Political Economy in Argentina: The 2002 default-causes and remarks. (original) (raw)

The Achievements and Failures of Argentina's Neo-liberal Economic Policies

Oxford Development Studies, 2002

The stability of an economic policy regime depends in large measure on either its successful authoritarian imposition or on the general acceptance by society of the distributional status quo of assets and/or income. Although Argentina's Convertibility Plan ("Currency Board" system) brought price stability and growth to the country, the inability or unwillingness of the government to attain a fiscal adjustment threatened its survival. The "fight for shares" in this "conflict society", which was inherited from previous regimes was never resolved. We show that this fight previously left unresolved through inflationary finance, was left unresolved through the rapid growth of indebtedness under the Convertibility Plan. From 1999 on the contradictions of the Plan had become obvious and it was clear that the key to future stable economic growth was dependent on finding a way to turn the "conflict society" into a "consensus society." The construction of such a society is still a pending task for Argentina. 4 Wise (2000), p. 97 5 Wise (2000), p. 97.

Explaining the Economic Failure of Argentina's 'Proceso de Reorganización Nacional', 1976-83

2014

When Argentina’s armed forces seized power under a triumvirate Junta on March 24, 1976, the coup was broadly approved of throughout the country. Seven years later, a regime that had named itself the Process of National Reorganization, or ‘Proceso,’ was completely reviled, having incompetently lost a war and economically destroyed the country. Why, after initial successes predicated on complete social control and during seven years in power, did the military fail to achieve its long-term economic objectives? How could a period termed the National Reorganization Process result in an economic crisis worse than the one it assumed power to solve? Ultimately, as I will argue, the various elements of the Junta’s failure are the consequences of the contradictory economic objectives of simultaneously stabilizing, stimulating, and restructuring the economy. Individually considered, reform was counterproductive in only benefitting the financial sector, stimulus was wasteful and unproductive, and stabilization wasn’t seriously pursued - in controlling inflation - or poorly effected – in controlling deficit spending. Equally important, the military junta attempted to achieve its economic objectives within the constraints of its security and political priorities. As a result of trying to stabilize the economy without creating recession or unemployment, the passive crawling peg (‘la tablita’) was instituted and alongside an irresponsible financial liberalization, would create conditions of high liquidity that would eventually explode. The specific mechanism of this implosion was the combination of an overvalued exchange rate alongside high interests rates and deposit guarantees that created economic distortions that promoted both financial moral hazard and necessitated later currency devaluations. The government’s response was to assume private sector debt as public sector debt, eventually amassing an insupportable foreign debt. In other words, inconsistent economic objectives applied haphazardly resulted in volatile outcomes. Moreover, the contradictions in the Proceso’s economic policy making were the amplified consequence of the armed forces’ own internal contradictions, namely monetarist policy making restrained by the powerful statist interests of the military. Trying to carry out one without impeding the other would demonstrate that the military, contrary to its claims, was not above politics nor a monolithic entity. The conservative forces that assumed power in 1976 would ultimately represent the interests of the country’s upper bourgeoisie, an alliance between the rural Pampean export oligarchy and domestic and international finance capital. Lewis writes that, “their rivalry, which extended to the ranks of the military officers themselves, prevented any coherent policy from being applied long enough to make an impact. In the end, the dissension and frequent cabinet turnovers it caused rendered the military governments no more effective than the civilians they replaced” (Lewis 178). This is captured by the frequent changes in economic policy throughout the dictatorship and the “wavering between renewed interventionism and more vigorous economic liberalization” (Veigel 9). The decision to go to war over the British Falkland Islands, partly as a way to distract the public from economic deterioration by 1982, made that same deterioration inescapable and irreversible. This paper will begin by recounting the experiences in the year before the coup, with Isabel Perón’ administration and the ‘Rodrigazo’. After briefly introducing the Junta regime, it will go into the economic history of 1976-1983 year by year. After it will examine, the mechanisms of the ‘perverse’ financial and economic restructuring, the internal dynamics of the regime and economic team, and look briefly at how international events throughout this period exacerbated the aforementioned within Argentina.

Historical causes of the Argentine crisis (1)

According to the great French historian Pierre Vilar, 'Only a comparative, complete history (economy, societies and civilizations) .. .'is the appropriate instrument to provide us with an understanding of the complexities of a society. More precisely,' ... to distinguish among the many combinations of the old and the new, what is a promise, what is a threat. Among the sciences of man the most illusory', continues Vilar, 'are those that promise to discover a single aspect of reality in isolation-'economy' on the one hand, 'mentalities' on the other-as if all sectors were not always interdependent'. 1 It is on the basis of this all-embracing view (economic, political, social, ideological, national and international) that we will analyse the historical causes of the Argentine crisis of 2001-2002, the most profound in the country's history. The explanations given for the crisis are varied and they are linked with both exogenous and endogenous factors. However, there is a prevalence of unilateral approaches, which concentrate on some factors or others, thus losing the unity of the process. There are those who believe that it is exclusively a question of external factors, such as the effect of the crises that occurred elsewhere from the mid-nineties on: the Mexican crisis (socalled Tequila), the SouthEast Asian crisis (the most important one) in 1997, the Russian crisis, or the Brazilian devaluation of 1999. From a different ideological position, but also stressing external events, the Argentine crisis is apparently a result of globalisation and of policies imposed by international financial bodies responding to the interests of the 'central' countries. Now, since the internal causes are avoided, these views are incapable of explaining why these same phenomena produced different effects on countries with similar characteristics, even within Latin America. At the opposite extreme, that is, where local factors are considered to be the determining factors in the crisis, there are also different approaches. Orthodox thinking blames excessive public spending and the fiscal deficit. However, empirical evidence shows that Argentina tends to have a minimal State and that foreign public indebtedness played a central role in providing the currency required to maintain the convertibility scheme, also

The nature of Argentina's policy reforms during 1976-1981

1986

All nghts reserved Manufactured in the United States of Amenca First pnnting January 198.6 This is a working document published .niformally by the World Bank. To present the resu".: oi research wikth he least ooss.ible delay, the typescript has not been prepared in-ccor 'a-: mith the procedures appropnate to formil p: nted texts, and the World Bank accepts no responsibility for errors The publication is supplied at a token charge to defray part of Ite cost of manufacture and distnbution The World Bank does not accept respurns..'-y for the views expressed herein, which are theose of the authors and should not be attnbuted to the 'vio-ld Bank or to its affiliated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank. they do not necessanly represent official policy of the Bonk. The designations employed. the presentation of matenal, and any mnaps used in this documefnt are solely for the convernience of the reader and do not imply the expression of an', opinion whatsoever on the part of the World Bank or its affiliates concenring the, legal status of any country. temtory. city, area, or of its authorities, or c-oncerring the delimitation of-ts boundanes, or national affiliation. The most recent World 'ank publications are descnbed in the annual spnng and fall lists, the continuing research program is de.cnbed in the annual Albstracts of Current '5rudies Tlle Itest edition of each is available free of charge from the Publications Sales Unit, Depiartment 1. The World Bank, 1818 H Street, N W., W; shington. D.C. 20433. U.S.A. or frorn the European Office of the Bank. 66 avenur d'ltna, 751 lo Pans. France. Julio I Hogucs is an econo.aiist in the International Economic Research Division of the World Bank's Development Research Department Library of Con'gres. Cataloging-in-Publicati6ni,Data Nogues, Julio" The nature of Argentina's,,economic,policy reforms duri,ng-1,2-1981.

Crises & Crashes: Argentina 1885 â 2003

2005

This paper is aimed at studying the determinants of currency crises suffered by Argentina from 1885 to 2003, on one hand, and at characterizing each particular currency crisis, on the other hand.

The Political-Economy of Argentina's Debacle

SSRN Electronic Journal, 2000

In this paper I argue that political-economy considerations -and in particular the identity of the reformers-are central to understanding the Argentine crisis. During the 90´s the main political parties remained attached to populism, and no strong party emerged at the center of the political spectrum. This had two effects in the reform process. First, it severely deteriorated it (efficiency, corruption), reducing the support of the population. Second, when a series of shocks hit the economy the anti-reform camp tried to undo most reforms, and thus convey a message to the population about the "right" model of the world. JEL classification codes: F31, E60

Towards a critical understanding of the Argentinean crisis of 2001

In this essay I will develop an alternative explanation to the causes of the Argentinean crisis of 2001. The predominant approaches, based on mainstream economics, argue that the causes of the crisis are to be found in elements outside what they consider as the economic sphere. I will argue that these approaches are based on an approach that abstract economics from its social foundations and does not consider certain fundamental aspects of the contemporary mode of production. Using their epistemology will therefore lead to a narrow understanding of events such as economic crisis. In this sense, I will need to move beyond mainstream economics’ understanding of social reality and propose my own framework, based on a Marxist approach. Then I will be able to give some important nuances to the debate. I will show that capitalism has a tendency towards overproduction and economic stagnation. It therefore depends on the disciplinary forces of crisis to re-establish the conditions of capital accumulation. In this sense, my main argument will be that the Argentinean crisis of 2001 was a geographically concentrated devaluation of overproduced capital.

Recent Experiences of Stabilisation: Argentina's Economic Policy 1976-81*

The IDS Bulletin, 1981

This (the fact that "the causal chain between money and incomes or money and prices is the reverse to that postulated by the Quantity Theory of Money") does not mean that a "monetarist' economic policy such as that of the present government is futile. Control over the 'money supply ' which has in any case been ineffective on the government's own criteria, is no more than a convenient smoke-screen providing an ideological justïfïcation for such antisocial measures (high interest rates, an overvalued exchange rate and the "consequent diminution in the bargaining strength of labour due to unemployment")'. I Lord Nicholas Kaldor 1980: emphasis added. I