Stiglitz, Argentina and the "Libertarians"

[RangerCat67 at aol.com]

What I meant to ask was whether Lindsey had a point in these two paragraphs. 
When he says that Argentina's exports were actually increasing in 2000 and 
2001 (in absolute terms and as a percentage of GDP), is he correct and, if 
so, by how much? It seems that, given the depths of Argentina's recession at 
that point, an increase in exports would be an improvement begun from a very 
low baseline. I'm wondering if the Cato Institute (which does some pretty 
sloppy work) took inflation and other factors into account when coming up 
with the 23.3 and 26.7 billion peso figures for 2000 and 2001, respectively, 
and if the increase in exports as a share of GDP doesn't really reflect the 
decline in local businesses and revenues for public spending programs drying 
up as the recession worsened. 

<< Stiglitz's explanation flies in the face of some very basic facts. 

 Argentina's trade deficit shrank, not grew, shrank in 1999 after the 

 Brazilian crisis. Meanwhile, in 2000 and 2001, Argentina actually ran a 
trade 

 surplus and exports were increasing. Massive trade deficits didn't cause 

 capital outflows because there were no massive trade deficits. Likewise, 

 weakened exports due to an overvalued exchange rate didn't wreck the economy 

 because exports didn't weaken. Exports in goods rose in 2000 and 2001, 

 climbing from 23.3 billion pesos in 1999 to 26.7 billion pesos in 2001. 

 Exports were equal to 8.9 percent of GDP in 1998, before Brazil's currency 

 collapse; they stood at 9.8 percent of GDP in 2001. (See this Cato Institute 

 paper by Kurt Schuler for the stat's I've cited.)

 

 So what really happened in Argentina? Fiscal deficits, not trade deficits, 

 were what drove up Argentina's foreign debt. Government spending grew 
rapidly 

 during the second half of the 1990s, while an anti-growth tax system did a 

 poor job of pulling in revenue. As the economy tanked after Brazil's crash, 

 the new de la Rua administration responded with tax increases and 
undermining 

 the fixed rate (by proposing a shift from a straight dollar peg to a 

 dollar-euro peg). The inevitable devaluation would have been survivable if 
it 

 had been done sooner and the fixed rate had been maintained. Instead, the 

 government dropped the fixed rate, attempted to "pesofy" outstanding 

 dollar-denominated debts, and ended up completely wrecking what had been a 

 fairly healthy financial system. The current meltdown is the result.

  >>