Sunday, March 3, 2024

OP-ED | 23-12-2023 06:55

Will crunch come to Grinch?

While opinions are divided on whether Milei is finally transforming Argentina into a modern country or going disastrously wrong, there is a third option – that he is going nowhere in particular.

The first Christmas centred on a homeless family soon forced into exile, only to evolve many centuries later into its current image of turkey feasts, brightly adorned trees, shopping sprees, etc. – could this Yule find Argentina moving in the opposite direction with meat prices several thousand pesos a kilo, trees as often down as up from the gale-force winds of last weekend’s storm and the President himself working around the clock to convince us that this is not a season to be jolly, something only to be found in a very distant past and a not so close future?

A week might be a long time in politics (Harold Wilson dixit over half a century ago) but a fortnight is far too short to reach any conclusion about the new administration – perhaps the only thing at this stage is to take one day at a time and let Christmas be Christmas. Yet there is already a rush to judgement on all sides. Libertarian enthusiasts (and others too) are gushing about a historic change of era when all we have so far are basically statements of principle with umpteen minefields awaiting them. One of these was widely celebrated as having been defused in the form of Wednesday’s relatively uneventful picket march but this could be deceptive – putting a lid on a pressure cooker where the current runaway inflation is massacring purchasing-power across the social spectrum might well end up replacing the frequent irritation of road-blocks with a major explosion. Not to mention that the demonstration took place before the announcements from President Milei’s national address, which prompted immediate cacerolazo pot-banging protests across the capital in response. 

Easy enough for critics to dismiss this government as far worse than even its dismal predecessor which cannot hide its responsibility (hence its electoral defeat) on the basis of prices and growth moving in opposite directions but they are not assured the last word either. With the economy inevitably downsized to match monetary deflation, looking across the Andes would give us an extreme example. In the year 1982 the Chilean economy suffered negative growth of minus 14 percent. Now there is no way of describing 14 percent shrinkage as anything but a total disaster and let us hope that we are not heading there now but where did this leave Chile? The following three decades of uninterrupted growth trebling the size of the economy were a direct consequence of what might be called that 1982 chainsaw massacre of the economic deadwood, forcing companies to look beyond a destroyed domestic market to a much wider world and to improve their productivity to become competitive. That model imposed by Chicago boys under a military dictatorship is not readily transferred to the here and now where Javier Milei has to look to the “forces of heaven” with little more than a few dozen Congress seats and nor has it saved Chile from political gridlock and economic stagnation in recent years but it does show that things need to be seen in a wider context than just a fortnight.

The Milei government is moving with determination to transform the model – perhaps not so much to be seen in Wednesday evening’s deregulatory decree (for the very simple reason that decrees cannot repeal laws without revolutionising the Constitution) as in the previous week’s announcements. These were widely seen as basically fiscal but perhaps their implications for trade deserve more attention – going much further than expected both in overshooting the exchange rate for exporters (despite the export duties) and surcharging imports, they were a clear bid for the twin fiscal and trade surpluses of Néstor Kirchner. But no guarantee of success – quite apart from the obstacle race against Congress, the provincial governors and the courts (even when prematurely writing off the pickets), even freezing the volume of the money supply does not ensure control of inflation since the velocity of circulation can be an even bigger factor.

While opinions are divided on whether Milei is finally transforming Argentina into a modern country or going disastrously wrong, there is a third option – that he is going nowhere in particular. The man is a walking contradiction, starting with his self-definition of “anarcho-capitalist.” Just one recent example – that pantomime of showing up last weekend in Army uniform in the storm-tossed naval base of Bahía Blanca (a cheap imitation of the stellar presence of Volodymyr Zelenskyy at his inauguration?) after side-lining his administration’s chief military voice, Vice-President Victoria Villarruel. Almost all his original followers are now in the wilderness like John the Baptist but space does not suffice for all the contradictions.

Early days but Christmas comes but once a year and it starts tomorrow.    


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