Keith Hudson:
> What happened in the course of the last century is that Argentina's > dictators learned how to make themselves popular in difficult times by > giving out large welfare benefits to the public instead of allowing their > economy to operate in the normal way. In order to do this, the politicians > had to borrow repeatedly from banks and other governments -- though > reneging on the loans when due. The result today is that no government will > lend Argentina's politicians any more money (that is, via the IMF -- which > doesn't have money of its own) unless there's evidence that they will > follow normal economic rules, among which would be a sincere intention to > repay. Keith, I don't think it was quite like that. Certainly, Argentina had its military dictatorships and wrong-headed populists, but the present crisis seems to have been precipitated by somewhat more recent wrong-headed policies. One was tying the peso to the US dollar, one for one, even though the peso was not worth a dollar. Fear of a devaluation of the peso led to a flight of dollars, and a substantial shrinkage of the money supply. A shrinkage of the money supply meant that people could not be paid and that meant that businesses could not operate. It also meant plunging even people who had been relatively well off into poverty. You'll recall the pictures of people lined up outside of banks trying to get their money out, and the banks not letting them in because they didn't have money to give them. Another set of policies were driven by foreign leanders, principally the IMF, on which Argentina had come to depend. These were essentially neo-liberal in character, and followed the IMF's universal prescription for crises - cutting back on government expenditures, privatization, downsizing in the public and private sectors to make the economy more efficient, and restricting the money supply. This was not what was needed in an economy of growing mass unemployment and in danger of collapse. In combination, these and, I'm sure, several other factors such as a weak export sector, meant a downward spiral which brought the economy to a standstill. I've not followed the situation recently, so I don't know if Argentina is recovering or sliding into further disaster. I would agree that the populists and military dictators of the past did not help to build a country that was able to withstand crises. Part of the historic problem was, as I understand it, a country difficult to govern, essentially a federation of autonomous provinces and strong class interests. But I'm not clear about how much of a role all of that may have played. Ed
