August 25, 2024 by Dan Mitchell @ International Liberty
About 10 days ago, I showed that Milton Friedman was a much better economist than Joseph Stiglitz by comparing Chile (which followed Friedman’s ideas) and Venezuela (which followed Stiglitz’s ideas).
It was a slam-dunk win for Friedman. Chile started poor and has become relatively prosperous.
The opposite happened in Venezuela, which started relatively prosperous and has since suffered a horrible economic decline.
I then noticed a tweet a few days ago that tells a very similar story. It includes this chart, showing what has has happened to per-capita GDP since 1998 in Argentina, Estonia, Poland, and Venezuela.
The author the tweet, Charles Lajoie, explained the significance of the data.
If you want to know the difference between Milton Friedman and Joseph Stiglitz, I present to you 4 countries with a GDP per capita of about $15,000 in 1998 (Poland being a bit poorer back then).
The first one, Estonia, reformed its way out of socialism through shock therapy. Mart Laar, the architect of the reforms, cited Free to Choose as his main inspiration. The second, Poland, also reformed its way out of socialism, and it did so through even more radical shock therapy than Estonia.
Leszek Balcerowicz, who’s widely seen as the main actor behind those reforms, has won the Milton Friedman Prize for Advancing Liberty in 2014, a reflection of his reforms’ adherence to Friedman’s…ideas.
The third one, Argentina, has followed the ideas of Néstor Kirchner since 2003, a man who was directly advised and praised by Joseph Stiglitz. As late as 2022, Stiglitz praised its economic policies.
The fourth, Venezuela, followed economic policies that were openly praised by Stiglitz as late as 2007… And, there you go. That’s the difference between Milton Friedman and Joseph Stiglitz.
I might quibble with a few details. For instance, I think Estonia’s reforms were more radical than Poland’s reforms.
But Lajoie’s core point I spot on. Friedman-style policies have worked and Stiglitz-style policies have failed.
P.S. Now that Argentina has the world’s best leader, it will be interesting to see how fast and how far Argentina will improve (President Milei faces a hostile legislature, so he can’t turn his country into Singapore overnight).
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