Reimagining the Debt Crisis: Latin America and Europe in Conversation

In Fall of 2012, the Bertelsmann Foundation began a focus on Latin America as part of the Global Economic Dynamics project. With Europe trudging through a debt crisis, we felt that considering the Latin American experience with debt would be a perfect introduction to why Brasilia matters to Berlin, and why Madrid matters to Mexico City. Ultimately, I complied my research into the paper Surviving a Debt Crisis: Five Lessons for Europe from Latin America.

The paper suggests that Latin American policy makers and central bankers were forced to disentangle precisely the same Gordian knots that we face today. Some of their efforts succeeded, others failed—and all told, they left a body of work that is absolutely relevant to the current crisis in Europe. The principal lesson is clear: pounding austerity into a recession does not work. Such policies cost Latin America what is now known as the “Lost Decade,” and it was not until Latin American policymakers incorporated growth into the strategy that the region began its long trek towards recovery. In short, it is not austerity or growth but austerity then growth that is required. Europe—on pace to lose a decade itself—would do well to take notes.

My goal with the document was to reinvigorate a dialogue that I felt had become stale. Just read any editorial in any major newspaper and one finds the same tired arguments. I attempt to offer a different perspective, and it is my great pleasure that a select group of Future Challenges bloggers have considered my work and offered their own perspectives. These are precisely the new angles that could help break the logjam in current debates, and, to this end, I believe it fits neatly with Future Challenges’ Collaboratory Globalization and Internet Initiative.

So here is to keeping the dialogue open, honest and fresh.