Stephany Griffith-Jones, economist: “Boric is what in Europe is called a social democrat”

Boric is “concerned with developing a welfare state and promoting investment, particularly green,” the prestigious economist and part of Gabriel Boric’s advisory team, Stephany Griffith-Jones, told El Desconcierto. The Cambridge University PhD in economics does not believe in the labels of “extreme” that have been put on the candidate of Approve Dignity. Regarding pensions, he bets on a “gradual” reform and ensures that “savings will continue to be managed by investment managers and investment rules will be maintained in the new system.”

Included in 2017 in the list of the 100 most influential economists in the world by the English magazine Richtopia, Stephany Griffith-Jones is one of the most prominent names in Gabriel Boric’s team of economic advisers.

He joined the candidacy in October, after learning about the proposal of the Approve Dignity candidate to create a National Development Bank, one of the topics of his expertise. As a consultant, she has had to interact with well-known economists who joined after the results of the first round, such as Andrea Repetto, Roberto Zahler and Ricardo Ffrench-Davis.

Griffith-Jones studied Commercial Engineering at the University of Chile and worked at the Central Bank, all this before going to England, where he has lived for decades. There, he received a doctorate in economics from the University of Cambridge. She is currently the director of the area of ​​financial markets reforms at the Initiative for Policy Dialogue, based at Columbia University and founded by Nobel laureate Joseph Stiglitz, with whom she had the opportunity to work.

Two weeks after the second round, the expert responds to The bewilderment and addresses part of the criticisms and fears that come from the business sector. “We see financing and public investment as a complement and a catalyst for investment and private enterprise,” he explains from the British country. He does not agree with the label of extremist that Gabriel Boric has often been given and is concerned about Kast’s ideas of lowering taxes: “it is quite difficult to reconcile the need to respond to social demands while reducing the tax burden ”, he argues.

-Why do you think that an attempt has been made to install a discourse of “polarization” and “struggle of extremes”?

I think that Jose Antonio Kast is from the extreme right, but Gabriel Boric is from the democratic left; Boric is what in Europe is called a social democrat, concerned with developing a welfare state and promoting investment, particularly green.

–Juan Sutil, president of the CPC, stated that issues such as state entrepreneurship “generate doubts” in him, arguing that this type of initiative goes against SMEs. Would these proposals represent an obstacle for entrepreneurs?

A clear priority of Gabriel Boric’s program is supporting SMEs, both financially and in technical assistance and other aspects. The vision we have, for example in expanding the role of Corfo, which is comparatively very small, in international terms, and what it was in the past in Chile, so that it supports more and better private companies, particularly in areas such as innovation, to increase productivity and productive diversification, for example towards investment in sectors that will support an ecologically sustainable economy. We see financing and public investment as a complement and a catalyst for investment and private enterprise, not as competition.

-The Gabriel Boric program seeks to implement a tax reform to increase the burden by 8 points of GDP in 8 years. Given the composition of Congress, should that goal be lowered? How much?

Government programs indicate a road map, a direction in the changes that are desired for a country. This is not the exception. The speed of that will depend on the conditions, one of which is the majorities that must be counted on to move forward, crucially including that of Congress.

-In contrast, the candidate José Antonio Kast proposes to lower taxes, how do you see that direction?

It is quite difficult to reconcile the need to respond to social demands while reducing the tax burden. Even more so, if you are starting from a situation of very high fiscal deficit.

-Kast also proposes the dismissal of thousands of public officials, as well as eliminating ministries to reduce spending. Do you see the Republican candidate’s program viable? What would be some of the consequences of implementing it?

I believe that firing so many public officials can reduce the efficiency of the state. For example, if you want to reduce tax evasion, it is important to strengthen the Internal Revenue Service and not weaken it. Furthermore, such a dismissal would generate social problems.

-You have highlighted the importance of the AFPs for the Chilean capital market and have called for a “prudent” reform of the pension system. Does that contradict Boric’s promise to end the AFPs?

It is not in conflict because savings will continue to be managed by investment managers, and investment rules will remain in the new system. I think it is better to do the transformation somewhat gradually.

National Development Bank

As a specialist in international finance and development, Stephany Griffith-Jones is one of the world’s authorized voices to talk about development banks, one of his passions. Boric’s program proposes the creation of a National Development Bank, a public bank with a mandate related to the country’s development objectives, his team explained.

The economist considers that the initiative can prove to be very valuable for the country and that it is “key for Chile”, however, she aims not to accelerate and start by “improving and expanding Corfo.”

-What lessons can we learn from the implementation of development banks in other countries? What examples do you consider most emblematic?

There is a rich international experience from which we can learn. For example, the importance of being large enough to have a sufficient impact on investment and growth is very key for Chile. For me, two important models are the German KfW and – at a regional level – the European Investment Bank, but there are many others, such as the French BIS and Bancoldex in Colombia.

-What type of entrepreneurs would be the objective of a National Development Bank in Chile?

Support for private companies would go particularly to SMEs, which often lack sufficient access to finance, but also to support large companies in priority sectors, such as green hydrogen, expansion of solar and wind energy, among others.

-He has ensured that promoting a development bank in Chile “is a project that is convenient for the private sector.” In what sense? Could it help generate more private investment?

A development bank is precisely destined to generate more private investment, and stimulate innovative entrepreneurship. In many countries, in addition to the fiscal contribution, development banks can be leveraged by placing bonds in the local private capital market, which deepens it.

-What differences does this type of initiative have with programs like Corfo’s? Would they be parallel systems?

I think it would be better to start improving and expanding Corfo, both in volume of resources and in the range of instruments it uses. Afterwards, one could think of moving towards a development bank, built on the basis of Corfo, which, for example, separates risk capital from credit operations, since they require quite different capacities.

-How is this initiative complemented with another central axis, such as generating development with protection of the environment?

An important priority, both for Corfo and an eventual development bank, would be to support, together with private companies, mitigation and adaptation to climate change. This is very important to meet the goals of the COP agreements in Paris and Glasgow. But it will also be key to supporting new private and public investments, as well as jobs in these green activities, which have a great future in Chile. In terms of both the national market, but also the export market. I think green hydrogen, production and processing of lithium, renewable energy should be supported. The detailed discussion of the sectors to support and the best way to do it should also be developed through a dialogue between the government and the private sector, as well as with workers’ representatives..

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Stephany Griffith-Jones, economist: “Boric is what in Europe is called a social democrat”