Thursday, September 28, 2023

OPINION AND ANALYSIS | 12-05-2018 11:31

The return of the prodigal son

Macri overestimated his ability to clear up the extraordinary mess left by the Kirchnerites fairly quickly and underestimated the strength of the opposition he would have to face.

Mauricio Macri’s decision to ask the International Monetary Fund to rubberstamp his ambitious and very expensive programme and, while about it, to lend him thirty or so billion dollars to prop up the peso, offered his many enemies a chance to attack him for selling the country down the river. They were more than happy to take full advantage of it. As was to be expected, he was roundly condemned by the many who had managed to convince themselves that by gleefully defaulting and then, under Nestor Kirchner, telling the IMF to get lost, Argentina had won the freedom to go her own way and would no longer have to worry about the things that keep economists awake at night.

The IMF has an unsavoury reputation in leftist and populist circles both here and in other parts of the world because its representatives always demand something in return for the large sums of money they make available. They are so arrogant that they refuse to take seriously the theories favoured by heterodox thinkers who say austerity is worse than useless. And as spokespeople for a variety of opposition factions are currently reminding us, they are an uncharitable lot who have the nasty habit of insisting that whatever they finally cough up should be used to make the country solvent again so that in future it has no need to ask the lender of last resort for a spot of cash to tide it over for a while.

Many opposition politicians and all progressive intellectuals agree that telling a government, even a “neoliberal” one like Macri’s, what it should do in exchange for a timely loan is simply outrageous. They assume that if a country’s government wants to spend the money on handouts or what North Americans call pork-barrel projects designed to make life easier for politicians whose support it needs, that is its business and outsiders have no right to interfere.

Unfortunately, things are not as straightforward as would have us believe those who think the IMF is run by evil individuals who would like to see the poor starve to death. Its critics may think sovereign nations are entitled to bankrupt themselves rather than make an effort to live within their means if that is what a majority appears to want, but the folk up there in Washington DC, where the IMF is headquartered, have to take into account the effect yet another Argentine disaster would have on the world economy. Were the country to go over the cliff again, the tremors would be felt not just here but in many other places as well.

If what people in the main financial centres are saying these days is anything to go by, the standard view is that Macri is, broadly speaking, on the right track but should go a bit faster because, thanks to the Fed, the easy money that has let him put off making some serious spending cuts is drying up. For understandable reasons, the government is reluctant to subject the economy to the kind of shock that would please the fiscal hawks; it would seem that the IMF technocrats, who by now are well aware of the risks such a policy would entail, share its view.

They may be as heartless as people say they are, but they are also pragmatists who know it would be foolish for them to overlook certain political realities, one of which is the probability that Macri’s government would be unable to survive a full-blown financial upheaval and that its collapse would open the door for something far worse. From the IMF’s perspective, one Venezuela in Latin America is more than enough.

Macri’s game plan is based on the notion that, once the economy has been properly refashioned, Argentina will be able to repay the many debts she has been piling up. Until then, he would do his best to nudge the economy gently in the direction he has in mind and, on occasion, appeal to national pride. That strategy has its merits. Until quite recently, it seemed to be working as more and more people became aware that, unless Argentina broke away from the corporatist populism that for so long had been the national creed, she could soon be overtaken in the Latin American league tables not just by Chile and Uruguay but also by Paraguay and, in the longer term, even by Bolivia.

However, as recent events have made unpleasantly clear, Macri overestimated his ability to clear up the extraordinary mess left by the Kirchnerites fairly quickly and underestimated the strength of the opposition he would have to face. Argentine society may be be more than willing to adopt imported fashions in sexual matters and the like, but in other areas it can be extremely conservative.

Trade unionists, businessmen and many politicians, among them a majority of Radicals, do not take kindly to change. Most seem to feel nostalgia for a golden age they locate in the now distant past when it was taken for granted that Argentina was a rich country and the only problem faced by her rulers was how all the God-given wealth should be distributed. So far, all attempts to persuade them that Argentina is as poor as the statistics say she is have failed miserably. That is the main reason why Macri’s government now finds itself in deep trouble.

For at least three quarters of a century, Peronists and Radical leaders have spoken and even behaved as though they thought that if a government failed to deliver prosperity within a couple of months, it was either because, in addition to being incompetent, it was too mean-spirited to give their compatriots what they deserved, or because an envious world was determined to bring it to heel.

Because they are part of the ruling coalition, many Radicals have become more willing to consider the possibility that, by itself, a desire to make people better-off may not be enough. That leaves the Peronists. Though there are signs that some politicians belonging to the “rational” wing of their amorphous movement have come to the conclusion that it would be in their interest to take a more realistic approach to the country’s many economic problems, few could resist the temptation to make the most of the turmoil in the financial markets that followed the latest increase by the Fed of its key interest rate. By frightening investors out of their wits, they helped make things far worse.

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James Neilson

James Neilson

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


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