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IMF underwrote policies that caused economic collapse in Argentina By Guillermo Makin Published: February 5 2004 From Prof Guillermo Makin. Sir, Your editorial "Time to say no to Argentina" (February 2) neglects to mention the causes of the default. They are to be found, broadly speaking, in the policies of the 1990s from the Washington consensus and in local over-enthusiasm for neo-liberalism. The result was record unemployment, even while gross domestic product grew between 7 and 8 per cent. The Financial Times did not at the time sound its disapproval in the vigorous terms employed in this editorial. The policies the International Monetary Fund underwrote in the 1990s, and which you approved, caused massive de-industrialisation, import overdrive, capital migration and record poverty - now close to 50 per cent of the population - thus destroying the market for consumer goods, investment, profits and unleashing a depression that seriously undermined financial institutions in Argentina. Furthermore the default was not an act of malevolent wilfulness, as you now imply, but the inevitable result of massive economic collapse. The signs were there throughout the 1990s in terms of high unemployment and de-industrialisation and, above all, indebtedness now close to 150 per cent of GDP. The time to object was when all this was happening. The unbalanced view of your recent editorial is ideological, dogmatic and unhelpful. President Nestor Kirchner intends to pay. His spirited arguments merely make the point that the terms must be realistic. An economy that barely managed a surplus of 0.5 per cent of GDP in the 1990s as an average and is now throwing up a surplus of 3 per cent cannot be asked to divert resources from social benefits and reconstruction to ensure that the IMF and the bondholders are not made to pay for their manifest follies in the 1990s. Perhaps somebody in the FT ought to read some of Joseph Stiglitz's work. Mr Kirchner holds that any increase in revenue will go to pay what he calls the social debt, not the foreign debt. The electorate is cheering him to the rafters and that is why George W. Bush and José María Aznar back his approach. Mr Kirchner is hardly likely to abandon polices that caused growth of 8.2 per cent of GDP in 2003 and underpin his popularity. Guillermo Makin, Associate, Centre of Latin American Studies, University of Cambridge, Cambridge CB4 2AS, UK & Universidad de Belgrano, Argentina |
