As she increases her political appearances, probably to her detriment in terms of public sentiment, Cristina Fernández de Kirchner is trying to position herself as a sort of economic maverick, one who can question both the policies of President Alberto Fernández and the “criminal” neoliberalism of Mauricio Macri.
The vice-president seems to be enjoying her time onstage once again, having her ego massaged by ornate introductions at massive public rallies with a host of Kirchnerite VIPs in the front row that applaud her words of wisdom and laugh at her jokes, marvelling at her mere presence. It’s not so different from the ‘glory days,’ when she would sermon her cabinet and “friendly” business owners from the Casa Rosada while the entire population was forced to watch or listen to her extended remarks aired on obligatory national broadcasts (“cadena nacional”).
Mrs Fernández de Kirchner is above all a political creature, so the initial explanations for her actions should be found in that arena, not in the realm of economics (even if she believes she is illuminated). She probably has drunk the Kool-Aid, though, and believes her craftily constructed economic arguments help explain a combination of ineptitude by the president and his cabinet, along with the inherited malaise from the Macri years. It’s interesting to note that not only does she never express regret or remorse for any policy decision taken during her eight years at the helm, her every reference to the 'good ol’ days” is by definition from the B.M. (Before Macri) years.
Apparently coached by her former economy minister, Axel Kicillof (the current governor of the Buenos Aires Province), CFK this week went on a structured rant where she blamed the private sector for being the root cause of inflation, explaining that its greed has turned Argentina into the third largest tax evader in the world, behind Guyana and Chad (which share the first place), and Malta. This is the counterpart to being the largest “former of foreign assets,” a technical term loosely used to refer to capital flight (we’ve explained previously in this column why the terminology is deceptive), coming in behind the island-nation of Comoros, Zambia, and Pakistan. This time, Madam Vice-President didn’t explain whether there was a tie in the podium ahead of Argentina.
In the post-modernistic return to modern terminology that Cristina builds her intellectual concepts on, in the dichotomy between the market and the state, it’s the former that causes inflation due to its monopolistic tendencies, while the latter is the only one capable of correcting successive inequalities. Fiscal deficits and the law of supply and demand do not explain inflation in Argentina, she noted in her recent speech, relying on charts that put Argentina in a relatively sustainable 13th place among G20 countries in primary and total deficits, while the United States and other rich countries’ expenditure is ridiculously large, leading to massive trade deficits which emerging nations, like Argentina, don’t have. Remembering the 2007-2008 global financial crisis, the Covid-19 pandemic, and now the Russian invasion of Ukraine, CFK noted that developed nations weren’t criticised for their monetary expansion, pointing the finger at the United States as the main culprit.
Ultimately, and taking a page from another of her “favourite” economists, Hernán Letcher, it’s the concentrated economic powers that extract their profits – facilitated by the state, from the productive economy and into US dollars – that cause inflation in Argentina. In a direct blow to President Fernández, she notes this is a “stupid state” where the Central Bank, the Securities Commission,the AFIP tax authority, the Economy Ministry and the Productive Development Ministry have all failed in their tasks to limit an “import frenzy” that is the reason why there’s no dollars. Oh yeah, and Macri’s reckless policies of dollar-denominated indebtedness is also responsible too.
A lot of what Fernández de Kirchner says appears sound, but when put in context, it becomes nothing more than a series of half-truths. Indeed, monopolies cause market inefficiencies by raising prices while disincentivising innovative investments that increase productivity. Tax evasion – especially in a country like Argentina, with an obsession with the US dollar – creates a greater strain on government coffers, while fiscal deficits are manageable if one looks at historical standards. And situations of constricted supply and loose money could result in lower inflation than times with greater supply under some conditions (like cheaper marginal costs). Failing to coordinate macroeconomic policy among multiple ministries and public agencies leads to greater inefficiency, while Macri’s excess indebtedness has put a huge burden on the nation.
No matter how big or small Cristina’s desired state would be, if no-one trusts that it will pay back its debts, respect the rule of law and remain consistent with the framework it sets for the private sector, then it will fail. The United States and most of Western Europe have managed to run up large fiscal deficits and trade deficits because of their economic and military might, and because of a powerful interconnectedness that extends into Asia (namely China) that is fragile and dangerous. Excessive money printing, supply chain restrictions and a War in Eurasia have pushed inflation rates to the highest figures in 40 years, while a painful market correction is already in place. But those economies will probably prove to be resilient in their capacity to absorb the shocks and return to some level of productive equilibrium, as opposed to Argentina’s near half-century of decadence.
So what was the real intention of Fernández de Kirchner’s vicious speech, and why did she this week attack the social movements (“piqueteros”) that at one point were key allies of the Kirchnerites? Therein lays the true message: her economic vision is one of short-term resistance that can only lead to further contraction, as her last term in office proved, thereby laying the groundwork for today’s mess. Laying bare the implicit schism within the ruling Frente de Todos coalition, CFK continues to distance herself from the government’s economic trajectory knowing it will be destructive heading into the 2023 election. She’s been saying this ever since the electoral beatdown they received in the 2021 PASO primaries. Sensing a presidential victory is highly unlikely for any pan-Peronist front after this administration’s economic record, she is looking to consolidate her sphere of influence in the Buenos Aires Province, where Kicillof or some other more competitive candidate could retain the governorship and she would probably earn a Senate seat. The vice-president’s son, Máximo, an influential national deputy, controls the Justicialist Party in the region, which is a platform from which to build alliances with the so-called “Conurbano Barons” (Peronist mayors of the extremely poor towns that surround the metropolitan area of Buenos Aires). They are the ones losing power to the piquetero movements that controls hundreds of millions of pesos monthly, which are disputing mayorships and even national posts. The other threat is the Frente de Izquierda y de Trabajadores left-wing coalition, which enjoyed a great election in 2021.
There’s a long way to go and the road ahead is tough. But increasingly it feels as if Cristina will gradually recede into the sunset.