Editor's Page

Two Argentine politicians, Pedro and Pablo, are drinking in a Buenos Aires bar and lamenting their country�s lamentable situation. Suddenly Pedro says, �I got an idea.�

�Ideas are a dime a dozen,� Pablo retorts.

�� But this one is brilliant.�

�� Bueno, let�s hear it, genius.�

�� We declare war on the United States,� Pedro says.

�� What?� Pablo exclaims, �are you nuts?�

�� Didn�t you ever hear of the Marshall Plan?� Pedro snaps his fingers at the barman and points to his empty glass.

�� Sure. What about it?�

�� Look at Germany and Japan. They lost the war and afterwards the United States, who won, gave them millions and millions of dollars.�

�� Pablo stares at his friend in admiration and wonder and points to his own glass.

�� Get it?� Pedro says.

�� Pablo has his mouth open to answer, but stops and shakes his head. �I don�t know, it would be very dangerous.�

�� Of course we�d lose a few thousand soldiers and a city of two, but��

�� No, I don�t mean that,� Pablo interrupts him.

�� What do you mean then?�

�� Pablo downs his whiskey and says: �What if we win?�

��

I first heard this story sometime in the late sixties, so it would seem that things haven�t changed that much. But they have, in some ways for the worse, in others for the better. A couple of decades ago the situation Argentina is going through now would have resulted in a military coup. Because of the military having been completely discredited due to its last regime, ending in the eighties, during which 30,000 people were �disappeared� and the Falkland Islands war lost, this is no longer a conceivable option. That is for the better.�

Argentina finally made the front pages of the world�s newspapers and TV screens, and no wonder. How many countries can boast of having had five presidents in two weeks? The reason the duly elected president fell was that the people finally got fed up with his stupidity and his Economy Minister�s fanatical adherence to an economic model that simply didn�t work, resulting in forty per cent of the population having sunk under the poverty live, unemployment at over twenty per cent, rampaging crime. The model is neo-classical free market globalization. The people took to the streets clanging pots and pans, the police overreacted, people were killed, property destroyed. Because of a run on the banks, withdrawals were blocked in order to prevent the collapse of the financial system.

The fifth president, an old school Peronist, Eduardo Duhalde, took office yesterday and has his work cut out for him. In his inaugural address he was at least honest: �Argentina is broken and at the limit of its endurance�� A so-called government of national salvation � the other major parties promising collaboration � was formed. A factor of extreme importance remains to be solved. Ten years ago, during a period of galloping inflation, the same Economy Minister who was responsible for the current disaster initiated the �Convertibility Law� under which the Argentine peso was tied to the U.S. dollar at a one-to-one exchange rate � and it survived until this week. At the moment the dollar is being quoted on the �parallel� exchange market at 1.40. When originally begun, convertibility stopped inflation. However, as the neighboring countries� currencies gradually devalued in relation to the dollar, the Argentine 1 to 1 exchange rate became a straightjacket holding prices too high and destroying the export market. This, in my opinion, was the principle cause of the current debacle.�

When I worked in the airline business, it often happened that the Brazilian currency devalued more than the Argentine one. The result was that almost all tickets for transportation originating in Argentina were sold in Brazil. When the reverse occurred (the Argentine currency devaluing more than the Brazilian), sales of tickets for trips originating in Brazil were sold in Argentina. The market will always seek the cheapest price for the same product, and in Latin America this is determined by the exchange rate. The airlines finally solved the problem by �dollarizing� the price of all tickets sold in South America. Argentina has been toying with the idea of exclusively using the U.S. currency and dumping the peso completely. Cooler heads, however, realize that this would only tighten the straightjacket. All airlines sell in dollars, but far from all South American countries are willing to dollarize their economies, and if all don�t do it, it won�t work. Devaluing the currency will make certain people, such as the banks and multinational giants � and the pressure exerted by them is intense � most unhappy, but it must be done.

It would be easy to blame the IMF, globalization and �certain foreign interests� for the Argentine disaster, as more than a few are doing. Certainly the IMF bears a goodly share of the blame as it encouraged Argentine economic policies during the past ten years, before abandoning the country a month ago. Globalization as such is here to stay, but the question is how a weak, inefficient economy can appease the monster and at the same time avoid collapse. An Argentine politician (out of power) called the last ten years of government here an �ineptocracia�. The people are calling for an end to corruption, including a demand for the resignation of the entire Supreme Court. We can only hope that Argentina will have learned its lesson and can somehow at least reduce the levels of corruption and ineptitude and rise up from the ashes.��

In this page in the last issue of SCR I questioned the wisdom of the United States� bellicose reaction to the World Trade Center disaster. It looks like I was wrong, because the war in Afghanistan has certainly been successful. It now remains to be seem what the more far-reaching effects of the success will be, and to what extent international terrorism has really been defeated. Will the world community help the destitute and therewith avoid future conflicts? Will the neo-Darwinist economic policies be re-thought and replaced by something fraternal and sustainable?��

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FTS