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Macroeconomic Cronyism

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A cura di Paul Krugman – My old teacher Rudi Dornbusch — whose presence is sorely missed in this world gone mad — once wrote an influential analysis, with Sebastian Edwards, of what they called macroeconomic populism. This is the historical tendency of some (not all) populist governments to engage in wishful thinking, to believe that they can repeal the usual rules — that they can indefinitely contain inflation in an overheated economy with price controls, that they can ignore limits on capacity, etc..

It’s slightly tricky to talk about this problem in times like these — macroeconomic populism is heterodox economics, but not all heterodox economics is macroeconomic populism; e,g,, capital controls have often been an ultimately destructive attempt to mask underlying reality, but in some cases, like Iceland in recent years, they are just what you need to calm a market panic. But macroeconomic populism in the bad sense has been a real problem in some times and places; it’s clearly part of the mess in Venezuela, and Argentina has, sadly, slid from the useful heterodoxy of its stunning recovery after 2002 to a lot of the old-fashioned vices.

But let’s not talk about Latin America. Instead, let’s talk about Russia. Putin’s thrashing, his evident decision to reject advice from economists who tell him anything he doesn’t want to hear, feel very familiar to me and I’m sure many others who’ve followed Latin America over the decades. Basically, it sounds a lot like good old-fashioned macroeconomic populism.

There is, however, one interesting difference. The stories Dornbusch and Edwards analyzed, the issues of Latin America today, involved governments that really were trying to help the poor and workers with low wages. That is, they really were populist regimes, even if they didn’t end up serving the interests of their constituency. But nobody would call the Putin regime populist; he’s rejecting economics as we know it to defend a kleptocracy, not the downtrodden masses.

Have there been comparable examples? I’m sure there must have been, but I can’t think of them. Malaysia’s imposition of capital controls in 1998 was in part about rescuing its version of oligarchs, but it was actually a reasonable policy given the circumstances, and worked OK. And otherwise I’m coming up blank.

So Putin seems to have brought something new, or at least formerly rare, into the world of economic policy: macroeconomic cronyism, an effort to suspend the laws on economics on behalf, not of the broad populace, but a tiny group of well connected malefactors of great wealth. Innovation!

Fonte: http://krugman.blogs.nytimes.com/2015/02/03/macroeconomic-cronyism/?module=BlogPost-Title&version=Blog Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

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