Thursday, June 13, 2024

OP-ED | 23-09-2022 13:00

Neither magic nor realism

The theatre of the absurd would seem to have found a home in Argentina. Yet amid all this surrealism there are real problems awaiting real solutions and until these arrive, there seem no limits as to what will fill the vacuum.

A candy floss gang at the centre of the assassination attempt against Vice-President Cristina Fernández de Kirchner, while problems with World Cup album stickers prompt an emergency meeting of the Domestic Trade department ahead of addressing constant industrial complaints about import shortfalls threatening production (when last month’s imports were 36.2 percent up on the previous August) – the theatre of the absurd would seem to have found a home in Argentina. Yet amid all this surrealism there are real problems awaiting real solutions and until these arrive, there seem no limits as to what will fill the vacuum.

Neither the government nor the opposition show any signs of having a grip on those real solutions. The government is totally baffled by their slumping popularity, given the shocking attack on their vice-president (offering a replay of the massive sympathy vote which fed the 2011 landslide vote of 54 percent re-electing a recently widowed Fernández de Kirchner) and a raft of positive macro-economic indicators. But opinion polls surprisingly show four times more people intensifying their dislike of the vice-president after the attack than becoming more sympathetic. Yet the opposition gains from this slump continue to be as precarious as their unity and will remain so until they start concentrating on finding constructive alternatives instead of criticising. This government is all too easy to criticise, anybody can do so but what the people are looking for from the opposition are some credible answers.

Easier said than done. One person taking a proactive approach is the new Economy Minister Sergio Massa, who in little over a month has fired off a series of instant responses to problems, only to find that there is no magic in velocity. The segmentation of public service billing is proving unexpectedly complex (a case of more haste, less speed) while the soy dollar now sees the Central Bank’s quasi-fiscal deficit at sevenfold the levels left by the previous Mauricio Macri administration due to paying so much more to buy those dollars (at the cost of printing almost half a trillion pesos) than earned from their sale. Nor does breaking the rules via the Central Bank resolution trapping farming beneficiaries with their new glut of pesos by denying them access to exchange markets help matters.

Nobody talks about “asymptomatic crisis” as they did in the last years of the previous Kirchnerite administration yet the disease becomes that much harder to diagnose when so many of the macro-economic indicators are healthy, including that traditional bottom line of growth. Year-on-year economic growth was almost seven percent up in the second quarter and also one percent up on the previous quarter. Other data argue against this growth being merely a consumer splurge – while private consumer spending rose 1.8 percent (0.2 percent in the public sector), the investment rate rose 19 percent to a respectable 21 percent of gross domestic product and exports climbed 3.5 percent. And while the figures of previous Kirchnerite presidencies were suspect, these are coming from an INDEC national statistics bureau which measured last month’s inflation at seven percent or half a point above most independent estimates.

This inflation, one of the world’s worst, goes a long way towards explaining both the sense of crisis and government unpopularity – thus a relatively low unemployment rate below seven percent, another positive figure, is negated by a battered purchasing-power leaving housing or a car beyond the reach of even a skilled worker as never before. Yet this soluble problem leaving inflation outside the vocabulary of most countries until recently is more intractable here. Firstly, there seems a lack of serious government will to end it because the easiest answer to the fiscal deficit giving rise to inflation is precisely inflation to boost revenues and liquidate liabilities. Secondly, the monetarist solutions which have worked elsewhere run into the problem that there are two v-words underlying inflation – not only the volume of the money supply but the velocity of its circulation. The government could stop printing money altogether (as the Macri administration did in its final year) or withdraw it from circulation but if people spend it several times as fast, the result will be the same or worse.

Which brings us back to the beginning of this editorial – the theatre of the absurd feeding the disbelief of a systematically sceptical population with the non-economic factor of the underlying lack of confidence the fundamental problem. As G.K. Chesterton observed, the problem with people believing in nothing is that they end up believing in anything – and anything could happen. 


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