June 18, 2013
Cry if you must for Argentina — but take the long view
CHARLESTON, South Carolina — Taking the long view of Argentina’s economic performance it is possible to extract some comfort from the knowledge that the present is not as crazy as the past. The hubbub over the takeover of Repsol’s majority shareholding in YPF, which becomes once again the state oil company, set me thinking back over the 50 years that I have lived with the Argentine economy.
Looking down memory lane, there is nothing that matches the lunacy of the “Rodrigazo.” The name of that bout of madness comes from Celestino Rodrigo, who was appointed economy minister on June 2, 1975, by president Isabel Martínez de Perón on the recommendation of José López Rega.
Peron’s widow, known as Isabelita, was under the spell of López Rega, who was her Rasputin. He was certifiably mad. He believed that he was the incarnation of the Archangel Gabriel.
So it was not surprising that his choice for economy minister proceeded to plunge Argentina into chaos. Rodrigo lasted until July 17, but in those few days he devalued the peso twice, the first time by more than 100 percent. (At the time there was some discussion as to whether it was possible to devalue the peso by more than 100 percent. Did that mean the peso disappeared entirely? asked puzzled foreigners.)
The explanation was that the commercial rate was raised from 10 to 26 to the dollar, the financial rate from 15 to 30 to the dollar and a new rate for tourism was established at 45 pesos to the dollar.
Public service tariffs and transport fares were doubled; fuel prices were raised by 180 percent. To compensate, Rodrigo announced an across-the-board wage hike of 45 percent.
Rodrigo’s “shock therapy” was hailed by the business establishment and praised by the so-called “conservative” media. The Review of the River Plate, whose editor was the charmingly eccentric Archie Norman, went so far as to propose that Rodrigo should follow the example of Cambodia’s Pol Pot by rounding up lazy porteños and putting them to work on the land. The suggestion was not entirely in jest.
Rodrigo, who basked in the fleeting popularity that Buenos Aires crowds generously bestow on people who behave irresponsibly, made the most of his emergence from obscurity. To set an example for the austerity that was to come, Rodrigo travelled to his swearing-in ceremony at the Casa Rosada on the subway. And he ended his address to the nation, the next day, by saying:
“Tomorrow you’ll kill me or tomorrow we’ll begin to do things right.”
Ahead of his time, he also preached a little sermon on the evils of the consumer society:
“The consumer societies that lead the world are failures as they deserve to be. As money has no value (people) buy things they don’t need ...”
The labour unions were unimpressed and they won the day, eventual securing wage increases averaging 160 percent. The result was the opposite of what Rodrigo intended. The inflation that he sought to cut off at the root blossomed into full flower. The episode, which ended with Rodrigo’s resignation, had consequences. Isabelita was overthrown, whisked away in a helicopter from the Casa Rosada.
I thought at the time that it would have been better if she had been allowed to finish her term. But the armed forces, encouraged by the establishment, the media and public opinion, not to speak of the guerrilla/terrorist organizations, preferred another military dictatorship, by then a traditional way of replacing a government without holding elections. (There is an excellent book on this period, The Politics of National Capitalism: Peronism and the Argentine Bourgeoisie by James P. Brennan and Marcelo Rougier. The Pennsylvania State University Press.)
Looking back, it seems to me that it would have been better if all the governments that were overthrown or destabilized had been able to complete their terms, so that democratic continuity could be maintained.
The “Rodrigazo” remains in my mind as the worst of economic times because it was both bizarre and grotesque. But I still have many other mental images of economic distress. I recall the time when money disappeared. Advertisers paid the Herald in goods they produced so salaries were paid with refrigerators, household appliances, even cars, as I remember, or whatever came in. There was also a time when currency notes had become so deteriorated that it was customary to spend a few minutes each evening repairing tattered, torn and grubby peso bills with transparent tape.
Hyperinflation was a laugh. HA! HA! The value of currency notes ticked away like the meter in a taxi. Prices in the supermarkets were raised before your eyes by assistants who snatched items from customers’ hands to re-price them. Peso bills were overstamped when the rate of inflation outpaced the printing presses, which eventually rolled out million peso bills that were soon worthless. Media magnate Ted Turner, an occasional resident when he goes fishing on his vast landholding in Patagonia, gave one to his son, telling him, “That’s the only million you’re going to get from me.”
As I recall economic hard times, I am reminded of the play Happy Days by Samuel Beckett.
On top of the catalogue of economic disasters that characterized the years before the 1976-84 military dictatorship, which was a catastrophe on every front, came the crash of 2001, which still overshadows Argentina and is fresh in the memories of millions of people.
In order to live a normal life in abnormal times, a sense of perspective and a sense of humour are essential.
Take comfort for now in the sunny view of Nobel laureate for economics Paul Krugman who repeatedly urges us not to cry for Argentina.
A few days ago he posted this on his New York Times blog:
Citing another blogger’s claim that Argentina is “a remarkable success story, one that arguably holds lessons for the eurozone,” he goes on to say:
“I’d just add something else: press coverage of Argentina is another one of those examples of how conventional wisdom can apparently make it impossible to get basic facts right. We keep getting stories about Ireland’s recovery when there is, in fact, no recovery — but there should be, darn it, because they’ve done the ‘right’ thing, so that’s what we’ll report.
“And conversely, articles about Argentina are almost always very negative in tone — they’re irresponsible, they’re renationalizing some industries, they talk populist, so they must be going very badly.”
Read the full post, with a link to a glowing report on Argentina by blogger Matt Yglesias, at http://krugman.blogs.nytimes.com/2012/05/03/down-argentina-way/
For another view from abroad, Inc. magazine asks its readers:
“Think the US economy feels shaky? Try doing business in Argentina, where corruption is the norm, regulations are absurd, inflation is rampant, and financial crises are a dime a dozen (11 cents next month).”
Read the full story by pasting this link in your browser:
And if you must cry for Argentina, go ahead; it won’t change whatever destiny holds for the beloved country.