This strikes me as a topic PEN-Lrs could really sink their teeth into. What do people think should be done instead of the D&C plan to bring Argentina out of its current crisis, and will the suggested alternative be able to avoid the harsh dilemma D&C anticipate (i.e., prolonged misery now or even deeper and more prolonged misery later)? Why isn't the Argentina case like the post-WWI Austria case, as D&C suggest? Or are they wrong to accept that the League of Nations solution for Austria was appropriate? Gil
> Dear PEN-L-ers, > > I thought I had head it all, but this one is just unbelievable. Check > out > Dornbusch and Caballero's solution for Argentina, including giving up > sovereignty on financial issues!!!!!!! > > One has to admire their honesty, I guess. This is what the IMF has been > doing for decades, though D&C (interesting parallels could be drawn > here) > take it a step further and formalize the undemocratic, imperialistic > intentions behind it all. > > Luckily, this is extensively covered in today's left of center daily. I > hope next time Dornbusch (or the IMF) set foot on Argentine territory > they > are met as they deserve to be met. > > Alan > > The URL is: http://www.mit.edu/~rudi/media/PDFs/APLANFORARGENTINA.pdf > > ------------------------------------------------------------------------------ -------------------- > > 02/27/2002 > Argentina: A Rescue Plan That Works > Ricardo Caballero and Rudi Dornbusch > Massachusetts Institute of Technology > Argentina is waiting for the next bailout, a shipment from the IMF that > helps resolving > the myriad unresolved issues in economics, politics and the social area. > Of > course, > everybody knows that this is not the answer. The truth is that Argentina > is > bankrupt. > Bankrupt economically, politically and socially. Its institutions are > dysfunctional, its > government disreputable, its social cohesion collapsed. Having fallen > that > deep, it comes > as no surprise that reconstruction rather than quick-fix financial > support > has to be the > answer. Argentina is like the European economies in the early 1920s, not > a > country with a > liquidity issue that needs a tough year and is back on its feet like say > > Korea, Mexico or > Brazil. > It is time to get radical. Any plausible reconstruction program must be > built around three > points: > • The recognition that this will be an effort of a decade, not of a few > years. > Argentina’s productive economy, its credit and its institutions have > been > destroyed. Both its physical and moral capital will have to be built up > and > that > takes a very long time. > • Because Argentine polity has become overburdened, it must temporarily > surrender its sovereignty on all financial issues. Financial soundness > is > the key > area where a beach head of stability must be created to even start > thinking > about > sound public finance, saving and investment. > • The rest of the world should provide financial support to Argentina. > But > it must > do it only upon Argentina’s acceptance of radical reform and foreign > hands-on > control and supervision of fiscal spending, money printing and tax > administration. > Any external loan is to bridge the gap between immediate fiscal needs > and the > day, a year or two down the road, where radical reform creates > sustainable > finance. > Argentina today is bankrupt and slipping further. On the current course > of > events, money > printing will cover up unresolved claims only so long. Far from > resolving > the open issues, > financial and public chaos will further destroy the bases for a > reconstruction. A wasteful > distributional battle is taking place between workers and the wealthy, > those who are > trapped by the bank closure and those who have their money in Miami, > between > provinces and Buenos Aires, between unions and businesses, between > foreign > investors > or creditors and a nation that wants to shed obligations in a vain > effort > to maintain some > normalcy. Argentina is being cannibalized by this strife. Further IMF > money > without a > deeply intrusive change of the rules of the game won’t prevent > self-destruction.
