I was worrying about what to write here this month and finally decided to say something about home. A few years ago Argentina was considered a model for Third World countries learning their lessons and going the neo-capitalist route. It didn’t work; in fact it was a disaster. Let’s ponder why.
Many will recall that in the seventies and early eighties Argentina suffered through a military dictatorship that lasted for twelve years during which up to 30,000 people were kidnapped, tortured and murdered in the cause of anti-communism. It is true that guerrilla organizations had terrorized the country for years, but it was replaced by a murderous state terrorism. When the military junta collapsed, it was not because of its human rights violations, but because of economic mismanagement and the invasion and occupation of the Falkland Islands (Malvinas), which resulted in an ignominious defeat at the hands of the British.
Elections were then won by an inept politico named Alfonsin, one of the few who had emerged from the dictatorship period with clean hands – soon to be soiled under democracy. There are two main political parties here: the Justistialists (Peronist) and the Radicals. Peron was, of course, a fascist. Fortunately, today’s Peronists have little to do with true fascism; they are merely hypocrites, knowing that they can usually own the votes of the majority by evoking the names of Peron and Evita, especially the latter – because, fascist or not, Peron was the only politician who did something for the working classes, although he also manipulated them for his own purposes. The Radicals get the middle class and anti-Peronist vote, while the upper classes go whichever way the wind is blowing in their favor.
Alfonsin won the presidency but not the congress. He did nothing to address the bloated state bureaucracy and corruption and resultant deficits except print more money. One very positive thing he did do, however, was to appoint a commission headed by Argentina’s foremost living writer, Ernesto Sábato, to investigate and report on the crimes committed by the state during the dictatorship. The commission did its job very well, perhaps too well. They accumulated enough evidence to put most of the military’s higher-ranking officers and noncoms in jail for life. A few state attorneys and judges even began legal procedures for that purpose.
But the army had other ideas. A mini-revolt was organized by a few colonels and they took over a military installation near Buenos Aires. Alfonsin couldn’t convince the “loyal” part of the military to move against them, so he decided to negotiate. Afterwards, on an Easter Sunday, he stood on the balcony of the Casa Rosada and exclaimed to the cheering crowds below: “The Republic is safe”. The rebels went home to the barracks and the republic was indeed safe – dishonored but safe. It was obvious that Alfonsin had made a deal. Shortly afterwards, he promulgated the law of “due obedience”, which congress approved. This law exonerated all but the generals, by philosophizing that a soldier must be obedient and follow orders. So if he is ordered to kill innocent victims without due process he is absolved of responsibility. This wasn’t enough for the gladiators though, so soon the law of “punto final” came into effect, which allowed a few months times for trials to commence. The time was much too short for the ponderous legal system, so the effect was to absolve all the criminals.
All this was not the cause of Alfonsin’s downfall, however. The cause was, in the words of that great American political philosopher, Bill Clinton, (“It’s the economy, stupid”), the economy. The currency became virtually worthless, there were daily riots, supermarkets ransacked in broad daylight with the police looking on or participating, and so on. Alfonsin was forced to helicopter away into the sunset after calling for early new elections.
Anyone the Peronists nominated would have won and after the bloody inner party warfare ended the surprise winner was the relatively unknown Carlos Menem, governor of La Rioja, an insignificant Province, who brought his entourage of provincial crooks with him to Buenos Aires. Things could only get worse now, one thought. And they did, until Menem appointed a bona fide messianic madman – Domingo Cavallo – as economy minister. With the exchange rate at 10,000 pesos to one dollar, he chopped off 4 zeros, so it was then 1 to 1. Well, that has been done before, but has no meaning, except for the cost of printing new currency, if you can’t keep it that way. So Cavallo had a law enacted by congress, called the Convertibility law, according to which the Argentine peso was to become a fully convertible currency. No money could be circulated unless it was backed by its equivalent in dollars in the Central Bank.
But where do you get the dollars? Easy: sell off state holdings – the railroads, the national airline, the telephone system, the postal system, the petroleum industry (though not a big player in this field, Argentina is self-sufficient in oil, even exports), gas, electricity, a steel company – in short, everything. There was even talk of privatizing the police. Naturally enough, most of the buyers were foreign. And it worked – apparently. Inflation, Argentina’s perennial problem, no longer existed, the telephones worked (previously it cost about US$ 2,000 to get a line installed for a telephone that mostly failed to function), mail was delivered, service station rest rooms and restaurants were clean and the infrastructure worked. There were some glitches of course: no one wanted the railroads – originally constructed by the British, nationalized by Peron – because they were in a hopeless state of disrepair with powerful, corrupt labor unions running them – except for the Buenos Aires commuter lines, and the subways – so they were abandoned to rot away. The airline was sold to Iberia, an inefficient state-owned (Spanish) company, and went from bad to worse. (It has since been re-sold to private Spanish interests and seems to be flourishing, despite the general airline business woes.)
Argentina, according to President Menem and Economy Minister Cavallo, was entering the First World, the latter proclaiming it almost daily in the media as the Argentine version of neo-neo-capitalism. It also involved opening Argentina’s borders to duty-free imports.
There was much enthusiasm by almost everyone except died-in-the-wool leftists. I remember lengthy discussions with friends in business and even economists concerning the merits and demerits of the system. It seemed to me that establishing a 1 to 1 exchange rate with the dollar, though the results might seem beneficial for a time, was in reality a distortion of true values. To insist that one peso was worth one dollar, when a currency is a reflection of the productive power of the issuing country, and the two countries involved are the United States and Argentina, is like Baron Münchhausen trying to pull himself up by his own pigtail. Sooner or later there would be the devil to pay. Also, how could Argentina compete with North America, Europe and the Far East at the same prices?
The devil took longer than I expected to arrive in full swing. “Convertibility” lasted twelve years, before it collapsed in ignominy like the Berlin Wall. In the meantime, that part of Argentine industry, mostly small and middle-sized companies which were not taken over by multi-nationals, disappeared. The country was flooded by imports of better quality and much cheaper (in dollars) than domestic products. The state had run out of things to sell, so it increased its debt astronomically to the IMF, World Bank and other institutions, who all gave gladly, hoping to avoid the collapse of their star pupil. But worst of all, unemployment and poverty increased drastically and crime became rampant.
Menem was in office for ten years, during which he pardoned all the military criminals. At the end of this period the economy was in shambles and corruption was epidemic. Even squeaky-clean IBM was caught paying a 12 million dollar bribe to win a lucrative contract to computerize the national bank. The opposing party, the Radicals, won the presidential election. De la Rua, the new president, promised he wouldn’t touch the 1 to 1 exchange rate, because the opposition Peronists accused him of wanting to do just that. A devaluation would have affected millions of people who had bought things on credit in dollars, as well as companies with debts in that currency, so no politician dared touch the exchange rate.
Under De la Rua things got worse, until finally violent demonstrations against him left many dead and forced him to follow his party colleague Alfonsin into the sunset. An interim president was appointed by congress for two years. The Convertibility Law was derogated and the currency devalued on its own by 300 percent, causing financial chaos.
New elections were held this year and another unknown Peronist, Kirchner, won, not by votes, but by the polls. When Menem, the leading candidate in the first round of voting among a half dozen candidates realized, from the polls, that about 80% of the population would vote for anyone in order to avoid him becoming president again, he withdrew. Kirchner therefore became president with only about 20% of the popular vote, but with the polls saying that his would have been a massive anti-Menem victory.
Kirchner has done some things which have made him enormously popular, such as getting rid of the corrupt chiefs of the Federal Police, the Supreme Court and armed forces, annulling a De la Rua decree that prevented military officers from being extradited to foreign countries, notably Spain, for murders committed during the dictatorship, pressuring the supreme court and the congress to annul the Due Obedience and Punto Final laws, which would result in the war criminals finally being tried in Argentina.
However, it’s still the economy, stupid. Although faint signs of recovery are in sight, mostly because the favorable exchange rate has made Argentine products exportable again, sixty per cent of the Argentine people still live under the poverty line, of which almost 80% are children. The public and private debt is enormous, probably unpayable in fact. The cities are hotbeds of crime, the favorite being kidnapping.
The productive and service economy is still in private hands and the government has no intention of re-nationalizing it. That’s already been done in the past, not only in Argentina, and anyone with eyes can see that it simply doesn’t work. The basic problem now, as I see it at least, is not capitalism as such, but the fact that it is uncontrolled and dominates, through bribery and/or sheer power, all other aspects of society. But even more problematic is the fact that the education system has deteriorated so far because of bureaucracy, cronyism and under-financing that the masses are kept in such a state of ignorance that they can be convinced of almost anything. According to U.N. statistics Argentina enjoys an over 90% literacy rate. They get these figures from the Argentine government of course, which seems to calculate that since children are theoretically taught to read in the first grade, and almost everyone finishes first grade, they are all literate. A more meaningful statistic would be the one which measures functional illiteracy, which would be high indeed.
According to sociologist Artemio Lopez, the problem isn’t really an economic one. In Greater Buenos Aires, the country’s cultural center, 60% of young people between 20 and 24 years of age haven’t finished high school. Of these a large proportion neither work nor go to school. The figures for the other areas of the country are even more alarming. According to Lopez, “There is no social ascendancy in Argentina by means of education and work. There are only shortcuts. The models are instant fame, the compulsion to convert kids into successful athletes or musicians, and corruption as a way of getting rich. In short, the adult models are missing.”
I wish President Kirchner the best of luck in his attempt to turn Argentina into a “normal” country, as he puts it, but until now no efforts have been made to do something about the appalling educational infrastructure in which teachers are grossly underpaid, the schools are in disrepair and many children attend only to get the free breakfast and lunch provided by state schools. Man may not live by bread alone, but without it naught else is possible.