Argentine recovery defies neoliberal convention

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, December 26, 2004
Argentina's Economic Rally Defies Forecasts
By LARRY ROHTER

BUENOS AIRES, Dec. 23 - When the Argentine economy collapsed in December 
2001, doomsday predictions abounded. Unless it adopted orthodox economic 
policies and quickly cut a deal with its foreign creditors, hyperinflation 
would surely follow, the peso would become worthless, investment and 
foreign reserves would vanish and any prospect of growth would be strangled.

But three years after Argentina declared a record debt default of more than 
$100 billion, the largest in history, the apocalypse has not arrived. 
Instead, the economy has grown by 8 percent for two consecutive years, 
exports have zoomed, the currency is stable, investors are gradually 
returning and unemployment has eased from record highs - all without a debt 
settlement or the standard measures required by the International Monetary 
Fund for its approval.

Argentina's recovery has been undeniable, and it has been achieved at least 
in part by ignoring and even defying economic and political orthodoxy. 
Rather than moving to immediately satisfy bondholders, private banks and 
the I.M.F., as other developing countries have done in less severe crises, 
the Peronist-led government chose to stimulate internal consumption first 
and told creditors to get in line with everyone else.

"This is a remarkable historical event, one that challenges 25 years of 
failed policies," said Mark Weisbrot, an economist at the Center for 
Economic and Policy Research, a liberal research group in Washington. 
"While other countries are just limping along, Argentina is experiencing 
very healthy growth with no sign that it is unsustainable, and they've done 
it without having to make any concessions to get foreign capital inflows."

The consequences of that decision can be seen in government statistics and 
in stores, where consumers once again were spending robustly before 
Christmas. More than two million jobs have been created since the depths of 
the crisis early in 2002, and according to official figures, 
inflation-adjusted income has also bounced back, returning almost to the 
level of the late 1990's. That is when the crisis emerged, as Argentina 
sought to tighten its belt according to I.M.F. prescriptions, only to 
collapse into the worst depression in its history, which also set off a 
political crisis.

Some of the new jobs are from a low-paying government make-work program, 
but nearly half are in the private sector. As a result, unemployment has 
declined from more than 20 percent to about 13 percent, and the number of 
Argentines living below the poverty line has fallen by nearly 10 points 
from the record high of 53.4 percent early in 2002.

"Things are by no means back to normal, but we've got the feeling we're 
back on the right track," said Mario Alberto Ortiz, a refrigeration 
repairman. "For the first time since things fell apart, I can actually 
afford to spend a little money."

Traditional free-market economists remain skeptical of the government's 
approach. While acknowledging there has been a recovery, they attribute it 
mainly to external factors rather than the policies of President Néstor 
Kirchner, who has been in office since May 2003. Increasingly, they also 
maintain that the comeback is beginning to lose steam.

full: http://www.nytimes.com/2004/12/26/international/americas/26argent.html


Louis Proyect
Marxism list: www.marxmail.org