I was peacefully reading a BBC article on Ecuador’s plans to introduce a digital currency to bring banking services to the rural poor, when in the midst of the article the anonymous author decided to attack President Rafael Correa because Ecuador borrows money from China.
“Ecuador introduced the US dollar as its currency after a crippling bank crisis in 2000. Since then, the government has tripled social spending and the state is currently billions in debt, mostly to China which buys most of Ecuador’s oil.”
The reader is meant to understand that Correa is recklessly increasing “social spending” through massive public borrowing from China. How did a story purportedly about an innovative program to marry new mobile telephony technology and a new digital currency to bring banking services to the rural poor suddenly include this gratuitous attack on Correa? Because any excuse will do if you piss off the Brits by giving sanctuary to Mr. Assange.
What is Correa’s great sin according to the BBC? “Ecuador … is currently billions in debt.” How many nations are “currently billions in debt?” Roughly the 150 nations with the highest GDP have at least a billion in public debt and over 100 have “billions” in public debt. So, if it is a terrible thing to be “billions in debt” – it is a terrible thing that should be in every BBC article written about virtually every nation in the world.
It is not a terrible thing for nations to borrow, which is why they virtually all borrow. It is true that Ecuador is more vulnerable to external shocks than other nations that have a sovereign currency. Ecuador’s currency is the U.S. dollar. For political reasons it is currently impossible for Ecuador to reestablish a sovereign currency. Correa, an expert economist, and one of the most popular elected officials in the Americas, understands both points.
So, how much public debt does the reckless Ecuador have compared to prudent nations such as the U.K., the U.S., and Germany? The CIA has the answer – and the CIA’s hate for Correa exceeds even that of the BBC. The CIA’s World Fact Book has an introductory discussion of Ecuador’s economy that is a cry of rage and spite. The one thing that the CIA can never forgive Correa for is the enormous success of Ecuador’s economy and the “social programs” that became the national priority under Correa. The CIA introduction to Ecuador’s economy does everything possible to try to suggest that Ecuador’s economy was performing brilliantly prior to Correa’s first election as President of Ecuador and that anything positive that has happened since Correa’s election is the product of luck that will soon be replaced by disaster. We know that the CIA is not stacking the numbers to make Ecuador look good under Correa’s leadership.
The CIA reports that Ecuador’s public debt as a percentage of GDP is a staggering 23.2 percent (as of 2013, the most recent available data). If you go online and click on the “public debt” icon for Ecuador (or any other nation) a chart will appear that gives the same data for almost every other nation. The BBC’s home is the ultra-prudent U.K. under the leadership of the ultra-prudent Tories. The U.K.’s public debt to GDP ratio is a mere 91.1 percent. The U.S. ratio under the vastly imprudent President Obama is 71.8 percent. The real proof of the BBC’s point comes when we examine the über-prudent Germans’ ratio under the leadership of Merkel the Merciless – an almost non-existent 79.9 percent.
How does Ecuador’s 23.2% figure compare to three conservative darlings in Latin America: Mexico is 37.7 percent, Colombia is 39.6 percent, and Guatemala is 31 percent. (Chile is back under socialist leadership.) Peru and Paraguay are the rightist regime in Latin America with a materially lower ratio, but they too are “billions in debt.”
We all know that the leftist national leaders of Latin America must be off the charts in their government debt ratios compare to the rightist leaders of Germany and the U.K. Ecuador must be the only leftist leadership in Latin America with a lower ratio than Germany and the U.K. Bolivia’s ratio is a whopping 36 percent, Brazil (which the BBC treats as respectable) is 59 percent, Venezuela (with the only Latin American leaders that the BBC treats with even greater disrespect than they do Correa) is so irresponsible that its ratio is a calamitous 34 percent. And the poster child in the conservative West for leftist Latin American insanity – Argentina – is off the charts at 46 percent (roughly the one-half the figures for the U.K. and Germany).
And, no, Ecuador has not been funding its government expenditures primarily by borrowing money. What has Ecuador “tripled social spending” on since Correa’s election? Infrastructure, health, and education are the three areas. Those are the three areas of governmental spending that the Washington Consensus said needed large increases? What have been the results? Substantially reduced unemployment, well below U.S. levels, reduced poverty, reduced inequality, and substantial growth without harmful inflation. And Ecuador, which lost more citizens to emigration as a percentage of total population than any nation in the Americas now has a net population inflow. People are “voting with their feet” by remaining in Ecuador or moving to Ecuador. Very few nations can boast of similar achievements, particularly given the drag caused by the Great Recession and then the second Great Recession (and Great Depression in the EU periphery) brought on gratuitously by austerity. Even now, parts of the EU are sliding back into their third recession is six years.
The remainder of the BBC article is simply unintentionally hilarious. This stems from the uncritical acceptance of the statements of Mr. Booney, a purported expert on digital currency. Booney’s concern is that Ecuador may be unable to replicate Bitcoin’s “success.”
“Bitcoin (a global digital currency) has faced huge challenges to get people around the world to use it, and that is a worldwide movement with thousands of developers working on it.”
First, Bitcoin is not a success, except at aiding and abetting a host of transnational crimes. Second, Bitcoin does not have “thousands of developers.” It may be used by thousands of web sites devoted to aiding transnational crime. Third, Bitcoin has been beset by enormous scandals because it attracts criminal “developers” and criminals who wish to steal Bitcoins. Bitcoin “faced huge challenges” because it is at heart a Ponzi scheme that is used overwhelmingly by transnational criminals. Bitcoin is simply a particularly shadowy product of the shadow financial system that blew up the global economy.