Milei and Caputo put on golden straitjackets

Milei and Caputo put on golden straitjackets

The American writer and columnist in The New York Times, Thomas Friedmandeveloped a provocative metaphor to illustrate the liberal economic policy recommendations that condense them and that today they try to use strictly in Argentina: golden straitjacket

The figure, originally presented in his book “The Lexus and the Olive Tree” from 1999, represented the quintessential suggestion of the most orthodox recipe book to promote a development process, which despite its efforts to date has not produced any successful case. Unfortunately, it was an ingenious rebranding of the Washington Consensus, pronounced by a World Bank chief economist, John Williamson, in November 1989, a week after the fall of the Berlin Wall, to refer to a closed package of reforms aimed at economies. of Latin America, after the debt crisis of the 1980s.

Friedman’s cartoonish synthesis (he is not related to Milton, but shares his ideology) seeks to install the idea that, regardless of the specific characteristics of each economy in the world and the historical moment in which the golden straitjacket is used, the best decision is always that the State has no way of intervening in the economy to guarantee that market forces are totally released. The fundamental axes to apply it are: reduction of public spending and fiscal balance, privatization of public companies, contractionary monetary policy, liberalization of foreign trade, opening of the financial and telecommunications sectors, deregulation of all markets, stimuli for foreign investment and fight subsidies.

In other words, the proposed scheme ties the country to the designs of the market, as is happening again today in Argentina, after three failed attempts in the last half century. Unfortunately, President Javier Milei and Minister Luis Caputo, immobilized in that type of vest, appear to be discovering that there are flesh and blood individuals who have a first and last name, behind the markets, and they demand moderation in price increases. Apparently, Guillermo Moreno’s problem now was only his aggressive manners.

If those of Milei and Caputo are not acts of authentic naivety, the alternative scenario would be even more dangerous and ruinous for the country. It would imply that the highest public authorities in economic matters could have common interests with the companies that enjoy the free rein they were given to shamelessly abuse the pockets of consumers. The opacity in the design of DNU 70/2023 makes us suspect that this second option would be the most feasible, although in that case, nobility obliges, we would have to recognize the acting skills of the protagonists, especially our President.

Let us also remember that Caputo “played in the Champions League” and that, in his previous management in the public sector, he was fired from the government at the request of the IMF for having allowed capital flight with the dollars obtained from the largest loan that he granted in his history. . This precedent, which at the same time required the evasion of the legislative controls demanded by the National Constitution, removes the chance of ineffectiveness on the part of the minister and, therefore, increases the danger that the current situation is a new planned scam. , which predicts an even more chaotic scenario for the coming months.

“Weak with the strong and strong with the weak?”

The recent and most resonant episodes of the use of the golden straitjacket with a strong regressive impact on income distribution have been the dregulation of the market for prepaid health companies, the liberalization of fuel prices and the elimination of price controls on basic foods and medicines. Although Milei and Caputo limited themselves to making some public boasts against the most grotesque abuses of the companies and, as a supposed palliative, they improved the conditions for importing basic basket products, the effect does not seem significant in the shelves that, four months after the December devaluation, it remains in the double monthly digits. The vest immobilizes but does not gag.

In Milei’s case it is more difficult than in Caputo’s to establish a position regarding whether he trusts what he does and is dissociated from reality or if his decisions are the result of a conflict of interest. The crude statements on Alejandro Fantino de Milei’s radio program about the construction of bridges (he said: “quietly, people can do them directly”) or the use of fake bots to assert that “prices are going down” (not that the inflation decelerates) place him in a place closer to the figure of a patient who must use a straitjacket to control his emotions than to an unscrupulous bandit. The minister, on the other hand, did not dare to express his opinion on the construction of bridges without state participation and was less vehement when he spoke of the drop in prices.

Perhaps Milei is really beginning to notice that the concentration of the markets works against his project and that the evolution of the CPI is determined more by the interaction between supply and demand than by the level of monetary emission. It is possible that he did not foresee that, faced with the brutal fall in activity and with a demand for transactional money concentrated on goods and services with inelastic demand (consumption is depressed proportionally less than the increase in prices in those sectors), the real reduction of the monetary base is insufficient to stop the escalation of prices and there are price makers who take advantage. Possibly, Milei is repeating the failed reasoning of his advisor Federico Sturzenegger, who believed that the 2016 tariff would not accelerate inflation by assuming that the rise in some prices forces spending on others to decrease and thus the less demanded goods drop in price, compensating the increases of the most consumed. Unfortunately, reality eludes them, All prices rise and the least dispensable prices rise the most.

It is worth adding a brief technical detail that also plays a role. The evolution of transactional technology accelerates the speed of money circulation (there are more electronic means of payment and more intensive use of existing ones). However, in the theory followed by Milei it is assumed that the speed is constant, which will force its management to make increasingly severe adjustments to the monetary base to obtain the desired effect.

Faced with the impotence of being able to reduce the rise in prices, Caputo tries to resist the straitjacket, interfering in salary agreements without equal approval, contrary to the freedom of negotiation between private parties. The President, for his part, in this case has managed to avoid the double discursive standard (freedom to set prices and not to negotiate salaries) and his dirty work focuses on firing public employees and stepping on the salaries of those who keep their jobs. of work.

The duo’s priority mission is beat inflation without affecting the business of large concentrated sectors. Then they seek to further contract the consumption capacity of workers and retirees to mitigate price increases by trying to provoke greater excess supply.

Néstor Kirchner in a memorable television program had already denounced this formula applied in Convertibility when he gave a painful recognition to the then Minister of Labor, Patricia Bullrich, for lowering the income of retirees: “What is the audacity? Weak with the strong and the strong with the weak?” Milei and Caputo seek to repeat that experience by trying to impose parity rates that do not exceed the inflation rate of the month in which the adjustments are applied, something that they can only say on complicit radio or television programs because, obviously, what the workers demand through joint ventures is to restore the loss already suffered in their purchasing power.

In the face of these abuses, the worker and student organization, valuing our country in the context of regional submission and repression, historically knew how to set a limit that allowed the preservation of labor rights and social benefits achieved. This is the fourth attack suffered in less than half a century. We must resist again and fight. It is the great mission of our militancy.

Economist, advisor to companies and industrial chambers and university professor.

Source: Ambito

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