December 14, 2017
Friday, December 23, 2016

‘The lower middle classes are heavily reducing consumption’

Head of UCA’s Observatorio de la Deuda Social, Agustín Salvia, poses for a photograph.
Head of UCA’s Observatorio de la Deuda Social, Agustín Salvia, poses for a photograph.
Head of UCA’s Observatorio de la Deuda Social, Agustín Salvia, poses for a photograph.
By Leandro Renou
For the Herald

Agustín Salvia, head of UCA’s Observatorio de la Deuda Social

Agustín Salvia heads the Observatorio de la Deuda Social of the UCA Catholic University, an organisation which measures poverty, exclusion and unemployment in this country. Its numbers sparked controversy during the Cristina Fernández de Kirchner presidency, given that the official INDEC statistics bureau had lost all credibility with its measurements of poverty. The paradox is that once in government a year ago, Mauricio Macri (who valued the UCA data when in opposition) found Salvia’s Observatory marking an abrupt increase in poverty — from 29 to 32.6 percent in just four months — due to the first measures implemented by the Let’s Change administration. Even if the UCA’s figures seem shocking, Salvia warns that the Observatory’s statistics should not be compared with other official data from Latin American countries because they use different methodologies. Salvia spoke with the Herald about social challenges and the need for economic growth for the government of President Mauricio Macri.

A few days ago you presented unemployment data that was close to two digits. In this Argentine context, is that high, low or more or less to be expected?

The trend here is that following the lowest level of unemployment in 2011, which was between seven and eight percent, the figure has been creeping up to reach the current (level of) 9.9 percent. But growing faster than unemployment is the trend toward downgrading the workforce — not only full employment but informal jobs are increasingly precarious. We’ve seen a very important increase in what we call “unstable underemployment” or the “jobs of the destitute,” which grew between 12 and 18 percent this year. Everything we have seen in the last four or five years has been a deterioration of what is considered decent jobs by the ILO (International Labour Organisation).

You’ve covered a period which includes this year but also the previous four. Two governments differing in policies and ideas but with the same unresolved problem.

There are two processes. An economic cycle of stagnation which got worse this year but that’s nothing new. It already stems from the 2014 devaluation, which they then tried to cover up with macro-economic disarray and consumer policies. That could not be sustained and led to austerity by this government, which aggravated the situation. Even beyond the compensatory measures which — it should be said — the previous government had also taken. The first problem of this economic cycle is that the investments are not arriving as expected. The difference between one government and the other is that the previous lot had currency controls and a debt owed to the holdouts with a discredited international image among financial centres. And this one is trying to change some of these issues and yet they are not managing to improve things. The investment is still not arriving — neither in the stagnant stages of the CFK government nor now. The dynamics might change but there are no clear signs of that occurring. Next year this government will most probably have to resort to the same political and economic tools as its predecessor — a strong expansion of public works and popular consumption could guarantee a different scenario. Something akin to that achieved by Eduardo Duhalde and Néstor Kirchner in 2002-2004 when people brought out their dollars and spent them. Argentine society did not want a qualitative change and here Macri needs to read them well.

It is true that his electorate is asking for something different but it cannot be that different. There’s not much political room for being very different.

Since you mention consumption, bearing in mind that it’s supposed to 85 percent of gross domestic product, what do you think of the government’s idea that some sectors should resign consumption as an indispensable sacrifice for economic growth?

Nothing wrong with expanding consumption but you’ve got to expand production as well. You cannot sustain an economy just on consumption — you’ve got to encourage production based on investment and productivity and that’s not happening. All the stimuli for consumption come from expanding the money supply and purchasing-power but that does not encourage investment. Based on that logic, consumption has an inflationary effect. When the government proposes resigning some consumption, what it is seeking is to reduce inflation. Since there are no new jobs created by investment, consumption becomes inflationary unless there is some austerity and downsizing, which is being tried. The spending on the poorest sectors is being maintained so that there is no social explosion.

There is a significant figure in this sense, which is the fall in food consumption.

Families have had to adjust their budgets, even more so in the lower sectors. For example, they no longer go to supermarkets — purchases have gone up in smaller shops. Incomes are much more tightly managed.

There is no way that this is not going to impact in the form of the reduced sales of any product or activity, including food. So you have to expect increased poverty or destitution in terms of access to decent food. All these processes usually lead to crises — in my opinion this is worse than the crisis of 2014. In that year the CFK government leaned heavily on middle-class consumption as the big reflationary factor for Kirchnerism. Now that is not happening so much since it is the middle and lower middle classes who are heavily reducing their consumption.

You mentioned the poorer quality of jobs as a cause of poverty — who’s responsible for making those jobs so precarious?

You might think that placing workers in a more precarious situation is an extra-legal vice of some in the private sector. According to our diagnosis, that happens but it is is not a majority phenomenon. The most important factor is that the labour and economic policies did not create a bridge — an effective redistribution of capital, credit, resources, etc. — between the most dynamic sectors and small local businesses. This latter sector has been sustained by a subsidized domestic sector but not by their own productivity.

Around half of current jobs are being created within this sector and 70 percent of those jobs are precarious — 70-80 percent of those working there earn less than the minimum wage. This is a segment which has not been stimulated productively and which has never adhered to a programme of economic development. Thus should investments come pouring in, this would dynamise the most modern sectors of the economy but will not trickle down to these least productive segments. With interest rates of two or three percent, there might be some more movement which would give a breather but that is all which can be expected. No big changes, just a slight and relative improvement.

Was “zero poverty” a campaign promise with any chance of being kept?

I think it was a campaign slogan which marks a horizon and has the value of placing the issue on the agenda. But it is impossible to keep and shows an excessive confidence that both the first and second halves of this year were going to be better than expected. And that mere growth would reduce poverty.

That did not happen. To speak of “zero poverty” is a fantasy — inconsistent even within the terms of the definition itself. You could translate it into “zero hunger,” “zero destitution,” “zero ignorance” or “decent housing for everybody” and that way it could be more realistic.


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