Monday, July 22, 2024

OPINION AND ANALYSIS | 06-08-2023 19:13

The great squeeze is already underway

When money is in short supply, even the most talented politicians soon find themselves in trouble.

Life is splendid for presidents and their minions when there is plenty of money around and, secure in the knowledge that a grateful populace will reward them handsomely for their public spiritedness, they can spend it more or less as it suits them. This is why Alberto Fernández, Cristina Fernández de Kirchner, Sergio Massa and their underlings have long tried so desperately to cling to the notion that, despite appearances, the economic situation is far less dire than almost everybody else believes it is. Their efforts to do this have been suitably ridiculed because, unfortunately for them, the country they describe is not much like the one in which most of their compatriots are struggling to make ends meet.

Argentina is certainly not enjoying anything approaching the unnoticed boom President Alberto Fernández and on occasion his spokeswoman go on about. The cost of living continues to soar at a rate surpassing those of all other countries with the exception of the Kirchnerites’ favourite, Venezuela, and the Lebanon, where a murderous Islamist outfit some Kirchnerites are fond of calls many of the shots.  And things are getting worse. In the last few days, consumers used to paying very little for their electricity and gas have been receiving utility bills which are several times higher than they had expected.  Needless to say, they are not the only people who feel hard done by. Though the Kirchnerite government has done its best to delay until after the elections the great squeeze it knew was coming, it has already begun and there is no relief in sight. Trapped on the operating table, Argentina is about to be subjected to the “surgery without anaesthesia” Carlos Menem once said he was determined to carry out.

Just what effect it will have on the voters who will soon go to the polling booths is an open question. Massa evidently hopes the onset of austerity will help him because many people fear that if one of his rivals takes charge the situation facing most households could become even worse that it now is. He can also insinuate that the ruthless technocrats of the International Monetary Fund are behind all the unpleasantness, though here he has to tread carefully because he continues to negotiate with them and, as he is well aware, they are about the only people on earth who are still willing to let Argentina borrow the money she needs to stay afloat. Were the Chinese regime to step in and lend him a hand, he would soon discover that its approach to debtors is positively Victorian; in return for a few more yuans, it would in all likelihood demand far more concessions than the IMF would ever dream of.  

The unhappy truth is that whoever wins the fast approaching elections will have to reduce public spending to the bone and then some. There is no money in the Central Bank, inflation is running riot and the recession is deepening as firms find they cannot import components and other supplies they need to stay in business. Though it is generally agreed that the grotesquely overmanned State sector is extraordinarily inefficient, reducing it to a more manageable size and retraining whoever remains will be anything but easy. Nonetheless, it will have to be done; taxes are already higher than is most developed countries; increasing them to satisfy public employees and their trade union bosses would crush what remains of the productive part of the economy. For the four candidates who are leading the pack, the immediate prospects are bleak indeed but they all feel obliged to see the bright side of things and make out that they have it in them what it takes to overcome the challenges that lie right ahead without demanding many sacrifices. To achieve this they can, as both Massa and, a bit more convincingly, Horacio Rodriguez Larreta are doing, suggest that they are clever enough to put things right without applying many painful measures, or, like Patricia Bullrich, stress that in the last analysis who matters most is strength of character.

Another alternative is the one that is being vigorously promoted by Javier Milei: he wants people to believe that a clean break with the “socialist” past and the whole-hearted application of policies once promoted by thinkers of the Austrian School would be more than enough to give Argentina a tiger economy capable of climbing to the top of the international rankings at breakneck speed. This may be far-fetched, but, like the less fanciful programme being devised by the people surrounding Ms Bullrich, it has the merit of implying that, intimidating though the outlook most certainly is, if Argentina pulls herself together she should be able to become what she once was, a relatively prosperous country which offers its inhabitants what many enterprising emigrants are now seeking abroad.

When money is in short supply, even the most talented politicians soon find themselves in trouble. People everywhere tend to believe that the state of the local economy directly reflects the character of the people who happen to be in office. If it is booming, many will assume it is due to the generosity and wisdom of the president or prime minister; if it is going through a bad patch, they suspect it is because the men and women in charge are mean-minded misanthropes in thrall to a wrong-headed ideology. This may be unfair: there is not that much most governments can do to make international energy prices go down, prevent droughts or floods from hitting farm output or bring a quick end to a costly war in foreign parts, but that is the way things are.

Governments everywhere do their best to explain to the citizenry that the problems it faces are not really their fault. This may be true up to a point, but getting the message across is far from easy even in countries which are accustomed to being ruled by politicians who are considered to be relatively competent. In others, among them Argentina, distinguishing between legitimate explanations of why times are hard and unabashed demagoguery is so difficult that many are prone to think the worst of all politicians, which is why a growing number of malcontents, of whom the loudest are supporters of Milei, would like to see every man Jack of them booted out of office and forced to look for a proper job in the private sector. 

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James Neilson

James Neilson

Former editor of the Buenos Aires Herald (1979-1986).


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