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Thursday, June 02, 2005

The Argentine Economy: Eduardo Conesa

Eduardo Conesa is an argentine economist (PhD Professor at the University of Buenos Aires) who in 2002 published an economic textbook titled "Macroeconomia y Politica Economica" (Macroeconomics and Political Economy).. His idea was to create an economic textbook that explained economics for Argentines utilizing the example of Argentina (no more having to learn from textbooks utilizing US or european experiences)... I have found the book extremely useful and as a service to Eduardo Conesa and general learning am going to translate some snippets...The book was published by Ediciones Macchi and has the ISBN 950 537 580 8 and it is currently available on amazon here...i think its particularly essential that President Kirchner learn from argentina's economic history if the nation is to avoid repeating the same that growth has returned to the economy there is talk in argentina of raising salaries but i am concerned about the inflationary pressure this could exert..though things have improved since the time of the book's writing i believe the lessons from the past must be learned for once and for all.. argentina has a dangerous habit of reinventing the wheel of economic debacle!..

the Prologue (most of it at least) by Eduardo Conesa reads..

Argentina lived in 2001, and still lives in 2002, the greatest macroeconomic crisis in its history. In the decade of the 90s the citizens were promised quick access to the first world owing to convertibility, privatization, and the partial dollarization of the economy. The promises proved to be a big macroeconomic scam of gigantic proportions like none any other country on the earth's globe had ever lived.

Instead of entering development and the first world we landed in something like the fifth, with unemployment and underemployment around 40%, by far the highest in the world. 49% of the population is below the poverty line. We count with the highest foreign debt in relation to exports of the planet. This debt is seven times that of exports. But at the same time, paradoxically, capital flight, at 6 times exports, is the highest in the world.

In addition, upon reading this book the reader will be able to observe that the argentine economy obeys all the same macroeconomic laws as the rest of the world's countries. There is nothing strange in the argentine macroeconomy. Our "macro" complies with the consumption function, and that of investment, with the elasticity of fiscal receipts with respect to GNP, with the function of monetary demand, with the PHILIPS curve, with the FISHER, with the law of OKUN, and our high unemployment can be very well explained by the appropriate use of the function of production of constant elasticity of SOLOW, CHENERY and others.

The great anomaly that our nation presents consists in that we have a clientelist and, therefore corrupt, State that begs reforming. Other nations that today make up the so called first world in their moment went through the same problem and resolved it. Nothing impedes that we do it. We simply need mental clarity and courage from the top of the political power. Society would welcome these reforms with pleasure.

This book is written from the point of view of the open economy in the era of globalization. Here it is held that there is nothing prejudicial in globalization if the nation counts with its own currency and follows a policy of free and floating exchange rates and low domestic interest rates and fiscal sanity. But we hold that globalization is mortal for developing nations with low fixed exchange rates, a dollarized or semi-dollarized economy with high domestic interest rates and fiscal deficits. In other words, the argentine prescription of the 90s and up to the year 2001 is the surefire path to disaster. This is demonstrated scientifically in this book.

If nations as powerful as the United States or Germany had exposed themselves to the macroeconomic experiments that we Argentines suffered they would have already dissapeared from the map. If Argentina still exists it is because we are without a doubt a great country. In the present book it is explained why these experiments brought us ruin and what we must do in the macroeconomic environment if we are to grow once again and recuperate the status we once held as a great nation.

copyright Eduardo Conesa

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