We’ll start the review of President Mauricio Macri’s first year looking at politics. Coming with the weakest parliamentary representation since the return to democracy, the government avoided the threat of a legislative paralysis by creating coalitions that supported controversial laws such as the agreement to pay bond holdouts or the tax amnesty. The opposition, with a formal majority but politically splintered, was only able to impose one major initiative, the anti-layoff law, which the president vetoed seemingly without paying as big a political cost as when Cristina Fernández de Kirchner vetoed the 82% pension bill in 2010. In the same vein, the deteriorating social climate has not led to the anticipated general strike from major unions or mobilisations from social groups capable of altering the status quo.
In other words, the diagnosis of ‘austerity without rebellion’ that we formulated two months ago remains in place, though the Macri administration still needs to get through December, Argentina’s dreaded month for governability. The tragedy of Cromañón (2004), the looting (2013), and the violence in Parque Indoamericano (2010) are reminders that since 2001, all Decembers threaten to be another 2001. President Macri knows this and, well-advised, acted in the only way possible: returning to the old trick of distributing resources such as the public-sector Christmas bonus, eliminating taxes on the medio Aguinaldo, and the social emergency initiative. In other words, ‘dipping into the till’, an expression used so often during the Kirchnerist but now mysteriously absent in the media today.
On the other hand, the economic balance is unfavourable, whichever way you look at it. GDP will fall by around 2% in 2016, matching the worst year for growth during the Kirchner era. Inflation will reach the highest level since 2002 and exports, measured in volumes, will both fall and become more concentrated in primary goods. The social impact is well known: a fall in purchasing power of around 5%, more poverty (32.2%) and more inequality (the Gini coefficient moved from 0.400 in 2015 to 0.417 in 2016).
On revising the economic year that is about to end, the impression is that after the initial round of shock therapy (removing export taxes, devaluation, tariff hikes, opening up the telecoms market by decree), the government was left without ideas and that now, with results not meeting expectations, it looks disoriented. Why, if we did everything we were ‘supposed to do’, things aren’t going well?
A mix of candour of the boys from tBuenos Aires’ wealthy northern suburbs and the dogmatism of business leaders seems to guide some of PRO’s fundamental economic convictions. Like, for example, the idea that removing state regulations would unleash dormant animal spirits in society and generate a Schumpeterian boom of entrepreneurial activity that would increase the number of disruptive discoveries and revolutionary start ups. To critique this is not about questioning a bet on innovation, which is crucial in any development strategy, but this is unlikely to ever prosper in a hostile macroeconomic climate that rewards financial speculation over entrepreneurial risk.
In the same manner, the theory that seeking quasi “carnal relations” with Western powers would result in anything more than friendly diplomatic gestures is being exposed as misguided. Looking closely, since the return to democracy in 1983 the two political cycles that stabilised the economy and encouraged growth – the Menem and Kirchner eras – managed to synchronise with global trends. In the first case, this was dominated by globalisation, the opening up of trade, and cheap capital, at least until the 1995 Tequila Crisis. In the second, it was the commodity boom, the rise of new global powers, and closer integration within Latin America (at least until the Lehman Brothers collapse in 2008).
Whether good or bad, Macri’s economic plan seems to be designed for a world that no longer exists, in a geo-political context in which the countries which Argentina is looking to open up to are electing leaders that reject international trade agreements and propose a return to protectionism. As the recent APEC summit showed, free trade seems more an objective for China now than the US.
Faced with a reality in which cold statistics reveal that standard causal relationships – monetary emission leads to inflation, deregulation leads to investment – are not coming through in practice, Macri now faces that Weberian dilemma between the ethics of moral conviction and ethics of responsibility. Should he change tack towards a sort of ‘responsible Kirchnerism’ (something that was considered a clear oxymoron until very recently) or keep faith in his old principles?
The quandary is made more urgent for two reasons. First is the difficulty of governing efficiently, as shown by the delays in key areas of public administration and the under-execution of the budget for a number of plans and programmes. Secondly, given its love for the notion of individual success, the PRO government has paid little attention to developing policies to soften the impact of a fall in consumption, the removal of trade barriers, and the hike in interest rates in entire fields of industrial production (such as textiles, footwear, toys, electronics) that are not very competitive.
Though they don’t have access to first-world technology and are unable to follow the Asian model of social dumping, these are nonetheless labour-intensive sectors which have a huge influence in certain territories. The textile industry accounts for 30% of industrial employment in the province of La Rioja; the company Coteminas, which produces sheets and towels, is the main source of private sector jobs in Santiago del Estero; and three textile companies account for the majority of private industrial employment in San Luis. And that is without mentioning Greater Buenos Aires, where most municipalities depend on industry. This “inefficient economy” is what guarantees social peace in the conurbano.
However, in spite of its tendency towards free trade and faith in the market, Macri’s government diverges from pure neoliberalism in one crucial aspect: it has not introduced drastic cuts in public spending (though it has altered spending priorities and channels more resources to servicing debt) nor sweeping tax cuts (though it did remove or reduce progressive taxes on agricultural exports and personal goods). In general terms, the 2017 budget confirms that the deficit will remain more or less around the same level as the final year of the previous government and the first year under Macri (4.2% of GDP).
At the same time, as the ultra-orthodox economists often like to remind us, the tax burden remains at around 37%, the highest in Latin America. In reality, the only truly new idea of Macri’s government – given a stable budget deficit – has been to replace monetary emission with foreign debt, which has risen alarmingly (this is something more to do with short-termism than strictly neo-liberal, as evidenced by the excessive borrowing of socialist governments like Venezuela).
We continue to believe, therefore, that Macrismo is a political creature difficult to define. The favoured approach of the media – take a position and then gather the arguments to reinforce it – is not very useful. Just as Kirchnerism differentiated itself from previous ‘national & popular’ experiences by avoiding widespread nationalisations and keeping the economy from exploding in crisis, Macrism is not slashing public spending, nor cutting taxes, nor privatising everything. There is an ideological ocean separating the two movements but both, in contrast to the most dogmatic viewpoints, are different to their respective 20th century versions.
At the same time, we shouldn’t fool ourselves. These diversions from traditional neoliberalism don’t mean that PRO lacks those ambitions but that it is intelligent enough to recognise the limits imposed by unions, Peronism, social organisations, and public opinion. Macrism is heading in a certain direction. If it hasn’t progressed with a general reform of labour laws (despite complaints about the ‘Argentine cost’ and the unprecedented deal for youth workers at McDonald’s), if it hasn’t reduced the public sector workforce (despite replacing some civil service workers with PRO activists), and if it hasn’t gone ahead with privatisations (despite budget cuts for state companies, less emphasis on developing YPF, and the use of social security funds from pensions office Anses), it is simply because it knows society would not allow it. It will be able to push as far as this correlation of opposing forces will allow.
This is also noticeable in the social policy. Though the term ‘rights’ has disappeared from the government’s lexicon, the social programmes in place are essentially a continuation of those used during the Kirchner era. This was not changed, and nor was another key issue: the anti-picket protocol announced in the first few months of the new government was discarded as it was impossible to enforce. It just takes a trip to downtown Buenos Aires to see that the protests and roadblocks are more or less just as common as before. Macri did not put the armed forces on the streets nor sent Congress a bill to impose harsher prison sentences. Is there really much difference between Security Minister Patricia Bullrich and Sergio Berni, national security secretary under Fernández. You can consider the government’s model to be terrible, but it’s not true that it can only be imposed with police repression.
The problem facing the government is reality. One year after taking office, Macri faces a world that is less free than it imagined, an economy less modern than it believed, and a society that is no longer passive and malleable like in the post-hyperinflation period (early 1990s) but an active subject that is following the government, watching it closely.
Translation by Marc Rogers.