Economic crisis ends an era
Argentina: IMF show state revolts
by Carlos Gabetta
From the Editors: For
many years Argentina was held up as a “model” supposedly illustrating how
successful an all-out program of privatization, liberalization, and
subordination to global economic power (such as the U.S.-based J.P. Morgan
financial group) could be. The actual result has been years of recession,
unemployment, and impoverishment, driving the people of Argentina to revolt in
desperation this past December. To provide our readers with more background
information about the present situation in Argentina, we are reprinting several
articles. This first one (which we hope to supplement shortly with several more
articles on our web site) is from the January 2002 issue of Le Monde
Diplomatique, which is associated with one of the most prominent
organizations in the worldwide movement against globalization. We are referring
to ATTAC. (The name stands for Association for the Taxation of [Financial]
Transactions for the Aid of Citizens.) Founded in 1998 by Bernard Cassen and
Susan George of Le Monde Diplomatique, ATTAC began as a campaign for the
implementation of the so-called Tobin Tax, the proposal by Nobel laureate James
Tobin to tax all speculative financial transactions. ATTAC played a key role in
organizing the World Social Forum, held last year and this in Porto Alegre,
Brazil, as a counter to the annual World Economic Forum, a platform for
multinational corporations and the globalization promoted by the financial
groups and institutions that dominate the world economy. The author of this
article is director of the South American edition of Le Monde Diplomatique,
based in Buenos Aires. His article was written before Rodriguez Saa was forced
to resign and was replaced by the “populist” Peronist leader Duhalde. The
translation by Barbara Wilson has been edited for Labor Standard.
After the International Monetary Fund refused to
release more aid to Argentina (already struggling to service an external debt),
the people of the country rose in protest. They rejected austerity measures,
forced the resignation of the president and the suspension of debt payments.
Since then there have been sequential presidents but no real end to the chaos.
Argentina finally exploded, a classic collapse.
Observers had been surprised at the national inertia, since this is a highly
politicized and unionized country with a long tradition of struggle. In the
past, its people had been willing to turn it upside down with far less excuse
than in the present intolerable situation: 20% unemployment; 14 million people,
out of a population of 37 million, living below the poverty line; purchasing
power almost halved in five years.
Yet until December 19, when tens of thousands
spontaneously took to the streets, the people had seemed spellbound, powerless
to express their discontent. Remembering the violent military dictatorship of
1976–83, the debacle of the Falklands war in 1982,and the traumatic
hyperinflation of 1989, they bowed to political blackmail, threats of a return
to authoritarian rule and economic disaster. Meanwhile, the leaders continued to
use the neoliberal economic model set up by the generals.
People remember that the generals’ illegal regime was
responsible for the deaths of more than 30,000 people, but they often forget
that it also presided over a sharp increase in external debt, from $8bn to
$43bn, and the beginning of a downward spiral. That was when they started the
preparatory phase of the adjustment plan, to meet the needs of the dirty war and
national security. The prime movers were the military president, General Jorge
Videla, the minister of the economy, Martinez de la Hoz, an IMF staff member,
Dante Simone, and the president of the central bank, Domingo Cavallo. (1)
In 1991, Domingo Cavallo was called on again — this
time by Peronist President Carlos Menem — to help crush hyperinflation. With the
blessing of the international financial community, Cavallo masterminded an
economic revolution including some of the most radical reforms in the continent
of South America. Obeying the Washington experts’ injunctions to the letter,
he dismantled the public sector, dismissed hundreds of thousands of civil
servants, privatized, liberalized the economy and foreign trade, and raised
interest rates. He invented the system of convertibility, fixed parity between
dollar and peso, which was to strangle exports.
The country was about to enter its fourth year of
recession. Tens of thousands of firms had gone bankrupt and those still in
business were under a severe technological handicap. By the time a center-left
president, Fernando de la Rua, was elected in October 1999, democracy was little
more than a charade in this neoliberal show state, ruled by a government corrupt
beyond belief. In March 2001, the parliament called on Cavallo to work miracles
again; he was given special powers and in July the zero deficit law was passed.
Among other measures, civil service salaries and some pensions were reduced by
13%; and the draft budget for 2002 proposed to cut spending by 18.6% — $9.2bn
less than in 2001.
A will to live
But Argentines seem to have recovered their will to
live. A mass uprising removed the hated minister of finance, followed by the
government and the president himself, forced to resign on December 20. It
started with thousands of desperate men and women, most of them workers who had
been unemployed for years without any social security or other means of support,
raiding shops and supermarkets for food. The president responded with a
ridiculous speech alleging that the protests had been organized by “enemies of
the republic.” The impoverished middle classes then joined in with cacerolazos
(2) everywhere. Then, as spontaneously as the first demonstrators, they too took
to the streets, converging on the Plaza de Mayo in Buenos Aires and government
buildings in other towns.
In contrast to other uprisings, the Argentines have
repudiated not only the economic model but also the ruling class and all the
unions, with one or two exceptions including the dissident trade union
confederation, Congreso de los Trabajadores Argentinos (CTA). In the past,
demonstrators had always obeyed strike rules, marching in columns behind their
union or party banners. This time, they came out simply as citizens. There were
no banners, just the national flag. Even the Peronist drums were silent for the
first time in more than 50 years. The few political leaders who tried to join
the crowd were rejected as hundreds of demonstrators attempted to storm the
A state of siege was declared, but the popular uprising
had turned an economic crisis into a political and potentially an institutional
one. It was the end of an era, one of those historic moments with incalculable
consequences. Society was saying that it had had enough of universal corruption (3), of a ruling class that had been living in luxury for 25 years on the
payrolls of the big banks, the multinationals, and the global power centers. The
country may be the IMF’s prize acolyte, with 90% of its banks and 40% of its
industry in the hands of international capital, but the result is a disaster.
Since the early 1970s Argentina’s external debt has
increased from $7.6bn to $132bn (or even $155bn), and the $40bn that the state
collected from privatization went up in smoke. Unemployment has risen from 3% to
20%, the number of people in extreme poverty from 200,000 to 5m, those in
poverty from 1m to 14m, illiteracy has increased from 2% to 12% and functional
illiteracy from 5% to 32%. And the foreign investments of political and union
leaders and industrialists now amount to $120bn. The neoliberal show state is a
demonstration model of the scale of theft and its disastrous effects on society.
A last straw
Cavallo’s latest demand on December 1 was the last
straw. Under international pressure to service the external debt — the country
was supposed to repay $750m by the end of 2001 and more than $2bn by the end of
January 2002 — the government set a limit on individual withdrawals from
The system therefore is supported in the last resort by
small and medium savers, and Argentine businessmen and industrialists, who are
now prevented from disposing of their assets as they wish and who live in fear
that devaluation will wipe out their savings. The banks took advantage of their
desperate plight to make more money by charging 40% on credit card transactions
in pesos and 29% on transactions in dollars, and were set to increase these
rates (5). Millions of people are already facing poverty, and this would have
left further millions of middle class people without resources.
The outcome of the revolt was 31 killed by the police,
thousands of shops looted, parts of major cities laid waste, and the state with
no one at the helm (6). After four days of frantic debate Congress
assortment of crooks, with a few honorable exceptions — invited Adolfo Rodriguez
Saa, the governor of the province of San Luis, to serve until power was handed
over to a new president to be elected by ballot on March 3. (7)
Will the ruling class show some sense of
self-preservation and approach the situation rationally, setting aside political
divisions, personal ambitions, and conflicts of interest, at least for the time?
They will not have an easy task. The economy is in ruins and the people are in
desperate need, as the uprising has shown. For years, the political leaders have
denied that the liberal model is in crisis. Now they will have to pick up the
pieces in the worst circumstances, since Cavallo has drawn on the currency
reserves to service the external debt and they are almost exhausted (8).
Rodriguez Saa announced strong social measures and
officially declared that payment of the debt is suspended pending renegotiation
with the creditors. He promised to create a new currency to try to revive the
economy. He has also said he will not devalue the peso — a move feared by
Argentine citizens and businessmen who have huge dollar debts. However, parity
is now no more than a dream, since the banks no longer sell U.S. dollars and a
dollar fetches two pesos on the street.
The political and parliamentary crisis has delayed
reactions to the social problems and there are fears that anarchy may follow. To
prevent this, the new government will have to choose between the customary
course of giving priority to the multinationals or enduring a further popular
uprising. Some observers see a disturbing similarity between the present
situation and the great depression of the 1930s, the Weimar republic, and all
This may be going too far. But the comparison seems apt
when we consider the recent history of Argentina — the defeat in the Falklands,
the years of frustration, the discrediting of elected representatives, the loss
of confidence in institutions, a worldwide economic crisis. Against such a
background, how can we discount the idea that the power vacuum may lead to an
authoritarian outcome or tempt an adventurer?
(1) See Arnaud Zacharie, “Aux origines de la crise
argentine” in the dossier “Crise de la dette argentine” of the Comité pour
l’annulation de la dette du tiers-monde, CADTM (Committee for the Cancellation
of Third World Debt).
(2) A form of protest in which people lean out of their
windows or take to the streets, clanging their pots and pans.
(3) The state loses half its tax revenue as a result of
tax evasion, which amounted to some $40bn in 1998. Only 17% of those in high
income brackets pay income tax. See Arnaud Zacharie, op cit.
(4) Daniel Muchnik, “La economia en la cuenta
regressive” (The economic countdown), Clarín, Buenos Aires, January 16, 2001.
(5) Gustavo Bazan, “Tarjetas de credito: solo
prestan en dolares y a tasas muy altas” (Credit cards: for dollar
transactions only and at very high rates), Clarin, Buenos Aires, December 18,
(6) In addition, thousands were injured and about 2,000
(7) The post of vice-president has been vacant since
Carlos “Chaco” Alvarez resigned in October 2000. The Peronist-dominated
Congress had a choice between calling a general election and letting a member of
Congress itself or a provincial governor hold the office until December 2003.
(8) See Julio Nidler, “Mucho plan, pero pocos dolares”
(Lots of plans but very few dollars), Página 12, Buenos Aires, December 21,
FAIR USE NOTICE: This site contains copyrighted
material the use of which has not always been specifically authorized by the
copyright owner. We are making such material available in our efforts to advance
understanding of environmental, political, human rights, economic, democracy,
scientific, and social justice issues, etc. We believe this constitutes a
‘fair use’ of any such copyrighted material as provided for in section 107
of the U.S. Copyright Law. In accordance with Title 17 U.S.C. Section 107, the
material on this site is distributed without profit to those who have expressed
a prior interest in receiving the included information for research and
educational purposes. If you wish to use copyrighted material from this site for
purposes of your own that go beyond ‘fair use,’ you must obtain permission
from the copyright owner.