ECONOMY-ARGENTINA: Public University Suggests Alternative Policies

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Sep 13 2001 (IPS) - Economists at Argentina’s leading public university drew up alternative proposals to the government’s economic model for the first time in the history of this Southern Cone country.

“Gradually, to the extent that the traditional formulas continue to fall into discredit, we will begin to influence the various strata of society,” Arturo O’Connell, a participant in the eight-month debate organised by the University of Buenos Aires Faculty of Economic Sciences, told IPS.

The academics did not propose ideas radically opposed to the neo-liberal policies in vogue today, but they did question principles held up in Argentina as “the truth,” but which in practice have shown themselves to be not very effective, such as a fixed exchange rate, public spending cuts, and the state’s withdrawal from economic activity.

Never before had a public university in Argentina drafted economica policy guidelines, despite the fact that the university produces most of the economists who join the ranks of the government or private think-tanks.

The guidelines contained in the “Plan Fénix” do not constitute “an apolitical alternative project, but one that is non-party in character,” which is to be presented to the government, trade unions, private enterprise and the public, according to the dean of the Faculty of Economic Sciences, Carlos Degrossi.

Among the economists who drafted the Plan Fénix were Aldo Ferrer, Hugo Nochteff, Marcelo Lascano, Jorge Schvarzer, Marta Bekerman and Julio Olivera (the president of the National Academy of Economic Sciences). The authors all agreed that the economic model applied in Argentina for the past 25 years has failed.

“We want to contribute feasible proposals aimed at promoting an academically rigorous debate against the sole, dogmatic current of thought that has prevailed since 1976,” stated the economists.

However, they admitted that the proposed changes would require a political consensus “that does not exist today.”

The release of Plan Fénix came at a time when Argentina’s three- year recession (fall in production) has evolved into an actual depression (destruction of productive capacity).

While restricting access to credit, the government of Fernando de la Rúa is attempting to implement fiscal austerity policies that, besides being staunchly resisted by the populace, are heightening the risk of depression.

Unemployment currently stands at 15.4 percent, according to official figures, while more than 40 percent of the population of 37 million has fallen below the poverty line – compared to 17 percent in 1994 – and the proportion of people whose minimum daily calorie requirements are not met rose from 9.9 to 14 percent between May 2000 and May 2001.

Given that panorama, the academics pointed out that the chief aim of the economy must be the survival of the population. More concretely, they cited the need for a development model with greater equity, social inclusion and better distribution of income.

“As members of the public university, we have a moral duty to present economic alternatives to a society that is despairing and which, after all, finances our work through its taxes,” said Degrossi.

The proposals presented by the economists this month in the Faculty of Economic Sciences call into question several economic assumptions that have taken on the status of revealed truths over the past 10 years.

The authors of Plan Fénix called for the negotiation of a reduction of Argentina’s foreign public debt, which has climbed to 130 billion dollars, and a refinancing of part of the rest of its debt.

They also questioned the functioning of the social security system, which was privatised in the 1990s, while suggesting a more flexible exchange rate – which has been fixed since 1991 – and proposing active policies aimed at stimulating production.

In addition, they argued that the state is not too large, and that the fiscal deficit can only be reduced after the economy gets back on its feet, rather than vice versa as the government suggests.

With respect to privatisations, they said the conditions under which the auctions of public enterprises took place were such that the firms which are now providing public services were granted unjustified rights, such as the right to raise rates in accordance with inflation in the United States.

The economists described the current social security sytem as a “time-bomb”, not only because most of the workers in the informal sector do not make contributions to any pension fund, but because the private pension fund administrators invest nearly all their revenues in public titles.

The pension fund administrators, they warned, are thus running the risk of losing a large part of the earnings that should be going towards the retirement payments of workers in the future, given the country’s liquidity crisis and the latent threat of a debt default.

Plan Fénix is quite different from the usual proposals set forth by private think-tanks financed by national and multinational companies, like the Foundation for Latin American Economic Research, the Mediterranean Foundation or the Centre for Macroeconomic Studies.

Three of Argentina’s last four economy ministers came out of those think-tanks. The only one who came to the ministry with a vision less closely tied to the concepts of fiscal austerity and macroeconomic balance, José Luis Machinea, ended up accepting, albeit reluctantly, the same requirements set by the multilateral lending institutions.

The men who have headed the economy ministry in the past few years have all shared the same creed, no matter what their party affiliation.

That was amply demonstrated by the case of Domingo Cavallo, who served as economy minister under Carlos Menem (1989-99), a Justice (Peronist) Party president, and who now holds that post once again under De la Rúa of the Radical Civic Union.

“There is a group of economists whose attitude is one of total acceptance of the status quo,” said economist O’Connell, who complained of the lack of debate. “In their view, all of us who do not see eye to eye with them are ignorant or irresponsible.”

O’Connell applauded the Faculty of Economic Sciences for calling together a group of economists who believe that something different can be done to pull Argentina back from the brink of collapse.