The end never justifies the means, we are told, and nor does it guarantee them – President Mauricio Macri has the big picture broadly right when he urges the need to end subsidies pricing public services at joke levels but this does not automatically shield his administration from errors of implementation.
At various times Macri (who has an almost reverential respect for his spin doctors) has opted for the electorally pragmatic over the market orthodoxy more commonly associated with his image. But not on this front – here he is almost as much of a hardliner as Energy Minister Juan José Aranguren. Macri seems to be convinced that not even a gradualist reduction of the fiscal deficit could survive a continuation of subsidies and that any limp capitulation to protests would kill his already slim chances of attracting overseas investment as well as complicating international credit lines. Perhaps even more than covering costs, the aim behind steeply hiking gas and other bills is to correct relative prices so that price stability can be given a chance – here those who call on Macri to also apply his much-vaunted gradualism to this sphere and those opposition bills proposing wage-indexed increases or strictly in line with the rest of inflation are entirely missing the point. Macri’s Radical and Civic Coalition allies are sensitive to the electoral dangers of these highly unpopular increases and obviously have an argument but only up to a point – most of Macri’s middle-class supporters aggrieved by these hikes have nowhere else to go.
So is Macri right and his doves wrong? The latest round of increases has magnified an inflexibilty which was always there. One clearly insensitive aspect is the growing impatience with the “social tariff” now being overtly expressed in the proposals to scale it down and phase it out. The “social tariff” which more or less maintains subsidies at previous levels and which benefits around 20 percent of bills was designed to protect those below the poverty line (now officially a quarter of the population, a third when the “social tariff” was launched) – the total thus falls well short of both the current and previous percentages of the poor even if such exclusion is more the fault of an incomplete national grid of public services than any direct discrimination. There can thus be no talk of reducing an already inadequate coverage until “zero poverty” is achieved and not merely proclaimed.
Nobody could accuse the Macri administration of totally ignoring the quarter below the poverty line, whatever the shortfalls, but there are absolutely no criteria regarding the other threequarters. Argentina has always prided itself on being a middle-class society and 40 to 50 years ago, as much of 70 percent of the population might have a genuine claim. Today, while some 80 percent retain middle-class aspirations, at least half cling to the claim on increasingly shaky grounds – thus Argentina’s million-plus teachers see themselves as middle-class because of their superior educational level despite their miserable salaries. Fully half the population is above the poverty line with their presence there vulnerable to a major economic crisis – only around 22 percent can consider themselves immune. It is these millions of precarious households and small businesses already struggling with high taxation and payroll surcharges which are hit hard by the April gas bills and other hikes but the government’s fiscal urgencies seem to prevent it from seeing this. The Macri administration already made the mistake of underestimating civic resistance with last December’s pension reform – it is always wiser to learn from errors than to repeat them.