Yesterday we met Nick Dearden, head of an anti-capitalist British group called Global Justice Now and frequent contributor to the Guardian. As recently as January of this year, Dearden described Venezuela as a “beacon of hope.” He’s also blamed the poverty of countries like the Democratic Republic of the Congo on American “vulture funds.”
The word vulture appears frequently in Dearden’s work. In a 2011 piece, he wrung his hands over the economic plight of Argentina, which, again, he blamed not on the Kirchner regime’s massive corruption and financial irresponsibility but on the creditors who actually dared to expect the Buenos Aires government to honor its debts. Dearden gave a thumbs-up to Argentina’s 2001 default (which “was undoubtedly the right thing to do”) and slammed creditors (a.k.a. “vulture funds”) for refusing to walk away meekly and let Kirchner & co. screw them over. He further accused Argentina’s main creditor, NML Capital, of “harassing” Argentina – by which he meant that NML, in order to try to collect the money it was owed, had had to take the Kirchner government to court .
Meanwhile, the closest he would come to admitting the deep, endemic problems afflicting the Kirchner regime was to say that “Everything is not perfect in Argentina to this day.” He acknowledged that Argentina shouldn’t have borrowed such massive sums in the first place – but instead of criticizing the Kirchner regime for taking out loans, he blamed the banks for making them. Fighting poverty, Dearden asserted, requires profound systemic change: “The financial system…needs to be directed for the benefit of people everywhere.” And part of this change is that “[c]reditors must accept the downside when investments go wrong just as they happily accept the upside when they go right.” Meaning, apparently, that when debtors choose not to pay their debts, creditors should just shrug and walk away.
We’ve written at length about Joseph E. Stiglitz, the economist, who, among other things, is a big U.N. booster, championing the idea that the U.S. and other countries should effectively hand over their sovereignty to the international organization. Dearden is in the same camp, contrasting the G8 – which he views as a gang of imperialist, colonialist bullies that “should by rights be dead and buried” – with the U.N. itself, which he see as a compassionate force for the world’s poorer and less powerful countries.
In a 2009 article for the Guardian, Dearden cited Stiglitz approvingly and at length on the need for thoroughgoing “reform” of “the international trade and financial system,” including extensive debt cancellation, a “new reserve currency to replace the dollar.” Dearden also quoted, with hearty agreement, the then-president of the General Assembly, Nicaraguan priest Miguel d’Escoto Brockmann, to the effect that “[t]he anti-values of greed, individualism and exclusion should be replaced by solidarity, common good and inclusion” and that our “profit-centred economy” should give way to “a people-centred economy.”
Presumably like the terrific, robust one in Nicaragua. Or Venezuela, that “beacon of hope.”
The other day we delved into a recent New York Times op-edthat sought to whitewash the massively corrupt Kirchner kleptocracy in Argentina, to demonize its creditors, and to defend its indefensible economic policies. The author of the op-ed was none other than the chief architect of those policies, and one of the Kirchners’ more prominent foreign courtiers and sycophants – economist Joseph E. Stiglitz.
This wasn’t Stiglitz’s first appearance here at Useful Stooges. In several articles last October, we pondered his perverse enthusiasm for command economies, his championing of a socialist U.N. superstate, and other perverse positions that make one wonder just how this character ever managed to score the Nobel Memorial Prize in Economic Sciences.
We were still shaking our heads over Stiglitz’s Times op-ed when his name again made a prominent appearance in the press. On April 13, the Guardian mentionedStiglitz in connection with the internationally notorious Panama Papers case.
You’ve heard of the Panama Papers, of course? They’re a trove of some 11.5 million documents that, leaked last year to the Süddeutsche Zeitung and first reported on earlier this month, have caused worldwide scandal. They describe in detail the use of various shell companies by powerful figures (including UAE president Khalifa bin Zayed Al Nahyan, Ukrainian president Petro Poroshenko, Saudi King Salman, and Icelandic premier Sigmundur Davíð Gunnlaugsson) for nefarious purposes ranging from fraud to tax evasion. The Guardian article outlined plans by the so-called JITSIC network – a task force of 31 major Western nations, plus China, Japan, South Korea, and South Africa – to take aggressive action against these activities.
How does Stiglitz figure in all this? Well, it turns out that while those responsible-minded JITSIC countries were criticizing Panama’s longtime willingness to host shady shell companies and cover up their crooked activities, Panama was handing Stiglitz a new gig. As the Guardian put it, “The Panama government announced that Joseph Stiglitz…would be one member of an international panel formed to review Panama’s legal and financial practices and recommend improvements.”
To us, this sounds like an exceedingly fishy development. First of all, Panama doesn’t need a Nobel Prize-winning economist to tell it to clean up its act; if it wants to be regarded as a transparent financial actor, what it has to do is pretty obvious. Second, given Stiglitz’s track record as an apologist for corrupt regimes, he’s highly unlikely to recommend that Panama institute any meaningful reforms.
What’s going on here, then? Most likely, Stiglitz is providing air cover – lending his name to Panama in its effort to whitewash its reputation as a cash hideout. Is he being paid for this? That’s one question the JITSIC countries might want an answer to – although even if he’s not collecting a fee this time around, his readiness to play ball with the creeps who run Panama deserves scrutiny. For this guy is looking more and more like an ambulance-chaser for unsavory governments.
Why does any of this matter? Well, one reason it matters is that places like the New York Times stilltake Stiglitz seriously as a wise, objective commentator on economic affairs. Another reason is that he’s on the faculty of Columbia University, which expects from its professors a high level of transparency – including full reporting to the college administration of any possible “financial conflicts of interest in research.” But although Stiglitz’s résumé repeatedly cries out “conflict of interest,” he hasn’t reported any such conflicts.
Just look at some of the folks he’s been in deep with over the years. In 2009, the generals who rule Myanmar took him on as a “consultant.” How much was he paid? What was the relationship between his work for the generals and his glowing public statements on Myanmar’s economy?
Stiglitz also “counseled” former Greek Prime Minister George Papandreou. Again, what was his fee? Were his positive comments about Greece’s financial health compromised by these arrangements? In 2013 he invited Panandreou to speak at the Columbia World Leaders Forum – but, in violation of the university’s guidelines, he didn’t disclose their financial connection.
Was the invitation some kind of quid pro quo?
The same question arises in the case of the late Ethiopian Prime Minister Meles Zenawi, whom Stiglitz viewed as a close friend, whose economic policies he praised, and whom he invited to speak at the 2010 Columbia World Leaders Forum. That invitation brought fierce criticism on the website of the Columbia Spectator, where scores of Ethiopians charged the university with legitimizing a “tyrant” who was guilty of “genocide, ethnic cleansing…and other…atrocities.” Jagdish Baghwati, an Ethiopian economist at Columbia, condemned the invitation as the act of academic “entrepreneurs” who were using the college to “ingratiate” themselves with criminal regimes “to get PR and ‘goodies’ for themselves at African summits.” And in a letter to the university’s president, Ethiopian journalist Serkalem Fasil described how she was imprisoned for doing her job, gave birth prematurely as a result of abuse there, and, in the ultimate example of “incomprehensible vindictiveness,” was denied by Zenawi the incubator doctors said her baby needed.
And what about China? Stiglitz has some kind of relationship with the Renmin University of China Institute of Economic Research – which, of course, amounts to having a relationship with the Chinese state. Again, he hasn’t made public any information about income he’s earned from this gig. What he has madepublic is his supposed enthusiasm for an alternative to the single reserve currency – a position neatly in line with Beijing’s – and his claim that concerns about risks to the Chinese economy are overblown.
Then there’s Bolivia, where in a single day Stiglitz received two honorary doctorates. After meeting in 2006 with Evo Morales, that country’s socialist strongman (and longtime Castro chum), Stiglitz began speaking out in favor of Morales’s nationalization of private property. What happened at that meeting? Did money change hands? Or did Evo – who’s not exactly famous for his eloquence – dazzle Stiglitz with the brilliance of his argument for expropriation?
Are you beginning to discern a pattern here?
These aren’t the only leaders who’ve availed themselves of Stiglitz’s “services.” Others include Fernando Lugo, former president of Paraguay, and José Luis Rodríguez Zapatero, former prime minister of Spain. Stiglitz has been a “financial consultant” to the Icelandic government and has given “expert testimony” on Ireland’s sovereign wealth fund.
What did he pocket? Who knows? In none of these cases has Stiglitz disclosed how much he’s been paid for his work – or, for that matter, exactly what his “work” has consisted of. How much of his “consulting” for heads of state and government has involved actual consulting – and how much of it has amounted to nothing more than an agreement to publicly promote their horrible economic policies? In other words, is he simply raking in cash from leftist governments in exchange for positive PR – like a crooked film critic selling a movie producer a rave?
Stiglitz hasn’t only done deals with governments. He’s delivered speeches under the auspices of a long list of Funds and Centers, Institutes and Coalitions, Foundations and Iniatitives, Councils and Commissions. How much did they pay? Again, mum’s the word. (Even Hillary Clinton makes public her lecture fees.) But more to the point: what were they really paying for? Did Stiglitz give these institutions tough, smart advice that they perhaps didn’t want to hear – or, as with his governmental clients, did he affirm their own wisdom to their faces and then come away touting it to the world?
To be sure, if Stiglitz is monetizing his Nobel, he wouldn’t be the first to do so. But there can’t be too many other Nobelists who’ve been so aggressive about it. Put it this way: if they awarded a Nobel Prize for using your reputation as a serious economist to help prop up unscrupulous autocrats, he’d have no competition.
Back in October we spent a few days pondering the Nobel Prize-winning economist Joseph E. Stiglitz, whose curious views are taken far more seriously in the corridors of power than they deserve. Stiglitz, as we pointed out, has called for a socialist U.N. superstate; so preoccupied is he with income inequality, moreover, that he views the Great Depression more fondly than he does the 1980s. Financial analyst Peter Tenebrarum has legitimately ridiculed Stiglitz’s claim that corporate tax rates have “little effect on investment,” observing that only “a life-long leftist academic and bureaucrat who has never created one iota of real wealth in his life” could ever utter such drivel.
Then there are Stiglitz’s deep and longstanding ties to the corrupt Argentinian President Néstor Kirchner (2003-7) and his wife and successor, Cristina Fernández de Kirchner (who left office in December). Stiglitz, who’s been a paid Kirchner advisor and consultant, filed an amicus curiae brief when Argentina defaulted on its debt in 2001; when it did so again in 2014, he once more took the Kirchners’ side.
Quite admirably, Argentina’s new president, Mauricio Macri, is trying to clean up the mess that his crooked predecessors created. To this end, he’s reached an agreement with his country’s major creditors that will set Argentina back on the road to fiscal responsibility and international respectability. Any sensible observer who respects the rule of law would applaud.
Not Stiglitz. In an April 1 New York Times op-ed, co-written with his protégé and frequent collaborator Martin Guzman, Stiglitz slammed Macri’s move – and Argentina’s creditors.
The very title of the op-ed was a lie: “How Hedge Funds Held Argentina for Ransom.” Ransom? When a government run by thugs – kleptocrats who’ve looted their country’s treasury – refuses to pay debts ruled legitimate by two U.S. courts, it’s not ransom. It’s the rule of law.
Let’s parse the op-ed’s first sentence. “Perhaps the most complex trial in history between a sovereign nation, Argentina, and its bondholders – including a group of United States-based hedge funds – officially came to an end yesterday when the Argentine Senate ratified a settlement.” Readers might assume, quaintly, that since this piece appeared in America’s so-called newspaper of record, there must’ve been some fact-checking. But apparently not.
First of all – and this is hardly a tiny detail – there has been no trial.
A trial generally indicates that there is some dispute over the facts of a case involving evidence that must be examined, typically by a jury. But no one ever disputed that Argentina defaulted on more than $80 billion in 2001 and refused to pay certain creditors in violation of their contractual agreements. The lawsuits over Argentina’s bonds were not disputes over these indisputable facts, but rather processes to determine the proper remedies for these violations. Furthermore, lest we be accused of being nitpicky about the terminology, it is also incorrect to say that this litigation “came to an end” last week. In fact, the litigation is ongoing, with important legal questions about Argentina’s settlement offers still pending before a U.S. Court of Appeals.
Second, the mention of hedge funds was a slick move, plainly intended to set knees jerking among anti-capitalist types for whom hedge funds are, by definition, pure evil. Never mind that there are other people – some of them citizens of Argentina – who also hold Argentinian bonds. In fact, it is precisely these small Argentinian bondholders who continue to litigate against Argentina due to the fact that Argentina has for some reason offered them less than it offered the hedge funds. (Stiglitz and Guzman would know this if they bothered to read the news sections of … the New York Times!) Thus, these small bondholders are doubly inconvenient for Stiglitz and Guzman – their existence both contradicts the pair’s erroneous declaration that the Argentinian debt saga has ended while simultaneously undermining their blatant attempt to blame the “evil” hedge funds for all of Argentina’s problems.
Third, the Argentinian Senate did not ratify a settlement. What it did was agree to lift the Kirchner-era laws that were intended to frustrate U.S. court rulings – and that led New York District Judge Thomas Griesa to hold Argentina in contempt.
The op-ed’s first sentence, then, was a minor masterpiece of misrepresentation. Perhaps we should thank Stiglitz and Guzman for making it clear from the git-go that what followed wasn’t going to be factually reliable.
“The resolution,” Stiglitz and Guzman went on to say, “was excellent news for a small group of well-connected investors, and terrible news for the rest of the world, especially countries that face their own debt crises in the future.” No: it was excellent news for the health of the international credit market, and terrible news for irresponsible governments that are inclined to pursue serial defaults.
Stiglitz and Guzman proceeded to describe Argentina as “[u]nable to pay its creditors” (a questionable contention) and to describe holdout investors as having “earned the name vulture funds.” Funny way to put it: these investors didn’t “earn” that name; it was coined by their debtor, the Argentinian government, and was taken up by Stiglitz and his ilk as a glib way of smearing creditors who’ve asked only to be paid what they’re owed. By obscuring the origins of the term “vulture funds,” of course, Stiglitz and Guzman were giving legitimacy to it – and providing themselves with a veneer of justification for repeatedly (and childishly) hurling this slur throughout their piece.
In what was perhaps the most dishonest part of their op-ed, Stiglitz and Guzman purported to sum up Griesa’s 2012 ruling. As they put it, he “threw the game in the vulture funds’ favor” by “blocking Argentina from paying” creditors who’d agreed to reduced settements “until it had paid the vultures in full.” The ruling “gave the vultures the weapon they needed: Argentina had to either pay them off or renege on the default they had negotiated, ruining the country’s credit in the future and threatening its recovery.” Omitted entirely from this tendentious summary – which makes it sound as if Griesa did something shady – is Griesa’s rock-solid legal reasoning: under the pari passu (or “equal footing”) clause in the bond agreement, Argentina was strictly forbidden from paying off some creditors while stiffing others. What Stiglitz and Guzman neatly sidestepped, in other words, is the fact that if Argentina had honored the pari passu clause, all its creditors could have been paid. The point, quite simply, is that Cristina Kirchner didn’t want to pay.
The op-ed’s mendacity continued with the claim that Macri’s deal “will carry a high price for the international financial system, encouraging other funds to hold out and making debt restructuring virtually impossible.” Nonsense. In fact, the market has already adjusted: in place of paripassu clauses, sovereign-debt agreements now include collective-action clauses. Stiglitz and Guzman would have us believe that nations like Argentina can’t protect themselves and can’t structure loans as they wish; instead of worrying about that, we should be concerned about those nations’ continued ability to default and force terms on bondholders.
“Most countries,” maintained Stiglitz and Guzman, “are intimidated by the creditors and accept what is demanded.” Intimidated? Was Cristina Kirchner intimidated when she maligned her creditors as “vultures” and basically gave Judge Griesa the finger? Our heroes then called sovereign-debt restructurings destructive – after all, they’re are often “followed by another restructuring or default within five years.” And what example did they cite? That of Greece, which underwent restructuring in 2012 and is already “in desperate need of more relief.” But the case of Greece doesn’t prove anything about restructuring; all it proves is that if a country is economically irresponsible on a colossal scale, the chickens will eventually come home to roost.
How, then, to resolve sovereign-debt conflicts? Easy: Stiglitz and Guzman touted a set of sovereign-debt “principles” that they themselves proposed to the U.N. General Assembly, which approved them overwhelmingly last September. Among those “principles”: that indebted nations should be immune from foreign courts’ verdicts and that creditors should be compelled to accept restructuring deals approved by a majority of their fellow debt holders. Predictably, the six countries that voted against the resolution were those whose citizens tend to be on the creditor end of these arrangements – Canada, Germany, Israel, Japan, Britain, and the U.S. The countries that approved the measure were, in effect, asserting their own right to dodge repayment of debts – not just debts owed to hedge funds, but debts owed to mom-and-pop investors, too. Some justice.
“Many countries have bankruptcy laws,” concluded Stiglitz and Guzman. “But there is no equivalent framework for sovereign bankruptcies….The United Nations has taken the lead to fill this vacuum, and as Argentina’s case proves, the initiative is more important than ever.” Saying this, however, doesn’t make it so. What Argentina’s case proves is that some countries, like some people, are deadbeats; if permitted to do so, they’ll default repeatedly on their debt for no other reason than that the law lets them.
None of this is new, of course – we already knew where Stiglitz stood on Argentina’s deadbeat behavior. In fact, he’s become something of a broken record on the subject. Take his hyperbolic claim in the op-ed that “[t]he resolution … [will make] debt restructuring virtually impossible.” He’s plagiarized this same claim from himself many times in commenting on various cases, at least once using virtually identical language in the same newspaper. Each time, he is proven wrong by subsequent sovereign debt restructurings that are successfully concluded via constructive, good-faith negotiations with creditors (i.e., the opposite of the coercive approach that he and Cristina Kirchner favor) – most recently in Ukraine.
So why now? Why has Stiglitz chosen this moment to repeat the same tired justifications of the Kirchners’ behavior and vilifications of Argentina’s creditors? For answers, look at the headlines surrounding the deal, and it seems clear at once: As the praise for Macri’s economic policies in general and his handling of the debt dispute in particular pours in from around the world, defenders and abettors of the Kirchners’ disastrous policies are looking worse and worse in retrospect. And, as you might expect, some have lashed out with desperate attempts to justify their actions and/or sabotage the Macri administration. Each is doing it with the tools at hand: For instance, former Kirchner Economy Minister Axel Kicillof now has a seat in Congress, so he is trying mightily to derail Macri’s settlement and keep Argentina mired in default. By contrast, Stiglitz has a standing invitation to bloviate on the op-ed pages of the Times. So bloviate he does.
But no amount of retrospective whitewashing can change the fact that the policies Stiglitz advocated as an advisor to the Kirchners were followed, and followed faithfully, with disastrous consequences for Argentina’s citizens. The Kirchners’ refusal to fully resolve the 2001 default in order to spite its creditors led directly and indirectly to the years of grinding legal battles, the punitive interest rates that Argentina was forced to pay as a result of its status as the world’s worst deadbeat, the falsified economic statistics that undermined its government’s credibility with everyone except for a handful of despots, the cozying up to said despots that further undermined its global reputation, the spiraling inflation that punished its citizens as access to dollars became scarcer and scarcer – Stiglitz was there every step of the way, cheering for Cristina in the international media. And now that she’s gone and someone more responsible is trying to clean up the mess that he helped make, Stiglitz is still there, jeering from the sidelines, and pointing the finger of blame somewhere else.