Peru Experiencing the Benefits of Sound Public Policy While We Suffer for Bush’s Mistakes
Palacio Legislativo in Lima, Peru (wikimedia)
Daniel Gross offers an interesting look at Peru, a country that’s weathering the recession fairly well thanks to sound policy:
In the latter half of 2008, being a poor, export-dependent, commodity-producing country set you up for a vicious downturn. But Peru has weathered the storm, in large part because President Alan García, an old leftist turned center-leftist, and the Peruvian central bank have proved adept at a set of capabilities notably lacking in the United States in recent years: sound fiscal and financial management. Fearful of a return of hyperinflation amid rapid growth, Peru’s central bank raised interest rates throughout 2008. Instead of spending the foreign currency that piled up on its books ($32 billion at the end of 2008), the government saved it. In 2008, Peru ran a $3.3 billion budget surplus.
And so, when troubles came, it was able to respond in textbook fashion. In December 2008, García announced a stimulus program, promising to boost government spending by $3.2 billion, and to take up to $10 billion in further measures. The total of $13 billion in promised stimulus doesn’t sound like much, but that’s equal to about 10 percent of Peru’s GDP. (By contrast, the big stimulus package Congress passed in February was about 5 percent of U.S. GDP.) The central bank’s 2008 vigilance against inflation left it with plenty of room to cut rates. So far this year, it has reduced the benchmark lending rate from 6.5 percent to 2 percent.
Peru’s economy took a hit in the first half of 2009 but never stopped growing. This even though commodity-exporters tend to get hammered by recessions even when they d>o everything right, and even though stimulus efforts tend to be less effective in small countries (more “leakage” of funds outside your borders) than in large ones. Recall that the United States could have been in a position to do this were it not for the fact that George W. Bush was a very bad president and a shockingly large number of bad members of congress from both parties chose to embrace his terrible ideas about public policy.
Had we left taxes where they were when Bush was inaugurated and refrained from invading Iraq, we would have been running substantial budget surpluses and done a good deal to pay down the national debt. Thus, when a big recession hit we would have been in a position to do a stimulus program that was much larger than the American Reinvestment and Recovery Act (meeting liberal objections to ARRA) while also keeping our debt-to-GDP ratio lower than it is (meeting conservative objections to ARRA). Millions of currently unemployed people could, instead, be employed.
55 Responses to “Peru Experiencing the Benefits of Sound Public Policy While We Suffer for Bush’s Mistakes”
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July 29th, 2009 at 11:37 am
It can’t be emphasized too much: Bush was a very bad president and cowards on both sides of the aisle either embraced without urging or were easily cowed into embracing his terrible, toxic ideas. For 8 years this crap went on. We were left at Bush’s departure like the moving van at the end of the Michael Caine version of “The Italian Job”.
July 29th, 2009 at 11:46 am
It’s rather intriguing to compare America with some third-rate second-world Latin American banana republic, but Peru is an especially interesting case, as it is, for all intents and purposes, a Canadian economic colony. Canadian banks and mining companies dominate the respective Peruvian sectors, which in turn dominate the country’s macro economy.
So, a terrible comparison.
July 29th, 2009 at 11:48 am
When you add in that the amount of tax savings to the top decile approximated the inflows into hedge funds you can see the outline of our problem quite well.
Still it is just too easy to blame it all on Bush or his tax cuts. The structural elements that lead to the credit bubble were all there before Bush. The XX trillion dollar addition to the financial sphere was just a shot of nitrous to already overpowered supercharged V8.
July 29th, 2009 at 11:48 am
“It’s rather intriguing to compare America with some third-rate second-world Latin American banana republic since Bush did his damndest to turn us into exactly that.”
There, fixed that for you.
July 29th, 2009 at 11:48 am
SO basically, we could have been like Peru if we were a structurally sound country without a hystory system corruption.
Basically, we couldn’t have been Peru. The country you’re talking about isn’t America. If GWB hasn’t spent all the money on tax cuts, Congress would have eventually doled it out to it’s campaign contributors.
July 29th, 2009 at 11:53 am
Chile also has a major long-standing budget surplus ($4 billion, last I checked) in a “rainy-day fund.” This year brought the first day rainy enough to raid it for stimulus funds, but only 20% of the amount. It’s a reassuring feeling to have a second line of defense for more stimulus, if it’s needed, compared to the U.S.’s (necessary) response of using up everything they had, and then some. But then, there are some advantages to not being the biggest fish in the pond.
July 29th, 2009 at 11:57 am
Right. Except that Bolivia didn’t do all those things and is growing faster than Peru. (And, needless to say, it’s not a left-right thing – Panama is also growing faster than Peru and has had a centrist government.)
July 29th, 2009 at 11:58 am
For years, as leftists won elections throughout South America, the conservative American media – National Review, Weekly Standard, Wall Street Journal – were full of stories about how their crank economic ideas were going to lead to economic collapse.
Yeah, how dare we compare ourselves to Peru?
July 29th, 2009 at 12:00 pm
Of course, during that same period, those same organs were fretting about deflation, and insisting that interest rates need to be kept low to ward it off.
This was during 2004-2007 – you know, while the bubble was reaching critical mass.
July 29th, 2009 at 12:03 pm
I think by that just leaving taxes where they were where Bush was inaugarated and refrained from invading Iraq would not have been enough. There are also the costs of programs enacted during the Bush administration (like the Medicare prescription drug program which is the major one) and the war in Afghanistan (which assuming we did not invade Iraq we would have put more resources into). What we should have done in terms of Afghanistan is pass some kind of Patriot tax (on gas or something like that) and ask people to help pay for in an effort to make some kind of sacrifice for the war effort. But it is true that Bush had it within his power to keep us running a budget surplus.
July 29th, 2009 at 12:11 pm
If GWB hasn’t spent all the money on tax cuts, Congress would have eventually doled it out to it’s campaign contributors.
Except they didn’t when they had the chance.
July 29th, 2009 at 12:15 pm
Thus, when a big recession hit we would have been in a position to do a stimulus program that was much larger than the American Reinvestment and Recovery Act (meeting liberal objections to ARRA) while also keeping our debt-to-GDP ratio lower than it is (meeting conservative objections to ARRA). Millions of currently unemployed people could, instead, be employed.
Of course, when the recession hit, we also could have chosen to do a stimulus program that actually stimulted. Instead, Obama and the Democrats chose a pork-barrell spending plan that hasn’t and won’t spend most of the money this year, and thus hasn’t and won’t stimultate this year.
If Obama and the Democrats had chosen that type of stimulus plan, as the Republicans were advocating, millions of currently unemployed people could, instead, be employed.
July 29th, 2009 at 12:18 pm
Not everything in Peru is rosy. Apparently, soccer players are getting the shaft.
http://www.nytimes.com/2009/07/26/sports/soccer/26sportsbriefs-Peru.html
The United States may not be Peru’s equal in fiscal discipline and ability to respond to “the crisis” with adequate stimulus, but the US has the 12th rated soccer team in the world, while soccer mad Peru is a lowly 86th. And, our players get paid.
Take that Peru.
July 29th, 2009 at 12:51 pm
I seem to remember Spain electing a centre-left government right in the middle of the Bush years as a general repudidiation of the previous government’s similar views on domestic matters as Bush (and of course the specific repudiation of the alliance with Bush on a particular international issue).
How did they weather the downturn?
July 29th, 2009 at 12:54 pm
Of course being the U.S. we did not really need to save up in order to undertake vast stimulus spending. Do you really think the stimulus would have been larger if the debt had been smaller?
So long as the official line is that the Fed has all the tools and skill necessary for its exit strategy, no sound policy needed, and we can always postpone till tomorrow this theoretical fiscal and monetary pain in order to keep money flowing today.
July 29th, 2009 at 12:55 pm
If Obama and the Democrats had chosen that type of stimulus plan, as the Republicans were advocating, millions of currently unemployed people could, instead, be employed.
As I recall, the stimulus plan Republicans were advocating was 100% tax cuts. In fact 36 Republican Senators voted for this plan, that did not contain a single dime of stimulus that wasn’t a tax cut. No funding for any projects whatsoever. And with the exception of the payroll tax, they weren’t even particularly stimulative tax cuts.
So please do let us know exactly how this alternative would have produced *millions* of new jobs. I’d love to hear this one.
July 29th, 2009 at 1:06 pm
Conservatives since Reagan are never Keynesians, even during periods of strong growth (when the government should be running a surplus, according to Keynes).
July 29th, 2009 at 1:09 pm
Heh. OK people, let’s look at the graph again with emphasis on the revenue line.
The first thing to note is the dropoff in revenue at the 2000 line. I have to assume this starts at Jan 1, 2000 and the last full year of the Clinton administration. That would also mean a recession had started in Clinton’s term, and higher tax rates along with the surplus, quit working.
Interestingly, the Bush tax cuts didn’t kick in until 2003 which would correspond to the halt of the revenue dropoff, and subsequent rise. How interesting!
Then of course we plateau right around the Medicare Drug act and the height of the Iraq war, and start the real dropoff at the onset of the banking crisis, instigated by Rubin, Graham, Greenspan, and misc other Democrats like Barney Frank.
Which brings us to today and a 2009 deficit that will be larger than all the deficits in Bush’s first seven years. Feel free to ignore the projections, the worst is yet to come.
So the moral of the graph is that
1. Clinton tax rates didn’t prevent recession.
2. Bush tax cuts didn’t prevent the surplus.
3. Bush tax cuts did grow the economy and bring in more money,
4. But didn’t overcome bad policies and excess spending.
5. If the Bush deficits put us in a hole, the Obama deficits will bury us six feet under.
6. No amount of stimulus can make up for the size of the deficit, and lastly….
7. You can “stimulate” until the cows come home, but if nobody believes it will work, it is wasted money.
July 29th, 2009 at 1:14 pm
Er, Alan Garcia also carried out the mass butchery of 50 indigenous protesters in the Amazon earlier this year, some members of his cabinet resigned, and the far-left opposition is calling for a revolution. I would hardly call Mr. Garcia either a man of the Left, or the guarantor of progress and stability. It will only be a matter of time before Colonel Humala is the next leader of Peru.
July 29th, 2009 at 2:08 pm
Yglesias actually gets paid to write this idiocy? Who did he sleep with to get this job?
July 29th, 2009 at 2:15 pm
the Bush fellow: el jerk type, no doubt
but…
price of copper (the Peruvian ones’ leading export) higher and higher, maybe suspiciously so
July 29th, 2009 at 2:52 pm
That’s pretty much exactly right, Matt. Of course, over those eight years of Bush cretinism, other things would have had to have been done. The Federal government obviously needed to be enormously extended. State government authority needed to be cut back. The financial markets needed to be heavily regulated. Disincentives in the form of punitive taxes should have helped cut down the compensation of the corporate upper management. Laws needed to be changed to allow unionization on a new scale. The U.S. should certainly have recognized Iran, and had a full embassy in Teheran by 2003. And of course the Government should have gone full tilt into creating Environmentally sound R and D – over that eight years, I think they should have spend about a trillion dollars.
July 29th, 2009 at 3:56 pm
@ shooter242:
I only pretend to understand economics, but your claim seems to present a false choice. To paraphrase, you are equating the reduction in taxes as creating economic growth that resulted in an increase in government revenue. However, that would only be true if you can show that but for taxes remaining constant, revenue would have decreased or remained static – which, I don’t think you can. Put another way, you’ve stated an obvious point, with little impact on the discussion: that government revenues increase when GDP growth increases.
It seems to me that the proper analysis of what effect tax cuts have on GDP and revenues is to compare results, say for example Clinton’s term and Bush’s term. Otherwise, what your noting is two phenomenon (reduced taxes and revenue increasing over time), but have not shown any causality or that, in fact, the result was caused by tax cuts.
Perhaps I’ve read more into your post than you intended, but it sounds substantially similar to the conservative argument that decreasing taxes will increase the amount of tax collected by the government (by generating more growth) – something that the facts do not bear out.
July 29th, 2009 at 4:47 pm
Responding to Hector:
You forget to mention that the indigenous protests arose because Garcia wanted to essentially sell parts of the Amazon to oil companies. That honestly sounds like something Bush would do if he were running Peru…and yet we’re lauding Garcia?
The macro numbers in Peru are pretty deceptive, unless you’re looking at education, poverty rates, etc. in which you see that all is not as rosy as some would like to believe. This is a pretty crappy post I gotta say.
July 29th, 2009 at 5:27 pm
@ Indy Reader
Actually, it’s already been noted. Do you see the downward slope for revenue from 2000, 2001, and 2002? 2000 is Clinton Rates, 2001 is Clinton rates minus .5%, and 2002 minus another .5%
The notorious reduction to 35% at the top doesn’t actually occur until paying 2003’s income in April 2004. And as you can plainly see that’s the period of bottoming and rising up again.
It’s not hard to understand if you consider the health of the economy to be dependent on future expectations. Clinton was tripped up by the anxiety of Y2K being dissipated, and then Bush by 9/11. But by being business friendly via taxes and interest rates, business took off. Business expected the future to be stable and conducive.
On the other hand Obama is business negative. He wants more taxes, more regulation, and more control. Business has no idea what is coming next, but they know it’s bad for them. Being defensive or being gone is all business can do, and that kills jobs and tax revenues.
But it didn’t have to be this way. Demonizing a class can be milked for political gain but eventually you need all classes together to thrive. That is the practical reality. The left didn’t need to bash rich people, who for the most part are the real producers of business and it’s benefits. But they did, and those with options are rearranging their lives to minimize increasing obligations from Government. Corporations are still made of human beings that react to their environment. It’s only natural.
July 29th, 2009 at 5:53 pm
Er, Alan Garcia also carried out the mass butchery of 50 indigenous protesters in the Amazon earlier this year, some members of his cabinet resigned, and the far-left opposition is calling for a revolution. I would hardly call Mr. Garcia either a man of the Left, or the guarantor of progress and stability. It will only be a matter of time before Colonel Humala is the next leader of Peru.
Hector, not in any way to defend what happened to those protestors, but Garcia is delivering relative prosperity to tens of millions of Peruvians at a time when the rest of the world is in deep trouble. That’s extremely impressive.
And the reality is that Humala is not popular, leftist insurgencies in Peru are not popular (Sendero and the MRTA basically poisoned a generation of potential supporters with their tactics), and Hugo Chavez– Humala’s sponsor– is REALLY unpopular there.
Bear in mind, Humala has little to offer Limenos (his support is all in the provinces) and there was a huge population shift as folks from the provinces fled both terrorism and Fujimori’s goon squads and took up residence in the pueblos jovenes around Lima. They are much more receptive to, say, Hernando de Soto’s proposals to give squatters title to their land than they are in a rural peasant insurgency at this point.
So sorry, Hector, you aren’t going to see your peasant revolution. The APRA is what passes for the left in Peru these days, and given that it is delivering results, I don’t see that changing.
Lastly, the blots on Alan Garcia’s human rights record doesn’t hold a candle to Fujimori’s, and I suspect (though I wish this was not the case) that there isn’t going to be a lot of popular concern about it unless and until it does.
July 29th, 2009 at 6:21 pm
Re: Millions of currently unemployed people could, instead, be employed.
The devil would still be very much in the details. Last year employers went on an irrational firing binge, from panic and hysteria initially, not because they had to. The result of course is that demand collapsed and millions more had to be laid off. I could have snowed golden ducats for Christmas and I doubt things would have changed much on the employment front. I’m increasingly of the mind that direct public employment of the long-term unemployed may be what’s needed now.
July 29th, 2009 at 6:32 pm
A. You misspelled Phill Gramm’s name.
B. Neither Phil Gramm nor Alan Greenspan are Democrats.
C. You are a propaganda victim.
July 29th, 2009 at 6:58 pm
Neither Phil Gramm nor Alan Greenspan are Democrats.
Maybe this explains republican ideological intransigence in the face of reality based feedback. If it turns out that 50% of democrats are actually republicans, then the GOP currently controls the senate 70-30. You can’t argue with that sort of mandate!
July 29th, 2009 at 7:13 pm
My apologies to one and all, my post should read …
July 29th, 2009 at 7:33 pm
Re: And the reality is that Humala is not popular, leftist insurgencies in Peru are not popular (Sendero and the MRTA basically poisoned a generation of potential supporters with their tactics), and Hugo Chavez– Humala’s sponsor– is REALLY unpopular there
Dilan,
1) Humala is no more a creation of Venezuela than Mousavi is a creation of the Americans. Humala’s movement is an autochthonous Peruvian movement, and if Chavez had never existed it would still be around. Hell, Humala and his brothers went into the military in the 1980s _expressly_ with the intention of someday leading a left wing coup. Their father instilled them with revolutionary though from young adulthood. The penchant of some to attribute all developments in Latin America to external forces- Britain, America, Soviet Russia, Fascist Spain, Cuba and now Venezuela- is an old one but no more correct now then it was then.
2) Humala has absolutely nothing to do with the Shining Path. Indeed, one of the criticisms against him is that he committed human rights abuses in the 1980s while he was engaged in fighting the Shining Path and MRTA. Humala models himself after his idol General Velasco, and Velasco made his mark by crushing the Cuban-backed communist guerrillas in the mountains before leading the left-wing coup in 1968. Indeed, Velasco’s regime is known as one of the prototypical examples of a military-led ‘revolution from above’, in contrast to the typical Marxist idea of ‘revolution from below’. So no, Humala has _nothing_ in common with the Shining Path except that they’re both left-wing authoritarians, and each of them would have gladly cut the throat of the other back in the day.
3) Did you notice that Garcia’s approval ratings were down to 21% after he shot those protestors? Humala, on the other hand, was an upstart who came from nowhere in 2006 to win 47% of the vote in a very tight race, and he was leading at various points during the race. Garcia has lost a lot of support, and there’s no telling what may happen in 2011.
4) APRA hasn’t seriously been regarded as a party of the Left since the 1960s or even before. Velasco hated the APRA and accused them of being, essentially, bourgeois hipsters, and there was a significant left-wing political opposition to APRA even during Garcia’s first term. A movement that wins 47% of the vote does not count as ‘Nothing to the left of APRA”. Remember, Haya de la Torre explicitly founded the APRA as a party of “Non-Socialist” revolution.
5) Venezuela, as of yet, is also not in recession and has a lower unemployment rate than the United States. Peru is hardly unique in that regard.
6) Peru’s current economic stability (and for that matter Venezuela’s too) are not going to last. Recession is coming for South America, and when it does at least the poor in Venezuela will have Mercal to rely on- the poor in Peru will be left to get angrier and angrier at APRA. Economies move in cycles- the Peruvian economy will sink into recession again sooner of later, and when it does, Garcia will fall, and be lucky to hop a plane to Miami, the city where Latin American oligarchs go to die.
7) Most Peruvians don’t live in Lima, and the birth rate in the areas that favor Humala is higher than the birth rate in areas that favor Garcia. Demographics is on our side, and we will bury you.
July 29th, 2009 at 9:43 pm
Shooter take your head out of the propagana sandbox long enough to realize why tax revenue fell in 2001-02.
Need to phone a friend? I’d suggest Rudy Giuliani, no matter question you ask him he should be able to help you figure it out.
July 29th, 2009 at 9:58 pm
Hector:
1. Humala is known in Peru as “La Chola de Chavez”. I won’t translate that for you, ask a Peruvian to.
2. I never said Humala had anything to do with Sendero. I said that Sendero and the MRTA gave the Peruvian left (and especially the insurgent Peruvian left) a very bad name, and for that reason (and the fact that many of Velasco’s constituents and supporters moved from the provinces to Lima in the 1980’s during the guerilla wars and changed their outlooks a lot) means that Humala cannot become sufficiently popular to succeed with his insurgency.
3. Nobody ever said Garcia was popular. Indeed, you have the entire election bass-ackward. Humala was such an unpopular candidate that he couldn’t even beat the guy who was the most unpopular elected President in Peruvian history (having been blamed, rightly or wrongly, for the terrorism and hyperinflation).
Don’t compare Humala’s vote count to Garcia’s popularity ratings. Vote counts and polls are two different things. Garcia against an undesirable alternative polls a lot better than Garcia against himself.
4. Don’t judge what “the left” is by looking at Velasco. Peru is very, very different now than it was when Velasco came to power. As I said, there are a heck of a lot more people living in Lima, and less in the provinces, for one thing. And the experience of leftist terrorism changed the populace’s attitudes towards the left.
At this point in time, the APRA is a left-wing party by Peruvian standards. The right wing did not support Garcia’s stimulus measures and social spending to fight the recession. It did not support Garcia’s continuation of Toledo’s policies with regard to prosecuting former Fujimori officials and Fujimori himself. The right wing in Peru is represented by Lourdes Flores. Garcia is as left as is electable in Peru at this point.
5. Venezuela is a time-bomb, and I say this as someone who thinks Chavez’s redistribution was basically necessary and a good thing. Seriously, the best article on this was Tina Rosenberg’s in the New York Times Magazine a year ago. You might look it up. Venezuela has run through its oil money and is on the verge of a big inflationary-recessionary spiral. It isn’t looking good and it’s basically a matter of how long Chavez can keep the thing from falling apart. Chavez is very good at fighting poverty in the present but was very shortsighted with respect to conserving the nation’s resources for the future.
In any event, Peru’s growth rate is much higher than Venezuela’s right now. And Garcia’s policies, unlike Chavez’s, contain no time-bombs.
6. Recession has come to South America. I was just in Argentina and can attest to this. But Peru’s doing better than the rest of the continent. That was Yglesias’ point.
7. Hector– what part of “millions of people moved from the provinces to the pueblos jovenes surrounding Lima fleeing terrorism” don’t you understand?
I don’t know where you decided that Juan Valasco was the ideal socialist or something, but Peru has changed and you are living in the past. Terrorism changed the country, I happen to know quite a bit about what life was like for Peruvians during the years when Sendero was active, and whatever Velasco may have achieved (which, even in its own time, was upturned by Morales Burmudez) isn’t achievable now.
One last thing. Don’t even think the provinces are all monolithic Humala supporters. You do realize that the political situations in Arequipa, Iquitos, Cuzco, Puno, Ayacucho, Trujillo, and Tacna are all insanely different, don’t you? I suspect if you wore your Humala shirt in the Plaza de Armas in Arequipa, for instance, people would look at you VERY suspiciously.
July 29th, 2009 at 10:34 pm
Of course, during that same period, those same organs were fretting about deflation, and insisting that interest rates need to be kept low to ward it off.
This was during 2004-2007 – you know, while the bubble was reaching critical mass.
You have to give the Austrians credit on this. We spoke out against ultra-low interest rates and warned that they would cause a bubble back then. That’s one area where we were at loggerheads with the Chicago-schoolite GOP.
July 29th, 2009 at 11:29 pm
You have to give the Austrians credit on this. We spoke out against ultra-low interest rates and warned that they would cause a bubble back then.
At best (i.e., even if we accept your premises), the Austrians being right falls into the category of a broken clock being right twice a day.
July 30th, 2009 at 2:00 am
lol @ hector… i hope you are not from peru spreading seed of misinformation about Humala being some kind of “positive reformist” around the world. He is simply going to be 100 times worst than Velasco.
July 30th, 2009 at 8:11 am
Dilan Esper,
1. Of course his enemies call him that. The concervative talk radio has some nasty names for Obama too. The simple fact is, however, that Humala and his entire family planned to carry out a revolution _long_ before Chavez was even heard of. Arguably, Humala is using Chavez much more than the other way around.
2. That’s why Humala isn’t leading an insurgency anymore (and to be fair that was his brother Antauro, back in 2005, who tried to stage a coup). Humala is, for the moment at least, trying to win elections. If the circumstances are right he may try a coup or a revolution- and if the economy tanks, which it will, that will be a much more winning strategy. If there is any man in Peru that can credibly claim to be a foe of Marxist guerrillas it’s Humala- he actually fought against them personally in the 1980s as a soldier. Velasco claimed much the same thing in the 1960s, claiming to be the only possible defence against Marxism, and he was right.
3) Garcia wasn’t personally popular, but he had the entire electoral machinery of APRA behind him. Humala had nothing and he had to build up his entire party from scratch. And yet he almost won. The evidence is that Garcia did well in exactly the same traditional strongholds of APRA in the North. You could get any freakshow whackjob in the US to run on the banner of the Democrats and Republics, and they would do well- not because of themselves, but because of the party.
4) APRA is, at best, a mildly social democratic party, and there has been a strong narrative in Peruvian politics (embodied by Velasco, Humala, much of the army, and by the Marxist left) for many decades that APRA is a party of decadent bourgeois collaborators. I’ll say again, a party that wins 47% of the vote is hardly a nonentity on the political scene. I suppose you think the Democratic Party is a party of the hard left too. The difference being that Ralph Nader has never gotten 47% of the vote. Humala has widespread support among the army too, which counts for a lot if he ever decides to shun the electroral route.
5. Wait and see. A year ago I was predicting that Venezuela would be in a severe state of recession right now and that Chavez would have to declare a state of seige to keep the peace. Hasn’t happened yet. In fact their unemployment rate is lower than the US. Chavez is smarter then I gave him credit for. Recession will come eventually, but who knows when?
6. Again, wait and see. The protests in the Amazon are just the harbinger of something much bigger.
7. That ‘living in the past’ narrative sounded a lot better before 2006. Anyone who gets 47% of the vote during an economic good year has a decent shot of winning the presidency in the future, particularly in a bad year. Anyway, ‘history is on our side’ is a weak argument coming from the Bolshies, and from the neocons, and from you. History has a way of doing things we don’t expect. Who could have predicted the Iranian revolution in 1978, or the Venezuelan revolution in 1997?
July 30th, 2009 at 8:42 am
By the way, I’m not an unqualified admirer of Humala. To get it out of the way before you bring it up, I don’t agree with his racial nationalism (or more accurately, with the racial nationalism of many of his supporters), and his mother is insanely homophobic (to be fair there’s no evidence that Humala is any more homophobic than Barrack Obama). That said, he is the best alternative for Peru right now. I hope he wins one of these days, and I suspect he will.
July 30th, 2009 at 1:21 pm
@ shooter242
Actually, it’s already been noted. Do you see the downward slope for revenue from 2000, 2001, and 2002? 2000 is Clinton Rates, 2001 is Clinton rates minus .5%, and 2002 minus another .5%
As I recollect, there was a recession in 2000. Compare the rates from the beginning of Clinton’s term when the tax rates were increased against GDP. I think GDP increased. You’re simply showing that the increased tax rate didn’t protect against a recession – which no one ever claimed it did or would.
The notorious reduction to 35% at the top doesn’t actually occur until paying 2003’s income in April 2004. And as you can plainly see that’s the period of bottoming and rising up again.
Again, this information is a correlation between events. Causation requires you show a direct relationship, this you cannot do. You may infer a different relationship by reviewing other periods of growth vs tax treatment, but I think that information shows the opposite of the principle you are attempting to advocate. Meaning, that growth was robust during the Clinton years, regardless of the higher taxes.
It’s not hard to understand if you consider the health of the economy to be dependent on future expectations. Clinton was tripped up by the anxiety of Y2K being dissipated, and then Bush by 9/11. But by being business friendly via taxes and interest rates, business took off. Business expected the future to be stable and conducive.
It’s also not hard to see how this generalization is not helpful. Future expectations, such as stability, have little to do with how much taxation occurs, but more about whether tax rates will stay the same. Business friendly takes all sorts of meaningful events into consideration as well, taxes are only one of them. I’m only guessing, but I bet your arguments are based on a comparison of the marginal tax rate, something that doesn’t take into consideration the reality of the situation which includes multiple, generous exemptions for business and the wealthy.
I also think the statement business friendly = less taxes to business really means = sheltering money “friendly.” If you look at the tax code, the items of growth (not those which merely put profits into individual pockets) are exempt from taxation. So, what your arguing eventually is that rich people make better use of money, than poor people, but I’ve not seen empirical support for that kind of reasoning.
On the other hand Obama is business negative. He wants more taxes, more regulation, and more control. Business has no idea what is coming next, but they know it’s bad for them. Being defensive or being gone is all business can do, and that kills jobs and tax revenues.
I agree with you that business now cannot necessarily know what the effect of future regulation tomorrow may bring. However, you’ve characterized regulation in this case as something bad, which it may not be if it bring stabilization (see your first point). I think its obvious the current situation is unsustainable if the possibility of another melt down exists – which also brings down growth and employment. Your comparison also begs the question: what regulation? You’ve already developed conclusions for regulations that even don’t exist; I think that is a premature response.
But it didn’t have to be this way. Demonizing a class can be milked for political gain but eventually you need all classes together to thrive. That is the practical reality. The left didn’t need to bash rich people, who for the most part are the real producers of business and it’s benefits. But they did, and those with options are rearranging their lives to minimize increasing obligations from Government. Corporations are still made of human beings that react to their environment. It’s only natural.
That’s a pretty harsh characterization, please link me some commentary to support it. Simply stating “you have more money so can afford a higher tax burden” isn’t “bashing.” I also fail to see how you can say we need to work together, but not see how progressive taxation does exactly that. I think what you mean is “you need to work for me, under the terms I dictate, so I can achieve the ends I think are desirable.”
Also, cite me evidence that under the Bush taxation scheme, attempts at avoiding taxes abated as compared with Clinton’s term and I’ll agree with you that tax rates determine how much people will avoid government obligations. Lets also include the number of amendments to the tax code each term that excused higher earnings and/or business expenses to make this inquiry more interesting. I read tax commentary here and there and I’ve yet to see that claim made. This sort of behavior doesn’t’ seem to be driven by the difference in the taxes that are the source of this discussion.
July 30th, 2009 at 2:21 pm
1. Hector, “la Chola de Chavez” isn’t a product of some small right-wing rump opposing Humala. That’s his nickname among broad swaths of the population, because he is seen as way too close to Chavez, who is tremendously unpopular. (Peruvians have historically not thought too much of Bolivarian rhetoric regarding the unification of South America, and they don’t want Caracas to be meddling in their affairs.)
2. Humala is stirring up violent and nonviolent demonstrations in a number of minor and major cities in the cloud forest and jungle regions in the eastern part of Peru. That is going on right now. The guy’s still an insurgent, though he is also trying to win elections.
Also, just so you know, “marxism” wasn’t seen as quite the problem when Velasco was in power that it became later on (really, more like “maoism”). You have this romantic notion that Peru can go back to the late 1960’s and early 1970’s, but it can’t. Marxism’s name is mud right now, because there were 2 major terrorist insurgencies that threatened, at their height, all Peruvians, whether they lived in Ayacucho or Lima.
3. Hector, building your entire party from scratch is the usual way to win an election in Peru. APRA has been around awhile, but it isn’t a strong party. There are no strong parties. Toledo didn’t have a strong party behind him– he had a mass movement. Fujimori’s “Change 90″ could hardly be even called a political party.
So don’t read too much into Humala winning 47 percent of the vote without a party behind him.
Garcia didn’t win because APRA was behind him. He won because he managed to eke his way into a runoff in a multi-candidate field, and then faced a candidate who was unelectable (Humala) in the general election. There were no other circumstances where Garcia, one of the most unpopular Peruvian presidents in history due to hyperinflation and terrorism in his first term, could get reelected.
4. If Ralph Nader were to run against Dick Cheney, he might very well get 47 percent of the vote. That’s what Humala was doing.
I agree with your wait and see points.
July 30th, 2009 at 2:37 pm
Re: Also, just so you know, “marxism” wasn’t seen as quite the problem when Velasco was in power that it became later on (really, more like “maoism”). You have this romantic notion that Peru can go back to the late 1960’s and early 1970’s, but it can’t. Marxism’s name is mud right now, because there were 2 major terrorist insurgencies that threatened, at their height, all Peruvians, whether they lived in Ayacucho or Lima.
True, but as I said, Humala is _not a Marxist._ Neither was Velasco. (And in point of fact, there _had_ been an abortive peasant insurgency in the early 1960s, inspired by the Cuban revolution, that the army under Velasco helped put down. Velasco became convinced by that episode that Peru needed a revolution, that the Marxists were not the ones to do it, and that the army would have to carry out a revolution to prevent the Marxists from carrying out theirs.) Humala and the MRTA may both hate the Peruvian establishment, but they both want very different things. Given that Humala cut his teeth _fighting_ the Shining Path in the jungles, it seems like a wild stretch to accuse him of links with Maoist insurgency. No political figure in Peru can claim more credibly to be anti-Shining Path than Humala.
APRA is something rather more than just another political party- as it developed in the 1920s and 1930s, it had some of the characteristics of a mass movement as well. It was meant to be, among other things, a non-Marxist, non-socialist alternative to the Communist Party, and had much of the same long lasting support in certain sectors of the populace. I suspect that APRA will do well in the next election even if Garcia isn’t running. Just like the Democrats or Republicans. We act like Dick Cheney is a d*ck, and he is, but even Dick Cheney could win 40% of the country at least if he was running on the Republican Party ticket.
July 30th, 2009 at 4:15 pm
Hector:
APRA’s vote totals in Peruvian elections:
2006 24 % first round (less than Humala), 52 % runoff (notice how many people shifted to Garcia only because of the threat of Humala)
2001 25 % first round, 47 % runoff
2000 2 %
1995 4 %
1990 19 %
1985 45 %
1980 27 %
1963 34 %
1962 33 %
Before 1962, the APRA didn’t even field candidates for presidential elections.
In other words, far from this electoral juggernaut, you have a party that generally gets about a third of the vote and was so decrepit in the 1990’s that it actually got down as low as 2 percent in 2000.
Political parties simply do not matter in Peru. Each election is won by some changing group of factions.
We act like Dick Cheney is a d*ck, and he is, but even Dick Cheney could win 40% of the country at least if he was running on the Republican Party ticket.
Doubtful. Seriously.
July 30th, 2009 at 4:53 pm
Re: Before 1962, the APRA didn’t even field candidates for presidential elections.
Dilan,
I don’t have my History of Peru volume with me at the moment, but this is highly misleading. APRA was a banned party for a good portion of the time between 1932 and 1962 (for good reason- among other things they had tried to conspire with the president of Bolivia to invade in case APRA lost the election). That’s the only reason they didn’t contest elections. But they were a very powerful clandestine opposition force, much like the Socialist Revolutionaries in late Czarist Russia. They did contest the 1931 election in which they got a lot of votes, and they were legalized and backed a candidate in the 1945 election.
It’s simply misleading to say ‘Political parties in Peru are weak institutions’. The correct statement would be,
Political parties in Peru are weak institutions _with the exception of APRA_. APRA is more than a party, it is a mass movement and conspiratorial cultural phenomenon similar to the Communist Party in European countries, that has exerted a powerful (and in my opinion, almost entirely harmful and negative) influence on Peruvian politics since they were founded in the late 1920s. It is simply false to say, “APRA is just another political party”.
It’s true that the middle classes hate Humala with a passion, but it’s also true that the poor hate the Right, and the army hates APRA with something of the same passion. If Humala can build a coalition between the poor and the army, he can beat out both APRA and the Right, and become the next ruler of Peru.
July 30th, 2009 at 5:55 pm
Hector, if APRA were such a big political force, how did they manage to get 2 percent in one election and 4 percent in another? Viable, longstanding political parties can ALWAYS turn out a greater percentage of the electorate than that.
Seriously, any actual Peruvian who heard you talk this way about APRA would laugh his head off. APRA is just a name that has survived all these years– it isn’t any different than any of the other shifting ad hoc factions that make up Peruvian politics.
July 30th, 2009 at 6:05 pm
Dilan Esper,
I suspect that many of the 47% of ‘actual Peruvian’ who voted for Humala would see things rather differently. Particularly among Humala’s power base in the army and in the southern highlands. By the way, I didn’t necessarily say that I think Humala will ever win an election. I think that his mass support will continue to build, but if Peru collapses into massive civil unrest (which is not unlikely) I think it’s quite possible that Humala could launch a military coup backed by the army, the southern highland peasantry and by the indigenous activists (and possibly attracting patronage not just from Venezuela but from Putinist Russia).
I suspect we’re at an impasse here so I’ll thank you for a polite and civil discussion. Again, I’d suggest we wait and see.
July 30th, 2009 at 6:47 pm
I suspect that many of the 47% of ‘actual Peruvian’ who voted for Humala would see things rather differently. Particularly among Humala’s power base in the army and in the southern highlands. By the way, I didn’t necessarily say that I think Humala will ever win an election. I think that his mass support will continue to build, but if Peru collapses into massive civil unrest (which is not unlikely) I think it’s quite possible that Humala could launch a military coup backed by the army, the southern highland peasantry and by the indigenous activists (and possibly attracting patronage not just from Venezuela but from Putinist Russia).
Hector, just out of curiousity, have you been to Peru? I actually spend a fair amount of time there, and I have a close relative in the diplomatic service there. There was a time in the 1980’s when civil unrest and a military coup were quite possible, and of course, in Fujimori’s years, the security services helped stage the autogolpe. And Toledo, of course, courageously led his mass movement to topple Fujimori in 2000-01.
But now???!?!?!? Peru’s probably the most stable it has been since independence. At most, there is a distant threat of Senderista terrorism (there’s a constant fear that they will get going again), but beyond that, things are pretty stable for a poor third world country. Certainly no serious political analysts are predicting coups or insurgencies, and it isn’t like Bolivia was before Morales where the governments were always teetering on the edge of falling.
You’d probably need to back the contention that in fact things are about to go to hell with some scholarship. Because I’m pretty plugged in down there and absolutely nobody’s talking that way.
July 30th, 2009 at 9:58 pm
Dilan,
After an abortive coup in 2005, the near victory of an extreme radical candidate in 2006, the killings of 50 indigenous protesters, the resignation of Yehude Simon, increasing civil unrest, and Garcia falling to 21% approval ratings, would you call that a stable country? Take a look at this, it doesn’t paint a picture of a nation at peace.
http://www.coha.org/2009/07/garcia%E2%80%99s-decline-in-peru/
Regardless, I don’t think either of us is going to convince the other here. You and I see the same set of facts but we draw very different conclusions (perhaps at some level we are both are influenced by what we _want_ to see happen. You want Garcia’s vision for the future to win: I want Humala’s to win.)
July 31st, 2009 at 12:54 am
Hector, for your information, every single Peruvian President since 1985 has left office unpopular. Garcia (the 1st time), Fujimori, Toledo. Now Garcia’s repeating the pattern.
And yet the only one who threatened instability to the system was Fujimori, and it wasn’t because he was insufficiently leftist, it was because he had dictatorial instincts.
As I said, I visit Peru pretty often. I have a close relative who knows quite a lot about it. Some people I care deeply about live and work down there. I have a pretty good handle of what’s going on down there. Have you ever visited Peru?
Seriously, Garcia’s low popularity ratings aren’t any different than anything we’ve seen before. Peruvians get very quickly dissatisfied with each and every government. There are complicated reasons for this, but it is a historical pattern. That doesn’t mean that there’s going to be a military coup or an insurgency.
Hector, I would suggest you visit Peru and get to know some folks down there before you make any more assumptions about either the stability of Garcia’s government or Humala’s popularity. Things are simply not as you believe them to be.
And by the way, I am not exactly a big Alan Garcia or APRA supporter. I support any democratic government that delivers for the poor in Peru. Given Garcia’s terrible record the first time around, I did not have very high hopes. But if what he is doing is working, that is a great thing, because the country is historically very difficult to govern and the populace gets frustrated and frequently turns to the mano dura / caudillo model.
July 31st, 2009 at 7:45 am
Re: Hector, for your information, every single Peruvian President since 1985 has left office unpopular. Garcia (the 1st time), Fujimori, Toledo. Now Garcia’s repeating the pattern.
That isn’t unique to Peru. In much of Latin America as a whole, there is chronic dissatisfaction with sitting presidents, for a vriety of reasons, and approval ratings are quite low more often than not. That said, a 21% approval rating is the lowest of any president in Latin America at the moment. In 2006, a UNDP also showed widespread dissatisfaction with democracy in general in Peru (I think to the tune of 75% of the populace). Again, wait and see.
July 31st, 2009 at 1:42 pm
That said, a 21% approval rating is the lowest of any president in Latin America at the moment.
Toledo got down that low and there was no coup or even a threat of one– he had a stable government.
In 2006, a UNDP also showed widespread dissatisfaction with democracy in general in Peru (I think to the tune of 75% of the populace). Again, wait and see.
Don’t assume the people who want a caudillo are Humala supporters or potential Humala supporters, Hector. Remember, Fujimori became immensely popular for a time while imposing the mano dura– a lot of dissatisfaction with democracy comes from people who want right-wing economic and anti-terror policies.
While this is a gross generalization, the Peruvian left tends to be more supportive of democracy, not less.
July 31st, 2009 at 3:37 pm
Re: Remember, Fujimori became immensely popular for a time while imposing the mano dura– a lot of dissatisfaction with democracy comes from people who want right-wing economic and anti-terror policies.
Dilan,
I don’t know if you’re still reading this, but Chavez actually has quite a lot of supporters in Venezuela that call themselves right-wing. They identify with his militarism and nationalism, even if they can’t identify with his economic policies.
One can be anti-terror and also pro-Humala. Indeed, as I said, Humala personally conducted military raids against the Shining Path in the 1980s. He can honestly say, unlike most civilian politicians, “I risked my life to bring down the Shining Path.” Linking Humala to the Shining Path is such a stretch that not even men like Hannity and Limbaugh who make their careers out of character assassination would be able to pull it off.
July 31st, 2009 at 7:02 pm
Hector, it isn’t that Humala is “linked” to Sendero. It’s that Sendero (and the MRTA) poisoned the well for the sort of insurgent left wing politics that you would favor in Peru.
They gave the left a bad name. That isn’t Humala’s fault and I never said it was, but it’s the reality and it’s a lot deeper than simply pointing out that Humala was in the military and fought Sendero.
A lot of rural peasants (who are normally the constituency of the left) were killed, forced out of their homes, or forced to move to the pueblos jovenes on the outskirts of Lima, a gigantic metropolis, because of Sendero and the MRTA. This effected a structural change in Peru’s politics, as a lot of these folks became supporters of Fujimorism. (Indeed, if you want a laugh, google for old photos of Fujimori campaigning the shantytowns wearing full Andean peasant garb.)
These folks haven’t forgotten what “the insurgent Left” did to them and their families and their towns and villages, and this is why the left can’t win an election in Peru. They are ever suspicious that a left-wing government will be either soft on terrorism or simply will sympathize directly with Sendero. And Sendero does just enough to keep this alive– a raid every once in awhile in some remote jungle town.
Venezuela has a different political culture and a different history. (Heck, so does next door Bolivia.) And that’s why you can’t assume that just because Chavez and Morales have been able to forge interesting political coalitions that the same thing can happen in Peru.
July 31st, 2009 at 8:03 pm
Dilan Esper,
Humala does best inb precisely those parts of the country (southern highlands) where Sendero was the most active, and where people suffered the most from their raids. If people associate all revolutionary left politics with Sendero, then it would seem as though he shouldn’t be popular in those areas. Humala’s brother actually staged a military mutiny in one of those mountain towns in early 2005, calling for the immediate overthrow of Toledo, and I remember reading that something like 30% of Peruvians actually endorsed it.
I think that the people of Peru are perceptive enough to see that Humala and Abimael Guzman have very, very, very little in common with each other. Indeed, I suspect that most people outside the United States foreign policy establishment and right wing talk radio are smart enough to see that. Venezuela and Bolivia, BTW, did have Cuban-inspired communist insurgencies in the 1960s that were quickly suppressed, although neither was nearly as barbaric as Sendero.
Off topic, but Sendero was truly something else. The eminent Marxist historian Eric Hobsbawm said something like this: “Looking at Sendero, for the first time I realized that here was a Marxist insurgency that I really hoped would lose.”
July 31st, 2009 at 9:04 pm
Humala does best inb precisely those parts of the country (southern highlands) where Sendero was the most active, and where people suffered the most from their raids. If people associate all revolutionary left politics with Sendero, then it would seem as though he shouldn’t be popular in those areas. Humala’s brother actually staged a military mutiny in one of those mountain towns in early 2005, calling for the immediate overthrow of Toledo, and I remember reading that something like 30% of Peruvians actually endorsed it.
Sendero, at its peak, was active all over the country, not just in the Southern Andes. They even bombed a Coca-Cola plant and several power facilities in Lima.
And what you don’t understand is that there was a mass migration of people as a result of that. Many of those places where Humala is popular are shells of their former selves, because people moved to Lima to escape terrorism, government oppression, and economic destitution.
Again, Hector, you really have to go to Peru sometime. Specifically, you need to see the pueblos jovenes– vast squatters’ villages on the outskirts of Lima containing millions of people who evacuated the highlands. And see how many of THOSE people Humala carried.
There are a lot fewer Peruvians living in small towns in the Andes than there were when Velasco was in power. That’s the other legacy of Sendero and the MRTA.
You are correct, however, that Sendero was something else. Officially, they were Maoist, but I’d say they were closer to nihilist.
July 31st, 2009 at 11:47 pm
Re: Sendero, at its peak, was active all over the country, not just in the Southern Andes. They even bombed a Coca-Cola plant and several power facilities in Lima.
True, but they got started in the southern Andes, and that was always their stronghold, wasn’t it?
I _should_ in fact go to Peru sometime, I would love to, whenever I find the opportunity. I certainly do find your firsthand experience interesting. Regarding the pueblos jovenes, they were starting up even in Velasco’s time, and I remember reading that he really didn’t do much of anything for them. His interest was in the peasantry, manufacturing workers, and fishermen, and not really in the underemployed and informally employed people in the shantytowns. So perhaps it’s not surprising that Velasco Part II is grossly unpopular there too (aside from the business about the Shining Path, which I still have a hard time believing that anyone could think that Humala had anything in common with the Maoists).
Thanks for an interesting thread.