Jeff Frankel has a piece on what Chile can teach the rest of the world here. The Irish fiscal debate could usefully move in this direction. The piece is also relevant to the thread below on economic expertise, and to broader debates about whether technical expertise in general is useful to policy making, and is sufficiently appreciated and availed of in Ireland.
11 replies on “Chilean lessons”
That is a very interesting piece. Clearly the politicians showed courage in their counter-cyclical measures – but also the piece mentioned institutional rules. The public are not a helpful actor in bubbles, indeed the sneaky politician will give them what they want.
I’m not sure “hard” rules are as easy to apply to Ireland – as we’re not as simple as a copper exporter. Though I do think as a starter : we should have a local “economic & fiscal policy board” that would be charged with giving hard hitting advice. This board would issue punchy, press release style commentary. Obviously a reformed Central Bank could fill this void (their output has tended to be equivocal and grey previously) – but with some outsider economists on the board also.
Compare this counter-cyclical approach to our minister for finance Charlie McCreevy’s self declared approach “When I have money I spend it, when I don’t, I don’t.” Small wonder we are where we are.
Our gamble now, of maximising borrowing in the hope that the world economy recovers is hardly awe inspiring policy. There is a huge property bubble manifesting itself in China. When that blows the market for sovereign debt will become exceedingly strained and the bond market will resemble even more the credit crunched domestic economies that are now the norm. Our short term debt obligations especially NAMA that have to be rolled over are already looking like a gamble to far in my book.
Ah natural resources!!!
We could have saved the taxes from our property bubble so that we could go counter cyclical to give back said taxes to those who paid them in the first place.
What am I not getting…
Al
@Al
As the helpful local once said to the tourist looking for direction, “Well, I wouldn’t start from here..”
The Harvard Business Review has a helpful chart showing where exactly ‘here’ is: http://hbr.org/hb/article_assets/hbr/1001/F1001E_A_large.gif
The amount of red (bailout) in the Ireland circle is worry, but perhaps a little misleading. What is of more concern is the tiny sliver of blue (stimulus).
LRK
Wow
For a small country we stand out!
Punching above our weight again!!
Night
Al
LorcanRK
Brill find! So much info at a glance. But they neglect the 4th diemension: time. Some countries are in depression longer than others. Timing is not everything, unless one has a clear accurate map.
What freets me is the Japan chart. Why so much stimulus, after 20 years?
How accurate can it be given that in many states the info is sensitive etc? The thrust is useful.
Way to hijack the thread!
Kevin O’Rourke
All actors in such scenarios are capable of being captured. As it is unlikely that contagion will originate in Ireland, that is not a major factor here. Contrast with what happened in the USA! Trouble is, people do not like being told what to do. They find ways around it. Chile was cleansed. Fascists killed and tortured until it was clean. None of those pesky radicals who could organize and no foreign agents. Except those who organized it. Wgho are you going to get to cleanse Ireland? It may not be crucial.
A committee of economists expert in what exactly? Very few actually called it in Ireland
despite what was obvious and what had happened in the USA. You seems to be saying that they knew and stayed quiet. What makes you think that unwelcome news will be more welcome if they are being paid to lord it over others, with all the resentment
that will bring?
Even the judiciary have been intimidated into giving away salary. Something I find very disturbing. The end can always be dressed up to justify the means. We will be safe for thirty years as the Kondratieff Winter becomes Spring. Then we will discover how great banking is again. We will have created a world government in all but name by then so the Euro phenomenon will not be relevant?
There is scope for contrarian announcements. One person would be enough and we already know who he is in Ireland. The Romans used a censor, to veto legislaqtion and executive action but when the Emperors took office….
Chile’e economy is dominated by copper mining and soft fruit production. Copper is a highly cyclical industry but predictably so. Soft fruit has a long season due to the north-south length of the country and has a stable market. Norway is the country that is best managing its resource (oil/gas) ups and downs and is also protecting itself from the destruction that rich resource countries are subject to. That is the resource crowds out the rest of the economy, also known as Dutch disease from the Dutch gas glut of the 1960s’.
Ireland in no way resembles Chile or Norway, it does resemble Singapore or Hong Kong prior to annexation or even Switzerland, Denmark or Sweden. I am being kind with my comparisons in the hope that aspiring to elevate ourselves we might one day actually merit comparison with decent company. There are times when I think Nigeria might not be a bad match.
@Kevin O’Rourke
Interesting – good to see the Chileans get a break ……….
“just the sort of structural reform” needed in so many countries where “the politicians have repeatedly proven themselves unable to maintain long-term fiscal discipline.” The former is a good idea for around here – the latter is a fact.
In a previous thread I asked a question, from a non specialist: over the past 20yrs or so how many ‘counter-cyclicals and progressives’ as distinct from ‘procyclicals and regressives’? _ answers in plain man’s language pls ….
@Robert Browne – you beat me to it ………. the fruits of flawed ideology are now only too apparent ……… and unlike Chile, we have to pay through the noze to export such fruits ……… and keep paying.
To be fair to McCreevey he did set up the National Pension Reserve Fund, albeit this was not supposed to be an anti-cyclical policy but rather a pre-funding of liabilities implied by demographic factors.
@ James Conran
“The six years of exceptional Irish inflation coincided almost precisely with the period of Charlie McCreevy’s tenure in that office. His decision to double current public spending between the years 1996 and 2003, (increasing it by an astonishing 36 per cent in the two years between 2000 and 2002), was what sparked off our exceptional inflation.”
Garret at his best (via BO’H from previous thread) …… http://www.irishtimes.com/newspaper/opinion/2010/0123/1224262925732.html
As for the Pension Reserve Fund – it’s been raided to feed the zombies …. they are salivating at the €15 billion still in there …… into the black hole … went the pin-shuns …
Chile is very well used to boom and bust. Copper prices have gone up and down for hundreds of years. So, sensible politicians there figured out that they needed to save a few pesos for the rainy day. Not exactly an automatic Nobel Prize.
Ireland experienced its first ever real boom — 1995-2007. Clearly, Ireland failed miserably in its first stab at managing a boom, but hopefully some lessons have been learned — lessons for the next time. We can always hope.
b