Saturday, April 20, 2024

OPINION AND ANALYSIS | 15-07-2022 13:00

A trail of two (big) chitties

Throughout most of this century Argentina has sought to make a virtue out of necessity by demonising debt so that if that was ever a virtue, it has become a deadly vice – the options to an inflationary expansion of the money supply are few and far between.

Earlier this month Argentina and Britain lost their economy ministers within three days of each other – already a blow to that Argentine exceptionalism which preaches that everything happening here is absolutely unique in the world, even (and perhaps especially) when going wrong. Almost immediately Britain went one better (or worse) by dumping its prime minister too – even if there are those who would argue that if Argentina’s ultra-presidential democracy had the flexibility of the parliamentary variant, the same would long have happened to President Alberto Fernández.

Argentine exceptionalism finds its weightiest corroboration in that famous Simon Kuznets quote: “There are four types of countries in the world: developed, underdeveloped, Japan and Argentina” (implying that Japan had done everything with nothing and Argentina nothing with everything). Yet the “clownfall” (as described by the British press) of Boris Johnson has little to envy Argentina’s tragicomic politics. That nemesis of hubris even managed to match Argentina’s uncanny knack for the grotesquely ludicrous in its various blunders if its immediate catalyst – the Conservative deputy chief whip groping two men in an exclusive Tory club – should be surnamed Pincher of all names. But rather more seriously, Johnson’s reckless “tax and spend” policies fully reflect the chronic deficit spending which most economists here pinpoint as the root of the Argentine malaise.

While this column almost invariably draws from my 1983-2017 Buenos Aires Herald newsroom experience to compare current issues with the past, my first encounter with deficit spending long predates that – to the Britain of over half a century ago. The newspaper reading of my teens found me constantly bumping into the initials “PSBR” – which did not take me long to find out stood for “public-sector borrowing requirement,” clearly indicating that already then the economy in that developed country revolved around the budget deficit. The difference between Argentina and Britain (along with so many other countries) is, of course, the latter’s ability precisely to borrow abroad as well as at home.

Throughout most of this century Argentina has sought to make a virtue out of necessity by demonising debt so that if that was ever a virtue, it has become a deadly vice – the options to an inflationary expansion of the money supply are few and far between.  Debt be not so proud when a state owes itself – something at which Japan, that other unique country for Kuznets, is a past master since its public debt is well over twice its economy but almost half is owed to the Bank of Japan among other state creditors – and bonds can also be issued in national currency, a path pursued to apparent exhaustion by the previous minister, Martín Guzmán. The latter’s successor Silvina Batakis is contemplating both options (her creation of a single state company account with its paper surplus of 600-plus billion pesos is a clear-cut bid to renew that half a trillion of peso bonds falling due at the end of the month) but it is always easier to channel deficit into international debt because it thus transfers it to the future, not the present.

To declare an interest in the best Westminster tradition, this columnist as a former European Union employee (on a 1977-1979 project to devise a uniform electoral system for the European Parliament which it still lacks) has never forgiven Johnson for Brexit – the fantasy that less Europe could mean greater wealth when annual growth has averaged less than two percent since then. And yet in many ways this last of the big time spenders owed much of his spectacular 2019 electoral landslide to what he did wrong – Brexit, deficit, interventionism and protectionism breaking into such Labour strongholds as Bolsover or Workington. But you can only spin the truth so long.

To close the book on Johnson, this columnist can provide Argentine evidence for The Economist’s conclusion that this serial liar “revelled in trampling rules and conventions.” When Argentina chaired the G20 in 2018, then Foreign Secretary Johnson was here that May for the meeting of G20 foreign ministers. While off duty he was given a guided tour of Buenos Aires by the Argentine-British Community Council (ABCC) with the accent on the United Kingdom’s contributions to the cityscape – a tour naturally including that Retiro clock tower known until the 1982 South Atlantic war as “la Torre de los Ingleses” after its builders. BoJo was taken halfway up the tower when he was warned that climbing any further up the 1916 construction could be dangerous – no sooner had he heard that warning than he was up the stairs in a flash. Breaking rules would seem to be little short of compulsive behaviour in his case.

All this leaves little space for deficit spending at the Argentine end but it also seems far too early days to rush to judgement on an incoming official who more than deserves the benefit of the doubt for shunning the universal basic salary (most opposition critics have not been so chivalrous). Plenty of time ahead for that.


* This column will be suspended until mid-August because winter (or summer, depending on the hemisphere) holiday staff shortages will oblige us to find quicker ways of filling this page in order to have time to cover other spaces. ​

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Michael Soltys

Michael Soltys

Michael Soltys, who first entered the Buenos Aires Herald in 1983, held various editorial posts at the newspaper from 1990 and was the lead writer of the publication’s editorials from 1987 until 2017.


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