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The IMF And Class Power In Argentina

Above: Alberto Fernández and Cristina Kirchner among their supporters. Credit: Alberto Fernández/ Twitter

Luis Buñuel’s surrealist film The Discreet Charm of the Bourgeoisie is a masterpiece of surrealist fiction, but also a powerful political indictment of the middle class and the ruling elite, if one chooses to look at it through a class lens, which Buñuel seemed intent on exposing. A raft of well-to-do couples attempt to come together for a dinner party but fail, their efforts continuously thwarted by seemingly random events. The dinner party, of course, is the staple of bourgeois life, in which the well-off congregate to celebrate their lives of comparative comfort and often debate the failings of the working class and impoverished.

What Buñuel does, however, is stifle the ability of the rich to stage their ritual by interjecting one social problem after another into their midst: corruption, drug trafficking, wasteful militarism, religious hypocrisy. It is as if Buñuel were wishing that the bourgeoisie might never slip back into their simple purblind pleasures until they address the crises of the majority, which they are immunized from, ignorant of, indifferent to, or have rationalized out of view.

In the global north, many bourgeoisie know Argentina in snippets and glimpses, most of them second hand. Through the very bourgeois rituals Buñuel mocked. Through an award-laden Argentine film that passes swiftly through town on a Latin film junket. Through the dark fruits of a celebrated malbec imported from the limestone soils in high Mendoza. Through an evening in a lavish Churrascaria, gorging on the boneless skirt steaks popularized by gaucho communities. Through hearsay and rumor, such as the idea that Buenos Aires is the, “Paris of South America,” with its wide boulevards and Haussmann-esque public works, and that local porteños are fiercely proud of their European heritage.

Despite the distance and lack of regular contact, it is striking how relevant what happens there is to what happens in the United States, in Europe, Russia, Africa, Asia, and nearly every other terreno through which neoliberal capitalism has threaded its suction-cup tentacles. If there was ever an argument for global class solidarity, neoliberalism is it. After all, the neoliberal project, as David Harvey has argued, is a “project to achieve the restoration of class power,” the class being the one percent and the power being chiefly political and economic, with military hegemony the unspoken enforcer of last resort.

To summarize the past few weeks in Argentine politics: the administration of Mauricio Macri, the neoliberal handmaiden of global banking elites, was upended in national elections, as the Peronist Alberto Fernandez was swept into office by eight percentage points in what Bloomberg euphemistically called a choice of “left-wing populism” over “pro-market policies.” They’d have done more honestly with Harvey’s description or the “naked calculus of greed” phrase with which scarf-wrapped soothsayer Cornell West once described austerity measures in America.


Fernandez is accompanied by his vice-elect Christina Fernández de Kirchner, former president and former first lady of Néstor Kirchner. That pair held power from 2003-2015 when Macri was elected with considerable support from Washington. It was Kirchner who finally steadied a collapsed Argentine economy and presidency when he refused a notorious IMF structural adjustment program (SAP), negotiated a write down of existing debt which he paid in a lump sum by 2005, and put the economy on a path to growth by rejecting inflation-focused austerity recommendations.

The Universal Debt Shackle

This is the crux of the matter. Many now know that the IMF and World Bank are thoroughly corrupted lending institutions. They were created by the post-war Bretton Woods agreements as international institutions that would help rebuild devastated regions of the world. But these institutions, along with many others within the United Nations, have been steadily vitiated of their populist purpose since neoliberal economics gained political supremacy in the early 1970s, subsequent to the galvanizing Powell Memo that launched a conservative backlash to the social uplift of the 1960s. While China and the Shanghai Cooperation Organization (SCO) are providing alternative funding sources on better terms, it isn’t easy to extract oneself from the snarl of legalities that underlie what is often odious debt agreed to in conclave between comprador elite and the economic hit men of the IMF.

We now know, for instance, that more development and aid money flows out of Africa every year than flows in, revealing the neoliberal project of leveraging debt as a means of economic and political control. This may be seen as the principal strategic difference between British imperialism and American imperialism. The former used boots on the ground while the latter use debt whenever possible, brandishing the sword of military intervention as a back pocket threat rather than a vanguard.

Argentina has been wrestling with their relationship to international banking this entire century. Kirchner’s efforts to salvage the economic independence of his country led to a rejuvenation of prosperity in Argentina, part of the regional pink tide that brought leftists to power across Latin America, principally with Bolivia’s Evo Morales and Hugo Chavez in Venezuela. Washington has been undertaking a largely clandestine effort in the last decade to rollback these progressive gains across the region it once referred to as, “our backyard” (see the Monroe Doctrine).

Washington-backed candidate Macri came to office in 2015, promptly secured an IMF loan, implemented austerity measures prescribed by the bank, told citizens they were “living above our means” and led the country directly into recession, as could have been predicted by any IMF economist. Marci made the usual templated cuts, driving poverty from 15 percent to 40 percent. As economist Jack Rasmus expertly points out, “That austerity has included cutting pensions, slashing government jobs, raising utility costs, eliminating past household subsidies.” (Somewhat famously, Macri also paid off vulture capitalists who had been lawyering for higher return payments on investments in the early 2000s.)

In fact, that is what the IMF has been inducing across the global south and parts of the north for decades. It first crashed the Chilean economy in 1973 after the Chicago School of Economics tutored the new government once Washington helped overthrow leftist Salvador Allende. The ‘shock therapy’ western lenders administered in Russia after the collapse of the Soviet Union generated a depression, “40 percent more severe than America’s worst economic crisis ever,” the Great Depression, according to the University of Massachusetts Professor David Kotz. What happened there has happened in nearly every nation the global banking cabal as implemented its ‘structural adjustment programs’ in exchange for large loans. It is expected. The point is to prevent a country from declaring bankruptcy or developing economic independence based on a different model of economic development, such as import substitution, which develops domestic industry that produces for the domestic economy. This approach is not without its issues, but has at its core a desire to build domestic industry where export-driven neoliberalism seeks to profit foreign finance and multinationals, by any means necessary.

That sensible approach is loath to Washington-controlled global finance, which prefers to privilege foreign direct investment in union-weak, regulatory-weak, resource-rich nations. Which means allowing global multinationals from the north to buy up the national resources of countries in the global south, but also to establish manufacturing in those nations that then export products, from agriculture to textiles, to the rich markets of the global north. The difference between what multinationals pay to extract and/or manufacture goods in the south pales in comparison to the prices they charge for those products in the north. Translation: windfall profits. It’s the same for the lenders, who draw compound interest on loans better guaranteed by interest-rate hegemony than influenced but untidy electoralism. Any effort to challenge or reverse this plan is roundly rejected by the north. Which is why, when leftists win, stock markets collapse and investors begin to withdraw their funds.

The Left/Right Divide in Buenos Aires

Macri was planted by the northern elite to shutter progressive reforms and reinstall the long-standing IMF-led extraction policies by which populations are turned into debt slaves, their economies utterly beholden to northern banking institutions. Which means social spending is capped because the conditions of IMF loans stipulate that the first priority of the loan is to pay bankers promptly. The population is a secondary or tertiary consideration at best. In fact, what typically happens is precisely what happened in Argentina. Of the recent $56B loan Macri secured from the IMF, the monies never passed through Argentina, let alone trickled down to the actual economy. Monies were simply transferred from the IMF to the lending banks that owned Argentine debt. The loan debt is then paid off by the borrowing population, who never benefit from the loan. Instead, governments like Marci’s implement austerity and leach debt payments from slashed social spending programs.

Fernandez’s challenge to austerity implemented by Macri has given quite a fright to the capital markets. Stocks and bonds and other signal elements of economic conditions uniformly collapsed in August when he first won the primary elections. Now his election is confirmed and he is faced with the job of fulfilling his promises. As Bloomberg notes:

Fernandez’s broad promises to improve things will run into immediate difficulty when he is sworn in, given a lack of funds to play with: The economy is contracting, inflation is above 50%, unemployment is more than 10% and a third of the population lives below the poverty line. Investors also expect the government to default at some point.

Fernandez, 60, must satisfy the competing demands of far-left factions in his broad coalition that want more social spending, and the International Monetary Fund, which agreed to a record $56 billion bailout last year. The IMF will likely have little appetite to dole out more cash if Fernandez implements policies that risk a balanced budget.

Fernandez will evidently seek to accommodate the bankers by negotiating some manner of debt restructuring, meaning lower payments over a longer period of time. His success in doing so and subsequently permitting more social spending remains to be seen. He has already signaled a desire not to default on the country’s debt. We’ve already memorably seen how the European Union bullied Greece’s supposedly leftist Syriza Party into continuing its austerity program at the expense of its citizenry. Will the same happen in Buenos Aires?

The Kirchner path taken earlier in the century is here described by author Stephen Lendman, in the context of the Greek crisis of a few years ago, with the initial caveat that these kinds of debts are odious:

Greek debt is odious – illegitimately incurred to benefit powerful monied interests at the expense of its economy and people. The obvious solution is the default – walking away, refusing to pay, wiping the slate clean and starting over to restore economic health, freed from Troika-imposed debt peonage.

Doing the right thing works. In December 2001, Argentina halted all debt payments to domestic and foreign creditors. Months earlier, an IMF loan didn’t help.

Nearly $100 billion in debt was restructured, completed in 2005 on a take it or leave it basis. Stiff haircuts were imposed on bondholders agreeing to terms of around 65%, deciding something was better than nothing.

Most holdouts out capitulated in 2010 on similar terms.

Sustained economic growth followed from 2003 through 2007, helped by debt restructuring and a devalued currency.

Kirchner essentially moved to free the country of the banking mafia whose practices have been outlined here and have been so well documented elsewhere, including surveys where you will learn that the Latin debt crises of the 1980s were triggered by “punitive” interest rate spikes engineered in Washington, a dollar-driven inflationary debt spiral many Latin nations have never recovered from, languishing in their peonage while various comprador elites and visionary leftists battle to command office. Several methods of the neoliberal project are clear: one, overvaluing local currencies to privilege cheap imports from foreign multinationals, which flood shelves but have the knock-on effect of decimating domestic industry, ultimately tying economies to imports and loans with which to purchase those imports, given the decline of domestic jobs and wages; two, a plan to ‘liberalize’ capital controls to allow foreign multinationals to buy up domestic resources, utilities, and finance, and swiftly exit the country should a leftist rebellion occur (as they inevitably do); and three, to wield interest rates in dollar-denominated loans as a hammer to constrain domestic governments from spending on social need. For the local population, in Argentina and everywhere else, these measures result in low wages, low savings, low investment, low production, low industrialization or de-industrialization, low social spending, but high unemployment and high government debt, which in turn continue to drive down wages and social melioration.

Political Economy

For an excellent deconstruction of the global north’s attitude toward the global south, read Vijay Prashad’s The Poorer Nations, a searching portrayal of economic negotiations between the first and third world countries in the Seventies. What is clear from the research is that neoliberalism deals one crushing blow after another to fragile domestic economies and populations, abolishing their economic independence, leashing them to debt slavery, and exporting economic control to Washington-backed institutions–all to pad the profit margins of the globalized one percent. All of it deliberately, all of it politically. It is impossible to reasonably evaluate the events of nations like Argentina without contextualizing them in the broader policy framework of neoliberal capitalism, which at the bottom is a project that lifts profits above people, for the benefit of the few against the existential needs of the many. In other words, it is political first, economic second, a fact which gives the lie to the relentless misinformation from influential journals like The Economist that what is needed most of all is all manner of economic liberalization.

All of which begins to answer the question of why citizens don’t simply elect representatives that will do their bidding? If only it were that straightforward. As Noam Chomsky has reliably noted, the methods of control in an ostensibly democratic society are markedly different from those in an openly fascist country. In the latter, force is the principal means of coercion. In the former, the control of opinion is the critical lever by which power maintains and extends its grip and superficial legitimacy. This is why the media is far more sophisticated in market democracies of the West than in any dictatorial regimes elsewhere: it has to be. What is called the mainstream media exists in every western country, controlled by elite capital, beholden through advertising to the interests of autocratic profit-seeking corporations, and staffed by journalists who have internalized the profits-before-people mantra of neoliberalism. This gets to the heart of the problem with democratic capitalism: the institutions of civil democracy are toothless if not accompanied by economic democracy. A panoply of public rituals belied by poverty of opportunity. Capitalist democracies cede economic affairs to private interests on the false assumption that economics is not a political sphere. This false creed is then reinforced with tireless effectiveness by the mainstream press.

In Buñuel’s masterwork, the bourgeoisie affect to live apart from the swamp of political discord, sailing merrily past on a carpet of propriety and shared luxury. Yet they are again and again foiled in their efforts to exile the messiness of the political from their midst. This is precisely what neoliberal financiers hope to do in Argentina and elsewhere, to smuggle in their extractive policies behind a slew of altruistic platitudes and economic casuistry, hoping the commoners will leave their fates to the experts. But inevitably, the pandemonium rips through the thin-skin of rhetorical niceties, making a shambles of the bankers’ ball. The mob would feign to rule.

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