Did Argentina break the back of the IMF?

Posted on October 31st, 2007 in Economy,General,Politics by Robert Miller

Most Americans do not know that the IMF (International Monetary Fund), an organization implemented to help troubled economies stabilize themselves, has, since Ronald Reagan, been populated and dominated by economists from the Milton Friedman Chicago school of Economics. This group harbors what I think of as a radical view of economics, first espoused by Adam Smith, modernized by Friedrich Hayek, Nobelized by Milton Friedman and introduced into the world as the "free market economy" by Ronald Reagan and Margaret Thatcher, both of whom saw the pro-business model as one that was advantageous over the "command economy" of FDR. This group is possessed by an ideology, an assumption that they must be right, buttressed by the modern approach to economics, that of developing mathematical models which they claim prove their conclusions. The first country to get a high dose of the free market economy was Chile following the overthrow of Allende and the installation of the brutal regime of Pinochet. Eventually most of the Southern Cone countries of South America came under free market dictatorships, with brutal repressive regimes that received high praise from Ronald Reagan. But the trouble with this economic model is that it institutionalizes high corporate profits, high corporate influence, privatization of government functions and generates leaders that like to go to war. We have a couple of free market war mongerers in office right now. Every country that has instituted the free market economy has experienced a dramatic increase in the economic disparity between the upper and lower income classes. And, in addition, they have witnessed their own home-grown companies get bought by foreign investors, usually at a small fraction of what the company is worth, based on earnings.

The Falkland Islands war is a classic example of a failing free market dictatorship, Argentina, whose leaders needed a war to distract and galvanize the public. On the other side of this artificial conflict was Margaret Thatcher, the free market British leader, who was losing ground in her battle with the striking coal miners; she too needed a galvanizing national experience to gain the upper hand as she was trying to do to the coal miners what Ronald Reagan did to the air traffic controllers in 1981….break the backs of unions. The result was predictable. A completely meaningless island to Britain became a two month battleground through which Thatcher got the public support she needed to win the 1983 election and gain the upper hand over the miners. In contrast, the dictatorship of Argentina’s military junta, led by General Leopoldo Galtier , collapsed as a result of the war. Galtier and many of his co-leaders spent time in prison and democracy in Argentina was restored, with continued bitterness to those rulers who perpetrated the "Dirty War" that involved brutal killing and disappearance of leftist leaders and sympathizers. It’s been estimated that as many as 30,000 citizens of Argentina were whisked off the streets and disappeared, a process that involved torture and murder. Pregnant women who were seized were kept in a secret prison until they delivered their baby. They were then thrown out from a plane over the ocean and their children were adopted by leaders in the military junta. All this brutality was highly praised by our Republicans who labeled it as brave "anti-communism."

But, while Argentina had its democracy restored as a result of the Falkland Islands war, it continued to live with the free market economy reforms introduced by the junta, but designed through the IMF and the Chicago boys who trained most of the economists that came from South American countries to get their education in the United States. For reasons you can guess, our own government helped channel these trainees into the Chicago school, so that they could gain free market ideology and return to implement Friedmanism in South America. But Friedmanism or free marketism or coporatism or Reaganism didn’t work to the advantage of the South American countries. Indeed, once this economic reform was introduced, income levels for Argentinians stagnated and remained that way for the latter part of the 20th century. A short-term economic relief for Argentina, provided by the junta with loans through the IMF, was followed by increasing economic hardships.

When Argentina defaulted on $ 100 billion in loans in 2001, it was broadly assumed that they would have to undergo further reforms along the model of the IMF and its free market economy dictates. According to economist Mark Weisbrot of the Center for Economic Policy and Research Argentina succeeded by precisely avoiding help from the IMF.  By restructuring its own currency, Argentina not only stabilized its economic situation, but it began to grow like it had not done in decades. Since then, 28% or 11 million Argentinians have been pulled above the poverty line. The recent election of Cristina Fernandez de Kirchner is the first time in Argentina’s history to elect a woman president. This election was a no-brainer. Her political party, under President Nestor Kirchner (her husband), led a dramatic economic turnaround that made Argentina the fastest-growing economy in the Western Hemisphere over the last 5 1/2 years. While one can hardly say that Argentina does not face problems and will continue to encounter impediments from the free marketeers of America who control vast amounts of wealth and influence, Argentina has turned a corner and the new Bank of the South implemented by Chavez to avoid the IMF, may prove to be the beginning of a new era for South America. The Southern Cone countries once had booming economies and were seen as a new emerging European society in the new hemisphere. That was interrupted by brutal dictatorships who used torture as a means to suppress the society and make them more compliant for free market reforms. High profits for a few followed, but collapse for the many was the more common rule. Perhaps the back of the IMF has been broken, at least in South America. Just four years ago, the IMF had about$49 billion in loans to South American countries, but today that number has slipped to around $1 billion. It is fundamentally a simple issue. What is the function of a corporation? Is it licensed by the public to serve a public need, or is it free to pursue unfettered personal greed? I hope that Argentina succeeds and that South America gets free of the IMF and the World Bank. We need a new system, one designed along the lines advocated by Ralph Nader: corporations are licensed only to fulfill an important public need, not to run the country but to serve it. Sounds simple, but today it’s radical.

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