Back in 2012, Paul Krugman did a post praising the "New Economic Policy" in Latin America, which focused on reducing inequality. A few weeks later, he singled out Argentina and Brazil for special praise:
Just to be clear, I think Brazil is going pretty well, and has had good leadership. But why exactly is Brazil an impressive "BRIC" while Argentina is always disparaged? Actually, we know why - but it doesn't speak well for the state of economics reporting.
And it's true that these countries had shown some impressive growth. But that was more than 2 and 1/2 years ago. How do things look today? Obviously, things are going downhill rapidly in Argentina, but what about Brazil? Here's The Economist:
IN 2005 a debate raged between the two most powerful figures in President Luiz Inácio Lula da Silva's government. Antonio Palocci, the finance minister, proposed taking advantage of faster economic growth to eliminate Brazil's persistent fiscal deficit-and thus lower its exorbitant interest rates-by capping the increase in federal spending. But Dilma Rousseff, Lula's chief of staff, thought Mr. Palocci's plan "rudimentary" and blocked it. Ms. Rousseff became Lula's successor as Brazil's president in 2011, implementing a "new economic model" that placed full employment and wage increases ahead of macroeconomic rigour.
Fiscal laxity has come back to haunt Ms. Rousseff, who won a second term last month by the narrowest of margins. As we went to press she was due to announce that Joaquim Levy, one of Mr. Palocci's deputies in 2005, will become her new finance minister. Nelson Barbosa, the most capable economist in the ruling Workers' Party (PT), will get the planning ministry. Mr. Levy is a Chicago-trained economist who has been running a big asset manager; his presumptive appointment has been welcomed by investors. It seems that Ms. Rousseff has at last tacitly accepted the error of her economic ways.
Big spending policies to promote jobs and wage increases to reduce inequality - no wonder Krugman was impressed. Unfortunately Brazil is now paying the price, with only about 1%/year RGDP growth over the past three years. Fortunately, after Keynesian economics make a mess of things there's always a few "Chicago Boys" available to clean up the mess. I have another post at Econlog, discussing how Krugman's preferred tax policy failed in France, and how a somewhat more moderate economic minister was brought in to clean up the mess. Not a good two years for Keynesian/Piketty economics; maybe 2015 will be better.
Speaking of the supply-side, I endorse Miles Kimball's post where he argues that Doug Elmendorf should be reappointed at the CBO. The GOP would be making a mistake if they force him out.
I won't do much blogging over the holidays. Merry Christmas to my Christian readers, and Happy New Year to everyone!
(Look for some big announcements in January).