Ed, Your account below of what happened in the first days of the crisis seems accurate from what I remember. I also remember that there was an even crazier policy by which a brand new currency was to have run in parallel with the peso, though not exchangeable with it. This was to have been a system whereby two different currencies would co-exist -- as though in two different worlds -- one for the benefit of those with dollar bank accounts, the other for the ordinary workers. Of course, it was nonsense and failed immediately.
You ask whether Argentina was recovering or falling further into disaster. >From what I gathered on the radio, the country's now on a slide into complete destitution. (Incidentally, Argentina now has several currencies. Most of the provincial governors issue their own now which, as barter tokens, carry out at least one proper function of a currency, if nothing else.) I would imagine that a revolution of either the far-left or the far-right is now imminent. The paradoxical thing about the IMF is that once the Bretton Woods Agreement broke down in the 70s and most countries went onto self-adjusting exchange rates then there should have been no further purpose for the IMF (at least among the major developed countries). But it survived as a sort of Dutch uncle giving out sensible advice -- which it was for the most part. Where it went badly wrong so often was in dealing with countries with financial cultures that were very different from those of the western countries which were the main investors in the IMF. But I return to my main point in the advice I originally gave to Carmen. Here was a bright qualified young economist who, together with her colleagues, probably knew all the technical solutions to their country's problems. Furthermore, there are many good Argentinian economists in their universities (including one of world class whose name I've forgotten) who are quite capable of sorting out the mess in a technical sense. But technical solutions can't compete against long-standing political corruption and deep cultural prejudices by the population (welfare dependency -- even by what should be the entrepreneurial middle class). Keith At 10:52 24/06/02 -0400, you wrote: (KH) <<<< 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. >>>> (EW) <<<< 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. >>>> ---------------------------------------------------------------------------- -------------- Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England Tel:01225 312622/444881; Fax:01225 447727; E-mail: [EMAIL PROTECTED] ________________________________________________________________________
