## Thursday, February 9, 2012

### Intercambio de correos electrónicos con Jayati Ghosh por su artículo "Could Ecuador be the most radical and exciting place on Earth?"

Este post reproduce completamente el intercambio de correos electrónicos con Jayati Ghosh y los miembros del consejo editorial del diario inglés The Guardian, en relación al artículo de opinión "Could Ecuador be the most radical and exciting place on Earth?".

Envié la primera carta en Enero 31, 2012 al editor de opinión de The Guardian (letters@theguardian.com) con copia a Jayati Ghosh. Su texto se reproduce a continuación:

In her op-ed of January 19, 2012 called “Could Ecuador be the most radical and exciting place on Earth?,” Dr. Ghosh not only describes Ecuadorian’s economic policies under President Correa’s mandate, but also praises these policies calling for the rest of the world to learn from this “ongoing radical experiment” since “what is happening in Ecuador provides inspiration and even guidance.”

It is academically sloppy analyzing these policies without offering measures of their impact. Moreover, even if Dr. Ghosh offered measures of the economic and social improvements after the implementation of these policies, which could look good, a question that remains is: are these improvements as good as they should be in comparison with the huge extraordinary fiscal resources available given the high oil prices of the last five years? If Dr. Ghosh had checked the evolution of oil prices and the growth of the non-oil economic activity after 2007, when President Correa’s administration started, she could have seen how the performance of the non-oil economy is getting more and more linked to the evolution of oil prices. (Figure here) (For those who are familiar with statistics, the correlation between oil prices and non-oil economic activity growth is close to zero before 2007 and about 0.8 after that year.) Hence, it is not accurate saying that over the last five years Ecuador has been “diversifying the economy to reduce dependence on oil exports.”

I won’t go over the administration’s limitations to constitutional freedoms of speech and opinion that have raised red flags at the Inter-American Commission on Human Rights; or the changes in election rules less than a year before the 2013 elections that implement D’Hondt’s method (which favors large parties and coalitions over scattered small parties), and the changes that forbid the media to broadcast any news or documentaries that “could influence elector’s choices” 45 days before the election day.

Finally, with respect to Dr. Ghosh’s claim about the world learning from President Correa’s policies in Ecuador, it is disappointing that an academic like her does not take into consideration the rigor of the scientific method: her empirical evidence is a single country. A scientific knows that, to draw inference, she must have a set of observations that allows her to acquire new knowledge, and Dr. Ghosh has only a single observation. Therefore, more than being a scientific conclusion, her recommendation is only an opinion that bears no consequence.

Ella respondió casi inmediatamente con copia a dos personas más del diario (Libby Brooks y  Jaz Cummins). El texto de su respuesta se reproduce a continuación:

Dear ----------------------,

Thank you for your response. Let me reply by noting our areas of agreement and disagreement.

1.       I think the most important point to note is the direction of change in economic policies – is it one that benefits the bulk of the citizenry in terms of providing better access to food, housing, health and education; one that seeks to improve employment conditions and provide a more stable and environmentally sustainable pattern of growth? I think you must agree that compared to the past in Ecuador, this is clearly the case, even though we may not be satisfied with the pace of change or indeed all the individual elements of that change.

2.      On oil prices and their role, of course Ecuador has benefited from oil rents. But oil exports alone do not guarantee much economic progress, as the obvious example of Nigeria shows among many others. The presence of natural resources can even generate opposite outcomes, associated with the “resource curse”, as high export prices generate “Dutch disease” effects that discourage diversification of production, and the economic rents from these resources are appropriated by a small minority of the population. Indeed, until recently, Ecuador displayed both of these tendencies quite sharply. It is not the presence of oil resources per se, but rather the recent ability of the government to transform the nature of control over oil by increasing its own share of royalties, and to use these rents for improving material conditions for the population as a whole, which is at the heart of the improved performance.

3.      I had noted that there were measures that were aimed at diversifying the economy away from oil dependence – surely this is a desirable goal and one that you also would agree with? That these measures have not yielded immediate fruit is hardly surprising – there is no economy I can think of where his is possible in such a short time frame. Rather, the idea is to put in place public and other investments in infrastructure as well as other enabling conditions that would allow a diversification over time, particularly when such oil revenues are no longer available.

4.      I am not sufficiently familiar with the detailed politics to go into a discussion of the government’s attempts at media management. However, I will note that it is interesting to see that this particular feature (and indeed, one particular libel case in which a newspaper was found guilty by the court and three people have been jailed) is what gets the most exposure in the Northern media, so much that many even well-meaning people in the USA for example (among those I have interacted with) have no idea that there are any other things happening in Ecuador other than state attempts to “muzzle press freedom”. In fact, when I visited Ecuador I noticed that all the Spanish language newspapers I saw (and the little of the television news that I could understand) was openly and extremely critical of both the President and the government, often to the point of being defamatory, so they are clearly not muzzled. Since the private media are generally controlled by three big business houses, that is probably not surprising. But it is surprising that liberals to choose to get excited about this are much more silent about far more blatant and aggressive methods to silence journalists in other countries. In Turkey, for example, hundreds of journalists and academics have been jailed for years without trial, but since that regime is seen as economically neoliberal and an ally of the US, there is scarcely any mention in the supposedly free media of the US.

5.      Finally, on whether Ecuador can be seen as an example. I would remind you that examples do not emerge from cross-section analyses, they are necessarily single cases. And what I find most interesting about Ecuador is not even the ability to derive progressive benefit from the oil rents, but the ability of the government to take on the domestic bourgeoisie in the effort to improve living conditions of the people in general. Clearly, despite continuing global turmoil and domestic pulls and pushes, much can be done after all. Tax revenues can be increased, by enforcing proper tax collection and cracking down on evasion. Big companies – both domestic and multinational – can be disciplined, without adversely affecting investment or GDP growth. The increased public revenues can be used for more public provision in necessary areas to ensure the social and economic rights of citizens. Labour rights and social security for all citizens can be fought for and sought to be provided. These provide important cases for other small developing countries to learn from.

Of course, there is always room for more nuanced and shaded interpretations of any reality, and I do no attempt to provide a comprehensive picture (which in any case cannot be done in a short article). But I really do believe that we should highlight cases of progressive change and see what we can learn from them, rather than carping about small details and trying to make out that everything is still the same everywhere.

With best wishes,

Jayati

Finalmente, yo le respondí con la carta que aparece a continuación:

Dear Dr. Ghosh,

Thank you for your prompt reply. I would not like to make of this email exchange an endless situation, but a few things need to be pointed out.

Let me start with your last point, which is one of my main criticisms to your arguments. If Ecuador is just an example, then its economic policies cannot be applied anywhere else: You ought to agree that there is no country out there equal to Ecuador. That is why, from a scientific standpoint, recommending this set of policies, in case they actually work, could only be feasible and adequate for Ecuador.

Most of your arguments mention the desirability of the policies that Ecuador is implementing per se, but you do very little at providing evidence that these policies are actually working or that they would be sustainable in the long run. How can you argue for the benefits of these policies without having a metric of their impact? As an economist you ought to agree that, given the limited nature of economic resources, the analysis of an initiative has to be done in terms of its efficiency. Before January of 2007 oil prices averaged $30.5/barrel (from 2000), while during President Correa’s administration they have averaged$72/barrel. Obviously this has implied more government investment and consumption compared to the past in Ecuador. The question that needs to be answered, before praising President Correa’s policies, is if the improvements in economic and social conditions have been or will be according to the resources spent.

Related to this point is the fact that the Ecuadorian economy has become more and more linked (to not say dependent) to the price of oil. You also ought to agree that policies whose funding relies on a commodity price cannot be sustainable and should not be formulated in those terms. As I have shown, the growth of the non-oil economic activity has become more and more correlated with oil prices since 2007 when President Correa started his mandate. That means that a moderate shock to oil prices will ruin any public policy plans, and the economy in general, as it happened in 2009 when oil prices dropped and the government had to stop several of its projects. Is that what you are recommending for a country rich in natural resources? I am pretty sure that you know how Chile manages its resources from copper exports, or how Norway does it with oil. These countries try to reinforce their economies to prevent that external shocks affect them by saving any extraordinary financial flows from their natural resources. For a country like Ecuador, this should be part of the macro-prudential policies that are becoming more and more popular around the world after the global financial crisis. Besides, this is precisely the way to avoid the effects of the ‘Dutch disease’ that you cite. After 5 years very little has been done to change the extractivist nature of our economy, especially since the ideology of the administration is to not sign trade agreements with Europe or the United States (the focus is being put to trade with Iran, Libya, Mercosur and markets that don’t represent any relative comparative advantage to Ecuador.)

It is true that people now have access to free health services, free education (even college education, which should not be free given the well known private return of college education), subsidized housing and better roads. But, besides the roads, all the mentioned services are still deficient. Premature babies die in public hospitals by the dozens due to poor sanitary conditions; people avoid K-12 public education, which is the only alternative for those who don’t have the means to pay for private education; government-provided housing is still lower compared to previous administrations. Don’t you think that 5 years is enough to make these things work at a decent level, especially after all the fiscal resources that were spent in these fields?

It is regrettable that you pretend to justify any limitations to human rights of speech and/or opinion in Ecuador by arguing about how things are similar in “neoliberal” countries. Two wrongs don’t make a right. Just to clarify who the owners of the TV media in Ecuador are: Out of the 6 major TV stations, the government owns 2 confiscated to bankers. In addition to that, the government owns 3 other TV stations, 4 radio stations, 3 newspapers, 4 magazines, and one news agency. All of these in a country of 14 million people.

Given that you are not sufficiently familiar with the government’s attempts at media censorship, I leave you this video that was presented at the Inter-American Commission on Human Rights: http://youtu.be/zVgaSDSQdMg

I also leave you with three articles:

“Ecuadorean President Rafael Correa’s assault on media freedom” Washington Post http://tinyurl.com/7sjockm
“An Assault on Democracy” The New York Times http://tinyurl.com/77awyor

I agree that my country needed to redirect focus towards social programs, and that is what any developing economy should do in order to achieve social stability. However, the way in which this is being done in Ecuador cannot serve as an example to the rest of the world. If you, Dr. Ghosh, think that I am wrong, please show me scientific evidence to contradict me. Otherwise, your statements will be on dogmatic grounds, in which case any academic debate will be futile.

Best Regards,

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