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Joseph Stiglitz, in Caracas, Praises Venezuela’s Economic Policies

Caracas, October 11, 2007 (venezuelanalysis.com) - Nobel Prize winning economist and former vice-president of the World Bank, Joseph Stiglitz, praised Venezuela's economic growth and "positive policies in health and education" during a visit to Caracas on Wednesday.

"Venezuela's economic growth has been very impressive in the last few years," Stiglitz said during his speech at a forum on Strategies for Emerging Markets sponsored by the Bank of Venezuela.

Venezuela, the fourth largest exporter of crude oil to the United States, has experienced the highest economic growth rate in Latin America in recent years, with fifteen successive quarters of expansion and looks set to close the year with 8-9% growth. Despite the high rate of growth, high public spending and increased consumer demand have contributed to inflationary pressures, pushing inflation up to 15.3%, also the highest in Latin America. However, Stiglitz, who won the Nobel Prize for economics in 2001, argued that relatively high inflation isn't necessarily harmful to the economy.

He added that while Venezuela's economic growth has largely been driven by high oil prices, unlike other oil producing countries, Venezuela has taken advantage of the boom in world oil prices to implement policies that benefit its citizens and promote economic development.

"Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the countries oil wealth," he said.

In his latest book "Making Globalization Work," Stiglitz argues that left governments such as in Venezuela, "have frequently been castigated and called ‘populist' because they promote the distribution of benefits of education and health to the poor."

"It is not only important to have sustainable growth," Stiglitz continued during his speech, "but to ensure the best distribution of economic growth, for the benefit of all citizens."

Although Stiglitz praised Venezuela's "positive policies" in areas of health and education and policies to promote economic diversification, he assured that Venezuela still faces the challenge of overcoming structural problems associated with an economy overwhelmingly geared towards oil production.

In terms of economic development Stiglitz argued it was not good for the Central Bank to have "excessive" autonomy. Chavez's proposed constitutional reforms, if approved in December, will remove the autonomy of the country's Central Bank.

However, Stiglitz claimed, developing nations must strike a balance between public and private control of the market.

"The key to success is to find the correct equilibrium between the private sector and the government, which is different for each nation," he said.

Stiglitz also welcomed Venezuela's initiative to create the Bank of the South; due to be founded in Caracas on November 3, saying it would benefit the countries of South America and boost development.

"One of the advantages of having a Bank of the South is that it would reflect the perspectives of those in the South," said Stiglitz, whereas, he argued, the World Bank and International Monetary Fund often impose conditions that "hinder the development effectiveness."

Stiglitz also criticized the "Washington Consensus" of implementing neo-liberal policies in Latin America, in particular the US free trade agreements with Colombia and other countries, saying they failed to bring benefits to the peoples of those countries.

The Washington Consensus "is undermining the Andean cooperation, and it is part of the American strategy of divide and conquer, a strategy trying to get as much of the benefits for American companies," and little for developing countries, he said.

Stiglitz also met with Venezuelan President Hugo Chavez in Miraflores, where they exchanged points of view on the global economic situation, economic indicators and the behavior of world markets.

 

*Stiglitz quotes translated from Spanish

Published on Oct 11th 2007 at 8.45pm