Tuesday, July 01, 2008

Regarding "A Hidden Agenda: John McCain and the IRI"

I read the COHA article on IRI activities in Latin America. Whatever one might think of what this institution does or is capable of doing, the idea that Latin America's "lost decade" would not have occurred without the IRI is not credible.

The "lost decade" of Latin America was attended by an equally lost decade in the state of Texas and in other economies where raw materials played very important roles After rapid increases in the price of oil and other commodities during the 1970s, prices fell hard in the early 1980s - plunging in the late 80s. Countries that depended on these sales for tax revenues began to default on their government's debt. Of course these same problems caused difficulties in the private sector. As the poor got poorer, and even the rich did, political strife became common across Latin America. Everybody wanted to grab what was left. It isn't for me to be telling anybody about the effects of IRI activies, but I am certain that much of the conflict was a reaction to these price shocks and resulting income shocks. While it is interesting to read about the IRI as a conduit for politically charged money, turbulent world commodity markets and subsequent sovereign debt defaults would have been plenty by themselves to cause a lost decade. This is not rocket science. Just access databases of the prices for oil, copper, gas, iron, or soybeans.

However, the easiest way of figuring this all out is through each country's terms of trade statistics. Most people don't quite understand what "terms of trade" means. Terms of trade is simply the ratio of the prices of things that a country exports to the prices of things that a country imports. Just go to the World Bank's World Development Indicators, pick out an assortment of Latin American countries, and then command the database to produce terms of trade statistics from the late 1960s to the present. I just did this. I punched in the names of each of Latin America's seven largest countries - (in order of population size) Brazil, Mexico, Colombia, Argentina, Peru, Venezuela, and Chile. Terms of trade fall throughout the 1980s and are at their worse in the second half of the decade. Try this and I think that you will not have the slightest difficulty deciding what the lost decade was really about.

William Gruber

In response to "A Hidden Agenda: John McCain and the IRI," by COHA Research Associate Sarah Hamburger.

Sarah Hamburger's response:

Mr. Gruben,

You have obviously considered my article thoughtfully and your explanation of the “lost decade” in Latin America was clarifying. I regret it if I was not clear enough in my article. My intention was never to imply that the lost decade was a result of the IRI, in fact the events I spoke of regarding Haiti and Venezuela took place in the 2000s, not the 80s and 90s. My point is that the IRI illegally intervenes in the affairs of sovereign nations, which is a violation of international law. The “lost decade” portion of the piece was just a brief statement about the auspices under which the IRI was founded (essentially, it is an organization based on a speech by President Reagan, a man with a demonstrably disastrous Latin American policy with Iran-Contra and the Salvadoran Civil War). I appreciate your response.

-Sarah Hamburger

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