The Collapse of Argentina part 4 (conclusion): the incredible shrinking economy

[Louis Proyect <lnp3@xxxxxxxxx>]

On July 15, 1955, two months before he was overthrown by the
military, Juan Perón said:

"The Perónist Revolution has ended; now begins a new constitutional
stage without revolution ? I have ceased to be the leader of the
National Revolution in order to become President of all the
Argentines."

The notion that he could unite all Argentines regardless of class is,
of course, false. While Perón was not what one could call a
theoretician, he did try to put forward a rudimentary class analysis
in "Force is the Right of Beasts". According to Donald Hodges, he
interpreted the 1955 military coup as a showdown between two classes.
In Hodges's words, there was "the productive class of manual,
technical and intellectual workers who allegedly consumed only what
they produced; and the parasitic class consisting of the oligarchy,
the clergy, and the professional politicians who lived off the
surplus created by the productive class."

This alignment, which evoked the political philosophy of Saint-Simon,
could not begin to do justice to the complex social relationships
within Argentina and on an international level in the mid-1950s.
Rather it evoked the French Revolution with its notion of a parasitic
class. Missing from this account is any explanation why the fraction
of the national bourgeoisie based in manufacturing, as well as large
segments of the professional middle-classes, would abandon his
Justicialist project. Surely, the answer was not "treason", but
rather diverse classes acting on distinct material interests.

Perón had failed to realize that the national industrial bourgeoisie
had already begun to become integrated with North American capital.
In some ways this paralleled the symbiotic, but dependent,
relationship the pampas bourgeoisie had to British capital a century
earlier.

During his years in exile, Perón always believed that the alliance
between the working class and the industrial bourgeoisie could be
reconstituted, but inexorable economic processes would militate
against that outcome. From 1955 until his return to power in 1973,
the Argentine bourgeoisie would find itself more and more co-opted by
US imperialism or--alternatively--put out of business. The objective
conditions for a neo-Perónist project would have been eroded beyond
repair long before his arrival at the Ezeiza airport in 1973.

To start with, Perónism had opened the door a crack to US business
for reasons that had nothing to do with an ideological affinity for
Uncle Sam. Of course, once that door was opened, the jackboot of the
US multinational would come crashing through. We should recall that
Perón had instituted a sweeping program of nationalizations that
affected European interests generally and Great Britain in
particular. As such, the US became the logical trading partner,
despite the fact that Great Britain conspired with Washington to
block the ability of Argentina to buy American capital equipment as I
discussed in my last post.

Argentina was also forced to look to the United States because of the
limitations of Perónist economic policy, which fell far short of
socialism. By failing to carry out radical land reform and failing to
nationalize agro-export related industries, such as meatpacking and
sugar refining, etc., Argentina failed to provide an adequate
financial basis for future industrial development. By contrast, the
seizure of Cuban sugar, tobacco and cattle production had not only
created a strong base of support for the revolution among
field-hands, it had also helped to make foreign exchange available
for native industry such as the new bioengineering enterprises.

In the aftermath of the overthrow of Perón, solutions were put
forward that combined deeper integration into imperialism with
half-baked "developmentalist" theories. Perhaps nobody exemplified
these contradictory impulses more than Raul Prebisch, whose "Prebisch
Plan" was adopted both by the military coup that removed Perón in
1955 and by the Arturo Frondizi government that succeeded it
(1958-1962).

Prebisch was the commissioner of the United Nations Economic
Commission for Latin America (ECLA) prior to his involvement with the
post-Perón regimes. In this capacity, he developed a theory of
"import substitution" which urged "peripheral" countries to foster
native industry in a protectionist framework or else risk being
swamped by the vastly superior power of "core" nations. He was a
major influence on other UN economists, including Brazil's Celso
Furtado, Samir Amin and Andre Gunder Frank--all of whom would become
identified with the "dependency" school of the 1960s grouped around
the Monthly Review.

Unlike those whom he influenced, Prebisch was no leftist. As an
economic adviser to the military government that ruled Argentina
prior to Perón, he proposed the creation of a central bank, whose
directorship he would occupy between 1935 and 1943. During this
period, Prebisch was deeply involved with negotiations that would
result in the Roca-Runciman Treaty that most Argentine nationalists
regard as a sell-out to Great Britain. Indeed, his role in this was
no surprise to those who had been following his career from the
beginning. During the 1920s and 30s, he was on the staff of the
Sociedad Rural Argentina, the bastion of the landholding elite.

Because of his questionable background, he was excluded from holding
any important posts in the Perón administration. Instead, he took a
job with the United Nations where he began to think through
developmentalist strategies for Latin American countries.

Once he had the ear of the post-Perónist military coup leaders and
the Frondizi administration that followed it, Prebisch recommended
solutions that bear scant relationship to the redistributive approach
that brought him fame in some quarters.

The Prebisch Plan incorporated two essential criteria:

1. It would backtrack from what most would consider the mildly
exploitative treatment of agribusiness during the Perón years. The
plan would not only actively promote farm exports, it would make sure
that the landed gentry receive a larger share of revenues than
realized during the Perón years. (One suspects that this decadent
class would waste the surplus on shopping trips to London, but I have
no citation for this.)

2. It would suppress the import laws, which protected young
industries against foreign competition. Under Frondizi, two laws were
passed in 1959 and 1961 that threw open the doors to foreign
investment. According to NACLA, "the first gave foreigners the same
rights as local investors, opened up new industrial sectors
(automotive and petrochemical), granted special privileges to
investments in the exploitation of raw materials (petroleum) and
exempted imports of certain capital goods from custom duties.
Finally, profit transfers out of the country were freed of all
restrictions, except those stipulated at the initial point of
investment, and could be made without special authorization."

This plan would reveal Prebisch to be about as committed to his
developmentalist ideology as Enrique Cardoso was, who a generation
later would toss all his "dependista" books out the window after
becoming president of Brazil, where he pursued a vicious neoliberal
economic policy. (What lessons can we draw from their behavior? It
leads us to question the long-term value of a developmentalist
economics that stops short of Marxism. No matter how much lip service
you pay to the interests of the "peripheral" nation, as long as you
refuse to break with imperialism, there will be intense pressure to
be "practical". Revolution is never "practical" but it really is the
only solution.)

The impact of the Prebisch Plan was dramatic. In 1959-1960, new
foreign investments reached $576.3 million as opposed to the $16
million between 1951 to 1955 under Perón, and $257.7 million in the
coup years of 1956-1958. As opposed to the modernization schemas of
Walt Rostow and his sympathizers on the left--conscious or
otherwise--foreign investment was a disaster. Bankruptcies went up
from an average of 67 a month in 1960 to 107 in 1961, to 153 in 1962.

Illia, a Radical Party politician, succeeded Frondizi. This
middle-class formation was much better situated to carry out
pro-imperialist policies than the parties of the pampas bourgeoisie,
since it had a history of struggle early in the century. Whatever its
past glories, it could do nothing to reverse Argentina's drift to an
impoverished status. Consequently in 1962 Perónista candidates were
elected to the legislature, but a year later they were banned from
participating altogether in order to prevent a return to the past.

Although Illia came to power on the basis of repudiating Frondizi's
pro-imperialist policies, inexorable pressure from core countries
pushed him in the same direction. He replaced Prebisch with Adalbert
Krieger Vasena, a member of the corporate elite, who would remain in
his post even after the military came to power once again under the
brutal Ongania dictatorship. In 1971, when Ongania was in power,
Krieger sat on the boards of 12 multinational subsidiaries in
Argentina. He attempted to resolve Argentina's impasse by undoing the
policies that had favored the rural bourgeoisie, but he also pushed
for a deepening of the open door policy toward foreign investment
that had marked the Prebisch Plan.

As was the case during the Frondizi administration, bankruptcies
swept across the country but at even more accelerated pace. They grew
from 1,647 in 1968 to 2,982 in 1970. As NACLA points out, "Local
companies which could not compete with the advanced technology of
foreign corporations and which could no longer afford expensive
capital imports disappeared and automatically gave up their share of
the market to remaining firms. Thus Coca-Cola and Pepsi gained
control of 75 percent of the soft-beverage market."

Between 1963 and 1971, foreign companies bought more than 53
Argentine firms. The acquisitions were in every critical area:
automotive, chemical, petrochemical and metallurgical. Nine of these
companies were among the top 120 in Argentina when the NACLA pamphlet
was written in 1975. If anything, the process has only accelerated in
the intervening years.

Krieger also gave a green light to foreign financial firms. Between
1967 and 1969, foreign companies bought 19 local banks. US and
European banks, who had been restricted by law to activity in the
Buenos Aires region, now instituted branch banking throughout the
country. In 1975, foreign banks controlled 17.5 percent of all
deposits, 24 percent of all industrial loans and 18 percent of all
commercial loans.

In 1955, the year Perón was overthrown, foreign corporations assumed
8 percent of industrial production. By 1972, on the eve of his return
to power, the percentage had increased to *40 percent*. Foreign
investment would total $1.3 billion in the same period. This
investment did not have the same character as investment by one
advanced capitalist nation in another, as for example when the USA
sets up a plant in Great Britain. Or vice versa. Foreign investment
in Argentina produced a capital drain that impoverished the nation.
Between 1960 and 1971 $853 million flowed out of the country. This is
what Lenin called super-profits. NACLA summarizes the impact:

"The primary force behind the post-1955 thrust of imperialism has
been the United States. North American capital made 70 percent of all
new direct foreign investment between 1959 and 1969. By 1973 the book
value of U.S. investments in Argentina was reported at $1.3 billion
(or 56.5 percent of all foreign investment in the country). Four
branches of industry absorbed 80 percent of all U.S. capital:
chemical and petrochemical; plastics and glass; metallurgical,
mechanical and electrical appliances; and automobiles. These sectors
are precisely those which have been completely monopolized by foreign
corporations and the U.S. holds a substantial share of that
monopoly."

It is this economic data that allows us, in contrast to Chris Harman
of the British SWP, to allege that Argentina is and was a neocolony.

Imperialist penetration of Argentina not only led to the ruination of
local industry and a degradation of living standards for the working
class, it also tended to deepen the political ties to the USA among
the elites who benefited from American investment. This new alignment
of class forces would weaken Perón's ability to rule in the name of a
multi-class alliance after his return in 1973. With an important leg
of his stool missing, the whole structure was difficult to keep
standing.

Perónism's return to power was marked by bitter fighting between
those who wanted to cater to the interests of the compromised
industrial bourgeoisie and the old agrarian elites and those who
wanted to push the Perónist project in a radical, if not socialist
direction.

Unfortunately, the radical Perónists in the guerrilla movement
combined the worst elements of Perónism and Guevarism, the source of
the new radicalism that erupted in the period after 1974. They drew
the most schematic conclusions from the Cuban Revolution, while
tailing an ever more rightward shifting Juan Perón.

The Montoneros, no matter their personal courage and their dedication
to a more just society, mixed all the worst aspects of ultraleftism
and reformism. When Perón introduced a "Social Pact" that required
trade unionists to sacrifice in the name of progress, just as was the
case under Frondizi and Illia, some elements of the Perónista left
protested vigorously. On January 30, 1974 the Perónist Armed Forces
(FAP) denounced the strategy of allying with the national
bourgeoisie. In contrast, the Montonero journal stressed the need to
maintain an alliance with the middle sectors of the national
bourgeoisie. Later that year, the Montoneros adopted a new program
titled, "Rechannel the Perónist Movement as the Axis of
Liberation--Reconstruct the Front under the Hegemony of the
Workers--Recover the Government for the People and for Perón."
Unfortunately, Perón and the people had parted ways long ago.

For the next few years, the army and cops fought a low-intensity
warfare with Perónista rebels of one sort another (and with the
Guevarist/Trotskyist ERP) under a nominally democratic government
under Perónista control. After Juan Perón's passing, his wife
administered a government that combined anti-working class austerity
and repression of the left. When this proved insufficient to maintain
the smooth operation of capital, she was pushed aside and replaced by
a succession of military governments: Videla, Viola and finally
Galtieri.

The Generals attempted to resolve the contradictions of the Argentine
economy by a new round of "primitive accumulation" that would finance
future expansion through wage cutbacks. A new round of
deindustrialization marked this period. Between 1975 and 1980, the
percentage of imported capital goods increased from 25.4% to 50.2%.

William C. Smith points out:

"By 1981 total industrial production was 17 percent less than in
1975. In the important metallurgical sector, total physical output
declined 25 percent in 1980 and an additional 45 percent in 1981 when
the full impact of previous policies began to be felt. Even the
sectors originally selected to play a strategic role were in full
crisis by 1981. The petrochemical sector was operating at only 50
percent of installed capacity, chemicals at 45 percent, steel at 54
percent, and even the once dynamic automotive sector limped along at
a mere 25 percent of installed capacity."

After Galtieri seized the Malvinas, his erstwhile allies in the USA
and Great Britain turned on him and tightened the screws on the
Argentine economy. A new round of popular unrest, with a strong base
in the Perónista movement that had not been exterminated during the
"dirty war", led to the return of "democratic" governments that had
all the spinelessness of the Frondizi and Illia regimes.

Since the post-Perón years had been marked by such a severe economic
contraction, a partial recovery during the Alfonsin years led some to
believe that Argentina was some kind of economic miracle. This sort
of bourgeois propaganda was also applied to the Pinochet "miracle" in
Chile, which had simply made some progress in returning to the
standards that were commonplace during Allende's administration
before US economic subversion succeeded in destroying a promising
experiment.

Alfonsin's administration was marked by hyperinflation that robbed
that diminished the purchasing power of the working class. Just after
he was voted out of office, to be replaced by Raul Menem, the July 7,
1989 Journal of Commerce reported:

"Five-and-a-half years after Mr. Alfonsin took power, his economic
record was as dismal if not worse than the one left by the military
regime he succeeded in December 1983.

"Inflation rose to a one-month record of over 100 percent in June,
according to private economists, up from a 78.5 percent increase in
May.

"Official statistics show that unemployment rose to 6 percent from
about 4 percent since Mr. Alfonsin took office. Local news reports
say hundreds of thousands of workers were laid off this year as
inflation crippled production.

"Workers' salaries lost nearly half of their purchasing power after
the Radical's August 1988 Spring Plan backfired in early February,
spurring price increases and putting the Argentine currency on a
nose-dive, in which it lost over 96 percent of its value against the
dollar.

"Argentina's foreign creditors have virtually cut the country off
from fresh funds sources after it stopped servicing most of its $ 60
billion external debt in April 1988. It has piled up over $ 3.5
billion in interest arrears since then."

Since the Menem debacle is familiar to most people reading this
article, there is no need to rehash the last 13 years of Argentine
economic history. Let me conclude with some brief observations.
Argentina's problems are most often attributed to the IMF. While the
IMF is a big problem, it is not the primary cause. To focus on the
IMF is like focusing on the part of the dandelion that is visible on
the surface of your lawn. If you cut the flower at the stem, it will
only grow back. You have to dig deep down and get to the taproot.
That taproot is called capitalism.

Argentina borrows money from the IMF and imperialist financial
institutions because it suffers from what dependency theorists used
to call "unequal exchange". In the epoch of imperialism, countries
that rely on agricultural export suffer from declining commodity
prices, while those that rely on manufacturing, finance and high
technology can take advantage of their competitive edge. Neoliberal
economics posits a world economy where those countries that are
geared to agro-export do what they do best, while the manufacturing
countries do what they do best. Anti-globalization protestors all
around the world and the piqueteros of contemporary Argentina, a new
generation of 'descamisados,' are now challenging this fiction. For
Argentina to finally enjoy on a permanent basis the fruits that were
first tasted during the early years of the Perón administration, it
will have to break its ties with the global capitalist system,
liquidate the local bourgeoisie and begin planning on a rational
basis for human need. Needless to say, the methods they use to
achieve that goal will have to be worked out by the mass movement led
by a Marxist revolutionary organization.

Sources:

1. Donald C. Hodges, "Argentina 1943-1976: The National Revolution
and Resistance" (U. of New Mexico, 1976)

2. North American Congress on Latin America, "Argentina in the Hour
of the Furnaces" (1975)

3. William C. Smith, "Authoritarianism and the Crisis of the
Argentine Political Economy" (Stanford, 1989)

--
Louis Proyect, lnp3@xxxxxxxxx on 05/20/2002

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