Dornbusch: Argentina must surrender sovereignty on financial issues!!!!

[Alan Cibils <abcibils@xxxxxxxxx>]

Dear PEN-L-ers,

I thought I had head it all, but this one is just unbelievable. Check out
Dornbusch and Caballero's solution for Argentina, including giving up
sovereignty on financial issues!!!!!!!

One has to admire their honesty, I guess. This is what the IMF has been
doing for decades, though D&C (interesting parallels could be drawn
here) take it a step further and formalize the undemocratic,
imperialistic intentions behind it all.

Luckily, this is extensively covered in today's left of center daily. I
hope next time Dornbusch (or the IMF) set foot on Argentine territory
they are met as they deserve to be met.

Alan

The URL is:
http://www.mit.edu/~rudi/media/PDFs/APLANFORARGENTINA.pdf

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02/27/2002
Argentina: A Rescue Plan That
Works
Ricardo Caballero and Rudi
Dornbusch
Massachusetts Institute of Technology
Argentina is waiting for the next bailout, a shipment from the IMF that
helps resolving
the myriad unresolved issues in economics, politics and the social area.
Of course,
everybody knows that this is not the answer. The truth is that Argentina
is bankrupt.
Bankrupt economically, politically and socially. Its institutions are
dysfunctional, its
government disreputable, its social cohesion collapsed. Having fallen
that deep, it comes
as no surprise that reconstruction rather than quick-fix financial
support has to be the
answer. Argentina is like the European economies in the early 1920s, not
a country with a
liquidity issue that needs a tough year and is back on its feet like say
Korea, Mexico or
Brazil.
It is time to get radical. Any plausible reconstruction program must be
built around three
points:
? The
recognition that this will be an effort of a decade, not of a few
years.
Argentina?s productive economy, its credit and its institutions have
been
destroyed. Both its physical and moral capital will have to be built up
and that
takes a very long time.
? Because
Argentine polity has become overburdened, it must temporarily
surrender its sovereignty on all financial issues. Financial soundness is
the key
area where a beach head of stability must be created to even start
thinking about
sound public finance, saving and investment.
? The
rest of the world should provide financial support to Argentina. But it
must
do it only upon Argentina?s acceptance of radical reform and foreign
hands-on
control and supervision of fiscal spending, money printing and tax
administration.
Any external loan is to bridge the gap between immediate fiscal needs and
the
day, a year or two down the road, where radical reform creates
sustainable
finance.
Argentina today is bankrupt and slipping further. On the current course
of events, money
printing will cover up unresolved claims only so long. Far from resolving
the open issues,
financial and public chaos will further destroy the bases for a
reconstruction. A wasteful
distributional battle is taking place between workers and the wealthy,
those who are
trapped by the bank closure and those who have their money in Miami,
between
provinces and Buenos Aires, between unions and businesses, between
foreign investors
or creditors and a nation that wants to shed obligations in a vain effort
to maintain some
normalcy. Argentina is being cannibalized by this strife. Further IMF
money without a
deeply intrusive change of the rules of the game won?t prevent
self-destruction.