Between disintegration and
by James Petras Henry Veltmeyer
CovertAction Quarterly magazine,
Throughout the early and mid-nineties,
the International Monetary Fund (IMF), World Bank, the Inter-American
Development Bank, and the G-7 countries, all praised Argentina's
liberalization program as an economic model for the Third World.
Then President Carlos Menem and Economic Minister Domingo Cavallo
promised the Argentine people that they would soon become part
of the "First World."
Today, Argentina is in total disintegration.
Not only is the economy in its fifth year of recession/depression,
but its banking system has collapsed, the unemployment rate has
skyrocketed, and over half the population lives below the poverty
No country in contemporary Latin American
history has fallen swifter and further into mass poverty and experienced
as prolonged an economic collapse as Argentina. Though most Latin
American countries have applied neoliberal policies, none has
been as thorough and rapid as Argentina. Moreover, no Latin American
country was as industrially advanced or had as diversified an
economy. Finally, Argentina had the highest standard of living
in the region, the most qualified and skilled labor force, and
the political leadership most determined to follow the precepts
of the International Financial Institutions (IFls) and the G-7.
Argentina is a test case for the efficacy
or failures of the neoliberal approach under optimal conditions:
a willing government, a well-developed infrastructure, a skilled
labor force, long-term links to world markets, and a significant
middle class with Euro-American patterns of culture and consumption.
The number of Argentines below the poverty
line has grown geometrically: Ten years ago there were less than
15%, two years ago it was 30%. In June 2002 the percentage exceeded
50%. In that month, Eduardo Duhalde's regime acknowledged 18.2
million people (51%) below the poverty line. Of these, 7.8 million
are indigents according to SIEMPRO (Spanish acronym for System
of Information, Monitoring and Evaluation of Social Programs),
an official institution under the jurisdiction of the President.
Children and adolescents living in poverty number almost 8.2 million.
Between January and May 2002, the number of poor grew by 3.8 million,
or 762,000 a month, or 25,000 a day. The rate of indigence is
growing even faster. In 1998, 29% of the poor were indigent; in
June 2002, 43%. The massification of extreme poverty is manifested
in the high rates of child malnutrition-over 58% in Matanzas,
a working-class suburb of Buenos Aires. In the interior there
are numerous reports of children fainting in school for lack of
food, and over 60% of newborns in Misiones suffer from anemia-a
direct result of government cutbacks to meet G-7 and IMF demands.
INTO THE ABYSS
Apart from the top 10% of the population,
all working sectors and pensioners have experienced an average
67% income decline. In 1997, the United Nations Development Program
(UNDP) calculated per capita annual income at $8,950. In March
2002 it was $3,197. The decline affects all regions of the country.
If we use as rough indicators of "class" the different
regions of the province of Buenos Aires, we can approximate the
social impact of the crisis. The income in the capital city of
Buenos Aires, which we can take as largely middle class, saw the
average fall from $909 a month in December 2001 to $363 in March
2002; in the working-class suburbs (conurbano) of the city of
Buenos Aires income fell from $506 to $202; in the province of
Buenos Aires, from $626 to $250. The largest decline is among
workers in the informal sector (work without benefits or employment
protections) and among pensioners. In the capital, income of the
"informals" dropped from $643 to $257; in the working
class suburbs from $334 to $134; in the province from $394 to
$158. Among pensioners the decline was from $437 to $175 in the
capital; from $320 to $128 in the working-class suburbs and from
$360 to $144 in the province. The situation is far worse in the
other provinces, where pay scales are lower, unemployment is higher,
and where there are frequently three to six month delays in payment
of salaries and pensions.
For the working and middle classes, the
loss of formal employment means a sharp decline in income. Employed
wage earners in the private sector of the capital earned $904
in December 2001. Those who were forced into under-employment
were earning $257 in the informal sector three months later. A
30% rise in prices during the same period accompanied the skyrocketing
loss of jobs.
The decline of income among the different
occupational categories indicates both the absolute and relative
decline of the middle class, a clear process of proletarianization.
Bank employees in the capital have seen their income decline by
nearly 60%, from $1,081 to $432 per month, and public employees
have experienced a drop from $1,144 to $458 per month. As of April
2002, income of the former middle class did not cover the basic
necessities of rent, food, transport, school and health expenses.
If we take the figure of $400 as the cutoff
for the poverty line and $250 as the cutoff line for indigence,
we find that every occupational category in the working class
in the suburbs of greater Buenos Aires is below the poverty line
and several categories are "indigent."
Those whose main income is a pension are
indigent in all geographical sectors, as are all unemployed workers
(30% of the labor force) living in the suburbs and greater Buenos
Aires. Even if we assume that some workers classified as unemployed
are actually working in the informal sector, almost all are near
or below the line of indigence. The massive growth of unemployment
to 30% nationally, from 40 60% in the working-class suburbs, and
even higher in some of the former one-industry towns of the interior,
is reminiscent of the worst years of the U.S. depression of the
1930s and of Weimar Germany in the 1920s.
Accompanying and interrelated to the impoverishment
of the mass of the middle and working classes is the concentration
of wealth in the ruling and upper middle classes and foreign capitalists
and bankers. In 1974 the top 10% received 28% of national income,
in 1992 slightly over 34% and in 2001 over 37%, while the poorest
10% received 2.2% in both 1974 and 1992 and 1.3% in 2001- before
the devaluation and sharp increase of unemployment.
Together the upper classes-the ruling
elite plus the upper middle class-receive 53% of declared income.
Because the upper classes were able to withdraw their funds (estimates
run as high as $40 billion) from the banks and send their money
outside the country, avoiding the confiscation of December 2001,
the percentage of wealth in the hands of the upper classes is
probably close to 80%.
In that confiscation, the government froze
all bank accounts, and subsequently converted them to pesos. The
conversion rate in June 2002 was 3.5 pesos to the dollar. In effect,
the accounts were reduced from $45 billion to approximately $13
billion and declining. The regime's attempt to convert the remainder
into state bonds redeemable in ten years at 2% interest would
devalue these personal savings accounts even further, given the
30% rate of inflation for the first quarter of 2002. This attempt
by the regime to swindle the account holders out of their savings
was prevented by massive demonstrations by the impoverished middle
class-the potbanging cacerolazos-which threatened the Congress
and stormed the banks.
During the first three months of 2002,
industrial activity declined by over 18%. Textiles and manufacturing
were down 48% over the previous year. The number of plant closures
accelerated throughout the 1999-2002 period, reaching unprecedented
levels in the last trimester of 2001 and the first half of 2002.
Unused industrial capacity was running at more than 50% in most
sectors of the economy, including metal, textiles and auto parts.
Between 1990 and 1998, the foreign debt
grew from $58 billion to $140 billion. Over the same period the
cumulative sum of capital flight plus interest payments rose from
$75 billion to $197 billion. In other words, external borrowing
largely financed capital flight and part of the mushrooming debt
payments, leaving a net deficit in capital flow. This eroded the
economy's capacity to sustain growth and subsequently led to the
recession, further budget cuts, and later turned the recession
into a depression. The foreign and domestic elites' massive withdrawal
of funds-aided and abetted by the foreign banks led to the confiscation
of savings of millions of Argentines and the virtual collapse
of the financial system. Throughout 1999-2001, IMF loans merely
served to pay back private banks and the IFls, while exacerbating
the debt problem, deepening the recession, and lowering living
standards. In order to get short-term loans, Argentina was paying
16% over U.S. Treasury notes as late as August 2001. Once the
fall took place, neither the IFls nor the G-7 were willing to
lend new money, unless the central government repealed its Economic
Subversive Law (a law designed to prosecute illicit banking practices),
abolished the provincial currencies which kept the local economies
afloat, and fired several hundreds of thousands of health, educational
and other public employees.
The key concern of the IFls with repealing
the Economic Subversive Law was that it was an instrument to prosecute
G-7 banks that were involved in the illegal transfer of over $50
billion in the year 2001-02. In June 2002, under IMF pressure,
the law was repealed. While the IMF blamed the Argentine "savers"
for the financial crisis-by making panic withdrawals-substantial
data demonstrate that the private, principally foreign-owned banks
had already consummated a massive transfer of funds out of the
country and were not willing to re-capitalize the banks. Furthermore,
the IMF and World Bank pressured the Argentine government to assume
the private banks' obligations to their depositors and issue ten-year
state-guaranteed bonds in lieu of direct payments to holders of
savings accounts. Lacking funds and facing total unwillingness
of foreign bank corporations to recapitalize their Argentine subsidiaries,
the foreign and national private banks claimed to be on the verge
of bankruptcy, at exactly the moment that the rightful claimants
attempted to withdraw their savings.
The immediate cause for the collapse of
Argentine capitalism was the role of the foreign-owned banks and
the IFls, led by the IMF, in emptying the Argentine financial
system. The longer-term reasons are rooted in regressive structural
changes including privatization, Structural Adjustment Programs
(SAPs), open markets, and quasi-criminal "deregulation"
of the economy. All these led to the collapse of domestic production,
wholesale pillage of the economy, and the confiscation of millions
of saving accounts.
In the months leading up to the crisis,
the ten leading banks moved approximately $27 billion out of the
Argentine financial system. This system operated on two levels:
a formal system of deposits and loans and an "informal sector"
where mega-accounts operated, largely to launder funds and carry
out speculative activity in the financial sector. The "other"
categories in February 2001 amounted to $57 billion in assets
and $60 billion in obligations. By November the totals of "others"
declined to $25 billion for assets and $35 billion in obligations.
A closer analysis reveals that of the $25 billion decline in assets,
over 74% of it took place among the ten biggest banks. The IMF
loans to Argentina served to cover the growing drain of resources
out of the financial system by the financial elites, while imposing
harsher cuts in public spending and investment. The triple phenomena
of deepening economic depression, financial flight, and growing
indebtedness were caused by the alliance of the IFls, the foreign
and local big financiers, and the foreign-owned banks. The small
and medium Argentine depositors were victims of a covert financial
swindle, and not the perpetrators, as the apologists charged.
Their desperate and belated effort to withdraw their savings was
a reaction to the financial swindle executed by the financial
elite. Most small and medium savers, however, were not successful.
Bank liabilities after the flight of big accounts and the drying
up of overseas credits far exceeded their assets; with the economic
crisis, many of their outstanding loans were delinquent and there
was no way that headquarters would inject new funds to cover the
demands of depositors. The government intervened to "save
the banks" by freezing all deposits and preventing depositors
from recovering any of their savings. The gross class character
of the government's financial rescue plan infuriated the dispossessed
middle and lower classes. The subsequent devaluation of the peso
in effect robbed them of two-thirds the face value of their frozen
savings and depressed their incomes, while the upper middle and
ruling classes who got their money out of the financial system
were able to lower their cost of living, production and consumption
by a commensurate 65%.
Argentine industry was pressured both
by inexpensive consumer imports from low-wage areas (Asia) as
well as upmarket goods from high-tech, large-scale, heavily subsidized
Euro-American manufacturers. The liberal argument that "competition"
would make Argentine enterprises more "efficient" was
false few Argentine companies had the scale and financing to compete
with the top U.S. and European multinationals, and even the lowest
paid Argentine workers could not compete with a Chinese worker
earning a dollar a day. The rapid lowering of barriers also precluded
any preparation for competition, and the lack of reciprocity in
lowering subsidies and barriers in the U.S. and Europe prevented
Argentine companies that were competitive from capturing overseas
Historically, the U.S. and EU countries
have undergone a gradual process of selective liberalization,
in stark contrast with the Argentine experience. Free convertibility
in Europe did not take place until the economies were on their
way to sustained expansion-which for some did not take place until
well into the 1960s. Trade barriers, including quotas, tariffs
and non-traditional constraints (health barriers, unfair trade
and anti-dumping rules) are still frequently and extensively used
to protect non-competitive sectors. Mass state subsidies and fiscal
deficits are used to promote exports and to stimulate domestic
The Menem regime gave the appearance of
an "affluent regime" thanks to heavy borrowing and windfall
income from the selloff of public properties. Most of the inflows
of capital raised upper class consumption and facilitated wholesale
corruption by the entire political class and their entourages
of public officials, judges, customs officers, police, and military
officials. Foreign bankers were willing to lend because the interest
rates were 10 to 20 points above the Euro-U.S. rates and there
was easy liquidity given free convertibility, and the de facto
dollarization of the economy ensured monetary stability. Thus,
each step of the liberalization process weakened the fundamentals
of the economy: The domestic economy shrank, entrepreneurs fled
into apparently lucrative financial-speculative activity, debt
payments skyrocketed, the loans-for-privatization deals were approaching
their limits, and external flight of capital accelerated as the
upper classes sensed that the whole liberal edifice would eventually
collapse, leaving neither a productive system nor monetary resources
to revive it.
Crucial to the collapse of the bubble
economy was the behavior of the Argentine big bourgeoisie. Powerfully
ensconced in the Menem regime, they were the initial
beneficiaries of the privatization process
and the loans from overseas lenders. They were also the group
that dictated economic policy. The Menem regime's point of reference
for developing the liberal agenda was, first and foremost, the
dominant classes in Argentina who had investments overseas, were
tightly linked to overseas banks via joint investments in privatized
banks and via foreign loans, and who demanded a peso easily convertible
into dollar equivalence. Liberalization to the maximum allowed
this 'transnational' Argentine bourgeoisie to buy public banks
and enterprises on the cheap and sell them to foreign capital.
Deregulation of the banks allowed massive transfers of funds out
of the country and the laundering of illicit gains. Cheap imports,
easy loans and fast exits of funds were the Argentine elite's
definition of liberalization.
For obvious reasons the G-7 countries
and the IFls were wildly enthusiastic: They gained control over
banks and deposits, lucrative telecommunications, airlines, oil
and other money-earning public enterprises. They encouraged the
regime to proceed full speed ahead with reckless abandon.
As the domestic economy, particularly
in the provinces, collapsed, the provincial governments ran up
huge debts-partly to finance corrupt political machines to sustain
the national government, and partly to avoid provincial popular
revolts. Unlike South Korea, China, and Japan, large-scale corruption
did not grease the wheels of national production: Bribes greased
the hands that sold off lucrative public enterprises to foreign
investors who stripped assets and reduced local production in
favor of large-scale speculative activity. There was an inverse
relation: As corruption grew, industry declined, tax receipts
were negligible and competitiveness became an empty slogan.
Meanwhile, foreign investors moved in
on the agro-industrial sectors, retail trade (mega malls), real
estate and hotels, in association with a small nucleus of the
Argentine economic elite and sectors of the kleptocratic political
class, headed by the extended Menem family and its political entourage.
The first major adverse effect was the
slashing of employees in the process of preparing public enterprises
for privatization. The state fired hundreds of thousands of workers
in the telephone, railroad, and waterworks sectors, assuming the
economic costs and taking responsibility for repressing the ensuing
protests. Many cities in the interior, like the petroleum city
of Neuquen, were turned from prosperous cities to ghost towns,
with 30-40% unemployment rates. Promises of "alternative
employment" were never kept, as provincial and local officials
linked to the central government either stole the funds outright
or used them to finance their political machines, through expansion
of unproductive "administrative" jobs.
The "centralization" of legislative
and executive powers in the presidency-in his very person-and
the dictatorial methods Menem used to legislate (most industries
and banks were privatized via presidential decrees) facilitated
rapid and extensive liberalization.
DISINTEGRATION & DESTITUTION
U.S. Secretary of the Treasury Paul O'Neill
weighed in on the side of the IMF's "final squeeze,"
endorsing the IMF bailout of the bankers and the takeover of the
remaining sectors of the economy. But he demanded, in typical
euphemistic language, "a political solution." He called
for a strong authoritarian regime capable of ramming the mass
job firings, budget cuts and abolition of local currencies policy
down the throats of the impoverished Argentines. O'Neill questioned
"the leadership capacity" of the Duhalde government.
According to an interview, O'Neill said Argentina's problem boiled
down to a single question: Will the Argentine government do what
it has to do, namely, implement the IMF policies? What O'Neill
and others in the IFls and G7 mean by "political will"
is precisely to override the interests and survival of thirty-three
million Argentines, elected congressional officials, governors,
and mayors, and force upon them further bankruptcies and unemployment-to
push beyond the 53% poverty level to satisfy overseas bankers
Probably the most obscene remarks came
from Anne Krueger, second in command at the IMF, a U.S. appointee
and a former Stanford professor. In an interview in the Financial
Times, she claimed that "the Argentine authorities are not
sufficiently realistic as they should be." Realism, according
to Krueger, means that in the midst of a depression, cut public
spending, lower living standards and increase unemployment. The
"realism" referred to is the world of finance capital
and its voracious appetite to squeeze even more interest payments
from bankrupt provinces, businesses and public treasuries; to
withdraw more savings from Argentina with impunity.
The U.S. embassy staff in Argentina went
even further. Political attaché Michael Matera claimed
the crisis was due not only to Argentina's political leaders but
to the entire Argentine people. "The viewpoint of international
economists is incompatible with the national mentality of the
Argentines. Argentineans have a collective incapacity to change;
they are immature and paranoid." The racist ideology explicit
in such statements is inescapable.
The style and substance of Argentine relations
with the G-7 speaks to a new imperialism: the pillage of the economy,
the growth of vast inequalities, economic stagnation followed
by a profound and enduring depression, and the massive impoverishment
of the population as a consequence of the greatest concentration
of wealth in contemporary Argentine history. The new imperialism
works directly through the inter-state system and subsidiary financial
institutions like the IMF to dictate policy. The April mission
of the IMF, with its public pronouncements on every aspect of
the Argentine economy, the blatant dictates of the U.S. embassy
and the G-7 economic ministers, strongly resonate with the colonial
relationship of the past.
In a trip to Tucuman Province in April
2002, we visited the vast villas de miseria, or slums, and spoke
to the multitude of poor and destitute. They told us that between
2001 and 2002, in just one year, the number of children suffering
from malnutrition increased six-fold. The combination of mass
firings, inflation, and the cutoff of food rations turned the
poor into destitute, unable to meet even their basic food needs.
A week later, while meeting with a delegate
from the bank workers' union in Buenos Aires, we were informed
that the banks were planning massive firings. A month later, on
May 19, a newspaper close to the financial elite, La Nacion, reported
that banks were planning to fire two-thirds of their employees
(80,000 of the 120,000), and reduce the pay of remaining staff.
By early July the streets were noisy with
demonstrators, crime was rampant, university professors with three
positions (catedras) were making $200 a month, highways were blocked
and the pot-banging impoverished retirees and former middle class
were meeting to demand the ouster not only of the regime, but
of the entire political class.
The deepening polarization in Argentina
has taken a variety of social and political forms: a national
uprising that overthrew the De la Rua regime in December 2001;
permanent rebellion in the provinces; constant mass mobilizations
of the unemployed (piqueteros); and popular assemblies (caceroleros)
in the impoverished middle and working class neighborhoods.
On December 19 and 20, 2001, hundreds
of thousands of Argentines took to the streets to protest the
government's declaration of a state of siege banning public demonstrations,
the confiscation of $40 billion in savings, the deepening recession
and 23% unemployment rate. The uprising which finally forced President
De la Rua to resign and exit from the presidential palace via
a helicopter was the culmination of a series of mass road blockages
by the unemployed piqueteros, potbanging neighborhood marches
and assemblies, provincial mobilizations and attacks on governors,
mayors and federal officials. While each of the particular mass
actions has its own specific social base, forms of direct action,
and priority demands, they all converge in rejecting repayment
of the foreign debt, implementation of IMF austerity programs,
and the confiscation of savings.
The mass unemployed workers' movement
was the detonator for the uprising of December 19/20, even if
the organized unemployed were not a decisive force on the day
of the ouster of the President. The unemployed workers' movements
(MTDs, for Movimientos de Trabajadores Desocupados) have spread
throughout Argentina and escalated over the past six years as
the recession has turned into a depression and millions of former
unionized factory workers have become 'long term' unemployed.
The MTDs are organized territorially-by barrio, municipality,
and more recently across municipalities, and in some cases as
competing national organizations. Their main tactics are to barricade
major highways, blocking the transportation of goods, services,
and labor to and from industries, banks and other sectors. Their
demands invariably include state-financed jobs and food. They
are usually autonomous from the main trade unions and political
parties, though there are important exceptions. The MTDs usually
meet in assemblies in their neighborhoods to decide on tactics,
demands, and the distribution of jobs secured in successful struggles.
By early 2002, over 200,000 unemployed workers were organized,
though many more workers and underemployed participate in the
street blockages and marches. The MTDs draw support from rank
and file trade unionists, regional trade union leaders and the
Marxist parties. The MTDs clearly spearheaded the opposition to
the neoliberal regime in the absence of any sustained opposition
from the political parties and the official trade unions.
Several theoretical points emerge from
an analysis of the MTDs. First, the idea that the unemployed,
outside the factories, cannot be organized because they are too
dispersed, fragmented and without social leverage is false. The
MTDs demonstrate that their common social situation, the leadership
from below rooted in formerly unionized workers expressing themselves
through popular assemblies in horizontal structures can succeed
in organizing in the midst of a depression, despite the hostility
and indifference of the entire trade union and political party
The activist mass has become in large
part "feminized" as women are in most cases the head
of the household and have taken the lead in organizing the barricades
and the logistical support systems (roadside soup kitchens). Women
from working class families bring to the MTDs the experience of
two decades of neighborhood organizing, first via neighborhood
reform schemes of the various regimes and over the past seven
years through the autonomous militant MTDs. The road blockages
have evolved from sporadic, quasi-spontaneous actions into systematic,
organized activities coordinated among thousands of unemployed.
There were 51 road blockages in 1998, 252 in 1999, 514 in 2000,
and nearly a thousand in 2001. In 2002 the road blockages were
often combined with generalized uprisings, particularly in the
provinces of the interior, but also in the greater Buenos Aires
region. In January 2002, for example, road blockages accompanied
popular mobilizations in Cordoba, Santa Fe, Chaco, Misiones, Santiago
del Estero, Salta and Formosa. The combined struggles included
both the demands of the MTDs and those of other protesting sectors,
such as back pay for public employees, housing for the homeless,
an end of the confiscation of savings, and food distribution.
In some cases municipal buildings were sacked, supermarkets were
raided, and governors' mansions and state legislatures were occupied.
It is clear that the piqueteros are not
all that they appear to be, unemployed workers fighting for social
justice. Particularly the Peronist party, now in power, has used
the job subsidies to try to divide the MTDs, handing out job application
forms via their barrio ward bosses and organizing thugs to disrupt
local meetings. In addition, local Peronist bosses have hired
some unemployed to assault and intimidate assemblies n popular
barrios, though they seldom attempt to threaten the MTDs.
The radical MTDs are dispersed throughout
the country and in the greater Buenos Aires region. They include
Anibal Veron, General Mosconi, Almirante Brown, Teresa Rodriguez,
Solano the names of the communities in which they are based-and
many others, including regional affiliates of the CCC (Coordinadora
de Collectivos Clasistas) which have a militant confrontational
style of social action, advocate total blockage of highways, and
have retained autonomy from all the trade union confederations.
However, the radical MTDs are themselves
internally divided along political lines, with the Trotskyist
Workers Pole (Polo Obrero), the Communist "Land and Liberation"
( Terra y Liberacion) and other formations competing for hegemony.
The result is that the radical MTDs at best have only tactical
alliances, while more often than not they are in conflict, even
to the point of separate negotiations with the regime.
THE UPRISING OF DECEMBER 2001
The usually ubiquitous red flags and banners
of the Marxist Left, dissident trade unions and piqueteros were
almost completely absent when tens of thousands of Argentineans
marched to the Plaza de Mayo facing the presidential palace, the
Casa Rosada, on the hot summer afternoon of December 19, 2001.
The absence of the Left on the first day
of the uprising can be attributed to several factors, both ideological
and organizational. Most of the Left operated from a rigid class
analysis from which it deduced political behavior. The Left was
generally "workerist," in the sense that what didn't
come out of the factories was suspect. This rigidity generally
took the following logic: factory worker-unionization-revolutionary
party general strike-revolution. In the meantime, the unionized
workers became a minority, most workers were un- and underemployed
and many were organized in MTDs. Belatedly the Left turned to
organize, mobilize and fragment the MTDs.
Likewise, the Left missed the dynamics
of class mobility: The rapid downward mobility of the middle class,
its impoverishment and proletarianization. Having lost all their
savings, the middle class had nothing to lose. They had become
deeply alienated from their traditional conservative moorings.
They were open to a radical democratic style of street politics
and direct forms of assembly-style democracy.
The Left only joined the uprising on the
second day, December 20, and then only the activists and militants,
as the leaders remained in headquarters strategizing. Important
contingents of public sector trade unionists, piqueteros, Marxist
activists and tens of thousands of independent radicalized middle
class people poured into the streets. Thousands of young people,
from lower middle class students to young unemployed piqueteros,
joined the march and the eventual battles with the police in front
of the Presidential Palace in Buenos Aires and in other major
cities. The downwardly mobile middle class demonstration was the
detonator of the mass and continual assault on power. Four governments
came and went in fourteen days.
The uprising was successful on several
important counts. The Saa regime declared that Argentina would
not meet its debt obligations. The populace was able to force
the resignation of four presidents. The political class and the
judicial system were delegitimized, their venality and anti-national,
anti-popular character were fully exposed.
The December 19-20 mass uprising was historically
unique for several reasons: It was the first time in Argentine
history that a popular uprising had overthrown a bankrupt elected
or dictatorial leader. It was the first time in history that the
majority of Argentines had confronted and rejected the entire
political class. The uprising and the solidarity that ensued led
to new and creative forms of direct popular representation in
the shape of barrio assemblies, and new tactics of struggle, such
as pot-banging demonstrations capable of blocking state decisions
adversely affecting the people. Preventing Duhalde from converting
the confiscated savings accounts into the junkiest of junk bonds
is one important example.
The popular assemblies increasingly relied
on the work commissions to implement policy changes as the Marxist
sects began to penetrate, debate, argue over tactics, programs
and party turf, alienating many and recruiting few. There was
a temporary retrocession from the high point of December 2001.
The pot-banging movement has demonstrated
its capacity to veto presidential nominations and decrees. The
internal warfare of the Left sects undermined the assemblies'
attractiveness to many participants. Despite emerging weaknesses,
the political experience and the sense of power have sustained
an increasingly radical and growing current of opinion among the
impoverished middle class. Public opinion polls on presidential
candidates in late May 2002 favored a Marxist, Luis Zamora, over
any and all of the persona from the major parties.
PHOENIX OR PROMETHEUS?
In light of the complete and total collapse
of the Argentine neoliberal model, several alternative models
of development have emerged. One of them, Plan Phoenix, put forth
by over 100 economists and political scientists, is the most widely
circulated and influential in intellectual circles. The other,
which we can call Plan Prometheus is not yet a formal proposal
or document, but a body of demands and proposals now being articulated
within the emerging revolutionary democratic organizations.
Phoenix is both a critical diagnosis of
neoliberal policies and a prescription for change and development.
The critical diagnosis covers a wide range of economic policies,
from taxation, public spending, ALCA (Area Libre Commercio de
America) and MERCOSUR (Market of the Southern Cone) to privatization
and technology policy. Phoenix's main virtues are found in its
criticism of the total deregulation of the economy, the indiscriminate
opening to the world market, the unilateral and radical reduction
of tariff barriers (without reciprocity), the loss of control
over monetary policy via the de facto dollarization, the dismantling
of the state as an instrument of economic policy, the great concentration
of economic power, and the lack of transparency in the privatization
of public enterprise. Phoenix's rejection of globalization ideologues'
argument that the nation-state is no longer a viable tool for
policy making is part of a new project to revitalize the role
of the state in pursuit of an industrial policy which prioritizes
development of the internal market and international competitiveness.
In the area of reforms, Phoenix advocates
reductions in debt payments via a moratorium or reduced payments-the
document is self-contradictory. Its moderate proposals have been
bypassed by subsequent events, since three months after Phoenix
was published the government defaulted. Phoenix favors increased
taxes on the rich, the financial groups and other "non-productive"
sectors, and elimination of subsidies to privileged classes. The
revenues raised would be channeled toward employment-generating
investments in socially useful areas (schools, low income housing,
child care centers), as well as worker training programs. The
basic premise of the Phoenix document is that a coalition of political
parties, productive private sectors, and civil society would be
the political bases for a new regulatory regime. The state would
direct financial capital to fund productive capitalism; foreign
capital to reinvest profits in the national economy; and productive
(as opposed to speculative) capital to invest in socially useful
activities. Phoenix seeks to devise an economic policy to "reorient
capital" toward the domestic market, regional (re-)industrialization
and processing of raw materials to generate more value added to
exports in the international markets. The priority of Phoenix
would be to develop a national plan of development to reactivate
the economy, fix social priorities, selectively protect local
producers, seek sources of domestic funding and then negotiate
with the IFls, including the IMF. The focus would be on internal
transformation and the role of the national state, not on external
agreements with the IFls.
The Phoenix document is without any connection
to the powerful social movements and political uprisings that
have occurred. They are not even mentioned in passing. The organized
unemployed, the popular assemblies, the factory takeover movements,
and the provincial rebellions-all of which have the most direct
stake in the welfare, development and employment goals of Phoenix-are
ignored. Instead, Phoenix looks to the discredited trade union
bureaucrats of the confederations, the political parties and leaders
who have been the main cause of the disaster to reenact a new
national-popular coalition with foreign capital and credit from
THE REVOLUTIONARY ALTERNATIVE
For Plan Prometheus, the people's movements
are the point of departure. First and foremost is the need for
a new social coalition of the 80% of Argentines suffering a severe
decline in living standards, including the 55% below the poverty
line. Employed and unemployed workers alone amount to close to
50%, and the impoverished middle class includes another 20-30%.
This is a broad-based coalition, which is not linked to overseas
banks. This gives a socialist state the social basis to re-nationaiize
the banking and financial system and provides a political base
to resist pressures from the G-7 bankers. The nationalization
of foreign trade would provide the state with a mechanism for
reorienting foreign exchange to finance public investment and
national industrialization. The re-nationalization of petroleum
would provide income and revenues to stimulate job training, infrastructure
and social projects generating employment. Progressive taxes and
tax collection can be enforced by threats to expropriate the property
of tax evaders and tax delinquents.
The state reforms proposed by the Phoenix
document should be articulated through new assembly forms of popular
representation and the incorporation of the new social movements
(piqueteros) in local and municipal governments. Popular assemblies
should exercise direct control of budget allocations and expenditures,
an advanced form of participatory public finance. Public ownership
of strategic sectors of the economy is essential to sustain redistributive
policies, as the recent decades attest. With privatization the
inequalities widened, and decision-making power over macro-economic
policies was monopolized by powerful economic groups.
The economic crisis has cut per capita
income by two-thirds. Given the scarce resources and the disintegrating
productive base, only a public takeover under workers' control
can expand the material base and generate greater equality. Greater
equality depends on social control of the income to be distributed.
Social ownership is at the center of Plan Prometheus. It combines
the tax and expenditures of Phoenix but within a vastly expanded
social property sector, democratically controlled by the direct
producers and administered by a meritocratic public administration.
The plan is Promethean because it aims at the total reconstruction
of a disintegrating economy with a shattered social fabric in
the face of powerful U.S.-Euro imperial adversaries. Having control
over the basic economic sectors, however, means the return and
reinvestment of earnings in Argentina. Debt default means the
savings of over 50% of export earnings. The diversification of
production and the reactivation of the economy mean that optimal
use can be made of existing unused capacity-over 50% of the total.
MERCOSUR, China, the Arab countries and sectors of the EU and
Russia offer alternative markets to any IFI-organized boycott.
Public investments in innovation, technology, research and development
can incorporate Argentina's highly trained but currently underutilized
labor force. The reactivization of internal markets and selective
protection of provincial producers can expand markets. Public
investments in infrastructure can employ the unemployed and facilitate
inter-provincial and inter-MERCOSUR trade.
Plan Prometheus incorporates the criticisms
of Plan Phoenix and extends them from modifying the behavior of
the private actors to transforming their structural position.
Prometheus incorporates some of the specific welfare reforms of
Phoenix but locates them in a more realistic political-economic
properly framework that avoids the constraints and threats of
private/foreign non-cooperation. Prometheus replaces Phoenix's
proposed national-popular social coalition with a more realistic
popular coalition rooted in the really existing social movements
and their interests.
As of September 2002 there is no sign
of recovery or outside relief-on the contrary, the crises have
deepened. The collapse of the Argentine economy and the impoverishment
of the majority of its people following the zealous application
of "free market" doctrine is a warning to the rest of
the Third World. By early summer the Brazilian and Uruguayan economies
began their descent: Uruguay is in the midst of deep recession
(with 15% unemployed) and was temporarily "saved" from
collapse by a $1.5 billion IMF loan; in Brazil it took a $30 billion
loan to stave off collapse. What is called a financial "contagion"
is in reality the collapse of an economic model based on U.S.
pillage, local corruption and joint exploitation.
In June, during a march organized by the
Anibal Veron MTD, two piqueteros were executed by police officers-the
act videotaped. The result was a massive protest which forced
President Duhalde to announce new elections for early 2003. In
response to the continuing crises and the IMF refusal to provide
any support, a newly organized, massive popular rebellion is in
the works. Date and place to be announced.
ABOUT THE AUTHORS James Petras has 50
books and 375 scholarly articles to his credit. His work has been
translated into 28 languages. Globalization Unmasked (with Henry
Veltmeyer) is his most recent book. His web site: <www.rebelion.org/petras>
(Spanish), and <rebelion.org/petrasen glish> (English).
Henry Veltmeyer teaches Sociology and
International Development at St. Mary & University Halifax,
Nova Scotia, and Universidad Aut6noma de Zacatecas, Mexico. Recent
publications include: America Latina: Capital Global y la Perspectiva
Del Desarrollo Alternativo, and Globalization Unmasked.