ECONOMY-ARGENTINA: Impoverishment and Chaos

By Mario Osava Reprint | | Print |

Viviana Alonso and Mario Osava

BUENOS AIRES, Jan 31 2002 (IPS) - The disaster that has struck Argentina is linked to the failure of the “financial accumulation model” that was implemented during the last military dictatorship (1976-1983) and “deepened” in the 1990s, says Claudio Lozano, an economist with the Argentine labour movement.

“It was a financial accumulation that occurred based on the State, and it was a continued flight of resources abroad that allowed the economic agents – banks, business groups – to make big profits,” Lozano, director of the Argentine Workers Union’s research institute, told IPS.

Raúl Bernal Meza, international relations professor at the University of Buenos Aires, also traces Argentina’s current social and economic collapse back to the 1976 coup d’etát.

Twenty-five years of extreme neo-liberalism explain how a country that was as rich as Argentina could plummet into the chaos that has reigned since December, Bernal Meza said in a conversation with IPS.

And Eric Toussaint, president of the Brussels-based Committee for the Cancellation of Third World Debt, maintains that contrary to what some sectors believe, there was never a true rupture in the Argentine economic policy once the dictatorship ended.

Argentina “has suffered a regression as a peripheral industrial power, and today most people live in worse conditions than they did 30 years ago,” said Toussaint, also a member of the international preparatory council for the second World Social Forum, which runs Jan 31-Feb 5 in the southern Brazilian city of Porto Alegre.

Argentina’s foreign debt payments, suspended in late December, have been a “formidable mechanism for the transfer of wealth produced by wage- workers to the owners of capital, whether they are Argentines or residents of industrialised countries, beginning with the United States and Western Europe,” he added.

“Income poverty surpasses structural poverty in Argentina. More than 70 percent of the poor live in poverty due to their incomes,” according to unionist-economist Lozano.

“The financial system served as a framework for accumulating debt against the State,” and meanwhile became a “systematic process of inequalities that has been increasing over the last 25 years,” said the expert.

Argentina’s public debt amounts to147 billion dollars, according to unofficial figures. The Central Bank’s most recent report was issued last July prior to the crisis, when the total was 132 billion, or 45 percent of gross domestic product (GDP).

“In 1975 the Argentine population stood at 23 million and there were two million poor,” in 2001 the population reached 36 million, according to the census, “and the poor number nearly 15 million,” Lozano said.

“The crisis is political, economic and social. There has been a political collapse because the traditional system lacks any sort of proposal that is credible” to the population, he added.

The economic model implemented in Argentina took the shape of “savage capitalism”, unlike the softer Brazilian approach, and the Chilean model in which “the State engages in strong regulation,” academic Bernal Meza said.

The contrast is particularly evident in the foreign debt volumes. In Brazil, 80 percent of the debt has been converted into “concrete civil works,” like energy and telecommunications infrastructure and industry, and “20 percent has been lost in capital flight and corruption,” he said.

Meanwhile, in Argentina, almost nothing has been constructed with the foreign loans, and capital flight has claimed nearly 150 billion dollars in less than three decades.

The current curbs on bank transactions, known as the “corralito” (the little corral), are perverse, says Bernal Meza, because they seize the money of savers, of “families, professionals, and small and middle-sized entrepreneurs.”

The objective of the freeze on accounts is to protect the banks, which do not have any money available. Their reserves dried up because they freed up credits for “1,500 companies belonging to the same groups that owned the banks and thus were able to spirit that capital out of the country.”

All this occurred thanks to “an alliance of political parties with big financial capital that paved the way for the neo-liberal model, the ‘convertibility’ regime (eliminated early January after pegging the peso to the dollar for a decade), capital flight and now the ‘corralito’ in Argentina,” Bernal Meza said.

Lozano, meanwhile, commented that “we are witnessing a crisis of hegemony because there is no one to lead the next phase. There is no way out that integrates all of the powerful groups. The banks and privatised companies, on one side, and the exporters on the other, are not able to merge their interests.

“There is a clash of interests between the powerful, who cannot agree on anything, and the growing social movement, which today is expressing itself autonomously with respect to the political and economic powers,” he said.

Meanwhile, “the traditional political parties’ ability to exercise control has diminished and, as a result, there is a spectacular crisis of authority.”

“One regime is ending, but no one knows what will follow. The dominant classes do not have the answers, and those who are mobilising in the streets have yet to present any alternatives,” Lozano said.

In Toussaint’s opinion, “what is needed is citizen pressure (to push the Eduardo Duhalde government) to adopt a firm and lasting position” in facing up to the creditors. It is also necessary to carry out “economic reforms that favour a progressive distribution of national income, with a redistributive tax policy.”

Argentina needs “to organise the return of the privatised companies to the public domain and give priority to the South-South agreements of the trade relations with the United States through the FTAA (Free Trade Area of the Americas),” he recommended.

In addition, it must break its agreements with the International Monetary Fund. “Such a rupture would not entail any true harm. On the contrary, it could be beneficial for Argentina.” For the population and the movements in which the people are becoming organised, “it could be an important opportunity,” says Toussaint.