Economists From US and 10 Other Countries Warn of Danger of Return to Neoliberalism in Ecuador

Sunday, March 26, 2017
By 55 economists, Speakout



Over the past ten years, Ecuador has achieved major economic and social advances. We are concerned that many of these important gains in poverty reduction, wage growth, reduced inequality, and greater social inclusion could be eroded by a return to of the policies of austerity and neoliberalism that prevailed in Ecuador from the 1980s to the early 2000s. A return to such policies threatens to put Ecuador back on a path that leads not only to a more unequal society, but to more political instability as well. It is important to recall that from 1996 to 2006, Ecuador went through eight presidents.

Unfortunately, there is much confusion and misinformation about Ecuador's achievements in recent years. It has all but become conventional wisdom that the economic and social progress in Ecuador, such as it is recognized, resulted simply from a commodities boom and a spike in oil revenues. This explanation ignores the innovative and important reforms that the Ecuadorian government has enacted that have played an instrumental role and allowed the country to emerge, relatively unscathed, from the 2009 Global Recession and the more recent collapse in oil prices. These reforms included bringing the central bank into the government's economic team, a tax on capital exiting the country, a large increase in public investment, re-regulation of the financial sector, and countercyclical fiscal policy.

Neoliberal economic policies have been tried in Ecuador, and have failed to deliver. Compared to 1.5 percent annual per capita GDP growth from 2006 to 2016, per capita GDP growth averaged just 0.6 percent from 1980 to 2006. From 1980 to 2000, a period during which Ecuador had a number of loan agreements with the International Monetary Fund, Ecuador experienced a considerable economic failure, as GDP per capita fell by 1.5 percent over those two decades. This failure almost certainly resulted at least in part from the neoliberal policies of cutting spending, privatization, inflation-targeting, deregulation, and others that also made the Ecuadorian economy increasingly vulnerable to external shocks. In the 1960-1980 period, by contrast, per capita GDP growth was 110 percent.

Similarly, poverty increased by one-third between 1995 and 2001, when it reached 45 percent. Poverty did decline overall from 1995 to 2006, but by just 2.7 percent; by contrast, poverty fell by over 32 percent from 2006 to 2014. According to Ecuadorian government statistics, the Gini coefficient for net household income (a common measurement of inequality) decreased by over 10 percent between 2006 and 2014, after having increased by more than 7 percent from 1995 to 2006. The indicators from the pre-Correa years, as bad as they are, are bolstered by the fact that emigration of people from Ecuador under prior governments artificially held down Ecuador's inequality, poverty, and unemployment rates.

More:
http://www.truth-out.org/speakout/item/39993-economists-from-us-and-10-other-countries-warn-of-danger-of-return-to-neoliberalism-in-ecuador