According to the World Bank’s chief economist for Latin America and the Caribbean, the men and women who are in charge of Argentina need not worry about hyperinflation because there is no risk of her suffering a repeat of what happened when Raúl Alfonsín’s plans went awry and the local currency went into meltdown, pushing yet another segment of the population into poverty.
For a hard-pressed government, public statements like the one released a few days ago must be more than welcome, but given the situation the country finds itself in, they are anything but helpful.
While Economy Minister Martín Guzmán is desperately trying to keep things under control, Kirchnerite grandees like Cristina Fernández de Kirchner and her son Máximo are doing their utmost to force him to open the floodgates so people can have more money in their pockets by mid-November when the polling booths reopen. The idea is that they will then express their gratitude by voting for the ruling coalition’s candidates, thereby letting it reverse the results of the primaries in which they got clobbered.
Thanks to the World Bank economist, the vice-president who thinks she runs the show and her boy, who gives orders to Peronist deputies in the Lower House, can now tell Guzmán that as printing more cash and doling it out to everyone within reach would be almost risk-free, there is no reason why he should not get the local Central Bank to do just that. Much as he dislikes what they have in mind, Guzmán knows that unless he appeases them he will soon be out of a job, though exactly why he wants to cling on to the one he has is unclear.
If the technocrats in charge of the World Bank, the International Monetary Fund and the like really want Argentina to stay afloat, they should be doing their best to scare the living daylights out of Alberto Fernández and his crew by warning them that, unless they are very careful, at any moment the cost of living could skyrocket and then the entire economy would go under, taking them with it. They certainly do not need to tell them they can increase public spending with impunity because, no matter how much freshly minted cash they come up with, nothing spectacularly bad will happen.
Unlike the IMF, the World Bank does not have much of an image problem in Argentina and therefore has no reason to go out of its way to persuade people that it is a model of loving kindness. This is what the IMF has been trying to do for some time now in the apparent belief that if politicians here praised it for becoming far more touchy-feely than in former years, they would be more willing to take its advice seriously. However, while going soft might help the IMF win the hearts of progressives in rich countries who get indignant when they see it putting pressure on governments like Argentina’s in an effort to make them get their act together, it is counterproductive in places where the endlessly publicised “generosity” of members of the political establishment has had truly catastrophic consequences for much of the population.
Peronist, Radical and leftist politicians have grown accustomed to talking as though they were convinced that (for what might be described as humanitarian reasons) the world owes the country a living and it is monstrously unfair to expect it to pay back some of the huge sums of money it borrowed after they had promised to mend their ways. They are still at it, but while such rhetoric may play well enough with local supporters who are prone to stage mass demonstrations in which they can blame outsiders for the country’s economic plight, investors are unimpressed.
Argentine politicians are fond of telling creditors that the hardest hit by the austerity measures the IMF has little choice but to demand in exchange for the odd billion dollars in low-interest loans it has on offer are the enormous numbers of men and women who are already below the poverty line or soon will be, but the emotional blackmail they like applying is proving less effective than it once was in a world in which the Covid epidemic has had a devastating impact on what are, sometimes optimistically, regarded as developing economies. Far from ushering in a new age of international solidarity as some high-minded people imagined, the plague will in all probability bring about the reverse.
Most countries, including Argentina, are what their rulers have made of them. This is something many politicians, who are dead against linking specific causes with specific effects, are reluctant to understand. As far as they are concerned, saying that printing countless unbacked pesos is likely to lead to more inflation is reactionary nonsense, as is pointing out that, in the not so long run, a refusal to rein in government spending could do far more harm than even the fiercest austerity programme.
Do they really believe this sort of stuff? Apparently, they do. Providing them with arguments they find convincing are platoons of “militant” intellectuals who have contrived to persuade themselves and many others that mismanaging the economy is patriotic and that to be truly independent Argentina must free herself from the mathematical restraints weak-minded foreign politicians find intimidating. For these fervent enemies of what elsewhere is considered common sense, mass impoverishment has its merits because it proves that capitalism does not work.
This is where Argentina is today. The administration formally headed by Alberto is determined to keep on spending whatever money it can get its fingers on because the Kirchnerites who dominate it fear that, should they run out of cash, the power they wield would quickly slip away and they would no longer be able to provide Cristina with the protection she needs to stay out of jail. Giving the government aid and comfort so it can persist in its folly are spokespeople for prestigious institutions who downplay fears of hyperinflation. They should remember that their counterparts said much the same several decades ago before what for them was unthinkable actually happened. Presumably they too believed they were giving the country a dose of much-needed confidence that would enable it to overcome its difficulties and get moving again. Instead, they gave the government of the day an additional excuse to continue shilly-shallying, as it did until everything fell apart.