January 24, 2018

Politics & the press

Friday, January 6, 2017

Macri bets on Freud rather than Keynes

By Marcelo J. García
For The Herald


The economy will dominate Argentina’s political agenda in 2017. On the first day of the New Year, when the newspapers had been printed and hit the newsstands, it became all too clear that the country’s editors believe, just like most of the public, that the government has to move fast if it wants Argentines to go to the polls in August/October with healthier pockets then they had last year. The next day, Tuesday, the new Treasure Minister Nicolás Dujovne confirmed that thesis. He spent his first official day and a half in office giving press interviews.

But beyond the speed of any change, the question remains as to whether the government is moving in a right direction to muster an economic recovery. Ever since the 2015 campaign that surprisingly catapulted him to the Casa Rosada, President Mauricio Macri has worked under the assumption that good vibes and expectations would get the country’s wheels going after an on-and-off stagnation that started in 2012. He first placed his bets on his once fellow business leaders, who he thought would invest their bank accounts at the mere sight of a pro-market government taking the reins of the government. They didn’t.

Now Macri and his multi-headed economic team is placing the same sort of hope on the belief that Argentines will start spending more than they did last year, and that the economy will therefore grow in 2017. As someone who has recently had vast experience as a television and newspaper columnist on economic issues, Dujovne will now largely serve as an economic spokesman for the administration.

Javier González Fraga, a former Central Bank governor who supports the Macri administration, said that the country needs a minister “goes out and convinces people” and “generates enthusiasm” among business leaders. Dujovne started off immediately with the job: in one of the many early-bird interviews, he said “all the conditions were set” for 2017 to be “a great year.”

A matter of believing

But Dujovne has also left many people scratching their heads at the idea that he would promote a reduction in the government’s deficit — but without trimming spending. “We will look at the fine print of how the government’s money is being used,” he said.

The new minister might soon be trapped in the dilemma of the government’s so-called economic “gradualism,” which critics say only leads to contradictions in policy. It is an attempt to introduce reform at a slow-moving pace, one that is politically sustainable for a government running the country in a non-Peronist minority. To many government supporters this gradualism is unnerving, even to some other economists in the Cabinet. The Financial Times called Dujovne “a fiscal hawk.” But reality seems to be forcing him to be rather dovish instead.

The middle-of-the ground approach has linguistic consequences too. Dujovne tried to strike a balanced note by saying that being “gradual” does not equal being “stagnant.” In his end-of-year message, distributed via social media, Macri meanwhile invited Argentines to “walk together on the road toward happiness,” though he clarified that the “road is long,” that there are “no shortcuts” and that the country needed to make “its greatest effort.”

“I need you to believe,” said the president.

But is it just a matter of believing? It was November 2001, a month before the country drowned in its worst economic and political crisis in decades, when then-president Fernando de la Rúa said that it would only take some time before Argentines produced a “click” and started spending money to kickstart an economy that was already in its third year of recession.

“Argentines are saving too much,” De la Rúa said then.

The click, of course, never happened.

The country is nowhere near a situation like that just yet. But your typical recession here lasts for a year or so, and if it stretches longer it might come with the side-dish of a crisis in governability.

The government has already failed repeatedly to match its economic predictions for its first year in office. First the president said inflation would stand at around 20 percent in 2016. It ended up at double that rate. Secondly, the president said the economy would pick up in the latter half of the year. The country’s GDP is estimated to have shrunk by 2.5 percent last year. Now the Cabinet Chief has said that 2017 will be “a very good year.” The predictions are becoming less detailed but the government continues to rely on fuelling the expectations, rather than working on the reality.

The economy, experts say, is less sensitive to state of minds than it is to state of pockets. If you have more money, you spend it. If you don’t, you don’t. If the opportunity exists to make money, business invests. If there isn’t, they don’t.

John Maynard Keynes tends to be more straightforward than Sigmund Freud.



  • Increase font size Decrease font sizeSize
  • Email article
  • Print
  • Share
    1. Vote
    2. Not interesting Little interesting Interesting Very interesting Indispensable

  • Increase font size Decrease font size
  • mail
  • Print

    ámbito financiero    Docsalud    

Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia