Tuesday, 25 October 2011

An economics lesson from Argentina

The landslide victory for President Christina Fernandez de Kirchner in Argentina's general election on 23 October provides lessons in both economics and politics for Western governments in the grip of continued economic criss.

Her victory comes off the back of a successful economic and social policy based on fiscal expansion, one which has flown in the face of every neo-liberal nostrum. This paper from the Center for Economic and Policy Research shows how, following its default on its debt and the sharp painful contraction that followed, Argentina has not only seen growth that would be the envy of the Eurozone, Britain and the United States but has made huge progress in reducing poverty and inequality, with expanded social programmes producing major gains in public health and welfare.

In other words, Argentina has thrown off the burden of debt and turned Osborneomics on its head. It's not surprising that its government has been rewarded with a landslide victory at the polls.

There are two important lessons here as the Eurozone crisis develops and politicians call for more austerity.

First, it puts the lie to austerity economics imposed by financial institutions and their spokesmen in government.  Osborne and Cameron lie about job creation in order to rationalise their economics - in Argentina they've implemented the policies that neoliberals tell us are reckless and they've achieved real economic benefits, widely shared.

Second, there is an important message about democracy.  In Greece especially, indebtedness is being used to promote the interests of bankers above democracy, in an attempt by lenders to ensure they carry none of the risks of their lending.  The risk is instead borne by ordinary people.  The Argentinian default threw off that risk, and, importantly, deprived bankers and financial institutions of their powers to subvert democracy. 

At the heart of the neoliberal programme is the axiom that financial "responsibility" - which means concentrating power in the hands of a privileged minority - trumps democracy.  The real lesson of Argentina is that growth, employment, welfare and democracy can go hand in hand.  It's unsurprising, then, that neoliberal hegemonists should try to demonise Argentina as a rogue economic state. 

No comments:

Post a Comment