Advertisement
The current political-economic crisis in Argentina, at first
glance, appears to be the resultant snafu of a corrupt
government that is itself the legacy of an even more corrupt government which itself arose from the ashes of a military junta that was more preoccupied with killing off any perceived political enemies than in actually running a country. Upon closer inspection, however, the grave state of the Argentinean economy can be blamed almost entirely on self-serving, foreign meddling which, through the powerful vehicle of the International Monetary Fund, prevented Argentina’s leaders from enacting sound economic reforms that may have obviated the debt default, which is now unavoidable.
As Argentina’s newly appointed interim president Adolfo Rodriguez Saa announced plans, prior to resigning, to suspend payments on the country’s $132 billion debt to the IMF and foreign investors/creditors, a deluge of commentary surfaced, questioning the IMF’s spin on the situation. The IMF’s version of reality goes something like this: Argentina is headed by a poorly-managed government, which in turn is led by a weak president (recently ousted Fernando de la Rúa) who was largely ineffective due to an opposition-controlled Senate and growing popular discontent with his, and the government’s, perceived lack of control of the situation or any clear plan of action to alleviate some of the suffering felt by citizens. Okay, so up to this point, the IMF is correct. The IMF/U.S. stance, as stated by Morris Goldstein, member of a Washington think-tank on international economics, is that, “Within Argentina, the responsibility falls squarely on… de la Rúa, and his economic sidekick, Domingo Cavallo, for failing to stick to zero-deficit fiscal pledges or restructure the country’s overwhelming debt burden, and for rigidly adhering to the currency peg to the dollar.” What this statement fails to mention is that much of the decision-making occurred outside of Argentina and that de la Rúa and Cavallo, a Harvard educated economist, were really just IMF puppets with little or no control over their own policy.
Basically, in its desire to open world markets to U.S. investment and trade by controlling international capital flows, the IMF, backed by the G7 shareholders, most important of which is the U.S., has abandoned its original mission under the Bretton Woods charter to promote free capital mobility globally, while simultaneously promoting economic and civic stability through a brand of welfare capitalism. What has gone by the wayside is any concern whatsoever about how a country will provide for its own citizens. The developing world, much of Latin America being a good example, has become a fertile extension of the U.S. plantation, with each country’s individual citizens its newest slaves.
The debt crisis in Argentina is not exactly unique. In the early 1980s, the IMF urged various Latin American governments to guarantee the mounting foreign debt of their private banks in dollars, rather than in their individual currencies. Unable to do so, these governments were forced to borrow from, whom else, the IMF. Once a country started this slippery slide into permanent indebtedness, the IMF could influence virtually any aspect of policy it chose, creating whole countries of indentured servants. As could be expected, “welfare” was soon dropped from the IMF’s idea of capitalism. This is evidenced by the IMF-encouraged austerity plans drafted by Argentinean policy makers. These plans sought to eliminate deficit spending, something virtually impossible to do in times of recession, by cutting social spending. As unemployment reached an all-time high of 18%, the IMF would have Argentina’s lawmakers shut the door of the unemployment offices as well as the soup kitchens. And, so that suffering could be the one relatively equally distributed element of Argentinean economy, state salaries and pensions were cut as well. It is easy to understand why the Argentineans felt the need to ransack neighborhood grocery stores and supermarkets—they were starving.
The IMF/U.S. now claims that it never supported Argentina’s currency peg to the dollar and that it only supported it to keep the Argentinean government happy. Naturally this is exceptionally easy to believe because everyone knows the power that a developing country with only 20 consecutive years of democracy has over the United States and the IMF. Whether or not the IMF accepts blame for its huge role in the catastrophe in Argentina, the hope is that, by suspending payment of its foreign debt, Argentina can focus on providing for the basic needs of its own citizens.
Jodi Willoughby is a Spanish teacher at Dublin Scioto High School and has a Masters in Spanish from Bowling Green.
As Argentina’s newly appointed interim president Adolfo Rodriguez Saa announced plans, prior to resigning, to suspend payments on the country’s $132 billion debt to the IMF and foreign investors/creditors, a deluge of commentary surfaced, questioning the IMF’s spin on the situation. The IMF’s version of reality goes something like this: Argentina is headed by a poorly-managed government, which in turn is led by a weak president (recently ousted Fernando de la Rúa) who was largely ineffective due to an opposition-controlled Senate and growing popular discontent with his, and the government’s, perceived lack of control of the situation or any clear plan of action to alleviate some of the suffering felt by citizens. Okay, so up to this point, the IMF is correct. The IMF/U.S. stance, as stated by Morris Goldstein, member of a Washington think-tank on international economics, is that, “Within Argentina, the responsibility falls squarely on… de la Rúa, and his economic sidekick, Domingo Cavallo, for failing to stick to zero-deficit fiscal pledges or restructure the country’s overwhelming debt burden, and for rigidly adhering to the currency peg to the dollar.” What this statement fails to mention is that much of the decision-making occurred outside of Argentina and that de la Rúa and Cavallo, a Harvard educated economist, were really just IMF puppets with little or no control over their own policy.
Basically, in its desire to open world markets to U.S. investment and trade by controlling international capital flows, the IMF, backed by the G7 shareholders, most important of which is the U.S., has abandoned its original mission under the Bretton Woods charter to promote free capital mobility globally, while simultaneously promoting economic and civic stability through a brand of welfare capitalism. What has gone by the wayside is any concern whatsoever about how a country will provide for its own citizens. The developing world, much of Latin America being a good example, has become a fertile extension of the U.S. plantation, with each country’s individual citizens its newest slaves.
The debt crisis in Argentina is not exactly unique. In the early 1980s, the IMF urged various Latin American governments to guarantee the mounting foreign debt of their private banks in dollars, rather than in their individual currencies. Unable to do so, these governments were forced to borrow from, whom else, the IMF. Once a country started this slippery slide into permanent indebtedness, the IMF could influence virtually any aspect of policy it chose, creating whole countries of indentured servants. As could be expected, “welfare” was soon dropped from the IMF’s idea of capitalism. This is evidenced by the IMF-encouraged austerity plans drafted by Argentinean policy makers. These plans sought to eliminate deficit spending, something virtually impossible to do in times of recession, by cutting social spending. As unemployment reached an all-time high of 18%, the IMF would have Argentina’s lawmakers shut the door of the unemployment offices as well as the soup kitchens. And, so that suffering could be the one relatively equally distributed element of Argentinean economy, state salaries and pensions were cut as well. It is easy to understand why the Argentineans felt the need to ransack neighborhood grocery stores and supermarkets—they were starving.
The IMF/U.S. now claims that it never supported Argentina’s currency peg to the dollar and that it only supported it to keep the Argentinean government happy. Naturally this is exceptionally easy to believe because everyone knows the power that a developing country with only 20 consecutive years of democracy has over the United States and the IMF. Whether or not the IMF accepts blame for its huge role in the catastrophe in Argentina, the hope is that, by suspending payment of its foreign debt, Argentina can focus on providing for the basic needs of its own citizens.
Jodi Willoughby is a Spanish teacher at Dublin Scioto High School and has a Masters in Spanish from Bowling Green.