We look at the economic background to the rioting and looting in \nArgentina, and the factors which led to the social crisis there.<\/em><\/p>\n\n\n\n \nArgentina, the one time darling of the IMF, held up as an example of how\n a country should stringently adhere to structural adjustment \nprogrammes, is presently standing as a shining example of how the \ncapitalist system cannot be made to work in the interest of the \nmajority. <\/p>\n\n\n\n \nWhen Economy Minister Domingo Cavallo pegged the Argentinean peso to the\n dollar ten years ago \u2013 on a one-to-one basis \u2013 he envisaged that this \nwould end hyperinflation. Three years ago, when neighbouring Brazil \ndevalued its real, this seriously began to upset Argentina’s foreign \ninvestments and exports, as buyers of Argentinian products found they \ncould get the same next door and far cheaper. <\/p>\n\n\n\n Argentina is now in debt to the tune of $132 billion \u2013 attributable \nlargely to far-reaching borrowing carried out during the second term of \nthe Carlos Menem government, prior to the election of President Fernando\n de la Rua. The effect of the domestic and foreign borrowing was to send\n domestic interest rates spiralling upwards. As the debt increased, so \ndid the interest rates, which had a knock on effect for many businesses \nreliant upon credit.<\/p>\n\n\n\n In the 1990s, Menem introduced mass privatisation as a way of \nincreasing economic efficiency. This resulted in many workers being made\n redundant, with them being surplus to requirements and unprofitable to \nemploy.<\/p>\n\n\n\n So, back in 1999, the Argentinean recession began, a product of \nArgentina’s relative economic inefficiency and the measures taken to \ntackle it. The recession began increasing in ferocity as domestic demand\n declined and unemployment increased and, because the government’s tax \nrevenues started shrinking, Argentina’s burden of debt became all the \nmore heavier.<\/p>\n\n\n\n In November all of Argentina’s economic woes came to a head when \npeople, fearful their pesos would be devalued, began hurrying to the \nbanks to exchange them for dollars whilst the one-to-one rate was still \nin existence. Cavallo, fearful the banks would be drained of money, \nissued a decree which limited withdrawals to $1000 per person per month.\n The effect of this was to create mistrust in the government and \nwidespread uncertainty with people rioting and protesting on the \nstreets, with looting reported in many cities.<\/p>\n\n\n\n One week before Christmas the riots had spread to Buenos Aries. The \npresident declared a state of emergency and brought troops onto the \nstreets. But his government offered no remedy for the economic crisis \nand this only brought larger numbers of protestors back on to the \nstreets within 24 hours, the unemployed being joined by “middle class” \nprofessionals \u2013 all taking part in the looting. When thousands of \nprotestors congregated in Congress Square, banging pots and pans, the \nresignation of the president, his economic minister and the entire \ncabinet was almost immediate. De la Rua was determined to make one \nimpassioned speech before he left, but with an angry crowd having none \nof it, he was instantly whisked to safety by a helicopter.<\/p>\n\n\n\n Tensions rose. People poured in from outlying districts, blockading \nmotorways and erecting barricades, destroying banks and multinationals, \nlooting supermarkets and fighting with almost 40,000 police who had been\n drafted into the city. When the violence had subdued, 26 had been \nkilled.<\/p>\n\n\n\n Many Argentineans blame de la Rua for the crisis, citing the fact \nthat he was the president when the crisis was deteriorating more \nalarmingly \u2013 as if he could control the economy! As the economy was \ncontrolling him, he had little option but to cut public spending to \nservice debt repayments. De la Rua, however, did enter office foolishly \npromising to kick-start the economy and end high level corruption yet by\n early 2000 he had introduced \u00a3650 million worth of spending cuts and \nforced through eight unpopular austerity plans, which included a 13 \npercent cut in state workers’ wages. Just prior to the unrest, the \ngovernment planned to further cut public spending from \u00a334 billion to \n\u00a327 billion in a further attempt to service the crushing loan \nrepayments.<\/p>\n\n\n\n The current president is one Eduardo Duhalde, a former left-wing \nsenator and once upon a time investigated for the corruption his \npredecessor promised to stamp out. At present he plans to freeze the \nprices charged by foreign-owned utilities companies and put a tax on \nforeign owned oil companies. To protect the better off from currency \ndevaluation he has offered to convert dollar loans under $100,000 into \npesos, at the one-to-one rate \u2013 placing a hefty burden on banks, not \nborrowers \u2013 and he has further promised that cash will be set aside for \nthe unemployed. All of which amounts to a timely game plan to placate \nthe more volatile sections of Argentinean society.<\/p>\n\n\n\n Meanwhile, IMF top brass are in Argentina demanding, on behalf of the\n US and Europe, that the country does not default on its loan \nobligations. Outside markets are watching events carefully aware of the \nfact that economic crisis have tended in the past to lead to military \ncoups and all their implications and are now mindful of granting further\n loans to the region.<\/p>\n\n\n\n There has been much analysis of recent events in Argentina. The \ngeneral mood is that the IMF is to blame, that its structural austerity \nprogrammes are socially and politically unsustainable and that its \nrule-book needs tearing up. What has not been said is that, like the \nArgentinean government, the IMF is simply a body trying to make \ncapitalism work. And in this regard they cannot entirely be faulted, \nbecause as events in Argentina have revealed, capitalism is working \nperfectly well, for this is the only way it can work in an anarchic and \nchaotic manner, negligent and oblivious to the misery and suffering it \ncreates. If a few get rich while millions lose out big style, then this \nis capitalism working as it only can work. If there is recession \nfollowed by boom followed by recession, then capitalism is working \nhealthily. Argentina, therefore, is another example of capitalism \nfunctioning normally. <\/p>\n\n\n\n
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