Horrified at the prospect of yet another Latin American country swerving to the left, traders in London and New York are responding to the victory of Ecuadorean presidential candidate Rafael Correa by selling Ecuadorean bonds. Their fear is that Correa will follow Argentina's example and default on its foreign debt. And why not? The move worked pretty well for Argentina, if not for the foreign holders of that country's bonds.
It's easy to understand the trepidation of the international financial community. But I am utterly befuddled by a paragraph in an article published today in the New York Times analyzing the election results.
Simon Romero writes:
A former finance minister, Mr. Correa wears tailored suits and chats about how North American economists like John Kenneth Galbraith have influenced him. Yet before crowds, he rails against the Bush administration and the International Monetary Fund.
Say what? This is a case where the addition of one small word -- "yet" -- makes the entire passage incomprehensible. John Kenneth Galbraith died in April at the age of 97, so, alas, we can't call him up and ask him what he currently thinks of George W. Bush and the IMF. But we can hazard a pretty good guess.
He would rail against them! The liberal economist, an advisor to three Democratic presidents, was a staunch defender of regulation and government intervention in markets. In his last book, published in 2004, he called Bush (according to William Buckley) "thoughtless" and "dogmatic."
"I never thought I would yearn for Ronald Reagan," Galbraith once told a Canadian television interviewer, referring to President Bush.
As for the IMF and its laissez-faire Washington Consensus prescriptions -- which are largely responsible for Latin America's leftward journey -- one also imagines that Galbraith, who worked on Roosevelt's New Deal as an agricultural economist, wasn't its biggest fan.
One can only boggle when a generally good reporter like Romero sets up a false contradiction as dumb as the above implication that there is some kind of paradox inherent in being influenced by Galbraith but prone to criticizing George Bush. But it speaks to a kind of blindness that affects a lot of "informed" commentary on Latin America. Every day, I read economists bemoaning the policies of Venezuela's Hugo Chavez and Argentina's Nestor Kirchner and Bolivia's Evo Morales. Now add Rafael Correa to the list. And no doubt there are reasons to be concerned, particularly in Venezuela, at what could happen if oil prices drop suddenly. But what is consistently missing in these analyses is an acknowledgment that these leaders are not getting elected by accident. There are reasons why their message is popular, just as there are reasons why Democrats bashing free trade pushed Republicans out of office in the recent U.S. midterms. Economic policies forced on the world by institutions dominated by the United States -- namely, the IMF and the World Bank -- made a big mess. People are angry. And you don't have to wear a bandanna or be a bandolero to express that rage. You can do it in a tailored suit.