Experience has taught us that once inflation is ingrained in an economy, getting rid of it is no picnic – even if you are an economic superpower

It’s easy to discount what Latin America may have to teach the world about running an economy. After all, what can a region perpetually embroiled in intractable problems possibly teach us? In this part of the world turmoil is the norm. In reality, though, the basic problem in Latin America is not its chronic economic instability, but the inability of its leaders to learn from experience, and their propensity to keep pushing policies that have already proven disastrous. I call it ideological necrophilia – the passionate commitment to dead ideas.

This, however, does not mean that more advanced economies can’t learn from Latin America. In fact, here is some advice from Latin America that President Joe Biden and his team would do well to keep in mind.

The first is not to ignore the deficit. The idea of brushing aside the consequences of spending far more than a government collects in taxes has a long history, and is the subject of a fierce academic debate. In 1932, John Maynard Keynes argued that recessions can be remedied with dramatic increases in public spending. In 2002, then-US Vice President Dick Cheney blandly asserted that “deficits don’t matter.” That debate is very much alive. In 2020, economist Stephanie Kelton published a book titled The Deficit Myth. In this bestseller, the unorthodox economist explains why the so-called Modern Monetary Theory means that a government that controls its currency can increase public spending as much as it wants. Again: fiscal deficit doesn’t matter.