adjusts the interest rate, further cast a shadow over the picture.
Can the fiscal balance be dispensed with? Boric repeats no. That the health of the state accounts cannot be a flag given to the right. Petro tries to show that he thinks the same. How to achieve that balance without degrading State benefits? Boric and Petro give the same answer: taxes must be raised.
In Chile, this strategy sparks controversy. In Colombia, one of the great questions about the fate of Petro is raised: what degree of tolerance will the Colombian bourgeoisie have for the advance of the State not only on its profits but also on its assets? Ocampo has already warned that he intends to rebalance the corporate income tax, which is too high, with that of individuals, which is too low. And create a tribute on wealth. A very challenging purpose in a society in which the rich, not for fiscal reasons but for security reasons, have become accustomed to defending their properties with arms. The minister has set himself a more demanding barrier: he promised to show results in a year because, after that period, he retires.
Last week Boric presented his own tax reform, which also includes a tax on large fortunes in Chile. In addition to an advance from the treasury on mining, which is the most important activity in the country.
The region is witnessing a different experiment from the one that was known at the beginning of the last decade. Lacking the resources of a seldom-seen expansion, he must pay attention to the fiscal factor. But the adjustment is not thought of as a cut in expenses but, first of all, as an increase in income. It is the way of these liberals of the left, or social democrats, as Ocampo defined himself before Quesada, they think to harmonize the macroeconomic correction with the electoral commitments.
It will be very important to know how they are doing. Because in a short time the Brazilian deck will be turned upside down and it will be known whether, as the polls say, Lula da Silva wins. He will have to deal with the same paradoxes.
For all there is the lesson of one of their own: the Argentine Guzmán. Battered by a political storm that shakes Peronism, he was unable to fulfill his program. The IPD’s restructuring expert did his own restructuring last year, but these days the country-risk index is over 2,700 points, as if it were about to return to default.
Nothing surprising. It is the gap between the theory that is thought in cabinets and the harshness of politics, between PowerPoint and the street. It also happened to Columbus. His main talent was breaking up the mutinies of his first voyage, sparked when the voyage dragged on far longer than his imperfect maps had promised.
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Columbia discovers America