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The Sorrows of Carmencita: Argentina's Crisis in a Historical
Perspective, by Mauricio Rojas, translated by Roger G. Tanner.
Timbro, 2002, 146 pages.
Once a Great Nation by Stephen Cox
To most norteamericanos the phrase "South America"
suggests, if it suggests anything, the outline map of a strange landform dangling
inexplicably from the Isthmus of Panama, an appendage divided by strange,
squiggly lines into things that must, logically, be countries ("So Paraguay and
Uruguay aren't the same?"), sprinkled here and there with tiny images of
peoples and products: a man in a serape, a coffee cup, a llama. Stationed in the
center of one of the map's oleaginous political shapes is an icon of something
vaguely resembling a cowboy, except that he's wearing a funny kind of hat, which
means he's a . . . what do they call those guys? . . . A gaucho! That's it. So
this must be Argentina. One of those quaint little backward countries.
| | Stephen
Cox is a professor of literature at the University of California in San
Diego. |
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Well, not really. Argentina is one of the most important and
interesting countries on earth. It developed late as a political economy, even
later than the United States, but it developed with extraordinary speed, thanks
to a regime that was generally hospitable to free trade. In the late 19th and
early 20th centuries, Argentina was a dynamic part of the world economy. After
basic political stability was established around 1860, the nation experienced an
average per capita economic growth rate of three percent. By the early 1900s,
Americans and Europeans used the phrase "rich as an Argentine" to describe
substantial wealth. By 1914, only Great Britain was more urbanized than
Argentina; by 1929, only Great Britain had more cars per capita. In that year,
Argentina led the world in exports of such things as frozen meat and wheat. It
was, according to Mauricio Rojas, one of "the world's ten wealthiest nations in
terms of per capita income. . . . The distance between Argentina and the rest of
Latin America in terms of development and prosperity had grown conspicuously
large" (44). But this economic good conduct was not to last. During the
world economic crisis of the 1930s, Argentina came to rely more and more on
nationalist and protectionist policies. Then, at exactly the time when fascism
was being defeated in Europe, Argentina enthroned the fascist dictator Juan
Perón, whose goal was to redistribute income and make the nation
economically independent of all those wicked foreigners — chiefly British
and American — who would otherwise be most likely to invest in it.
Unluckily, Perón (and his abominable wife, Evita) had a fair degree of success,
in the short run. Large income transfers took place from one social class to
another, enormous numbers of government jobs were created, and tariffs and other
economic controls drove the price of foreign goods so high that Argentina began
producing her own incredibly expensive manufactures. Meanwhile, markets dried up
for the agricultural products that she had once lucratively exported. The
political results fulfilled the melancholy prediction of F. A. Hayek in "The Road
to Serfdom": state management of the economy turns political influence into the
primary determinant of financial success, and the people who are best at exerting
political influence transform themselves into the new ruling class ("the
aristocracy of pull," in Ayn Rand's phrase). A progressive free enterprise
economy turned into the political regime of "Atlas
Shrugged." |
| In the early 1900s,
Americans and Europeans used the phrase "rich as an Argentine" to describe
substantial wealth. |
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Perón was well on his way to ruining the country when the military
expelled him. That was 1955. By then, however, as Rojas argues, Argentina's
economic strategy was largely set; and Argentina continued on her way to complete
ruination. The mechanism — you guessed it — was inflation. The
government couldn't pay its bills, so it tried to inflate them away. The "rise in
prices between 1976 and April 1991 was an incomprehensible 2.1 billion times"
(89). During approximately the same period, per capita income sank by over 25%,
and the poverty rate among Argentine households soared from five percent to 27%.
Those were the days, as I remember, when the government-operated telephone system
provided so few phones (and what is cheaper than a phone?) that
householders waited till businesses closed for the weekend, then tapped into the
temporarily unused lines so they could enjoy two days of phone service, anyway.
The service was so bad for everyone that books were published about how to dial
"the tricky 3-4 combination." After Maggie Thatcher defeated Argentina in
the Falkland Islands War (1982), the military regime was driven out. A civilian
president, Raúl Alfonsin, was elected and eventually managed to pass on
power to another elected president, Carlos Menem. Alfonsin's various attempts to
reform the economy, some of them sensible, some of them not, faced the fanatic
opposition of all those groups to which Peronist (and other populist) economic
policies had given political power — those "strong organisations and
interest groups which for decades had been fighting a devastating [economic]
distribution struggle which they were in no way prepared to stop" (100). There
were 13 general strikes during Alfonsin's six years in power. Strike activity was
led by Peronist public-employee unions — a fact that gives strong support to
Rojas' idea that Argentine political life remained structurally Peronist.
Alfonsin attempted to reduce the size of government, but (proponents of states'
rights, please note the following) no sooner had he thrown people off the
employment rolls of the general government than the provinces added them to their
own employment rolls. By 1989, public employees in La Rioja province constituted
"more than half the gainfully employed population." A correspondent from The
Economist observed "schools with more teachers than students"
(100–101). The regime of Carlos Menem, Alfonsin's successor, began in
deplorable circumstances. Menem faced catastrophic hyperinflation, which was bad,
and he had campaigned as an old-fashioned Peronista, which was worse. Here,
anybody would say, was a stage set for fascism. But Menem betrayed Peronist
principles, made peace both with Britain and the United States, the chief target
of Argentina's envy, and began a campaign of privatization and austerity.
Free-market principles that had aided Argentina a century before now guided
another Argentine government. Menem went so far as to make the Argentine currency
fully convertible with the U.S. dollar — "a counterpart to the gold standard
of the past" (119) — and to forbid the central bank from ever making loans
to government. The result of Menem's reforms (only a few of which I have listed)
was an explosive growth of the national economy and of per capita income, which
rose 40% in eight years.
| Argentina's progressive
free enterprise economy turned into the political regime of "Atlas Shrugged."
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Yet when the nation had recovered sufficiently to be able to look about her,
evidence appeared on every side of the corruption of Menem's faction. More
ominous was a general reflocking of economic pigeons. For reasons that might be a
little more clearly explained than Rojas explains them, Argentina kept borrowing
a lot of money. (One of the reasons was the overvaluation of the Argentine
currency, which created recessionary tendencies that were countered by borrowing
money to pump up trade.) By the start of the new century, Menem was discredited
and out of office — at least temporarily; even Perón came back —
and the government was seizing the people's wealth by forcibly converting bank
balances in dollars into bank balances in pesos, at an imaginary rate of
exchange. In the late 1990s, public spending and borrowing soared, with our old
friends the provinces as principal culprits. Then there was unemployment.
Peronist policies had made it virtually impossible to be unemployed in Argentina.
In 1978 unemployment stood at about two percent — a world-historical low.
"Employed" did not, of course, mean quite the same as "working." Argentine
productivity was as astonishingly low as Argentine unemployment. When Menem
started firing people and privatizing industry, unemployment rose accordingly,
with predictable costs to all those people who were no longer receiving pay for
doing little or nothing. One thing that Menem did not get rid of was the Peronist
social security and employee welfare system, which, according to our author, took
"about 50 per cent of gross wages" (125). Nevertheless, social security and
pensions were underfunded, last year, by a nearly incredible 40%. Ahem! I think
we've found the culprit. And here's the moral: "Argentina has long been
living beyond its means, and this has become part of both the popular and the
political culture" (128). And what does living beyond one's means really signify?
In a private individual, it signifies a lack of responsibility for voluntarily
assumed obligations, a contempt for the principles of cooperation with others and
honesty with oneself, an inability to face reality and to do the hard things that
need to be done in the present for the sake of happiness in the future. It
signifies, in short, an abject moral and psychological failure. This is what
Rojas sees throughout the past 70 years of the romance between Carmencita, the
naive young woman by whom he typifies the Argentine republic, and the economic
fallacies of the modern world. It's terrible to see a person with so much charm
end up this way. In December 2001 Carmencita suffered one of the worst
jiltings of her career. The state, which could no longer conceal its bankruptcy
or explain its depredations on the populace, suffered total collapse. So far, the
vital elements of Argentine society have failed to disentangle themselves from
the rotting corpse. Rojas predicts that catastrophe will continue, until
Carmencita comes to her senses. "So sad . . ." he says at the end of it;
and it's a good thing to find an expert in economic history who has a heart. This
one has a brain, too, because he can see that economic events are not wholly
unrelated to moral ones. If Argentine political culture had possessed a sense of
responsibility, if it had favored commerce and cooperation over redistribution
and force, if it had balked at theft in the form of confiscation, theft in the
form of inflation, theft in the form of protectionism and taxation and subsidy,
then all would have been well. But it is not well. "The Sorrows of
Carmencita" is a beautifully produced, intelligently written book on an important
subject. Faint praise? If you think so, then tell me how many books you've
recently seen that have those qualifications. Timbro, the publisher of
"The Sorrows of Carmencita," is a classical-liberal institution that ought to be
better known by libertarians in the United States. I don't think it's out of
place to give a link to Timbro's website.
Check it out.
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