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Confusing Tales from Argentina
I’ve been trying for years to figure out the world economic system, but it ain’t easy. No matter how much I read I always seem to end up even more confused than when I started.
For example, lately I’ve been trying to understand what is happening in Argentina. I know there is a connection between the crowd surrounding the finance minister’s house banging pots (he resigned that night), and the International Monetary Fund (IMF), and people raiding grocery stores because they are hungry, and motorbike couriers being shot and killed by soldiers in Plaza de Mayo, but I don’t know how it all fits together. So for help I turn to some progressive economists and political commentators. They’re professionals and should be able to explain it to me, right?
First I read Marc Cooper (contributing editor to The Nation and a columnist for LA Weekly). In his recent column in the LA Times (12/30/01), Cooper tells me that for the past decade Argentina has been a ‘gold mine’ for international investors. Ok, I guess that means that big corporations and rich individuals invested their money in Argentina and made golden profits. That’s clear.
But then Cooper says “That experience [the collapse of the Argentine economy] should be enough to throw into question the free-market globalization model….”.
Swoosh! That one flies right by me and I’m confused.
If Argentina was a gold mine for international investors, why should the ‘free market globalization model’ be questioned? Who created and implemented the ‘free market globalization model’? It worked for the people who devised it, didn’t it? Isn’t the IMF controlled by the US Government, which is controlled mainly by rich individuals and big corporations? The IMF employees managed the Argentine economy for the benefit of their bosses in the U.S., and apparently did a damn good job. So why should the model be questioned?
I wrinkle my forehead and gird my mental loins. ‘Concentrate,’ I say to myself. ‘Focus and you will understand.’
Cooper continues: “The United States and other economically powerful nations, and the international financial organizations they finance, should allow for alternative models of development.”
Now I’m even more confused. Why should they allow alternative models if they are making such huge profits with their current model?
Looking for clarity I turn to Mark Weisbrot, (co-director of the Center for Economic and Policy Research) writing in the International Herald Tribune (12/26/01), and The Nation (12/10/01).
Weisbrot says: “The IMF’s role here was crucial. It arranged large loans, including $40 billion a year ago, to support the peso. This was the IMF’s second fatal error.”
‘Ok,’ I say to myself, ‘Go slowly. Why was this an error? Where did the $40 billion go?’
I continue reading. Weisbrot says: “The sacrifice of Argentina’s economy for the sake of Washington’s imperial interests and the interests of ‘emerging market’ bondholders fits a pattern at the IMF,….”
Zip zip zip! I’ve missed something again. First Weisbrot says the IMF made an ‘error’, then he says that this ‘error’ was made for the sake of ‘imperial interests’. So what is the error? Isn’t it the precise job of the IMF to implement ‘Washington’s imperial interests’? Again, who appoints them and pays their salary? The $40 billion apparently went to pay foreign bondholders, right? And the $40 billion came originally from US taxpayers, right? (Isn’t that where IMF money comes from?) So apparently, last year the IMF transferred $40 billion from US taxpayers to private US investors, via Argentina….it seems that IMF is doing exactly what they are paid to do. Why does Weisbrot call this an error? Has he not read what he has just written?
Maybe not because next he says: “Why does the IMF seem incapable of learning from repeated failures?” Forty billion dollars transferred in one year from the taxpayers to the private pockets of the folks who control the IMF is a failure. Hmm, what more could they possibly have to learn in order to succeed?
After recounting to us the similar things the IMF did to Russia, and Asia, Weisbrot calls what the IMF did in Argentina a ‘…failed economic experiment…’.
Zing! I’m confused again. How can it be an ‘experiment’ if they did the same thing in Russia and Asia? If an institution does the same thing over and over again, with similar results, I would call it a well-crafted policy that must work for the people implementing that policy, otherwise why would they continue doing it? What is experimental about it?
Longing for the light, I turn to the New York Times (01/02/02) and Paul Krugman, known as a fierce critic of the IMF.
Krugman (also writing about Argentina) says that in the 90’s, in response to IMF demands, “Tariffs were slashed, state enterprises were privatized, multinational corporations were welcomed, and the peso was pegged to the dollar. Wall Street cheered, and money poured in.”
‘OK,’ I tell myself, ‘Remember Econ. 101. If money poured in we can assume that it also poured out in the form of corporate profits, otherwise why would Wall Street cheer? Does Wall Street cheer for anything else?’.
But then Krugman, like the other guys, confuses me. He says: “The catastrophic failure of those policies is first and foremost a disaster for Argentines, but it is also a disaster for U.S. foreign policy.”
But wait a minute, the major purpose of U.S foreign policy is to make Wall Street cheer, correct? Where is the failure? How can this be a major disaster for U.S. foreign policy?
I agree it is a major disaster for Argentina. But the ‘free market’ policies implemented in the past ten years will now allow U.S. investors to swoop into bankrupt Argentina and buy all the companies they want at rock bottom prices. And isn’t that something that will make Wall Street cheer again?
Cooper, Weisbrot, and Krugman have described exactly how a relatively small group of wealthy people used their available financial and political resources to enrich themselves at the expense of others. But despite the fact that the IMF system worked incredibly well for the people who designed and paid for it, these three writers conclude it was a ‘catastrophic failure’, an ‘experiment’, a ‘failure,’ an ‘error’ and a ‘failed model’. Why?
I’m still confused. Perhaps somebody else can answer that last question.