Sunday, May 22, 2016

Left, right and economic progress in Argentina

Mark Weisbrot summarizes the lazy conventional wisdom about the conservative trend in Latin American politics (Has the Left Run Its Course in Latin America? The Nation 05/10/2016):

There is a popular narrative here in Washington and media circles that Latin America’s left-populist turn has finally run its course. It goes something like this: A commodities boom, led by demand from China for Latin American raw materials exports, fueled regional economic growth in the 2000s. This happened to coincide with the election of left governments that were reelected after spending lavishly on handouts to the poor. They alienated foreign investors and their economic policies were unsustainable. Now Chinese growth has slowed, commodity prices have gone south, and with them the fortunes of Latin America’s nationalist, populist left. November’s election of right-wing challenger Mauricio Macri as president of Argentina, the Venezuelan opposition’s landslide congressional win in December, and economic and political crisis in Brazil — including the current effort to remove President Dilma Rousseff—herald the beginning of the end of an era. In this view, the region will continue to elect more right-wing—or, in business-press parlance, “moderate” (and pro-US)—governments that will return to some of the more sensible economic policies of their predecessors.
Horacio Verbitsky (El tercer semestre Página/12 22.05.2016) writes about Federico Sturzenegger, the current head of the Banco Central de la República Argentina, appointed by current President Mauricio Macri, a devotee of neoliberal economic dogma. Sturzenegger is part of Macri's PRO party and was elected as a deputy (legislator) in the Autonomous City of Buenos Aires in 2013. Verbitsky describes the communication strategy on which Sturzenegger was coached along with other PRO candidates on how to defend their policies in public. As Verbitsky recounts it, this was part of the instructions:

No explicar nada. Si se explica qué es la inflación, habría que decir que la emisión monetaria genera inflación, que entonces debería reducirse la emisión, y que si se reduce la inflación habría que hacer un ajuste fiscal y que si se hace un ajuste fiscal la gente va a perder su trabajo. Eso es lo que no hay que decir. Desde el gobierno se puede hacer lo que se considera necesario, pero no hay que decirlo en medio de un debate. Mejor decir que están mintiendo con los números de la inflación o decir cualquier cosa; hablar de los hijos de uno. No importa.

[Don't explain anything. If you explain what inflation is, you will have to say that the issuance of money generates inflation, that therefore the money supply will have to be reduced, and that if inflation is reduced there would have to be fiscal austerity, and that if fiscal austerity is implemented people will lose their jobs. That's what you don't need to say. The government can do what it considers necessary, but doesn't have to say it in the middle of a debate. Better to say that they {Cristina Fernández' government} are lying with the inflation numbers or say whatever; talk about your kids. It doesn't matter.]
When you have a standard economic prescription that will damage large numbers of ordinary people in order to enrich the wealthiest even more, you have to dress it up some other way. Or, as Sturzenegger's coach recommended, avoid talking about them as much as you can.

Cristina's last Finance Minister Axel Kiciloff in his book Diálogos sin corbata. Para pensar la economía, la política (y algunas cosas más) en el siglo XXI (2015) discusses the dominance of liberal/neoliberal (free market/Herbert Hoover/Angela Merkel) type economic policies, associated especially with the military dictatorship of 1976-83 and the government of right-Peronist President Carlos Menem (1989-99).

Durante el liberalismo esto resultó tarea sencilla porque traían de afuera el recetario económico. Más allá de que tuvieras o no ideas propias, te decían lo que, había que hacer en el Ministerio de Economía, y eran políticas que todos conocen: ajuste fiscal; ajuste financiero, que significa bajar la liquidez, bajar el credito, la politica monetaria contractiva; apertura de la economía, es decir, ningún tipo de resguardo o administración del comercio exterior, dejar que todo venga de afuera ...

[During liberalism, this {finding an economic theory} turned out to be easy work because they brought a recipe book from abroad. Aside from whether they had their own ideas or not, I'll explain what they had to do in the Ministry of Economics, and those were policies everybody knows: fiscal tightening; financial tightening, which meant reducing liquidity, reducing credit, the contractionary monetary policy; opening the economy, that is to say, no type of protection or administration of external commerce, let everything go abroad ...
That latter reference is to the Hail Grail of the corporate-deregulation "trade" treaties like TTIP and PPT, the unrestricted flow of capital, both into and out of a country. This makes a developing country not only vulnerable to financial speculation that can create a run on its currency and and cause a financial panic. It also means that the country's development can be dominated by external political and market forces. The governments of Néstor Kirchner and Cristina Fernández de Kirchner pursued a policy of capital controls that had as its goal promoting domestic industry for the balanced development of the Argentine economy and reduce its vulnerability to economic attacks from other countries.

Kiciloff also gives this brief summary of the standard neoliberal prescription, "Ese plan de cuatro puntos - ajuste fiscal, ajuste monetario, apertura de la economía y endeudamiento - es el plan permanente del liberalismo y de la ortodoxia." ("This four-point plan - fiscal contraction, monetary contraction, opening of the economy and indebtedness - is the permanent plan of liberalism and orthodoxy.")

That prescription is also known as the Washington Consensus because the United States has promoted it assiduously through the IMF and the World Bank and the corporate-deregulation "trade" treaties. That four-point plan is a good summary of what the Macri government has been implementing at a rapid pace since it took office this past December.

Verbitsky's article includes the following table projecting a probable scenario for the growth of public and private debt in Argentina:


The orange bar shows the projected public debt plus the private debt denominated in foreign currency as a percentage of GDP (PIB). The immediate concern about the growing debt is not the percentage of GDP as such. It's that most of the current new debt is going not to long-term investments in Argentina but to paying what is essentially ransom to vulture funds that bought up already-defaulted debt. And the private debt denominated in foreign currency becomes bigger as a percentage of GDP the lower the Argentine peso falls in relation to the foreign currency.

And this is part of the standard neoliberal recipe that Macri's government is applying to the Argentine economy. They justify it by claiming that the economy was previously in bad shape. Verbitsky writes, "Macrì no para de repetir que desde hace cinco años la economía no crece ni crea empleo privado, lo cual es lisa y llanamente falso." ("Macri never stops repeating that the economy hasn't grown for five years nor has employment increased, which is plainly and simply false.")

He cites El Revelador, which provides this table and the text explanation shown below:


Durante la campaña electoral de 2015, la oposición al gobierno de Cristina Fernández de Kirchner, repetía (y lo sigue haciendo) que hacía 4 años que la Argentina no crecía. Y lo decían en términos porcentuales del PBI. Cierto es que dejó de crecer al ritmo en el que lo hizo en los años previos. Pero contextualicemos observando lo que ocurrió en el mismo período sumado (2011-2014) en los siguientes países:

Mientras que en 2014 nos cansamos de escuchar que Argentina hacía 4 años que no crecía, en ese período, su PBI creció porcentualmente más que el de Alemania, España, Estados Unidos, Francia e Italia todos sumados.
[During the 2015 election campaign, the opposition to the government of Cristina Fernández de Kirchner repeated (and are still repeating) that since four years Argentina did not grow. And they say it in terms of percentage of GDP. Certainly it stopped growing at the rhythm that it did in the previous years. But let's put it in context of what happened in the same period in total (2011-2014) in the following countries:

While we kept hearing in 2014 that Argentina hadn't grown in four years, in this period it GDP grew percentage wise more than that of Germany, Spain, the United States, France and Italy all together.]
So when Mark Weisbrot talks about what US elites and mass media talk about "more sensible economic policies," it the neoliberal prescription that they are praising as "sensible."

Weisbrot's point is that economic policies that work well for the majority of people are a strong attraction. And it's left governments, the so-called "Pink Tide," that have been delivering that. As he writes of the Argentine case:

Changes in economic policy were also key to Argentina’s success after its default and devaluation at the end of 2001. The remarkable economic growth and poverty reduction that followed over the ensuing decade — real GDP increased by about 78 percent, and poverty was reduced by more than 70 percent (these numbers are based on independent estimates, as the government’s estimates of inflation are disputed; see http://sedlac.econo.unlp.edu.ar/eng/statistics.php)—had relatively little to do with commodities. It was not even export-led growth.

One necessary condition for Argentina’s robust recovery (real GDP grew by more than 60 percent from 2002 to 2008) was the government’s default on the foreign debt and its taking a hard line in the renegotiation. Right away, this achieved a sustainable debt burden—rather than getting Argentina stuck in a series of recurring crises due to too much debt, as with Greece, for example. And again in contrast to Greece, Argentina freed itself from the demands of its creditors for continuing austerity. The government was also able to tax exporters to capture the windfall from the devaluation, use the central bank to manage the exchange rate, implement a financial-transactions tax, and pursue other policies that enabled the country to emerge from depression. [my emphasis]
In fact, Weisbrot is downright optimistic about the prospects for the democratic left in Latin America:

The Latin American left has led the region’s “second independence” in the 21st century, altering hemispheric economic and political relations, and—even including the economic losses of the recent downturn—presiding over historic economic and social changes that benefited hundreds of millions, especially the poor. Despite the electoral setback in Argentina and the current threat to democracy in Brazil, they are likely to remain the dominant force in the region for a long time to come.

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