By ADELA PINEDA FRANCO
In spring 2023, LLILAS hosted Nobel Laureate in Economics Joseph Stiglitz and former Minister of Economy of Argentina (2019–2022) Martín Guzmán. Their public conversation, moderated by JR DeShazo, Dean of the Lyndon B. Johnson School of Public Affairs, focused on topics that have been central to their trajectories as academics, public intellectuals, and policymakers: the structural basis of the global debt problem and the prospect of generating sustainable and fair economic development in Latin America and the world.
With this event, LLILAS inaugurated the Mary Ann Faulkner Distinguished Lecture Series in Latin American Public Affairs and Politics, which will address issues of broad import relevant to Latin America. We named the series after Mary Ann Faulkner, former first lady of UT Austin during the period 1998–2006, whose husband, President Larry Faulkner, made the growth of Latin American Studies and Collections at UT a centerpiece of his term. We are grateful to the LBJ School for their support and collaboration on our inaugural event. What follows is a synopsis and a brief reflection on the relevance of this event for Latin American Studies.
JOSEPH STIGLITZ, who won the Nobel Prize in 2001, focused on current economic challenges surrounding global debt, highlighting its disastrous effects, particularly in Africa. Central to his reflection was the proven fact that debt forgiveness does not solve the problem of excess debt. More than two decades after the debt relief campaign known as Jubilee 2000, many countries are again facing a major debt problem. For Stiglitz, the question is how to address the structural problem of debt within a viable framework of analysis and implementation.
Martín Guzmán provided a retrospective overview of Latin America’s main economic challenges during the last four decades. The 1980s witnessed the return to democracy in many Latin American countries, but it was also the decade that suffered the negative impact of the U.S. inflation crisis, which, in the region, resulted not only in higher cost of debt service, but also less investment in public resources. Sociopolitical tensions were the result of this distributional conflict. Following this lost decade, a large restructuring of debt took place within the framework of neoliberal economic reform in the late eighties and early nineties. However, the liberalization of trade relations heralded by neoliberalism failed to bring about the expected economic prosperity in the region. In the 2000s, renewed expectations for sustainable development in Latin America came with the commodity boom that brought economic growth to the region. Yet, some Latin American countries incurred more debt and were unable to transform the structures of production. This situation gave way to economic stagnation.
Stiglitz added to Guzmán’s remarks by highlighting the irony of the commodity boom, which led to more debt as banks were willing to lend more. Facing the volatility of commodity prices, many countries in Latin America missed the opportunity that this boom provided to implement forward-looking industrial policies and diversify their economies. One of Stiglitz’s most critical observations was on neoliberalism. In his view, Latin America fell victim to what is known as the Washington consensus, an agreement between the U.S. Department of the Treasury, the International Monetary Fund, and the World Bank to create strategies for the region’s development. According to Stiglitz, this development model did not consider the problem of inequality and neglected the management of capital flows, which, in the end, led to economic instability. In his new book, The Road to Freedom: Economics and the Good Society (2024), Stiglitz puts forward the argument that neoliberal economics has led to populism, which subsequently gives way to authoritarianism. Clearly, Stiglitz considers economics to be inseparable from politics. Guzmán shares this view, remarking that the absence of economic growth always leads to political fragmentation and a lack of hope.
Stiglitz and Guzmán agree that the global debt structure has changed dramatically in the last fifty years. Stiglitz succinctly described this change as going from bank lending to securitized lending, where more creditors with divergent interests have made it more challenging to restructure debt. The role of China in Latin America and the Global South is, according to Stiglitz, another consideration to assess in the current economic situation of the Global South. China plays an active role in Latin America, mainly through lending. China’s advantage over the U.S. with regard to Latin America is that China relies on the state to provide direct financing while the U.S. does so through multilateral institutions and the private sector, making the restructuring of the debt more difficult. On the other hand, both Stiglitz and Guzmán considered that China’s lending to Latin America has not enhanced productive development in the region. Except for Mexico, Latin American countries export commodities with low value-added to China and import high-tech manufactures from China. This model, based on the production of cheaper commodities for China, perpetuates the colonial pattern. Nonetheless, as Stiglitz reminded us, the neoliberal strategy didn’t play well for the development of the region either.
Ultimately, the message from Stiglitz and Guzmán was that Latin America needs to find its own way to achieve economic growth and political stability. For Guzmán, the integration of the region to develop transnational infrastructure projects, such as electricity and gas, is key. He also called for more regional development banks, like the Latin American Development Bank, and for investment in knowledge and in digital and physical infrastructure. In terms of U.S.–Latin America relations, Guzmán’s suggestion was to design more horizontal trade agreements with the region, particularly with Mercosur. The decolonization of such trade agreements would lead to better integration.
For Stiglitz, on other hand, U.S. trade agreements with Latin America have always been uneven due to agricultural protectionism in the U.S. He is therefore in favor of the establishment of more narrowly defined trade agreements based on common areas of interest, such as climate and the environment. For instance, an agreement with Brazil that allows for the importation of sustainably produced Brazilian products, tariff free, into the United States would provide incentives for Brazil to safeguard the Amazon in productive ways.
Stiglitz concluded his remarks by reflecting on the importance of education to tighten U.S.–Latin America relations. One of the strengths of the United States, according to this economist, is its educational system. Establishing major joint research projects and having more student exchange with Latin America will provide the basis to better integrate the two regions.
For Guzmán, a reform of the state in Argentina is essential to overcoming corruption, a pervasive global problem: “Both corruption American style . . . and corruption Latin American style completely distort the working of the system, . . . corruption infects the judiciary and the whole institutional apparatus. . . . Politics ends up having as the objective just winning elections for survival, rather than putting [in place] a system of power for the service of transformation of realities of the people.”
The discussion between Stiglitz and Guzmán at UT pointed to the close connection between the economic, the political, and the social realms, and why uncontrollable debt has serious political consequences. It also shed light on a central concern raised by many Latin American thinkers: the need to decolonize economic relations in order to forge robust civil societies in Latin America and the Global South. ✹
Adela Pineda Franco is director of the Teresa Lozano Long Institute of Latin American Studies and Lozano Long Endowed Professor in Latin American Literary and Cultural Studies at The University of Texas at Austin.
