Failures of the Economic Programme of the 1989-1999 Era Justicialist Party

this is probably one of those works im least confident about but i figured I would at least post it again for archival purposes

Peronism prior to Neoliberalism

Standing in sharp contrast to the prior administration of Peronists before the Menem era, the unique historical circumstances surrounding that ideology resulted in the cultivation of several tendencies. The right-wing tendency, embodied predominantly by the Tacuara Nationalist Movement and its successor groups, advocated for what was essentially a Falangist programme; National Syndicalism, nationalism, fierce catholicism, and what may be considered a variant of integralism. The left-wing tendency, known as the Tendencia Revolucionaria, was embodied by the Fuerzas Armadas groups, Movimiento Peronista Montonero, and the Juventud Peronista. These groups collectively formed the radically anti-capitalist camp in support of class-warfare, total nationalization and socialization of industry, Guevarism, and third-worldism. It was against this backdrop that a third camp came to the helm as the Justicialist party desperately needed a moderate wing capable of maintaining the status quo, especially after the turbulent period of the 1970s. Thus came to the forefront Carlos Menem.

Menemism

Carlos Menem represented a radical departure from the two tendencies in existence prior to his administration. Carlos Menem was, above all, a neoliberal. A brief analysis of his policies clearly show this:

Attraction of foreign investment
Pegging of the Pesos to the United States dollar
Mass-privatization
Reduction of state involvement in the economy
Private pensions

Essentially, Menem diagnosed the acute financial malaise experienced by Argentina for the past decade as a result of paternalism. Whether or not this diagnosis was accurate is not the object of this essay, but to say the least, it was certainly debatable. In any case, these reforms were a part of his personal crusade to ensure a stable line of credit from the International Monetary Fund, and within only 3 years, Menem had decreased public spending from 35.6% to 18.3%. Now, what can be said without much of a doubt is that the policies of Menem certainly resulted in a contemporaneous success; the disastrous Falkland War of 1982 had resulted in a devastating economic slump that Menem's administration seemed to save the country from. But, when looking at the long term, the Argentine economy was irreparably destroyed by the financially irresponsible stimuli introduced by Menem. As so often seems to be the case with rapid neoliberal reforms in formerly socialist and interventionist states (Yugoslavia, East Germany, Spain, Russia,) Argentina experienced a devastating loss of local markets, a total loss of a self-sustaining economy, a dismantling of an industrial base on account of mass privatizations and a failure to consider the employment afforded by state spending and ownership, cheap labourship, and a near total reliance on foreign investment. This last point is most poignantly demonstrated by the convertibility plan of 1991-2002 pegging the Peso at a 1:1 rate with the United States dollar, which also resulted in much speculation and overvaluation of the Peso.

Consequences of Menemism and Failures of the Justicialist Party

As Cecilia Zanetta’s seminal 2002 study on the period stated, “Argentina’s reform programs failed to address the challenges faced within individual sectors.” The complete lack of sustainability of Menem's economic reforms resulted in a 28% economic crunch in 1998. Moreover, the Convertibility Plan had unilaterally failed, resulting in a depreciation of 4 Peso per dollar by 2002, inflation rose 41% in 2002, unemployment reached 23.6% in 2002, wages fell 23.7%, and supermarket sales dropped 26%.

Why the Convertibility Plan Failed

The first component of Menem's failures was the monumental, and ultimately unsuccessful, gamble that was the Convertibility Plan introduced in 1991. Although initially successful, (by late 1991 it had seemingly already achieved its goal), the sustainability of the plan relied on foreign investment and external finance. The rigid nature of the exchange rate also meant that it was virtually impossible for the plan to have more than a decades worth of success; from 1991 to 1998, Argentinian exports increased every year and performed well, however in 1999 Brazil crisis began, resulting in 35% drop in valuation of the Real, almost immediately resulting in capital flight and the near-overnight collapse of export competitiveness. Moreover, the 1998 and 1997 crises in Russia and Asia respectively resulted in a dramatic rise in interest rates, and the foreign investments Argentina depended on became rare and at many points almost disappeared. The plan also resulted in a severe overvaluation of the Peso, as it was simply entirely incapable of matching the international strength and trust of the United States Dollar, meaning that any external crisis practically guaranteed a comprehensive failure of the Peso. It was these circumstances that resulted in the 1998-2002 Argentine great depression, resulting in more than 50% of Argentines living below the poverty line, 25% indigent, and a default on the 34.15% debt-to-GDP ratio.

Failures of Mass Privatization

The failures of mass privatization feature prominently throughout the 1990s. East Germany, Yugoslavia, the former Soviet Union, and Spain are just a few examples of this. However, in Argentina, paired with an already disastrous convertibility program, the results were tenfold. The sale of public enterprises, comprising a vast degree of the Argentine economy, proved an ineffective and counterproductive decision. The Yacimientos Carboniferos Fiscales, Gas el Estado, the National Telecommunications Company, and Aerolineas Argentinas, paired with other state enterprises, represented the employment of about 300,000 workers and 35% of government spending, resulting in a powerful, though often ineffective, scale of business. Although this essay, again, does not aim to defend the practices of the Argentine government prior to Menem, it is worth noting that State Enterprise had largely been mismanaged as a result of the 70s military coup, and prior to this period said enterprises were both effective and accountable to the general public. In fact, even throughout the lead-up to the Menem administration, unemployment was not at all a major issue. However, within only 4 years of the Menem administration (1993,) unemployment increased dramatically. Moreover, domestic firms were almost entirely incapable of competing with cheap imports from elsewhere, and substantial layoffs in the interests of speculators gobbling up the previously public sectors, resulted in a horrible export and business climate. The state-owned monopolies had also essentially switched hands from public to private, and without government spending propping up these businesses, many downsized and laid off thousands upon thousands of workers, who were unable to find work elsewhere as represented by spells of unemployment of more than 6 months representing approximately 40% of the unemployed. The new operators of the privatized enterprises also hiked prices. For example, Aguas Argentinas hiked prices by 9.1%. Privatization also created a generally unproductive and uncompetitive economy, and paired with the convertibility plan, represented a comprehensive failure of the Menem administration to recognize sustainability or a well-disciplined financial program. The public sector debt-to-GDP ratio also increased by 12 points during this time, proving that Argentine fiscal policy for the time was handled irresponsibly, a fact also corroborated by the lack of any centralized management of the privatization program.

Failures of Private Pensions

In 2008, Argentine congress decided to revert the 15-year long failure of the Private Pension program introduced by Menem. Just to provide an overall example of the failures of Private Pensions, the International Labor Organization reported that of the 30 countries to introduce them, 18 reverted it due to the disastrous results. The Pension Research Council reported that only about 52% of workers had even bothered to participate in the system by 2003 on account of its ineffectiveness, as the primary incentive for introducing the private pension program (easing of financial pressures, new incentives for labor formality and tax collection, and an overall boost in worker productivity) simply never materialized. The government also imposed severe restrictions on the program by absorbing as much capital as it possibly could, and by late 2002 about 75% of assets involved in the program were invested into public debt with virtually no resistance from private fund managers. The government had to fund 77% of beneficiaries in the scheme to even keep the program afloat, and returns after the 2002 crises were negative 10%. The fate of the private pension system was entirely dependent on the survival of the sustained growth experienced by Argentina initially under Menem. However, as we have learned, his programs represented a completely unsustainable policy that resulted in a catastrophic depression from 1998-2002 considered the country's worst. In short, the 3 primary neoliberal policies introduced by Menem had categorically failed to produce long-term results, and by the end of his administration, any positive effects had entirely reversed itself. In a word, Menem's administration was a categorical failure.

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