Power-mad?

In this month the ever up-and-coming Deputy Economy Minister Axel Kicillof has been both Dr. Jekyll and Mr. Hyde although the identical monster of state planning lurks behind both faces. Unlike in the R.L. Stevenson classic, Mr. Hyde came first — earlier this month Kicillof trampled all over the promising biofuel industry by inflicting the worst kind of cost-price squeeze in slashing the price by 15 percent while jacking up the export duties from 20 to 32 percent. Yet a fortnight later at the end of last week Kicillof could hardly have been more benign and magnanimous with the electric utilities, proposing a price scheme which would both cover their costs while guaranteeing a reasonable margin of profit — just the simple word “profit” was music to the ears of the virtually bankrupt utilities long battered into subsidized losses by populist pricing while Kicillof further assured them that any cost-price squeeze of the kind plaguing biofuels would be “my problem.”

Yet the two faces merge, not only because of the underlying Gosplan premises but because in purely practical terms the two sectors flow into each other — what would be the point of taking over the entire fuel sector (with the newly nationalized YPF now replacing the increasingly meaningless Enarsa state oil agency for fuel imports) without also controlling the power utilities who are the leading consumers of these fuels? But Kicillof’s scheme faces both conceptual and practical problems. Firstly, how do you go about guaranteeing a “reasonable” risk-free profit within competitive markets? Since capitalism is plainly incapable of offering such guarantees, the Soviet Union would now be flourishing and the Chinese preferring Maoism to their current capitalist course if risk could thus be abolished by bureaucratic decision. Despite the initial enthusiasm for Kiciloff’s guarantees, what guarantee does either side of this arrangement have of the other playing straight? The young economist will need to be extremely vigilant of the data he is fed by the power utilities if he is to avoid the notorious transport subsidy abuses spreading to that sector while the utilities will need rather more credible inflation data than offered by the INDEC statistics bureau if they are to calculate their costs accurately. And quite apart from the pricing issue (with a 3rd Cristina Fernández de Kirchner term being sought), Kilicoff’s scheme does not explain the source of investment (a problem still pending with YPF).

Might not state planning be the problem far more than the solution?